U.S. Leadership Void Squanders Influence - China Steps In

During this period in American history when the economy, business, trade and currency have taken pivotal positions in the Nation’s psyche, the country is led by what may well be the most economically uninterested Administration it has ever elected.

Loudly professing to fight for the vast middle class, the Obama Administration’s actions are taking the Nation galloping toward the destruction of middle-class incomes, toward upwardly spiralling middle-class taxes, toward bloated government, and toward overwhelming debt. 

As the expansive middle-class heads off to work at its one or two jobs each day, it has the right to expect its leadership to do the job it gets handsomely rewarded to do. That job includes paying attention to all matters which affect the long term health and stability of the country. 

We were not surprised to discover ineptitude such as the State Department’s decisions in Libya or in Egypt, nor were we astonished at cover-ups attempting to hide the incompetence. However, of more import to the middle-class is the blundering neglect and disregard this Administration has shown to economic matters which will directly impact the long term health of America – both its economic condition and its military strength. 

After four years of the current Administration’s platitudes, but prevailing economic indolence, we are presented with abundance of tell-tale ‘canaries in the coal mine’ evidencing a methane cloud sweeping across the whole country trying hard to drag it into a state of international subordination. 

The EU leadership’s attitude toward Cyprus bank depositors forecasts the future imposition of punishment on Spaniards, Italians, and other profligate governments. Any word from the White House? This act by Brussels is criminal expropriation of personal property, telling of an imperious inclination. But who cares? Surely the EU’s action cannot be a ‘canary in the coal mine’ for the American middle-class. It’s just those funny Europeans who speak strange languages, and anyway, we’re not like Europe and surely our leadership would not want to emulate theirs. So let’s look at ‘telling’ events elsewhere for more suitable ‘canaries’. 

Let’s skip to the other side of the world where Australia’s Prime Minister Julia Gillard, head of the labor party, is heading to China to slide Australia further into the Chinese sphere of influence through the signing of an agreement to allow for the direct conversion of Australian dollars into Chinese Yuan. Reducing the need for Australian businesses to convert U.S. Dollars (the greenback is the predominant currency middleman), in trade with China reduces some costs incurred by Australian companies. More importantly, this arrangement provides China a more direct and less expensive access to the raw materials it requires to fuel its own growth and increase its wealth. What of Chinese exporters to Australia? China is promising better prices and better payment terms under this new agreement. How perfect is that seduction? This Australian maneuver could be dismissed as a minor ‘canary,’ representing a trivial event relative to the global daily trade turnover of over $US3 trillion. Such an event is nevertheless an economic and political statement, highlighting the progress in the long term internationalization of the yuan. China is buying up all the mining companies and raw source materials it can in Australia, as it is doing elsewhere. It has done a successful job of hiding the reality that the communist party, which controls China, also controls most entities who ‘acquire’ foreign assets, and it influences any which it does not fully control. Down the road, that centrally manipulated ideological mindset will have massive control over foreign economies. 

Brazil is moving in the same direction with a $30 billion currency swap with China. Such arrangements are expected with other Chinese trading partners including the United Kingdom and Japan. This new and consequential trend is about receding the greenback’s and America’s prominence. 

In Canada, the disdain and the disrespect which the Obama Administration has shown for its leader, Prime Minister Stephen Harper, and for its economy, has pushed that country to bend over backwards for China. When the head of CSIS (Canada’s equivalent to the CIA), mentioned that the Chinese government had infiltrated the Federal and Provincial governments at the highest levels, the country’s predominantly liberal media admonished him and shut him down. How dare he talk against a country so busily buying up Canada’s natural resources. How dare he be so politically incorrect? The Canadian MSM actually placed the label ‘racist’ on him. As for Stephen Harper? Since Obama is not only uninterested, but recalcitrant, Harper is determined to forge a trading relationship with China to the point where everything is ‘for sale,’ including the out-of-control indebtedness of Canadians who now on average owe more than the average American. A whole generation of indentured citizens seems apathetic to its plight. China finances construction of hundreds of thousands of pigeon-hole condos, selling them to Canadians who cannot afford them. How is that for a perfect storm? A currency agreement with China such as Australia is entering into, can only be just over the horizon for Canada, further erecting the yuan’s position and sidelining the U.S. dollar. 

As any country’s trade with China increases relative to that country’s other trading partners, China’s ability to dictate trading ‘conditions’ increases. In Europe, the general weakening of the Euro trading block opens the door to sidelining the greenback. China can hardly be accused of being subtle in its efforts toward economic dominance. Here is a statement from a Professor Yu, who was a member of the monetary policy committee of the People’s Bank of China and an economic adviser to the government ”It is a simple case of invoicing and settlement currency, it is not about making the yuan a reserve currency.’’ Of course. 

Australia, Canada, Europe, South Korea, Japan, Indonesia, and, . . . and, . . . and, all depend on America for security. Individuals in much of the world go about their day, conscious that America has for as long as they’ve been alive, been a positive influence on their safety and on their stability, and most importantly on their freedom. The capacity to provide that stability has been financed by the strength of America’s economic engine, the health of its currency and confidence in its ability to lead. Flaccidly standing-by as ‘friendly’ economies become smothered and influenced by a communist government does not augur well for our well-being and our way of life. 

History dictates that maintaining a strong position on the global stage is essential for self-preservation and is imperative for the preservation of freedom and core values. It requires interested, visionary, and inspiring leadership. True leadership cannot be concocted through alchemy, or fashioned on a Hollywood back-lot, or discharged through a teleprompter. It is innate. Before more canaries prognosticate degradation of the Nation’s international stature, America’s taxpayers should make themselves heard, and demand pro-active leadership in Washington.

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China? With friends like this...

For 20 years Canada’s wide, open door immigration policy toward China has buoyed the country's real estate prices, auto sales, and food sales. For Canada’s exporters of raw materials, China has principally been a willing purchaser of low cost wood pulp and byproducts, as well as ores, nickel, copper, slag, ash and potash. Should we ask how much ‘value added’ participated in these exports? No. The answer is an embarrassment.

Canada’s overwhelmingly askewed trade ‘imbalance’ with China was -$23,610,999,607 for the first nine months of 2012. There is very little effort expended, or financial clout brought to bear on the evolution of Canadian ‘value added’. Canada has found it so much easier to sell raw materials, and to perform ‘banking’ tasks, than to manufacture finished, or even semi-finished products and then export them. Canada has for too long enjoyed picking the seemingly very low-hanging fruit.

The senior executives managing the handful of major banks who control Canada’s economic landscape have particularly enjoyed the past two supremely fruitful decades of low-risk real-estate and auto loan businesses to the newcomers. With the support of media such as the CBC, the Toronto Star, and the Globe & Mail, an echo chamber has muffled any and all pushback on anything related to China by members of parliament, or by a majority in the current crop of senior business leaders. Referring to the last Harper/Hu meeting, the CBC described it as, “exciting time.” No sign of critical, or discerning thinking there, but undoubtedly way too much breathless adulation.

Even evidence of surreptitious electronic espionage are dismissed, or muffled, lest they stir politically uncomfortable notions which might impact negatively on an artificial and unsustainably propped-up economy. There are bank bonuses to be cashed, cramped pigeon holes in the sky called condos to be sold, and foreign-made cars to be retailed. Distaste for all things 'politically incorrect', fear of reprisal, and fear of racist accusations have muffled the emergence of facts and realities.

China has fuelled Canada’s growth for two decades, and yet, scarcely a word is spoken or printed of China’s ruthless communist party, or that country's centrally manipulated economy, and the communist party's tight control over foreign asset acquisitions. Is there any real insight offered on the long term impact? Not an article in sight about China’s Princelings, and all those who are connected to them, or their direct impact on the Canadian financial and real estate machines. Reality, however, has a way or eventually floating to the surface, no matter how hard it is repressed. This week a couple of hard slaps to the face are waking us up to the harsh and brutal truth that China is not our friend, not our partner, nor is it our well-wisher. On two fronts, Canada and its real allies received a cold shower.

Yi Gang, the deputy governor of China's central bank threatened a currency war and stated that Beijing was “fully prepared,” for such, and “in terms of both monetary policies and other mechanism arrangement, China will take into full account the quantitative easing policies implemented by central banks of foreign countries." Nothing subtle or quietly diplomatic about this throw-down of the gauntlet. He was not only addressing Japan, which has allowed the yen to slide, but he was delivering a thunderous warning to the West, including Canada which follows dutifully whatever The Fed dictates.

Also thunderous, though perhaps more troubling, was the news that Chinese anti-aircraft, heat-seeking missiles have been discovered in an Iranian shipment of arms heading for rebels in Northern Yemen. What could possibly go wrong when a cargo of Chinese missiles, 316,000 Kalashnikov cartridges, 63,000 PK machine gun cartridges, 12,000 cartridges for 12.7 millimeter DShK machine guns and 95 RPG-7 launchers, and 17,000 blocks of Iranian-made C-4 plastic explosives are introduced into the region? What could go wrong with such serious weaponry in the hands of terrorist?

Everything could go wrong. Flying cities known as commercial aircraft are particularly uncomfortable when heat-seeking missiles are heading in their general direction. Yes, what could go wrong when China-armed-Iran-armed terrorists come to your neighborhood?

In its own best interest, Canada should be more forthright with the realities presented by China and its communist government, and we should be reminded that Canada has an important international role to play in the support of its real allies, rather than bending just a little too far, suppliantly, to those who blow an ill wind.

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Statist Wistful Admiration Of China’s Communist Party

China’s ascendance in our consciousness has been growing steadily for a generation, and we wonder what more impact it will have than has already been felt by our economy and our society. We cannot accurately predict China’s future or its actions going forward, but as it flexes its newfound powers to reshape global conventions, we should remain vigilant that our own perceptions not be warped by ideologically, or otherwise tainted assertions.

Our enthusiastic media collectively extol the moral legitimacy of China’s communist model of political rule which controls 1.3 billion people, and predicts that China’s surpass of the U.S. economy is just over the horizon – scarcely visible as that may be through the toxic haze. Should untarnished freedom be a fundamental human right nurtured within a true democracy, then such adoration of China by our leaders, scholars, pundits and so many others, challenges the core tenets at the heart of the Constitution. 

Defenders of the ethos imposed through coercion within China, rationalize that stomping all over individual rights is a necessity which protects the needs of the collective. Somehow when such justification is vaunted by our own self-anointed intelligentsia, with the always present caveat that, “after all, how else can you rule over 1.3 billion people?” . . . . we capitulate. All the while, our internal turbulence leaves us in visceral disarray. The virtuosos of the PR machines make it all right that we send (through spending), trillions of our dollars to enrich a regime which recent history (1950s and 1960s) has evidenced as the most ruthless in human history. 

As China today shuffles its leadership, we are provoked into accepting that the shifting of nameplates is founded on meritocracy, and not on handpicked automatons perpetuating dictatorship. The reality that much of the current Chinese leadership is formed by the natural laws of heredity and that the sons of well-known revolutionaries today take up the mantel, does not appear to trouble our cognoscenti in the West. Xi Jinping, who will be shortly confirmed as China’s leader is one such “princeling.” We should remember that in China, the Communist Party controls the army, and one only touches the levers of power after having held very senior military posts (read: demonstrated ruthlessness). 

Should we accept the propaganda (East and West) that virtue rises to the top, and that China’s leadership is genetically virtuous and molecularly superior? How affected are we when our media refers to China’s “Communist era,” as if it was some unfortunate ephemeral occurrence of the past, or simply a fading authoritarian dragon which lost its repressive teeth? Just because the Communist Party has carefully allowed some private sector to coexist with state controlled enterprises, it has not relinquished any authority over business, over media, over education, and it is on guard against any de-politicization of the country’s vast military machine. The secretive Organization Department of the Communist Party of China Central Committee controls ‘assignments’ in government and industry. 
The boot is firmly on the neck. 

Recent leaks which the Central Propaganda Department missed, suggest that the high level of corruption within the Communist Party is pervasive. The submissive population cannot react since it knows the potential of the beast camouflaged behind smiles. It knows the despotic force which controls its nation. This is the virtuosity that is so confident that it siphons its billions off-shore, acquiring hard assets like real estate in safe havens like San Francisco, Sidney and Vancouver. The pretence of stability provided by the virtuous Communist Party may not be so well founded given that it cannot explain why so many of its wealthiest have ensured themselves foreign ‘pieds-a-terre?’ It is incapable of explaining why so many of the wealthy have moved their families offshore while they continue to amass personal wealth within China. One acquaintance close to such events reminded me that it is very expensive to move money offshore from China because there are so many hands which have to be taken care of on the way out. Is this virtuosity so prevalent that millions of people, both rich and not as rich, leave the country for foreign shores as soon as they possibly can? 

Before we look at what some of our statist virtuosos of the ‘beau monde’ are selling us about China’s version of communism, we should remind ourselves that any government’s legitimate function is to protect the individual’s rights. 

In 2009 Thomas Friedman, the writer for the oracle of all that is socialistically holy, wrote, ”One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages.” This self-asserted sophistication upholding the concept of the benevolent dictator surely must know something which lesser minds cannot comprehend. Or is it more likely an uninformed observation from a philosopher-king wannabe, lost in ideological nonsense attempting political correctness? Whatever its motivation, this claim evidences a complete lack of insight into human nature’s tendencies and desires for self-actualization. Such ignorant percepts miss the fact that stifling people and frustrating their desire for fulfillment of their potentialities deprives them immeasurably. The result is emotional disturbance and psychological pathology. Long term, the consequence is broad based despondency. This socio-economic transport of a Nation into the elitist controlled utopia is the ultimate pinnacle of arrogance. Is this the ‘down river’ that our media is attempting to sell us? 

Confucius once informed, “What the superior man seeks is in himself; what the small man seeks is in others.” 

Let’s take a look at a rather ideal example of someone who would do well to read Confucius – President Obama’s Chairman of Jobs and Competitiveness, Jeffrey Immelt, who moralized on the Charlie Rose Show this past week, . . . . 

Immelt: “State-run Communism may not be your cup of tea, but their government works.” 
Charlie Rose: “They get things done.” 

Well, three cheers for state-run communism. Right? When you instill fear in people to perform your will, you “get things done.” Right Charlie? Charlie may be a herring mindlessly drawn by the statist current which enriches him, but Immelt is not. He is head of a global corporation doing $146 billion and employing a little under a third of a million employees. 

Immelt is self-serving and rationalizing his shift of some General Electric manufacturing facilities to China, knowing full well that the Communist Party makes the decisions on who ‘gets in.’ For now we won’t argue with him whether he could have managed increases in productivity in America instead of moving, but does he really believe what he is saying? Any of it? Does he understand what he is selling? 

The mind behind the visage of Obama’s Job Council seems not to grasp the seriousness of his message, nor its impact. Or perhaps he doesn’t care – there’s a personal empire to build, who cares about the country? Notice that in this interview, as in others, he has no idea what to do about jobs? None. He is evidently only interested in his own. Where is the wisdom? He certainly seems to know how to get taxpayer dollars, warming the Oval Office into the purchase of unproductive and unprofitable windmill farms. He can buy influence and taxpayer cash, with taxpayer cash. 

We cannot forget the enforcement of the population’s conversion to Immelt’s green-technology-made-in-China CFL light bulbs. Don’t ask him what you should do with the toxic mercury in those bulbs once they burn out well before their due date, just take them to the dump. We do not need to question why Immelt’s statist views are supported by GE’s tentacles in NBC, MSNBC, CNBC, NBC Sports, Universal Film Studios. We know why. We also will not bother inquiring into GE’s relationship with the U.S. tax system, since we already know it manages to sidestep that annoying tax thingie. Immelt knows how to ride the East-West fence, and statists applaud him as he promotes the socialist message. 

The Immelts and Friedmans advocate that we too could find success if only we had top down power of overreaching government following the Chinese model as the symbol of perfection. It is unfortunate there are some already in power here who dream of holding reigns of omnipotent influence over the masses. It is doubly unfortunate that these same individuals influence our media. Do they really long for a Chinese version of governance? They and their mouthpieces are certainly selling us hard on it, lying about the realities that lie hidden under the propaganda. 

Individuals like Immelt should be promoting America, encouraging its freedom, and the beauty of its Constitution. They should be praising and protecting the country which provided them their opportunities and their wealth. Sadly they represent a broad element across the Nation, too ready to do away with protection of fundamental individual rights. After all, it works over there, doesn’t it?

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• The Obama General Motors Duplicity

    For three years our consciousness has been bombarded with assertions from Obama, his handlers, and his justifiers, that he is pro-business, understands the private sector, and is a leader -- after all did he not singlehandedly “save” General Motors and America’s auto industry? Enough with the lies already!

    Now that there is an actual businessman running against him for the Oval Office rather than a pol, the President’s machine has been turning up the volume on Obama’s GM escapade. We too easily recall his preening three years ago as the media declared him the new CEO of General Motors. Today Obama claims that without him, there would be no auto industry in America and he further claims that GM is a roaring success.

With admiration from the vast majority of the media, Obama is spiking the football on his prime example of crony-capitalism. This is not just any version of capitalism. This three year saga of GM has been a White House mandated, directed, orchestrated, manipulated, sleaze filled, top-down, “I-know-better,” abuse of laws and industry with taxpayer money to achieve egoistic and self-serving purposes.

This Administration persevered in abusing its power to ignore laws and common sense, in order to pull-off the biggest heist in US government history. And it did so in broad daylight.

The fourth estate’s fear, adulation, and mostly uncomplicated ignorance, allowed this larceny to occur. Law makers allowed it to materialize without backlash. Taxpayers watched, confused. Some, not so confused, but unable to act.

Geithner orchestrated the redirection of TARP funds for the bailout - yes, that very same slush fund specifically established to bailout financial institutions, NOT corporations. While we may never fully know the total cost to taxpayers, and we will never know the full extent of the damage done to individuals harmed by the process, we can accept as a base amount the initial $80+ billion dollars from TARP and the government stock purchase of 60% ownership. Why is this a “base” amount?  On behalf of the Nation’s taxpayers, and circumventing the country’s bankruptcy/tax laws, the orchestrators of the GM scheme ALSO sacrificed taxpayer treasure in the form of a $45 billion gift of business-loss tax credit.

Section 382 of the tax code, limits net operating loss carry-forwards in ‘loss corporations.’  Did this restrict Obama, Jarrett, Axelrod and Geithner in any way? Not when they were buying the permanent financial backing of a powerful union. The same union which this year committed one half billion dollars to Obama’s re-election campaign. Did the rank and file have ANY say in what their leaders did with their union dues?

To circumvent laws limiting transfers of Net Operating Losses” (NOL), Geithner, (that infamous tax expert of tax cheating notoriety), issued “Notices” claiming the laws would not apply to the Treasury’s machinations as it converted TARP loans to GM for shares, and then sold those shares.

 

By law, accumulated tax write-offs evaporate in bankruptcy for ALL corporations, unless they are enjoying the process of Obama-commanded-bankruptcy. Do we really wonder how other auto manufacturers such as Ford, or any other corporations for that matter, felt about this serious breech of the Nation’s laws and assault on the capitalist system? This is politics at its worst.

Taxpayers were not provided an opportunity to opine on this $125 billion being used by an out-of-control Administration to purchase the eternal support of the AWU/UAW leadership. Keep in mind that the UAW was an unsecured creditor, unlike most of the creditors pillaged by this Administration. The union was gifted a 17% share position in GM in trade for some health and pension commitments and the UAW sold a third of this position for $3.5 billion when GM made a public share offering in 2010.

When you consider how team Obama handed control of GM to its union cronies while on the other hand it obliterated 100% of the original broadly held common shares; gave pennies on the dollar worth of shares to bond holders composed of families, retirees, middle class average Americans and pension funds; wiped out the debt held by GM supplier Delphi; gifted $1 billion to Delphi UAW retirees, but nothing to Delphi’s non-union and non-UAW retirees; stiffed the bond holders; terminated the existence of thousands of long-time dealerships who were not Obama funders; unceremoniously fired the GM CEO Rick Wagoner, replacing him with car czar Steve Rattmer who in turn placed crony Ed Whitacre as titular CEO while czar Rattner made all critical decisions (against all common sense, and corporate law and governance); politicized the restructure and politicized the eventual actualization of action plans for GM; wiped out non-union salaried employee pensions; enabled GM to pay for ads in China promoting the “The Birth of a Party” – a party for the 90th anniversary of the Chinese Communist Party (CCP), . . . . you begin to understand the full meaning of crony-capitalism as it is practiced in Beijing and Moscow.

 

Ask the retirees who depended on those bonds or the Pension, Mutual and Hedge funds which Obama so cavalierly demeaned as “speculators,” how they feel about the Obama version of “redistribution.”

The vast majority of individuals who were scammed weren’t aware of all the minutia of the complex deal. Many are very likely still in the dark about Obama’s redistribution of taxpayer cash, NOT to the needy, but to this Administration’s UAW friends, and in turn to himself. This is redistribution for Obama’s personal gain, and the personal gain of his crew.

Is it any wonder the top of the UAW’s food-chain has permanent passes to the White House?

Did the media admonish the President or Treasury Secretary for failing to carry out their fiduciary responsibilities?  Did the media support the free enterprise system which the country’s economic health depends on? Not at all. The media still yawns as laws are trampled, and rights are assaulted.

 

When you have access to a camouflaged, almost limitless mountain of cash to purchase ‘friends,’ your dreams of world-grand-mastership might just take on a veneer of reality, particularly when over 85% of your nation’s MSM is championing your cause, though it doesn’t understand what your cause really is.

The lying and nauseating demagoguery continued unabated at a recent Colorado pep rally, “. . . we created 4½ million new jobs. We saved an auto industry on the brink of collapse. . . . . what we did with the auto industry, we can do it in manufacturing across America. . . . ,” bragged Obama.

Would it educate the President to point out the fact that before the bailout, 75% of GM cars were built in the U.S., while today 2/3 of GM employees are overseas and 75% of its automobiles are made outside the country with most of the manufacturing occurring in China? Such questions might trouble his evidently limited capacities and confuse his mind about his claims that Romney  “Led the outsourcing of American jobs to India and China.”

This restructuring of a failing company by dictatorial decree was nothing more than theft from the highest power in government. If and when the details of this heist become clearer in the minds of all taxpayers, we may yet see legal recourse taken on behalf of those whose lives were damaged irreparably by the abusive and despotic actions of this Administration.

The return of America toward sustainable healthy economic growth, and away from 15% real unemployment, will only occur with leadership which comprehends and respects business and the entrepreneurial spirit, and not from a leader who has done nothing but live off the largesse of others and government.

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The Source Of Vancouver's Dangerous Housing Bubble

Heads in sand, Federal and Provincial governments have stood by as out of control forces abuse Canada's immigration largesse and place financial pressures that are already harming Canadian taxpayers.

Now Canadians get a glimpse at the sources of the cash that has corrupted the whole Immigration industry, and created a strange anomaly that has become known around the world as the Vancouver Housing Bubble.

The Financial Times has revealed, "Corrupt officials took $124bn out of China" outlining the size of the fraud perpetrated on China by corrupt officials. Canada has not been the recipient of the "investment" part of that stash, but its real estate has been impacted by large amounts of "cash sheltering." For twenty years the stories of Chinese "buyers," purchasing real estate in Vancouver, as well as Toronto, sight unseen, have been common place.

These ill gotten billions have created an unusual situation for Vancouver. As the Vancouver Sun reported, "Chinese are parking money in Canadian land like a bank." Its real estate prices have no economy to support them.

British Columbia produces very little that anyone outside its borders wants to purchase, other than the natural resources it digs out of its soil. And yet, it's real estate is among the most expensive on earth. Young people cannot afford to house themselves in Vancouver, and even find other parts of the British Columbia lower mainland too expensive.

The aberration of corrupt Chinese officials offshoring their cash has placed a massive burden on Canadians whose homes are in majority owned by banks. Canadians now shoulder more personal debt than Americans. The housing bubble that will inevitably burst, will begin a wave that will start in Vancouver, and will rapidly spread across the country. Neither Ottawa, nor Victoria, can do anything to temper the damage the burst will bring.

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• Another Misstep On Obama’s New Battle Front

There is little argument that the concluding G-20 meeting has been an international beat-up slugfest on America. Effective and substantial Strategic Planning is critical in the success of any significant endeavor. It should be ever-present when addressing the country’s economic long-term health.

Obama and his advisors fumbled once again on the international scene. Unfortunately, this time the fumble was on an economically critical battlefront.

The Fed continued its artificial manipulation of the economy by announcing that at the stroke of a pen filled with dollar printing ink called the Quantitative Easement Quill, a tidy $600 billion will be added to the float. While there is urgency in taking decisive action to stimulate hiring across the country, The Fed’s bond purchase program could have waited announcement another few days, particularly since it will be implemented over a very extended period. The Fed may in fact decide to scale back on the total amount depending on how the economic activity trend reacts.

Currency fluctuations have not been the source of the current economic crisis, but have been the outcome of such things as the overwhelming export of never to return jobs to inexpensive-labor-gives-us-cheap-products countries, AND we can artificially inflate national wealth by enforcing the financing of a home-for-each-citizen program.

Announcing the easement (read: circumlocutive euphemism for Inflative) just prior to G-20 gave China a major pass at the meeting, and in fact, pushed it to stand shoulder-to-shoulder with America’s “friends” pounding on America. The G-20 meeting should have been more about China’s maintenance of a weak Renminbi, and protectionism, rather than about the U.S.’s wholesale weakening of King Dollar.

The Bernanke announcement resulted in a verbal assault on America by everyone from China to Germany. America’s defense was left to representation by a President not familiar with things economic. It isn’t even clear that China’s real relative exchange rate hasn’t appreciated recently given the rapidly rising prices within China. Just like The Fed, whose complete independence from Congressional control or real oversight enables it to go wherever it wishes to go, so too China will ignore all bended-knee implorations from Obama and Geithner.

Now to make matters doubly difficult, the Administration is shouting into the deaf ears of its trading partners and geopolitical friends. China will continue on its merry way, and it has firmly confirmed that it would completely ignore the Administration when it admonished Obama as he went out the door with a, “Don't make others take the medicine for your disease,” (Yu Jianhua, a director general of China's Ministry of Commerce). The opportunity presented by the G-20 meeting to coagulate forces to pressure China is now passed, and the situation has been made worse for America.

This Administration really must take some classes on Effective Negotiating.

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• Don’t Believe The Pundits On This Being China’s Century

While countries struggle, muddling their way through stimulus packages and bailouts, China is being touted as everything from, “the best current place to invest,” to being, “the engine that will pull the globe out of its recession.” These entreaties and prognostications are sprinkled with reminders of the power it wields over America, given the huge dollar reserves that it holds. If I may quote Tony Soprano, “forget about it.”

China has asked rather politely, that the U.S. maintain its creditworthiness. No kidding? That plea was less a wish that the U.S. not skip town on its debt (devalue the dollar dramatically), than it was a declaration of a deep desire for a return to excessive U.S. borrowing. When the U.S. borrowed, it bought. When it bought, China prospered. This is rather basic, however, what is not so evident, or obvious to many pundits and experts, it seems, is the fact that China became inebriated through the glory days of consumerism. China now suffers the consequences of its acquiescence to a surety that the intoxicating euphoria enjoyed around the globe for a generation, would never end.

China understood that to become America’s principal provider of goods, it had to manufacture less expensively than anyone else. China excelled at squeezing productivity out of its labor force. It rapidly implemented a sweeping expansion of the necessary infrastructure to manufacture products faster, better (sometimes), and cheaper (always). New plants sprouted at an unprecedented rate. China’s expansion of its machine was based on an enormous assumption - the rate of growth it was enjoying through exports would continue unabated. It is now shutting down plants faster than it opened them. The capacity that was preparing for demand twenty years out, is now shutting down, and the Chinese are not about to ramp up their own consumption to energize reopening of the plants. While China has become a major manufacturer, the majority of its manufacturing is for, and on behalf of foreigners, selling established brands. China’s authoritarian “system” has made the creation and recognition of its own brands, all but impossible.

American consumers are not returning to the binge behavior of the past twenty years, although their ambivalence on trade with Asia persists. As for China, it focused on creating trade surpluses, and it adroitly squeezed its workers, but it did not prepare them, or its industries for broad based consumption. It has not created a self-sustaining, stable economic environment. China will dip into its coffers to stimulate internal employment, spending on infrastructure, or investing in what it knows best - export industries. Endeavoring to attract foreign investments, China will claim improvements in efficiencies, forensics, accountability and accounting practices of its indigenous infrastructure. The claims are beyond its ability to deliver. Until such critical elements as property rights, or a welfare breadbasket are implemented through appropriate taxation, Chinese consumers will be more prone to save, as they must individually concern themselves with how to pay for tomorrow’s meals.

Any cash China spends outside will go to acquiring natural resource producers for pennies on the dollar in the present climate, and countries, including Canada will be happy to sell out. This will do absolutely nothing for the long-term health of the North American economy.

There are currently foreign reserves of around $7.5 trillion held around the world with particular concentration of dollars held in East Asia, where since the late 1990s there was perceived need to protect against currency speculations, and a tendency, no, make that urgency, to feed (finance) the American engine driving China’s growth. We should note that the size of China’s reserve accumulations have, in the past couple of years, attracted the very speculation they sought to themselves protect from, which has further accelerated the bloating imbalance. The size of China's dollar reserves forces a tentative, even precarious, equanimity between the U.S. and China, but it is a potent equilibrium nonetheless. It will be a long road traveled before China finds sustainable balance in savings, consumption, exports, and internally stimulated (broad based) investment. It will also be a long wait before we witness demonstrations of international responsibility emerging out of China. Until then, China will continue to flex its new-found influence to push for such things as an independent currency a few degrees removed from the dollar.

The world’s economic history has been fueled by leaps from one bubble to the next, but the current recession may have a long wait for the next bubble of consequence that will yank the world out of the doldrums. Whatever its form, it is not likely to come out of the less than transparent, state owned, and controlled economy of communist China. China has created a massive middle class in a single generation, but it has yet to empower it. China will not soon be supplanting Americans, or Europeans, in the mall line-ups yearning for China-made-American-invented-branded-and-engineered products. American consumers are unconsciously pushing back the clock on that empowerment of the Chinese middle class through their dramatic behavior modification of the past year. Like it or not, global economic stability will for the foreseeable future depend on the West, and very particularly on America.

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• China’s Weak Gambit On A Currency Shift

China is calling for a move toward an obscure international currency known as SDRs (Special Drawing Rights) used by the IMF, to replace the U.S. dollar. The proposal on first blush suggests China is concerned with looming inflation in the U.S. and the devaluation of the debt it holds. While a reasonable concern, why would it push for such a dramatic shift?

The U.S. / China relationship is both complex and fragile. The American consumer has been the principal driving force that has fuelled the Chinese economy into becoming the world’s third largest. The result has been the creation of a communist controlled capitalist system very reliant on a democratic, open society on the other side of the Pacific.

The U.S. has long pressed for Beijing to allow its currency to float. All requests fell on deaf ears. Now with the world is in financial turmoil, and with the U.S. being blamed for mismanaging its own economy, there is some not so subtle muscle flexing being exerted by numerous countries, particularly China. Currency is a major element at the heart of any international debates. China’s suggestion that the world should begin moving away from the dollar changes the dialogue away from demands to see its own currency, the yuan, move higher which would reduce the competitive price edge of its products. Obviously this could in turn very negatively impact its exports. From the U.S. perspective, a rise in the yuan would aid in reducing its mounting deficit with China.

China purchased dollars and will probably purchase more of the Obama packaged U.S. debt. While it can clamor for a move away from the dollar, China has every incentive to see the dollar’s value remain strong, and will not sell its dollar reserves.

So what are we to make of China’s current grandstanding just before the upcoming G20 meeting in early April?

It is understandable that this populous country wants to increase its influence on the world’s financial affairs, and feels emboldened given its almost $1.5 trillion in U.S. securities, nevertheless, the world’s business is done, and continue to be done in U.S. dollars. China and Russia might wish otherwise, however trade is very dependent on the safety and security of the method of payment.

Although there have been abuses in America’s capitalist community, the vast majority of the country’s businesses are well managed organizations who present reliable balance sheets. The Euro has been touted as a potential alternative to the dollar, however the current economic state of countries like Germany, France, England, Italy and others, suggests that they are having difficulty putting their own and collective houses in order, affecting long term confidence on the common European currency. Some of the European member nations also present little reliability as worthy credit risks. For countries such as China and Russia, it would take two or three generations to establish confidence through the evolution of independent, authentic, trustworthy, and transparent organizations populating their economic landscapes.

The Knights Templar became extremely powerful in the middle ages because they could do what others, including whole countries, could not. Their influence was rooted in their reputation as a fighting force. They could guarantee letters of credit paying for goods moving across borders in a disorganized medieval world. America is not in a position to be losing it’s power and influence any time soon. Even as it goes through the process of recuperating from the abuse of its financial system, America remains the principal safe haven for the world’s cash, and the world's principal trading partner.

America holds two critical elements standing in the path of any change to the current status of the dollar; military power, and international confidence in its business sector. It is at this point inevitable that we will see a devaluation of the dollar as the U.S. government prints dollars on its way into unprecedented spending. This action will impact all of America’s creditors, however, it is difficult to envision an unseating of the dollar as the dominant reserve currency and the preferred currency of trade. It is also not likely that Americans will be unseated at the world's foremost consumers, and they buy in dollars.

No matter how much China beats the drums for change, SDRs will remain tools for the IMF to account for its aid to debtor countries, the IMF will not be creating a new super-reserve currency, and the dollar will maintain its position in trade.

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• G20 LAYS BLAME, BUT NO SOLUTIONS

A new world order? Not likely. What? You’re confused as to what and who makes up this new “Group” of countries now supposedly in charge of straightening out the world's economic recession? The politically loaded international photo-op was principally aimed at instilling confidence in the folks back home with two blunt instruments. One, “Watch me as I fly off to the U.S. because I’m really concerned about your plight, and I’m going to do something about it with these 19 other leaders.” Two, “… are you still watching? I’m shaking my finger at America. It is responsible for this mess, and we’re not going to take it anymore. How do I look?” Then home they all went, back to Paris, London, Canberra, Berlin, Tokyo, etc., back to their constituencies, having achieved nothing, but having left behind them in the American capital an odorous agglomeration of blame.

Countries around the world are relishing the misfortunes befalling America a little too enthusiastically. Their own balance sheets seem not to have cowed them into embarrassment. Sarkozi started the finger pointing process, quickly followed by Brown from Britain. The more powerful presences, China and Japan, were somewhat more polite, but the gloating from all members was evident, and its obnoxious cacophony has stained the cover pages of the world’s media.

It is also evident that most member countries believe it is now time to pounce, while the U.S. version of capitalism , and the country itself, appears vulnerable in their eyes. They feel that now is the time to create new international bodies intended to redistribute the economic clout from Wall Street to somewhere else. To where? Who knows? Perhaps to somewhere between Paris and Beijing, like the North Pole, or Geneva, or Moscow perhaps, … just anywhere but Wall Street. Anywhere but in the U.S. Dmitry Medvedev completely overlooked the fact that America held an election only days ago, and the largest economy’s electorate articulated its renewal by deciding to send Obama to the White House. He and his boss Putin felt it gratifying to assert that the United States had poor market oversight. Evidently Russia has not quite been brought up to date on the full translation or meaning of such terms as oversight, transparency, or even democracy, but accuse, they did. It read well back in Moscow.

Some humorous non-decisions by the 20 leaders were worth noting. The leaders indicated they would look into executive pay scales. That should be supremely comforting to most Russians and Chinese, whose leaders and friends are pilfering the treasuries of every business they can possibly find that produces any cash. How can an international body possibly dream of overseeing or regulating corporate entities? More likely, this is an arrow, that while directed at the U.S. banking institutions involved in much of the mortgage crisis, it will land in the middle of the Atlantic somewhere just North of Bermuda.

Another by-product of this historic conference was a call for the creation of new financial market watchdogs wonderfully identified as a “college of supervisors.” This group of experts would monitor major financial institutions dealing with transactions that crisscross member country borders. Actually, this was more than a call, it was a “pledge.” Pledges have more conviction. Such earnest commitment to oversight over financial markets would bring warmth to taxpayers from New York to Vancouver, as they settle in for the winter. The most heartening element in the pledge was its inclusion of hedge funds and derivatives under the oversight umbrella. This must read well in Caracas, but surely no one in North America is taking this seriously.

Granted, the $60 trillion in credit default swaps market is an aggregate of transactions floating in the ether of the electronic digital age, but we have not reached an age where civilization has advanced enough for international bodies to take oversight positions on the financial corporate firmament. National sovereignty will not allow it. Weak countries succumb to demands of organizations like the IMF. It is foolish to expect that any one of the 20 countries representing 90% of the world’s GDP would deign capitulating to such supervision or surveillance, particularly the United States.

It is understandable that a “plan” might be difficult to fashion in so short a time, however this financial calamity did not develop yesterday, and with the thousands of insiders and experts floating through the hallways and byways of 20 governments, it might not have been too much to expect the emergence of some creative ideas or concepts.

Calls for “financial stimulus” efforts are not a “plan,” and are definitely not creative. Oversight on the existing structures, even at a national parochial level, simply acknowledge that there is a problem, but will prevent nothing, and safeguard nothing of value since the organizations under scrutiny will be in no position to execute any abusive or dangerous transactions.

The world of tomorrow, which is no more than a year away, will have new structures, new frameworks of varying complexities, new inventive manners of exploitation that will create new financial bubbles around products not yet conceived. During the Dutch Golden Age, the spectacular, and scarce Semper Augustus tulip, with its blood-red flares and flakes streaking a white background, became a symbol of the 1637 tulip bubble. A single bulb of the rarity supposedly reached a value equal to a mansion in Holland. Delusions, illusions and herds create momentum. There always exists a human being or two, being human, taking advantage of that momentum. International bodies will never have the foresight to effectively provide oversight on behalf of their constituents. We now look forward to the musings of the next G20 meeting.

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• AMERICA FOR SALE?

The New York times recently asked “Does the America for Sale sign require a warning label?” The implication being, should the U.S. warn the global financial community that there are certain conditions to buying American companies? In this writer’s opinion, the New York Times has it wrong. These days it is not America that should have a warning label… the financial opportunists should get their Brioni designed lapels branded “HOSTILE”. Here’s why...

With weakness in the dollar, the world is coming to purchase everything, attached or not. It appears there are almost no limits… everything is for sale, our companies, our financial institutions and our real estate. Who’s buying? Well now, there’s the rub.

First let’s put the size of this new wealth in perspective. The average person going about the daily business of earning a living and attempting to build a life is familiar with the meaning of “wealth” as it might pertain to certain names who regularly appear in the media as being amongst the wealthy or wealthiest. Most of us can probably quote Warren Buffet’s stated fortune. By any measure the aggregate of his assets are substantial. They pale, however, when compared to the size of the foreign funds that have been accumulating through this past decade of oil price runaway inflation and global economic boom. Whether from trade, as China has done, or from the sale of a critical resource like oil, foreign governments have accumulated colossal amounts of cash. Some of this bullion has been parked in so called sovereign wealth funds. To this potent wealth, add the existing large pools of capital in off-shore trusts and funds also controlled by foreign governments, desert princes, dictators, and inheritors, and you have potential for irrepressible influence and leverage. Little is revealed of these enormous stores of wealth. They are not internationally accountable and there are no visible audit trails. They provide no structural evidence or transparency and their influence in the North American economy and markets is substantial.

Historically, corporate America has viewed these large baskets of cash as usually non-interfering deep pockets. Until now, it has been considered discourteous, indelicate, irritable and absolutely ungentlemanly to ask probing questions. The “depth and breadth” of this new-found power will engender audacious influence on whatever elements might fit the policy interests of its “owners” in the moment. Trade secrets will only be a line item in their “influence and pressure” list of priorities. They will have bigger fish to fry. The disturbing challenge to both the U.S. and Canada is that in the majority, these funds represent foreign entities antipathetic to North America’s way of life, its social structures and mores, its political structures, its culture and most importantly, its freedoms. This new financial clout is in fact new-found political authority for foreign geopolitical forces. This should energize all North Americans to sit up and take sober notice.

Heads of North American corporations, regardless of the wealth they have been able to privately accumulate, are pawns in the larger scheme of the global movement of capital and influence. It is unfortunate that senior executives managing these companies too often demonstrate a dearth of common sense, and default to “self-service” instead of considering the greater national perspective. Only very occasionally an acquisition emits blinding optics that politicians cannot ignore. Out of Congressional or Parliamentary pockets come the admonishing waving fingers incarnating “national security” or “national interests” and investigations are launched. Rarely is an acquisition, even one jeopardizing national security, ever stopped in its tracks. For such occurrence, a glaringly abusive corporate capture would have to have received an overdose of public attention.

Let us not ever assume foreign powers can be implored to act in our best interest. We can barely influence our neighbors to act conscientiously. Ask the Ukraine if getting oil cut off in winter by Russia was for financial reasons, or was for offensive political coercion. To date any attempts to bring reason to the table, clarify motives, or establish parameters for investments (acquisitions), have been all but dismissed out of hand and rebuffs have come with subtle warnings from individuals representing foreign interests. The IMF and the World Bank cannot be expected to provide surveillance or even negotiate on our behalf.

Is the current methodology satisfactory? 3Com’s recent presence in the headlines is a perfect reminder of the too present proclivity for careless and self-indulgent influence affecting decisions by both sides of the equation - the executives as well as the acquisitors. Only slightly further back in memory reside the shadows of Oriental Steam Navigation Co. (P&O) and its six major U.S. ports. There were at least two sources of bewilderment for Americans. One was that the company’s sale to the UAE (a foreign government) was being touted by the U.S. President, and the second was learning that the biggest “port” authority in the world was Dubai Ports World. “What? Who? How was this possible?” When it was finally slapped down following very loud public objection, did the threats from the UAE about damaging relations etc. ever come to pass? Not a chance. We should file that for future reference.

Now let’s go to the other side of the globe and consider the enlightening attitude of the Chairman of the China Investment Corporation, Lou Jiwei, speaking of the U.S., “if any country receiving investments has misgivings, China may choose to leave or look elsewhere.” We must heed this feigned indifference, while emulating the dispassionate “who cares.” Let’s not be so quick to further lubricate the already slippery out-of-balance free trade system. Prudence and sound judgment absolutely have to prevail, and balanced rules applied and followed.

Only a vigorous and impervious stance can be effective. It is a rare negotiation that is effectively concluded from a position of weakness. Since all acquisitions cannot be reviewed, foreign governments aren’t about to restrain themselves and executives will push boundaries whenever possible, what policy will protect the home front interests?

Answer: RULES. Congressional rules, not negotiated rules. The rules should include transparency of structure and control. The U.S.’s Committee on Foreign Investments should be dragged out of its closet and a more public vehicle installed for oversight.

This is at odds with the current approach of placating out of fear or out of misguided spirit of gentlemanly co-operation or perhaps ulterior motives or even backdoor inducements. Endless objections would surface, “we fear retribution” and “don’t we want their money?” and “our economy is in a downturn” and even “we can’t afford to right now, we need foreign investment” and “we can’t annoy these foreign governments” etc. Where else would they place their vast pools of capital? Will Saudi Arabia, Kuwait, Norway and Singapore switch a few trillion dollars to China's corporate sector? Or will Qatar, Bahrain and the UAE pull out of U.S. treasuries and markets, and perhaps invest in Russia’s unrecognizable version of democracy? Is there even another continent that the world’s largest pools of cash will move to? For the crumbs (risk capital) maybe. Not for the large cash. Owners of this new-found wealth and power may resent America, but they are not fools.

The U.S. remains the most stable and safe place for the world’s capital. PERIOD. No need to be arrogant – just confident.

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• AMERICA’S CHINA QUANDARY

While America’s attention, and too many dollars are directed at the Middle East, a looming giant in the Far East is evolving into a potentially more formidable antagonist on the world stage. The average American should be more preoccupied with current and future events in China than with any present or future embrace of democracy in Iraq, or anywhere else in the Middle East for that matter.

North America’s lifestyle has become dependent, even addicted to cheap imported goods from Asia. Practically every product we purchase at our local mall is manufactured in China, with only a few manufactured by its neighbors. The telephone call you make for service on those products goes to a bank of service reps in the Philippines who can instantly call up your private information. Manufacturers are providing us goods we might otherwise have to do without, or wait longer before acquiring. How much more would we pay for those goods? No one knows. That depends on too many variables, including existence of monopolies, company market presence, competition etc. Meanwhile, WalMart has become the standard bearer for free trade.

In the almost 166 years since the Treaty of Nanking when trade was opened up across the wider Chinese landscape, the West’s relationship with China has rested delicately on uncomfortable trade and not much else in acquiescence to the political and cultural divide. In the nineteenth century Britain positively counter-balanced its purchase of silk, tea, gold, silver and porcelain from China by becoming its principal opium supplier. The Treaty of Nanking obligated China to accept more opium grown on plantations Britain controlled in India. Some accounts of this period suggest that up to one quarter of the Chinese population became addicted. In the context of such history including the contemptible Opium Wars, it is not surprising that even after much time passed, attempts to admonish China for human rights violations are falling on deaf ears. Meanwhile, over a century later, the tide of goods leaving China for U.S. ports in 2007 was $321 billion. Only $65 billion worth floated in the other direction. Strangely, that inequality in movement is in and of itself, not an insurmountable problem, yet its optics cause unease on this continent.

Forecasts suggesting China will emerge as the world’s largest economy within one generation are likely accurate given China's propensity to remain pragmatic and maintain the status quo. It will do deals with anyone and any country that will serve its needs. It makes deals with oppressive dictators in Africa for natural resources and doesn’t meddle with local politics. It evidently does not see itself as an international policeman.

Congress is unlikely to take dramatic action other than uphold the concept of “free trade” although there is really no possibility of mutually beneficial free trade if there is not broad based balance between the partners. Trade sanctions would do little to repatriate jobs. Multi million dollar bonuses are too much incentive for heads of corporations to ignore . . . product manufacturing and the provision of services will continue to move off-shore. China has shown that it will move at its chosen speed in all affairs, including the devaluation of the yuan. It’s almost as if the corridors of power in Beijing are resonating with whispers saying “Global instability? What instability? We’re good. So what if we have mountains of foreign exchange? Did you manipulate the currency? … Nope. Did you?”

We all witnessed Matel apologize to China for shipping defective toys. Corporate America apologizing? By any other term, this is Fear. Fear that they won’t manufacture your toys for you if you don’t pull a mea culpa. Matel suggested that they hadn’t been careful enough with their quality control. That’s called confusion. Confusion because is shows lack of confidence. Such confusion was also present when Yahoo turned over names of dissidents to the Chinese government. Confusion and fear… that’s when stupidity sets in, and it did.

Tightening the belt on this side of the Pacific and internationally promoting the rule of law might have some influence on America’s long term peace of mind. That should include promoting full disclosure and transparency for Chinese companies that American firms take public. Can we expect that to happen? Not really. Wall Street has set up camp in China to raise capital for Chinese firms. Will they turn a blind eye to the lack of internationally accepted reporting procedures we have come to expect here? Will Wall Street firms defy common sense to make hundreds of millions in fees anyway? Will they attempt to rectify concerns pertaining to such trade apprehensions as subsidies, piracy and protected intellectual property violations? Past behavior suggests not. Anything goes, under the rationalization “We want to be in position to tap this burgeoning market. If we don’t, somebody else will. Why should we take a position on such elements, we’re not in the politics business.” Those are rationalizations, of course, for not doing the right thing.

It is left to the U.S. government to exert pressure. Unfortunately, threatening protectionism is no leverage at all when you’re admonishing a country holding over one and two third trillion dollars in U.S. government securities. Holding so much of America’s debt impels some moderation on China's part and we can be grateful that it requires economic stability as much as we do. At least for now. Let’s not create an even bigger power than the one we now face. Balance of power nurtures constraint and moderation.

America, cut back … way back, and save. Lousy time to be suggesting this, but is there a choice? It's time for America's middle class to become selfish.

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