Labor Shortages in Chinese Manufacturing

From the China Daily:

Companies in the Pearl River Delta, the country's manufacturing heartland, are facing major labor shortages after workers are failing to return after the Spring Festival holiday.

Nearly one in 12 migrant workers is not expected to show up after the break in Guangdong province, home to some of the country's leading exporters, according to survey of leading employers.....

Workers are said to be disillusioned with poor pay and are now finding better job opportunities near their hometowns and villages, which are benefiting from economic regeneration as a result of the stimulus package.

The article also notes that, as wages rise, the low-end export industry in China has to move up the value chain through technological innovation.

A problem is that the stimulus, i.e. bank lending, mentioned in the article was probably temporary in nature. And if many companies are not ready move up the value chain, then China could find itself squeezed between an eroding export industry and a wave of bad loans.

It's a strong possibility that China will begin posting trade deficits this year, due to the collapse of trade to the 'developed world' and a surge of imports related to their stimulus measures. Some analysts think this might cause a so-called black swan of renminbi devaluation if the dollar continues strengthening.

1'China says it may swing to trade deficits in next six months' - Marketwatch, Oliver
2'Migrant workers stay home' - China Daily; Limin, Moody

The Divergence Between Small Business and MNC's

While it appears many U.S.-based multinational corporations have been able to maintain growth though expansion into emerging markets, small businesses - more reliant on the domestic economy - are in a state of deep recession.

From Sandra Pianalto of Cleveland Federal Reserve:

...according to the most recent survey of the National Federation of Independent Business, or NFIB (January 2010), members cited poor sales as their single most important problem. The latest American Express Open Pulse Survey also expresses a similar perspective.

Small businesses create most of the jobs in the economy, and as a sum, are a more significant share of the total economy:

The importance of small businesses to our economy--especially in the early stages of a recovery--cannot be overstated. They have generated 64 percent of net new jobs over the past 15 years. During the initial years following each of the prior two recessions, those in 1990 and 2001, the strongest expansion in employment came from very small firms--those with less than 20 employees.Collectively, these statistics tell us that small business is in fact big business, and its impact is even greater because it remains one of the most innovative and flexible parts of the economy.

There are factions within any ruling class, and that between MNC's and small business will become more pronounced if this type of economic divergence continues. It could create splits in the current political architecture, such as a new party, or a right-wing 'populist' movement within the Republican party.

1'When the Small Stuff Is Anything But Small' - Cleveland Fed; Sandra Pianalto

The Housing Bubble and Jobs

In an economy where manufacturing jobs are vanishing over the long-term , housing construction is an area that is still labor intensive and can't be outsourced. It has a strong union presence and the wages aren't bad for an experienced worker.

The collapse of jobs in housing and construction means a lot of pain for workers who are deeply entrenched in these professions. There are few other blue-collar industries left that provide a large amount of jobs. Technology in high wage countries is making the human unnecessary for a wide range of tasks. This should be a good thing, but when capital is controlled by a very small group of people interested in profit, it is means an unhealthy economy for the general population.

I suspect the housing bubble was allowed to balloon because elite policymakers know about this jobs quandary. There was nothing to replace it within the economy as currently structured.

In the coming decades, more technology should mean less work and more leisure time, equally distributed. Not more work for a few, with a large pool of unemployed serving as a threat.

Keynes Attacked Income and Wealth Inequality

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.

-- Keynes, Chapter 24 of the General Theory

Inequality in the developed world is as severe now as when Keynes wrote, if not more so. It's curious that modern Keynesians spend so much time justifying deficit spending; while Keynes supports it in many cases, in the above passage (an important one, as it opens the last chapter) it is not central. Inequality of income and wealth are.

Avoid talking about income redistribution, and one can avoid unpleasantness about increasing taxes on the wealthy. And bond market rentiers are not displeased with government deficit spending, as long as inflation is kept in check.

Toyota and Japan

From CNN:

...growing in Japan is an undercurrent of conspiracy theories: That the U.S. government, now majority owner of General Motors -- the world's largest automaker before Toyota took the throne last year -- has an interest in bringing down the reputation of the company and its leader.

I don't think it has much to do with the U.S. government's stake in GM. But something does seem a bit 'off'. The same Congress of health care and jobs gridlock is acting with ruthless efficiency when it comes to Toyota, after years of ignoring consumer complaints.

I do wonder if it has to do with the new government in Japan and its stated desire to become more independent of Washington. Though economically it remains a country very much reliant on the U.S. market. The most prominent issue in dispute is the future of the U.S. military on Okinawa.

And along those lines:

The top U.S. Marine in the Pacific said on Friday that his forces needed to be based on the southern island of Okinawa for strategic reasons, as Tokyo struggles to resolve a dispute with Washington over relocating a base.

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As an aside, I recall a CNBC interview with billionaire Wilbur Ross, when he mentioned 'worrying' campaign promises coming out of Japan, shortly before Hatoyama's Democratic Party came to power. It was clearly something on the radar of at least one very wealthy person in the ruling class.

1'Japan Inc.'s reputation rides on Toyoda' - CNN; Voigt
2'Top U.S. Pacific Marine says base must be in Okinawa' - Reuters

Bus Drivers Are The Problem

So says liberal Gavin Newsom, who is a long-time family friend of San Francisco oil-heir billionaire Gordon Getty. Gavin's various businesses were initially financed by Getty. And his father, William Newsom, is the administrator of the Getty family trust.

On the heals of yesterday's vote by Transit Workers Union (TWU) Local 250 rank-and-file to reject the contract concessions negotiated by their President, Irwin Lum, and Mayor Gavin Newsom and senior management at the San Francisco MTA, Mayor Newsom expressed dismay and said he would support a November ballot initiative to force the issue with the union.
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"We'll go to the people of San Francisco, we'll get signatures collected immediately. Expect that to be done in the next week or two," said Newsom.

Mayor Newsom painted the issue as one between reducing TWU salaries or raising the fares for seniors, youth, and disabled riders, and he was confident the public would send a stern message to the union. "I don't think the riding public is going to accept a wage increase for the drivers at a time when their [own] wages are down and the fares are going to go up, particularly seniors, youth, and disabled."

Once again working class people will be turned against each other. Without a socialist left movement, there really is no force in U.S. politics capable of combating these types of grotesque divide and rule measures.

The money is there, and Newsom knows where to find it. He can ask his good friends.

1'Newsom Upset at Muni Operators’ Rejection, Threatens Ballot Measure' - SF Streets Blog
2'SF transit union rejects millions in concessions- San Jose Mercury
3'Bringing Up Baby Gavin' - SF Weekly

"Leadership-Class Solidarity is Weaker"

David Brooks, in between raving and whining, does put his finger on something. The new Establishment , with its colossal fortunes, has basically over run the old Establishment, but in its wake has created a kind of anarchy in the ruling class. This makes it difficult to 'get things done'. One wonders where this will lead.

The Protestant Establishment was inbred. On the other hand, those social connections placed informal limits on strife. Personal scandals were hushed up. Now members of the leadership class are engaged in a perpetual state of war. Each side seeks daily advantage in ways that poison the long-term reputations of everybody involved.

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1'The Power Elite ' - David Brooks, NYT

The Sociopaths Among Us

John Yoo, Bush's former legal guardian, on massacres:

The architect of the Bush administration's memos authorizing waterboarding and other “enhanced” interrogation techniques told investigators that the president of the United States has the power to order the "massacre" of civilians, according to an internal Justice Department investigation released late Friday.
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Included in what Yoo dubbed the "bad things opinion," according to the documents, was a section outlining the president's wartime powers. "What about ordering a village of resistants to be massacred?" an investigator asked Yoo. "Is that a power that the president could legally—"

"Yeah," Yoo replied, according to a transcript provided in the report.

"To order a village of civilians to be [exterminated]?" the questioner replied.

"Sure," Yoo said.

1'Justice: No misconduct in Bush interrogation memos' - Politico

"Why Doesn't 'Greed is Good' Work?"

Asks 'Jesse's Café Américain' :

Why doesn't 'greed is good' work? Because rather than work harder, a certain portion of the population, not necessarily the most productive and intelligent, will immediately seek rents and extraordinary income obtained by unnatural advantages, by gaming the system, by cheating and coercion, by the subversion of the rule of law, which will sap the vitality of the greater portion of the population which does in fact work harder, until they can no longer sustain themselves. And then the greedy seek to expand their venality, and colonies and then empires are born.

A most excellent post.

1'Modern Economic Myths and the Failure of Financial Engineering' - Jesse's Cafe Americain

A Bit on Private Investment

The collapse in private investment has been the principal drag on GDP growth since 2006. From 2006 through the end of 2009, it fell by 28 %, while the other three areas of GDP - private consumption, net trade, and government spending, all improved. It has fallen from 18 % to 11 % of total economic activity as measured by GDP.



Looking at private investment, about 70 % of the drop is from Private Structures (housing), and another 20 % from Equipment and Software.

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In terms of GDP stagnation, the recession is almost entirely due to the collapse of investment in housing, and the implosion of the housing bubble. This is not a consumption-led recession. Personal consumption has risen from 69 % of GDP at the beginning of 2006, to 71 % as of quarter 4, 2009. Consumption of services managed to grow every quarter, even during the steepest part of GDP decline.

This suggest a few things. Housing isn't going to come back in a big way. And folks who spent a good part of their careers building houses and working in real estate are going to have a hard time transitioning to another field. Second, strength in services means the wealthy are doing just fine. But the increase in private consumption in relation to GDP means the so-called 'imbalances' haven't gone away, either in the U.S., or it looks like, overseas.

Obama the Weak

He appoints a budget deficit committee to tell him what to do. Pretending to negotiate compromise between 'all' parties (i.e. the usual gang) and going with the folks who have the biggest financial weapons. So we can expect suggestions for harsh budget cuts in programs that benefit the under $ 250,000 crowd, and higher taxes. A VAT tax seems to be in the offing.

Perhaps this is the type of gumption it takes to get ahead in America.

As an Anonymous poster at Zero Hedge wrote :

It's the fact that Obama didn't have the balls to do it himself that is sad. He creates a 'side committee' to do his dirty work. Now he can say, "I didn't raise your taxes, the committee did."

In observing day to day life, weak people are usually the most dangerous, due to their penchant for over-compensation. (Iran's leadership should remember that)

1'White House's OMB Seems to Remove All Doubt: Sub-$250,000 Tax Spree To Commence' - Zero Hedge

Links

1'In China, shift to privatized healthcare brings long lines and frustration' - LA Times

Life expectancy growth in China has slowed in relation to other emerging economies over the last 20 years.

2'California teachers’ pension fund faces $43 billion shortfall' - wsws.org

California teachers do not get social security 'credit' for their work. So this pension is their primary source of retirement stability.

3'A Danger in Thin Air' - Counterpunch; Halligan

On India / China border disuptes.

4'Norway's Yara to buy Terra Industries for $4.1B' - AP

Imagine the hysteria if a Chinese SWF had bought a major agricultural company in the Heartland.

The U.S. Has Veto Power in the IMF

So talk about a happy new capitalist world order is more than a bit premature (see below). Unless people think Washington is going to give up that veto power, ever. There's no reason to think that will happen. Rather, it's more likely we will see a collapse of international agreements and a world of regional blocs. More Copenhangen's and Doha's. Over this fragmentation the U.S. military will be charged with 'keeping order', a task that looks increasingly difficult.

Global economic power has shifted. As suggested by a nice Godfather parable by Hulsman & Mitchell, the United States is "slipping." We've moved from a uni-polar world to a multi-polar globe. The United States will remain the "chairman of the board," continuing to hold more IMF votes than any other single country - as well it should, as the world's largest economic and biggest contributor to the IMF. But it will have to share power, most notably with China. And this will be the real, long-lasting change at the IMF.

1'When the shoe is on the other foot: Changes in Global Governance" - Vreelander Blog

The Logic of the Libertarian

Most people don't have defined-benefit pension plans, therefore no one should have defined-benefit pension plans.

Most people have expensive health insurance that doesn't cover much, therefore everyone should have expensive health insurance that doesn't cover much.

Most people are working longer and harder for less, therefore everyone should be working longer and harder for less.



(Note: Excludes billionaires and their intellectual head servants.)

Airborne Lasers and Algae Jet Fuel

A high-powered laser aboard a modified Boeing Co 747 jumbo jet shot down an in-flight ballistic missile for the first time, highlighting a new class of ray guns best known from science fiction.1

It's still unknown whether this will have any 'real world' value, but it does show that the U.S. is quite capable of dominating sectors which receive government support. For the U.S., this is military equipment and weapons systems.
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Just read this, and it's probably a better example:

The brains trust of the Pentagon says it is just months away from producing a jet fuel from algae for the same cost as its fossil-fuel equivalent.

The claim, which comes from the Defense Advanced Research Projects Agency (Darpa) that helped to develop the internet and satellite navigation systems, has taken industry insiders by surprise.3

1'Flying laser zaps missile in first for U.S.' ; Reuters; Wolf
2'Airborne Laser Testbed Successful in Lethal Intercept Experiment' - Department of Defense Press Release
3'Algae to solve the Pentagon's jet fuel problem' - UK Guardian

Economists and Pretty Models

It's interesting to note how we are told 'the models' still work , but for those brief periods when there is crisis. Too many professional economists seem to cling to models and dogma as if stranded on a lifeboat in the Pacific. The truth is that, in the United States, the Great Moderation was a fraud of flat living standards supported by mountains of debt. And the models weren't just wrong during a brief period from 2008-2009; they have been wrong for a long time.

Once upon a time I was involved with formulating statistical models that predicted baseball players future careers based upon their past performance. And the statistics we have for a baseball player are more comprehensive and empirical than what we have for the economy.

But models were only marginally useful in detecting unseen patterns. Usually they told you that if a player was good, he would continue to be until he aged. In real life, exceptions were the rule, even when throwing out unforeseen injuries from the sample. Humans beings are difficult to predict and control, it's just life, and it's good.

Models are fun to play around with, but it's best to not view them as sacrosanct. And though lecturing amateurs can feel - well - 'really good', it doesn't mean much in the end.

As a professional musician, I deal with amateurs all the time - and learn quite a bit from them. Amateurism is a sign of health in a profession. It means people are interested. And when one's field has failed at many of its basic tasks, and basic forecasts, it always a good idea to discard dogma.

Subtext : A Strongman to Make the United States Governable

Is this desperate talk about governing opening up the option for a strong leader, to come clean things up ? It's not like the United States has ever been easy to govern.

I suspect ruling class frustration has to do with its inability to break the popularity of entitlements, and the general failure of neo-liberalism. In the United States, neo-liberalism has resulted in stagnant living standards, but it has not been successful at dramatically reducing them. And while resistance is not the type associated with class struggle, like the strikes in Greece last week, it is still persistent in a peculiarly atomized American way. Institutions have become so openly corrupt that people are suspicious about whatever the political class wants.

I wonder if Obama was a last gasp, a last attempt, to put forward a democratic vision of U.S. imperial power. If he fails, pretensions may thrown aside in a way that would make Dick Cheney smile.

1'"We’ve got a Problem in Governing in this Country"' - Financial Times; Paul Volcker Q&A
2'Never Heard That Before' NY Times Opinion, Friedman (the Beijing Consensus)

The Next Phase of the Crisis

It will occur when investors, business, governments, the public - realize that China cannot pick up the baton from a debt weary Western consumer.

What tied China over during the last few years, after the collapse of exports, is bank lending on a massive scale. It stabilized their economy and the always important political situation.

But now stabilized, China is basically not concerned with taking the baton that Western business so eagerly hopes to hand them. The recent moves to constrain new bank lending in 2010 mean that there will be less of a long-term overhang of debt , but also less of an ability to power growth. And China's economy, sans exports, is mostly dependent on investment. Consumption remains stagnated at 35 % of GDP.

Market weakness in the last month is related more to a slowdown in China's credit binge than anything out of the EU. A world of overcapacity without a new consumer of last resort will lead to a new and deeper phase of the crisis.


1'China slowdown fears hit markets- Financial Times; Dyer
2'Growing Bearish' Forbes; Meredith

Silicon Valley Worries

Silicon Valley, facing a slowdown in innovation and a shortage of funding, may lose its competitive advantage to emerging U.S. technology hotbeds such as Huntsville, Alabama, and Washington, D.C., a study found.

A certain arrogance and belief has existed in the Valley that they are indispensable to the US economy. But centers of economic power are as capable of shifting in the United States as they are internationally. Silicon Valley benefited from a previous shift when it took over US economic leadership from the industrial Midwest. And this largely came on the back of government investment:

The government is a growing source of funding for new technologies, as venture funding remains sluggish, said Emmett Carson, CEO of Silicon Valley Community Foundation in Mountain View, California. Communities outside Silicon Valley, such as Washington, Huntsville and Austin, Texas, are doing a better job getting these funds, he said...

Silicon Valley received $6.7 billion in federal procurement spending in 2008, about 1.3 percent of the total, according to the report. In 1993, that figure was more than 2 percent.

“If you look at the history of Silicon Valley, we benefited in the past from defense spending and other spending,” Carson said. “It didn’t happen because of a garage -- that’s a great mythology -- but it happened because people took advantage of federal investments and what that meant for offshoots.”

A government in disarray and large public debts, are two obvious problems in California. But I would also point to futures challenges of its port dominance, such as the widening of the Panama Canal, and proposed mega-ports in northern Mexico, as equally troubling.

1'Silicon Valley Struggling to Keep Competitive Edge, Study Says' - Bloomberg; Flinn

Iran Isn't Going Away

The 'markets' are seemingly oblivious to this fact. Military action against Iran is growing more likely each and every day, with all of its potential consequences.

The Wall Street Journal lends out its pages for some hard-right red meat:

If there is a war, a large part of the responsibility will rest with Beijing. China has assumed the status of a great power, including a veto at the U.N. Security Council. But instead of becoming a responsible member of the community of leading states, acting jointly with other powers to avert the prospect of wars, China is using its new-found power in ways that make war more likely.

1'Blame China for Iran's Nukes' - WSJ

Vietnam is Now the Weak Link in Asia

With much of the finance world's attention focused on Greece, Vietnam just abruptly devalued their currency for the fourth time since 2008. The cause is a widening trade gap and an overvalued dong currency which is draining dollar reserves from the central bank. It's doubtful this official devaluation will be enough to match declines ongoing in the black market.

If Greece is the weak link in Europe, Vietnam could very well be the same in Asia. And though Greece's budget deficit is now estimated at 12% percent of GDP, Vietnam's is at a Portugal-like 7%.

Currency devaluations could trigger copycatting in a region still tied to the dollar:

The devaluation will help make Vietnam's key exports, which include shoes, coffee and rice, cheaper than those of many other Asian countries, potentially improving its relative position in global trade. That could increase tensions with some neighbors, especially Thailand, with which it competes heavily in global markets. Thailand has already complained that some currencies in the region, including the Chinese yuan, may be undervalued.(2)

1'Vietnam Dong Weakens to Record Low After Devaluation' - Business Week
2'Vietnam to Devalue Dong 3.4%' - WSJ
3'Panicked Gold Buying Forces Vietnam To Devalue Currency' - Business Insider
4'Vietnam devalues dong for second time in 3 months' - AFP; Minh Ha

European Chamber of Commerce Warns on China Protectionsim

"Foreigners don't have the money anymore," said the European Chamber. "They just have the know-how. And there is a feeling that China can develop the know-how on its own. What we are seeing is almost an isolationist stance."

Meanwhile, a manager at a retail company put it more bluntly: "The idea that China was one day going to be a lucrative market for foreign companies was just an illusion." 1

China was never going to fully open their economy to the West, particularly their financial sector. And domestic companies will always be favored, and potential profits for foreign run companies shaky. China can't open up too much because of the geographic scale and size of the country. Their leaders aren't idiots and they know fragmentation has historically doomed Chinese empires. Therefore, a powerful central government is of the utmost importance.

Ultimately, an authoritarian government can not integrate into the leadership of global capitalism. Capitalism requires a particular brand of bourgeoisie democracy to be successful - on its own terms - over the long run. This is not to applaud the West for its form of government, which of course is quite imperialistic in its foreign affairs. But China is ultimately a single party system that is going to restrict the 'rights' of private capital and the growth of an independent business class. No matter how much the City of London or Wall Street have stomped their feet, China has maintained control of its banking sector.

Meanwhile, Andy Xie has a presented rather detailed set of ways that trade war could be avoided, few of which look likely to be implemented. The various elites of the world seem to be preparing for war, and ready to drag the rest of humanity along with them.

1'UK businesses threaten to pull out of China over protectionism' - UK Telegraph; Moore, Foster
2'Steering Out of a Smash-Up No One Wants'- Caixin; Xie

A Riff on Playing Music for a Living

Here in the U.S., one has to wonder about the future of music schools and conservatories with tuition rates of $20,000 a year, when available jobs are dwindling. Many orchestras are in severe crisis now, with large deficits and no apparent way to make them up. And orchestras are traditionally the largest source of employment in the private sector for classical musicians. The decline of the orchestra in the U.S. has to eventually impact opportunities for musicians in the education system. Yet, people in positions of authority seem pretty much oblivious.

This is not just restricted to classical music. One could throw in jazz, as well, where opportunities are even more scarce. It's sad to see people who regularly played with Coltrane and Miles Davis living in rent-by-the month hotels as they struggle with the difficulties of age. Yet I know such people, who made much more thirty years ago than now. We are throwing away our history and cultural legacy.

Music schools have the standard jazz studies department, but who goes into fields such as these, when the opportunities to make money are limited and dwindling ? More and more it's exclusively children of the rich, who know they will be taken care of if things don't work out. But you're not going to get much vitality in an art that way.

Musicians don't go into the field to get rich, but one has to survive. The field is demanding, and requires one's full attention to improve and succeed. You simply can not be a top flight musician and have a 'day job'. This can apply to any segment of music, not just the above mentioned categories of classical and jazz. As economies decline, so to do the arts. People feel the pinch and have to survive, even if it means limiting their artistic pursuits. The Renaissance was an economic as well as an artistic flowering. They go hand in hand.

Those who celebrate their ability to get free music are pretty much celebrating the destruction of another economic base, though of course no one is 'pure' in this regard. As with any situation, there are success stories, but the general drift in the music field over the last decades has been towards less : less live music opportunities and less money through recordings (with or without evil record companies). Comparing our world of copyrights with Mozart's world is ridiculous. There were no recordings in Mozart's time, so live music was needed. Restaurants couldn't re-run a CD all day as they can now.

Everything cannot be about promotion - giving something away for free for a future reward. There eventually has to be a pay off. Bills have to be paid, teeth have to be fixed, shelter provided for. If musicians can not get their basic needs met by playing music, many will move to other fields, and a whole lot of interesting ideas will never be heard.

Yes There is a Ruling Class, No You're Not Invited

It's hard to find articles about this meeting organized by the Bank of International Settlements.

The world's top central bankers began arriving in Australia yesterday as renewed fears about the strength of the global economic recovery gripped world share markets.

Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet tomorrow (2/7) at a secret location, the Herald Sun reports.

1'Secret summit of top bankers'- news.com.au

Palin is Still Around

Despite being the standard joke at liberal dinner parties, Sarah Palin's poll numbers are not too bad. Her most recent Gallup poll, in December, had her at 44-47 , or a -3 % in favorability. In contrast, Obama's current Gallup 'Job Approval' is 49-44, or +5. Slightly different types of polls, but it is interesting how small the gap is. Incumbents usually need to crack 50% job approval to be favored in a re-election.

The election of an incipient fascist like Palin is some ways off - it would require continued deterioration in the economy and political establishment - but she is not going to just fade away. In the meantime she can build her base through shock troop movements such as the Tea Party. And stay in the media advocating another 'American revolution' (from the right), and war with Iran:

Say he decided to declare war on Iran, or decided to really come out and do whatever he could to support Israel, which I would like him to do.1

It will be interesting to see if she continues developing ties to the 'intellectual' far-right of U.S. politics, such as hardliner John Bolton.

1'Palin: Barack Obama needs to ‘toughen up’ if he wants to be re-elected' - Orlando Sentinel
2'Palin says US 'ready for another revolution'' - Financial Times; Luce

Toyota and Military Bases in Japan

The recent media crackdown on Toyota is a bit suspicious given that it comes at the same time Japan's new government is considering whether to force the U.S. military off of Okinawa. Toyota's problems have been known for years, but it is only now that the U.S. government is getting involved with serious investigation. And with that, the U.S. media is starting to pile on.

Toyota and Japanese exporters need the US market, and negative publicity like this could damage the entire Japan brand.

1'Toyota Recall Fails to Address 'Root Cause' of Many Sudden Acceleration Cases, Safety Expert Says' - ABC, Rhee
2'LaHood: Toyota Resisted Safety Fix' - CBS News
3'U.S. ambassador stresses need for troops on Okinawa' - Stars and Stripes; Weaver

Federal Tax Receipts and GDP

One wonders if we are seeing the growth of a grey market in U.S. economic activity, given the drop off in federal tax receipts in proportion to GDP. This could also be a measure of the weakness in personal earned incomes, which make up most of U.S. tax receipts. And, throw in the Bush tax cuts for good measure.

NPL's Soar in China

Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said.

“We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that.1

When this last happened, the government was able to bail out the state-managed banking system. But that was during a time of rising trade and trade surpluses. On the other hand, experts have been waiting for China's inefficient banking system to collapse for years, and it was the freewheeling West that went down first. In the meantime, living standards have risen for a good portion of China's population.

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1'China Defaulting Loans Soar, Insolvency Lawyer Says' - Bloomberg; Smith
2'Wen Says Chinese Concerned About Graft, Income Gaps, Housing' - Bloomberg

Capitalism Is About Making Money

Why are people surprised when capital seeks to do just that ?

My Favorite Things

Sri Lanka as a Pawn in the Grand Chessboard

Too often, the Left speaks in terms of conspiracy and intrigue as a way for 'the elite' to maintain power. But usually, ruling class arguments and objectives are out in the open.

Consider the recent US Senate report on Sri Lanka:

Sri Lanka’s geopolitical position has evolved considerably. As Western countries became increasingly critical of the Sri Lankan Government’s handling of the war and human rights record, the Rajapaksa leadership cultivated ties with such countries
as Burma, China, Iran, and Libya. The Chinese have invested billions of dollars in Sri Lanka through military loans, infrastructure loans, and port development, with none of the strings attached by Western nations. While the United States shares with the Indians and the Chinese a common interest in securing maritime trade routes through the Indian Ocean, the U.S. Government has invested relatively little in the economy or the security sector in Sri Lanka, instead focusing more on IDPs and civil society. As a result, Sri Lanka has grown politically and economically isolated from the West.

This strategic drift will have consequences for U.S. interests in the region. Along with our legitimate humanitarian and political concerns, U.S. policymakers have tended to underestimate Sri Lanka’s geostrategic importance for American interests. (page 2)

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The United States cannot afford to ‘‘lose’’ Sri Lanka...(page 3)

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Sri Lanka’s strategic importance to the United States, China, and India is viewed by some as a key piece in a larger geopolitical dynamic, what has been referred to as a new ‘‘Great Game.’’ While all three countries share an interest in securing maritime trade routes, the United States has invested relatively few economic and security resources in Sri Lanka, preferring to focus instead on the political environment. Sri Lanka’s geostrategic importance to American interests has been neglected as a result. (page 19)

1'SRI LANKA: RECHARTING U.S. STRATEGY AFTER THE WAR' - Committee on Foreign Relations, US Senate

Devaluation is for Weaklings

Apparently talk of devaluing the U.S. dollar, or revaluing the Yuan is gaining widespread acceptance ...but it's still the weakling's way to achieve export market share. It's better to have a superior product than a cheaper one.

The fact that every region of the world feels the political need to devalue is a sign of systemic crisis. That crisis is over-capacity, a crisis of overproduction in far too many crucial industries. And while the G7 was liquidating to an extent over the last two years, China increased bank lending by some 40 %.

It's beginning to looks like the 'savior' green industries of solar panels and wind turbines could be put in the over-capacity column, as well. As the world gets smarter and information flows more freely, I suspect market clutter will occur at a more rapid pace, even in new industries. This might suppress the motivation for productive private investment and relegate it more permanently to the speculative realm. In that case, government will have to step in.

1'Chinese Mercantilism' Krugman Blog - NYT

The Vatican Pushes for Pope Pius XII Sainthood

There is a lot of World War 2 amnesia going around. The Catholic Church is a highly political organization, and apparently they feel they can get away with making this Nazi abettor a Saint. After being declared one with 'heroic virtue', the step below sainthood, there is now - out of the blue !- a possible miracle attributed to him (a requirement for sainthood).

Like most good conservatives of the day, Pius tolerated fascism because he wanted to crush Bolshevism.

Pius' apparently ambiguous attitude towards the persecution of Europe's Jews also emerges from a meeting he had with the United States' diplomatic representative to the Vatican, Harold Tittmann, in October 1943. Pius XII had appeared indifferent to the fate of more than a thousand Jews rounded up in Rome and sent to Auschwitz. Pius XII had shown more concern over reports of "Communist gangs roaming in the environs of Rome", Tittmann said at the time. Cardinal Achille Silvestrini, a former Vatican official in charge of foreign affairs, who as a young priest served in Pope Pius’ private office, said the Pope had believed it would be "counterproductive" to speak out against Nazi atrocities, but dedicated himself to concrete actions.1

Resurrecting formerly disgraced World War 2 figures is a sign of increased reactionary tendencies amongst sections of the ruling class.

1'Documents suggest Pope Pius XII more concerned about Soviets than Nazis' - World Jewish Congress
2'Is Every Pontiff a Saint?' - NYT; Gibson
3'Vatican confirms existence of possible miracle attributed to Pius XII' - Catholic News Agency

Obama Budget Ends Constellation Moon Project

Done for possibly two reasons.

1) A simple political attack on the red-states where the Ares rocket program is mostly located.

2) China was probably going to beat 'us' back, so why even compete.

NASA is vital to improving science education in the public schools. Kids are just not inspired much by the thought of designing weapons systems, and NASA has traditionally offered that inspiration. Dismantling and privatizing it is at odds with the whole Science and Technology culture Obama portends to be creating.

1'Obama aims to ax moon mission' - Orlando Sentinal; Block and Mathews

Sliding Towards a Trade War ?

The Financial Times states the obvious:

With US unemployment in double-digits and a huge trade deficit with China, complaints about Chinese currency manipulation are getting a ready hearing in Washington. If China appears to be actively initiating a trade war, the American reaction may well be: “Bring it on.”

The US public never liked the end results of 'free trade' anyway, especially in key electoral states such as Michigan, Ohio and Pennsylvania. It wouldn't take much of a push to whip up a protectionist fervor.

I do wonder about China's recent hysterics. I suspect they are for domestic consumption, but that indicates a somewhat weak internal political situation.

1'China overplays its hand on Taiwan' - Financial Times

Why California's Decline May Be Long-Term

At the heart of California's rise was not Silicon Valley, but its ports and trade with Asia. All things being equal, areas with large trade volumes will be wealthier than areas without. Athens versus Sparta, etc.

With the widening of the Panama Canal, there will probably be a surge in Asian trade with the Eastern and South Eastern seaboards that will bypass the West Coast. In the long-term, this will weaken California's economy.

1'Cheapest Route to Walmart From China May Skip Buffett’s Railway' - Bloomberg; Sabo and Park

On Obama's Warmongering

Nicely summed up:

Even as progressives were savoring Barack Obama's "masterful" – indeed, "brain-searing" – performance at the House Republicans' retreat last Friday, their dazzling champion was busy applying himself with renewed and reckless vigor to that most un-progressive of occupations: saber-rattling around the world. The last few days have certainly seen a remarkable display of bellicosity by the Obama Administration, putting almost every tool in the militarist kit to use: nukes, ships, missiles, money, proxies and war-profiteering.

Obama is a weak person. And weak people can act in erratic ways as a matter of overcompensation.

Speaking of militarism:

The US military began its largest war games in the Pacific region Monday -- an annual training exercise with troops from Thailand, Japan, Indonesia and Singapore, now joined by South Korea.

I wonder why China was not invited ? After all, this is just fun and games.

1'Obama's Wild Weekend: A Worldwide Surge in Warmongering' - Chris Floyd
2'US launches largest Asian war games in Thailand' - AFP

Lancet Retracts Paper Linking Autism with Vaccines

Far too many have forgotten the life improvements childhood vaccines brought to the population.

1'Lancet formally retracts 1998 paper linking vaccine and autism' -AFP; Ingham