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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• Obama’s Not So Free Money

Government interference has simply never, repeat never, enhanced the efficiencies of markets. While Obama may claim to be a scholar of history, he appears not to heed what he has read, or simply does not believe it. Learning, real learning, is a long process of trial and error. History is full of trials and errors. Why is this not obvious to the current White House resident?

Attaching operational strings to government stimulus money is forcing many companies to take actions they would not otherwise implement. Along the longest and biggest by dollar volume trading border in the world, are endless American and Canadian communities, as well as companies that have co-existed successfully for generations through mutually beneficial trade. Obama’s exigent and rigid imposition of trade restrictions such as provisions requiring that only U.S. made steel, iron, and other manufactured products be purchased for state and local projects funded with stimulus funds, are twisting communities into stagnation and onto the unemployment lines. While in contravention to the free trade agreement between the two countries, such sweeping and misinformed restrictions have generated reaction from both Sellers and Buyers on either side of the 49th. parallel.

The impact on the U.S. side is that Americans are losing jobs. Canada continues to represent a sustaining market for many American companies manufacturing products used in the housing industry, for example, while the U.S. housing market has dried up for the foreseeable future. Why annoy your own marketplace, and propel it to react and to stop buying from you? “Buy American” makes sense where communities have decided where and on what such stance is of benefit. Enforcing such protectionist programs wholesale is being blind to realities and needs of business, trade, and life of communities where the rubber meets the proverbial road.

Government has no business dictating methods or practices to companies. Set laws for the land and punish those who break them, but don’t interfere with the functioning of such a critical element in the successful progress of a society. In particular, don’t interfere when you have no concept of what a business requires to effectively and profitably function. Allow companies to decide for themselves where to source products and services, particularly when such products are not available to them other than going North of the border. When businesses complain of the paperwork mountain required along with endless strings attached, someone should realize that the Obama free money has been rendered too onerous to be accepted.

If government is going to even establish suggested guidelines, first understand the nature of the beast. Canada, for example, is America’s biggest trading partner. Unlike almost every other nation the U.S. trades with, Canada’s standard of living, lifestyles and society in general are very similar to its own. England, Germany, and France don’t come close, and China isn’t remotely in the same ballpark.

Contrary to Obama’s representations to Unions, the reality is that Canada and the U.S. benefit from the NAFTA arrangement. Trade with China, on the other hand isn’t trade on equal footing, since China has imposed endless restrictions on imports. It is supremely idiotic to treat these different trading “partners,” with the same broad brush Obama style protectionism. While he pretends that he now does not wish to renegotiate NAFTA, his actions are not only confused, they are affirmatively ambiguous.

We can expect to find Obama once more make like Gretzky and implement a fast skate backwards down the ice on this front, much as we have seen him skate on almost everything else this administration has acted on. He forgot to do his homework and he will be forced to pull a reversal on the strings attached to the money, as will local and state governments involved in the cash distribution chain.

The financial services industry which came to represent an enormous percentage of the Nation’s total considered productivity output enchanted America into complacency and unreasonable personal debt. A self-serving Congress failed in its oversight of major financial service providers, and we are now enjoying the fruits of the deliberate bungling. America needs to return to creating, developing, building, and manufacturing, instead of being the world’s bean counter and dominant consumer.

Free enterprise did not bring us the current economic disaster, although free enterprise has become a favorite whipping post of many left leaning expectants of an uncurbed welfare state, and of the current administration. Businesses across Middle America should be allowed to function without government interference, and shouldn’t be made to feel that the new Administration has launched a war against them.

Dismembering the system that has produced the economic engine fueling America’s way of life will be detrimental to that standard of living. As he rushes headlong into an unfathomable indebting record $1.8 trillion deficit, Obama should stop long enough between Air Force One cross-Nation hops to listen a little more attentively to those businesses that are now saying, “No Thanks,” to the stimulus free money. He should pay special attention to the “why.” He should also establish for himself what might be defined as “free trade,” and what parameters such trade might entail before his next policy imposition.

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• CANADA’S BREAKING HEALTH CARE SYSTEM

The past year has seen much made by American media, including the film Sicko, of the supposedly superior Canadian medical system. Before the new White House resident rushes off to implement a national health care system based on the Canadian model, examine its realities. The Canadian health care system is breaking just when it is about to be tested with unprecedented pressure from a wave of aging boomers.

One of the benefits of being a Canadian resident is that you get a Medicare card. This magic access card opens doctors’ offices as well hospital emergency room care, at no cost to you. The No Cost factor is appealing and it is misleading. God help you if you require an operation that necessitates an operating room. Wait six months to a year, or two, unless you’re actually dying, … well actually, that’s not quite right either, some people die waiting. The waiting is a very real impediment to long term health since patients are impacted by irreversible damage from progressing deterioration. If that isn’t enough, add the onset of depression while painkillers become a daily staple of patient diets, and you have a health care system in the midst of cardiac infarction.

What could have gone so wrong? Why is there a new term called “health-care rationing” if the system is so enviable? Isn’t rationing a concept that suggests capitulation?

There is an abundance of strategic thinking for fixes that range from preventative care as in don’t smoke or you’ll get sick and take up a hospital bed, or doctor retention, meaning, pay these guys more or they’ll move to the U.S. The system is breaking because its promise is under funded and many using its services don’t contribute a dime to its costs.

Canadian taxpayers should ask themselves why so many of the new condos and skyscrapers that have clogged up their major cities in the past decade are over 50% empty. Look over a major city skyline between eleven o’clock and midnight, and count lit apartments in recently build structures. In some cases vacancy is 75%. The taxpayers should ask the question, then listen for answers. There are multitudes of well-documented methods of abusing the system that all Canadian politicians ignore, nevertheless as it relates to Canada’s medical care failure, a vacant condo provides some insight. That vacancy is both an address and a ticket to free medical care through abuse of the Canadian immigration service by foreign residents. If you’re a foreign student at a local university, you are even invited to apply for a Medical Care Card after on 3 months of residency. How easy is that? You can also use one of a long list of scams being promoted under the “new-would-be-entrepreneurs” programs where a small investment, quickly returned once you’re in, gets you in the Canadian system which has no effective method of tracking what you do or don’t do. Some retail businesses seem to have new owners every few months. You can almost set your calendar to the cycling.

Too many “visitors” of the past decade have been shown to be opportunists. Canada has little control of who enters or when. The acquisition of Canadian landed immigrant status or residency, and all of the rights vested therein is an abused process and the abuse is rampant.

Without reviewing all the possibilities, and the vast impact on the rest of the Canadian social or economic fabric, it remains that too many who pay no Canadian income taxes, show up when it is time to get medical attention. The new breed of “pretend Canadians” who pay no taxes, are not the only ones to abuse the system for health and other reasons. Canada doesn’t tax those who have slid assets to offshore tax havens to end their tax paying days. These expatriates temporarily move, but come back when the doctor needs a visit. The answer to the problem is simple, but it would take the enactment of a few bills by Parliament, and Canada finds such a step a virtual impossibility when it is saddled with a minority government that has no will. The nation with the world’s most open immigration system not only has the most liberal policies, but those lax policies are being exploited, and the taxpayers are the ones hurting.

So here’s a suggestion for when there is a majority government in Canada:
Place a surtax on all foreign owned real estate, commercial and residential, using a double digit multiple of the current tax levies based on the assessed mill rate, and transfer that revenue to the medical care system of each Province. A drop in real estate values will result? Not likely, but Canadians can wish.

While America builds its new medical care system, it should ignore the vaunting politicians North of the border, and talk to the taxpayers. They’ll be easy to find. Look in the long tail of any line-up.

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• A WATER POLICY FOR CANADA

Overshadowing world economic, energy and pollution challenges, there looms in my opinion, the biggest challenge mankind has ever confronted. It is also possibly the most complex. The world’s need for fresh, potable water has already exceeded its sustenance ability level. Not its want but its basic requirement. The usability of the little fresh water that exists on earth is being depleted as a result of environmental and climactic repercussions, many of which may be permanent, as well as through the industrial destruction of water ways and reservoirs. All this is a result of the perpetual intensification of the human imprint on nature. About twenty per cent of the earth’s population isn’t getting its daily ration and forty per cent is without essential sanitation. The status of water is being elevated to “basic human right,” well beyond other less fundamental commodities such as oil or even wheat. It has reached the realm of oxygen. Although easy to accept if you live in a rare country on the "we have plenty" side of the water debate, this classification can lead to potentially delimiting barriers to its movement and sharing.

All societies, both the have and have not in the water firmament should become familiar with this perspective. It is one of the highest hurdles to be overcome as water begins to flow in bulk quantities across borders, through other than natural means. As new realities permeate the domain of this very basic resource, such as becoming commoditized and traded through futures contracts, or as innovative methodologies surface for moving bulk water from one corner of the globe to another, events cascading on the flow of this life sustaining resource can only be described as a paradigm shift. There is little doubt that water will in time become more valuable than oil. Although water is already an economic commodity, with sound reason and in a spirit of broad magnanimity it could also become a social and cultural commodity to be managed and traded responsibly. The predicament here is weakness in government resolve.

Humanity will look to those who are geographically privileged and inadvertently placed in control of large quantities, to manage it responsibly and to share. While many suggest the problem is a financial one, or a question of waste, or just as likely the result of pollutive practices, mankind isn’t about to dramatically alter its behavior. There have have been endless debates and studies. Now it is time to establish policy.

First, and here's the anomaly, lay a deep line in the sands of water’s control - Public vs. Deregulated Privatization.

Historically, the exploitation of natural resources has not been executed in any manner that maximized the benefits to the federations from whose lands they were extracted. Unfortunately, corporations with the help of the legal profession were able to take advantage of situations as the public’s representatives engaged in negotiations with mandarins unfamiliar with the terrain. We have endless examples where the public’s interests were negotiated from positions of irresolute bearing mired in gullibility and ignorance, rather than from strength. Radically contrasting dispositions and strategies must be undertaken for the responsible stewardship of the fresh water systems.

The following is the synopsis of a plan specific to Canadian federal and provincial governments. It is also a proposed mindset.

Canada is the obvious place to start given that it holds roughly 20% of the world’s known fresh water supplies, and perhaps even more if one considers its percentage of strictly “clean and usable” fresh water. British Columbia in particular has the anomalous and glorious advantage of having 7% of the world’s fresh water supply flow through it’s tributaries. It has pristine fresh water in excess of 400 million-acre feet (AFY) each year (1 acre foot = 325,851 gallons or 1,300,000 liters). That means over 130,340,400,000,000 gallons flow into the Pacific Ocean each year. The numbers are staggering, and that’s just B.C.

Taking a leadership position and a prescient approach within this new paradigm will also provide exemplary guidance that other communities can mirror when such time comes that they too must take advantage of their own natural water resources to enter a market expected to become a multi trillion dollar industry. Canada can take the opportunity to take hold of the “fresh water enterprise” before corporations and international bodies dictate the conditions and substantively set the framework for all of its aspects.

Plan:
• Form a federal trust, including the participation of all Provinces to control and conduct the commercialization of all fresh water bulk sales from Canadian watersheds. Although this federal trust will report to parliament, its net income should go strictly to the benefit of the country’s social underpinnings of medical care, pension systems and education whose financial futures appear grievously under-funded. Distribution of funds should be proportional to the base of tax paying citizens domiciling in each Province.
• Set levels of transparency on all elements of ecological impact on the removal of targeted percentages of the fresh water flow.
• Set a sustainable and environmentally sound policy on the stewardship of the country’s watersheds. Take leadership on the research front as has been demonstrated possible by such institutions as the University of British Columbia, whose auspices and participation should be encouraged and invited.
• Establish levels of permitted collection from each targeted watershed.
• Launch the initiative in the most readily accessed water sheds and the ones closest to the intended markets. Profits from the nominal initial expenditures will finance expansion of infrastructures as well as the creation of reservoirs for satisfaction of long term needs.
• Set parameters for negotiation of just and reasonable agreements on the sale of fresh water, protecting the long term interests of the country, proffering ethical dimensions to all relationships.
• Ignore all entreaties from foreign bodies such as the World Bank, the International Monetary Fund, foreign capital funds or multinationals.
• Don't accede to the too often misguiding postulation that private management or private participation is required for any competent or efficient commercialization to ensue. This is water we are dealing with. No massive infrastructure decimating the landscape or damaging the ocean is required.
• Ignore all pressures to deregulate and privatize. Too many examples of abuse currently exist and the daily headlines are evidence that proceeding publicly with caution will be the only way to ensure achievement of social and ecological objectives encompassing this unique resource. How do you provide real oversight on a conglomerate based in Dubai that might be obscurely controlling your fresh water? Rattle a finger? ... not effective. Send in the troops? Not likely, but then would you wince when the CEO pays himself a $400 million bonus for a year?
• Establish rules of trade without getting bogged down by confining and paralyzing international bodies. Erect the precedents.
• Terminate the controversy over terminology in NAFTA dealing with what designates "bulk" water as a product. The squabble over whether a ship is really just a BIG bottle and therefore should be treated the same way under NAFTA is silly. Make it so.

To do otherwise would be foolish and create a widespread dissonant roar of discontent from a population claiming its “basic human right” which would bring to a grinding halt the common sense exploitation of a very renewable (for Canada) natural resource that could benefit many generations to come.

As the urgency of the world’s demand for water takes a dramatic shift, Canada would already be along the path, taking responsible, prudent, and compassionate bearing in the management of this too precious and fundamental resource.

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