Beijing ignoring the heat on currency pegging

ASIA: "Currency contortions: Tensions are likely to rise further over China's exchange rate," by Banyan, The Economist, 19 December 2009.

FRONT PAGE: "China dismisses currency pressure," by Geoff Cyer, Financial Times, 28 December 2009.

Banyan lays it out: The Chinese are firing back over "interference" regarding their domestic economic concerns, but it ain't domestic when you're talking an economy as big as China (no "liberty of insignificance," as Martin Wolf would put it regarding small economies).

A fast-growing economy with the world's largest current account surplus ought to see its currency rise. Instead, China's is sinking because the yuan is in effect pegged to a failing dollar.

The other key reason why this cannot be considered solely an internal matter: the global rebalancing argument.

So the Chinese are telling the U.S. to screw-off on the rebalancing while telling the rest of the world to stick it on its undervalued currency.

Eventually, get enough of the global economy mad at you and the trade retaliations will pile up. China can pretend it can stick to its guns on this no matter what, but the "no matter what" is being slowly redefined.

China's best counter-argument: we're saving the global economy right now with our surging economy when nobody else is growing similarly.

Not a bad comeback, just not a permanent license on currency manipulation. Meanwhile, China's purported shift toward more reliance on domestic consumption seems a myth: most experts see an economy still way too dependent on investment by the state and exports.

A UBS expert is quoted by Banyan as saying it's not so much a matter of lowering the household savings rate in China as the corporate one. Profit hoarding would be cured by a currency inflation, Jonathan Anderson said.

The 4th generation leadership (Hu, Wen) seem deeply committed to their "harmonious socialist countryside" vision, which has them pulling every possible manipulative trick to continue a hoarding of currency that can then be used for internal investment. They look to that restive, still overwhelmingly impoverished interior and see an undeniable priority that outweighs any external heat.

But that heat will continue to rise: already the EU is calling for currency appreciation, as is the U.S. Fellow BRICs Brazil and Russia have come to the conclusion they're getting ripped off. The list grows . . ..

Don't forget India

ARTICLE: India vs. China: Whose Economy Is Better?, By Michael Schuman, Time, Jan. 28, 2010

True enough that China wins most economy-to-economy comparisons when it comes to output, but when it comes to selling to consumers, most Western companies prefer India.

(Via WPR's Media Roundup)

Bits and pieces on Google-v-China

ONLINE: "In China, Google flexes some foreign policy muscle," by Rob Pegoraro, Washington Post, 24 January 2010.

ONLINE: "China to Scan Text Messages to Spot 'Unhealthy Content,'" by Sharon Lafraniere, New York Times, 20 January 2010.

NEWS ANALYSIS: "In War Against the Internet, China Is Just a Skirmish," by Eric Pfanner, New York Times, 18 January 2010.

BUSINESS DAY: "China, Where U.S. Internet Companies Often Fail," by David Barboza and Brad Stone, New York Times, 16 January 2010.

FRONT PAGE: "Scaling the Digital Wall in China," by Brad Stone and David Barboza, New York Times, 16 January 2010.

ONLINE: "Even a censored Internet has opened up a world for Chinese users," by Steven Mufson, Washington Post, 21 January 2010.

Was going to write my WPR column this week on this subject, because Haiti seemed already over-mined, but I wasn't enthusiastic, because I didn't feel anything much new could be said. So happy when reader sent me word of new Human Security Project report, which I instead used as basis for column.

But I collected a bunch of articles, and here's my quick rundown of my own observations:

Pegoraro: It is interesting to see a private company force the USG to follow in terms of enunciating commitment to a "free" Web, whatever that is in today's complex world.

Lafraniere: The CCP, as we know, dreams of tracking and censoring every comm imaginable, which is so pathetic. We can't manage it WRT terrorism, but allegedly, those magical Chinese will make it happen like snap! WRT to political free speech. Does the word euphemism mean anything to these dumbasses? Any population is infinitely clever in this regard.

Pfanner: Countries all over the world are exerting all sorts of censoring control, reminding me of my old brief line: Everybody wants connectivity, but everybody also wants control over content. China has its pet peeves, but it is not unique.

Barboza and Stone: All sorts of Western Internet companies have gone to China and not done well, because in something so culturally sensitive, local players do better, especially with government backing and their willingness to kiss ass on censorship, unblinkingly pretending it's a good thing when they're too smart to think that way.

Stone and Barboza: Nonetheless, it's no big whup for any Chinese to scale the Great Firewall.

Mufson: So I'm left with an old bit of mine: there's a reason why AOL kicked ass in the 1990s and got its ass kicked in the 2000s: the first generation of adopters doesn't mind the walled garden. Hell, it prefers it. It's the not the first generation that the CCP has to worry about, but the kids that come next. Once they bump into the walls of the Matrix, the CCP is screwed.

More states and nations

Looking at Gross State Product from Wikipedia (2008 numbers) and Gross Domestic Product from IMF (found at Wikipedia), I revamp the famous national map that I pulled from the Net way back when and used in Great Powers and my brief.

I match-up simply by finding the closest GDP equivalent, sliding states as required when they're weren't enough close-enough nation-states to match-up. If you check the two lists, you'll see where I legitimately smooshed, trying to achieve the smallest deltas (1-3 billion off sliding one way versus 4-6 billion off sliding the other).

I present because I'm updating the slide in the brief, and if anybody can come up with better matches, let me know.

Why make this effort? I ran into too many web comments/sources that criticized the old map as increasingly off-base.

Remember, this is a gross measure, not a per capita one.

1) California = Italy (replacing France in old map)

2) Texas = Russia (Canada)

3) New York = Spain (Brazil)

4) Florida = Netherlands (Korea)

5) Illinois = Turkey (Mexico)

6) Pennsylvania = Poland (Netherlands)

7) New Jersey = Sweden (Russia)

8) Ohio = Saudi Arabia (Australia)

9) Arizona = Norway (Thailand)

10) North Carolina = Austria (Sweden)

11) Georgia = Taiwan (Switzerland)

12) Virginia = Greece (Austria)

13) Michigan = Denmark (Argentina)

14) Massachusetts = Iran (Belgium)

15) Washington = Venezuela (Turkey)

16) Maryland = Thailand (Hong Kong)

17) Minnesota = Finland (Norway)

18) Indiana = Ireland (Denmark)

19) Tennessee = United Arab Emirates (Saudi Arabia)

20) Colorado = Portugal (Finland)

21) Wisconsin = Colombia (South Africa)

22) Missouri = Malaysia (Poland)

23) Connecticut = Czech Republic (Greece)

24) Louisiana = Hong Kong (Indonesia)

25) Alabama = Pakistan (Iran)

26) Oregon = Egypt (Israel)

27) Kentucky = Algeria (Portugal)

28) South Carolina = Kuwait (Singapore)

29) Oklahoma = Hungary (Philippines)

30) Iowa = Kazakhstan (Venezuela)

31) Nevada = New Zealand (Ireland)

32) Kansas = Peru (Malaysia)

33) Utah = Qatar (Peru)

34) Arkansas = Slovakia (Pakistan)

35) District of Columbia = Iraq (New Zealand)

36) Mississippi = Morocco (Chile)

37) Nebraska = Bangladesh (Czech Republic)

38) New Mexico = Croatia (Hungary)

39) Hawaii = Belarus (Nigeria)

40) Delaware = Sudan (Romania)

41) West Virginia = Luxembourg (Algeria)

42) New Hampshire = Syria (Bangladesh)

43) Idaho = Bulgaria (Ukraine)

44) Maine = LIthuania (Morocco)

45) Rhode Island = Azerbaijan (Vietnam)

46) Alaska = Dominican Republic (Iran)

47) Montana = Latvia (Tunisia)

48) South Dakota = Uruguay (Croatia)

49) Wyoming = Kenya (Uzbekistan)

50) North Dakota = Uzbekistan (Ecuador)

51) Vermont = Cyprus (Dominican Republic)

Again, if you can smoosh the list in some better way, or find me other sources that compare more fairly, be my guest.

But I don't want PPP measures.

As you can see comparing old with new, the old list provided plenty of joke opportunities, but so does the new one!

The Swiss are no longer so Swiss--sniff!

INTERNATIONALIST: "The Decline of Swiss Exceptionalism," by Denis Macshane, Newsweek, 25 January 2010.

First, this goofy logic: Switzerland has been long praised by the "evangelists" (read, nutcases) of globalization for all sorts of characteristics that make Davos the natural meeting ground of the World Economic Forum.

And yet! Swiss "exceptionalism" is now crumbling--apparently in a way that negates globalization.

The banks are becoming more transparent! Score one for deglobalization!

An influx of Muslims actually seems to be freaking out the locals! Were we not to expect instant karma?

Another myth of . . . something or other . . . is that the Swiss' purported freedom from the EU and its awful regulations, and yet, more and more the Swiss appear to be voluntarily conforming to them. Another deathblow to globalization! Sort of.

Killer piece. Shook me to my roots.

Brit Labour MP wrote it.

The marijuana debates heat up, creating a cloud of confusion!

PERSONAL JOURNAL: "Is Marijuana a Medicine? Doctors Find the Drug Can Help With Pain, Nausa; Scant Evidence So Far of Other Benefits," by Anna Wilde Mathews, Wall Street Journal, 19 January 2010.

U.S. NEWS: "Push for Looser Pot Laws Gains Momentum," by Nick Wingfield and Justin Scheck, Wall Street Journal, 16-17 January 2010.

I've readily admitted, both privately and in the public record (all those clearances, all those years), that I smoked a lot of pot in college (undergrad only). At first, it was fabulous for all the known reasons, and it surely delivers big time on nausea (the ultimate hangover tamer) and generalized discomfort relief. Is it that much better than since-formulated, more standard drug alternatives (like the Zofran Em got via an IV during her chemo days)? Damned if I know, but I'm always in favor of being super-nice to anybody in serious pain or discomfort or any horrible medical scenario. Geez, I say let them do whatever works.

Did I find it particularly addictive? Nothing like liquid Percoset, which I've used after surgeries and twice had to toss down a toilet 48 hours in. Frankly, I can't manage any narcotics any more, they all make me too depressed.

I get addicted to almost everything in some way (like carbonated water, which I drink too much of), as I tend to migrate from passion to passion, (which is why I work in such Herculean spurts), so it was somewhat hard to notice back then. In college I was addicted to partying, working for pay, studying massive hours, consistently maintaining a 3.9, winning entry to every scholar society there was, playing Frisbee golf, seeing damn near every movie, falling in love with Vonne, etc. The only thing I wasn't addicted to was sleeping, which one can pull off at 21.

I found pot less addicting than frustrating. Like virtually every recreational drug, the first times were outstanding and then it was all downhill from there (the only exception that works for me being a nice vodka martini maybe 3-4 times a week--max). I am reminded of the Beatles' description (see the Anthology book, which I now read along with bios of U.S. Grant and Reagan and Bill Shatner's goofy autobio) of acid/peyote--specifically George's: once you did it once and got all the revelation possible, repeats were fun but inherently pointless. This, to me, was especially true with pot--you just got dumber and dumber and less and less high with each use. For me, it was like the opposite of what most tobacco smokers say about cigs: easy to quit. But unlike cigs, which I could always use in moderation, with pot it was all or nothing, and I just found that too consuming--and too boring. Your world just narrowed too much and everything got unfun--with a background headache.

So, while I'm in favor of decriminalization, I'm not exactly in favor of making pot readily available (especially today's far more potent versions), even as it ranks far below tobacco (32%), heroin (23%), coke (17%), and alcohol (15%) when it comes to "estimated percentage of people in a national survey who used a substance at least once and became dependent." Pot came in at 9%, a number I find credible.

But everyone's different. So many go wild with alcohol in our society, to such amazingly detrimental effect, that I don't think decriminalizing pot (I am much less open on coke or heroin and the rest) would register all that much socially.

Personally, I'd have to be way retired and awfully depressed to turn back that direction--now a depressing quarter-century in my rear-view mirror! Nowadays, my pride and joy is a clear mind with clear sinuses attached, because it's the only state that allows for creativity at my current age and responsibilities, and I like both more than anything pot could re-teach me, with creativity reigning near-supreme as a daily joy (after . . ..).

Shale gas gets serious

COMPANIES & MARKETS: "BP and Sinopec to join forces in shale gas: Groups in talks over potential collaboration; Growing international interest in China fields," by Geoff Dyer and Carola Hoyos, Financial Times, 19 January 2010.

BP bought into stakes here in the States in order to gain know-how for international ventures, which it is apparently pursuing with great speed. China needs the tech, but its companies can be expected to offer the usual competitive backpressure down the road.

Still, something to watch.

Violence beats money beat sex beats vampires beats God

BACK STORY: "What do the bestsellers of 2009 say about us?" by Ramin Setoodeh, Newsweek, 28 December 2009.

Content-wise (as in, which thematic boxes are checked), Violence rings in at 70%, Money at 60%, Sex at 45%, then vampires (20%) and God (10%).

Also scoring are Politics (10%) and Youth (40%).

Meaning the usual trifecta of sex, money and rocknrolla (the Guy Ritchie definition) still holds.

Looking at the mainland-Taiwan normalization process

ARTICLE: Taiwan-China talks hit headwinds, By Jonathen Adams, Christian Science Monitor, December 23, 2009

ARTICLE: Over protest, Taiwan moves toward free trade with China, By Jane Rickards, Washington Post, December 23, 2009

First piece demonstrates the mainland-Taiwan normalization process will be long and slow in coming. Time is neither side's enemy per se, nor is it ours. So getting something politically sustainable is more important than speed of conclusion.

Me? I just like the process for what it teaches the Chinese. I look at Taiwan as negotiating the third implicit membership (after HK and Macao) in a larger, Chinese-centric economic union that allows for political differences to remain intact. In miniature, this learning process represents China's larger integration in the world.

So no fell swoops or grand bargains, but a brick-by-brick process that naturally drags out over a generation or more.

(Via WPR's Media Roundup)

US still reigns, and can expand

ARTICLE: As the World Turns, By Matthew Yglesias, The American Prospect, December 24, 2009

Nicely put, and without an ounce of hyperbole or fear-mongering:

The basic story of the contemporary United States involves the slightly awkward combination of unmatched power and inevitable relative decline. Our economy can't grow as fast as India's or China's or Brazil's, and there's no equivalent to the EU integration process that could enhance our power and expand our reach. The only real uncertainty about relative decline concerns the extent to which those powers will be joined by other potential regional powerhouses like Nigeria, Iran, South Africa, and Indonesia, if they ever get their acts together in terms of sustained economic growth.

But even though the waning of American hegemony can be clearly seen on the horizon, the fundamental reality is that it's a long way off. China's economy is basically only Japan-sized, and the country faces massive challenges starting with the fact that the majority of the population is still impoverished peasant farmers. India is even worse off. Japan is in demographic decline. Europe isn't an actual country and can't really make foreign-policy decisions.

In other words, our power is slipping away, but only very slowly.

The larger point of the article also rings through nicely.

I would disagree, though, about us not having any EU-like expansion possibility. Need to think outside the historical box on that one--the box since our last state addition, that is (HI, 8/21/59).

(Via WPR's Media Roundup)

SIO: waste

ARTICLE: Pentagon reviewing strategic information operations, By Walter Pincus, Washington Post, December 27, 2009

By and large, in my mind, a waste of time and money.

Telling our story better matters a whole helluva lot less than reorienting our practical partnerships on interventions (i.e., from West to East).

(Thanks: Dan Barrett)

Russians back to drilling Iraqi oil

ARTICLE: Oil Field Project in Iraq Won by Lukoil and Statoil, By JAMES KANTER, New York Times, December 29, 2009

Years ago, when I gave the brief, I used to say that Iraq's oil would primarily go to the Chinese and the Indians, with the Russians as one of the primary executors. Why? The Russians held all those contracts way back when under Saddam.

So guess who wins the "vast West Qurna 2 oil field" deal? Lukoil plus Statoil (the Norwegians, who had troops in Iraq through Aug 2006).

FT v. WSJ on Obama's proposed new rules for Wall Street

EDITORIAL: "Obama v. Wall Street," Wall Street Journal, 22 January 2010.

EDITORIAL: "Obama declares war on Wall Street," Financial Times, 22 January 2010.

Well, I guess the metaphors say it all: war versus a mere lawsuit.

But the FT notes the "incendiary profits for banks and bonuses for bankers," so no great surprise, I suppose, that Obama now scrambles to catch-up, as the FT puts it, with popular anger on the subject (the new rules were timed for Goldman's announcement on earnings & bonuses).

FT's first-cut judgment:

The primary aim in regulatory policy should be to make it possible for banks to fail without endangering the rest of the banking system--and society.

Hard to argue with that, but then the FT says the proposed rules do not help with this.

The WSJ says Obama is getting "serious about moral hazard," but that the too-big-to-fail danger remains unaddressed by these still, too-sketchy proposals.

I will eschew plumbing the proposals themselves for now (they basically involve limiting the big-bet activities by the largest firms, but in ways seemingly unclear to everybody writing about them), because I expect numerous iterations before anything approaching an actual vote by anybody.

China's future fractures

ARTICLE: China to Seek 'Stability' in Tibet via Development, By EDWARD WONG, New York Times, January 23, 2010

ARTICLE: China Plans for World's Highest Airport in Tibet, AP, January 12, 2010

I would expect the Chinese to continue down this rather traditional path of political subjugation/economic integration, no matter what the West says. Over time, I could see the more traditional elements of Tibetan culture surviving in pockets, but the bulk of the population adjusting itself uncomfortably to increased Han presence and the improvement of incomes/development.

If Tibet were independent, China would have to woo it like the rest of Asia, but that die was cast a long time ago.

Now, China's steep economic trajectory has Beijing's bosses close to being clinically paranoid about "splittism" and the like, and, unsurprisingly, there's more than enough Chinese nationalism to tap on that score, with many Chinese firmly of the belief that outside or internal challenges to Party rule carries with it the goal of derailing China's rise.

Will that change with time and development? It has everywhere else such developments have unfolded, but China, in its vast size, continues to be somewhat unique--not in suggesting that development can occur sans democracy but in suggesting just how long such evolution may drag out in a place that still features hundreds of millions living on little in the countryside in addition to the competing pressure of a rapidly aging society.

In short, China may well never get rich enough, on a per capita basis, to trigger the political evolution we seek in a coherent, even fashion across the entirety of the nation. And if that is the case, then China will indeed come apart eventually, in some muted fashion, with the richer, more developed parts demanding a freer hand in managing their own affairs while leaving Beijing to manage the inner regions. And the best way for that path to work would be for Beijing to forge an Asia-wide economic scheme within which various portions of China, as they mature irregularly, could feel themselves more in control of their destiny. Would China feel the need to dominate such a scheme? Yes. But it would do so anyway by virtue of its bulk.

I realize that chicken-v-egg waffling can be frustrating, but admitting it simply recognizes why Beijing's bosses remain so nervous on this subject, and why the cause of a "free" Tibet remains an illusion, in my mind.

(Thanks: Stuart Abrams)

Disconnect in Pakistan

ARTICLE: Poor schooling slows anti-terrorism effort in Pakistan, By Griff Witte, Washington Post, January 17, 2010

Why Pakistan is severely compromised as an ally in the struggle against extremism:

With a curriculum that glorifies violence in the name of Islam and ignores basic history, science and math, Pakistan's public education system has become a major barrier to U.S. efforts to defeat extremist groups here, U.S. and Pakistani officials say.

Like Jonah Goldberg's comments about Haiti's culture of poverty, here we see the obstacle of Pakistan's culture of civilizational hatred. It is not the sum total of what constitutes Pakistan, which is both Core-like and depressingly Gap-like, depending on where you look. But it's clear that the government has too long let its disconnected populations wallow in this angry victimization mode, buying them off ideologically.

Yemen: geographic clarity

POST: Yemen: Geography Matters!, By Curzon, Coming Anarchy, January 26th, 2010

Good, informative post that clears up the geographic distinction between the two conflicts going on inside Yemen.

Why Cadbury tastes so good to Kraft

KRAFT WINS CADBURY: "Hershey, on Its Own, Has Limited Options," by Ilan Brat, Deborah Ball and Jeffrey McCracken, Wall Street Journal, 20 January 2010.

All is found in the market-share numbers by region:

Mars and Hershey run North America at 28% and 21%, respectively. Kraft + Cadbury gets up to 8 percent.

In West Europe, Mars (12) and Nestle (8) now faced a K-C combo of 18%.

In LATAM, K-C registers at 26 (K's 8 + C's 18), with Nestle now a distant second at 13.

In Eastern Europe, K-C gets 14%, trailing Mars at 16.

In Asia Pac, Kraft goes from less than 1 to an immediate 6% with Cadbury. Nestle second at 4.

In MEA (Middle East/Africa), Kraft's 2 is now suddenly 18%, shooting past Mars at 12%.

In Australia/NZ, Kraft's 1 becomes a whopping 32%, putting it above Mars' 23 and Nestle's 18.

Upshot? With one purchase, Kraft becomes a major candy player worldwide, but especially in the major growth regions of the emerging middle class.

One sweet acquisition.

2010 outlook for China

ARTICLE: Three Hurdles for China in the Year of the Tiger, By JOHN FOLEY, New York Times, December 29, 2009

Nice, non-hyperbolic look-ahead piece on China.

I first took note primarily because I'm a tiger too (1962).

And yes, I will take any help I can get after 2009!

Needed: child custody rule-set reset

ARTICLE: Back From Brazil, Seeking an Ordinary Life for a Son, By KAREN DeMASTERS, New York Times, December 29, 2009

You gotta believe that, eventually, the world will come to grips with this growing phenomenon of marriages-across-borders and the resulting child-custody battles.

But until then, you take your chances with somebody who owns a passport different from yours (even if it's their second one).

Self-disclosure prepares for regulations to come

ARTICLE: Emissions Disclosure as a Business Virtue, By LESLIE KAUFMAN, New York Times, December 28, 2009

Nice to see, showing that even "failures" like Copenhagen continue to encourage the private sector toward anticipatory adaption:

Boeing and other enterprises are voluntarily doing what some might fiercely resist being forced to do: submitting detailed reports on how much they emit, largely through fossil fuel consumption, to a central clearinghouse.

The information flows to the Carbon Disclosure Project, a small nonprofit organization based in London that sifts through the numbers and generates snapshots by industry sectors in different nations.

By giving enterprises a road map for measuring their emissions and pointing out how they compare with their peers, experts say, the voluntary project is persuading companies to change their energy practices well before many governments step in to regulate emissions.

Scientists estimate that industry and energy providers produce nearly 45 percent of the heat-trapping emissions that contribute to global warming. While some governments are convinced that reining in such pollution is crucial to protecting the atmosphere, a binding global pact is not on the immediate horizon, as negotiations in Copenhagen showed this month.

Until broad regulation is at hand, many investors and company executives say, voluntary reporting programs like the Carbon Disclosure Project may be the best way to leverage market forces for change.

This sort of anticipatory action preps the private sector to the inevitability and utility of public-sector rules as they emerge over time.

Old story: having the right answer is one thing, making it happen at the right time (of widespread acceptability) is another.

In my mind, the evolution here is moving along with enough speed, as these things tend to take off at some point, so the more ducks lined up in anticipation, the smoother the inevitable rocket ride upward.