Rage, Anxiety In The West: BRICS Must Be Doing Something Right

If corruption is all about cornering wealth, power and resources, look at concentration of power.

Is the West assuming leadership of the global financial system, so that they can pervert the system like this? | Tom Toles, in washingtonpost.com on 18 Mar 2010

he day-after BRICS announced their plan to start a BRICS Development Bank in New Delhi last year, reactions in Western media barely concealed anger at the BRICS proposal.

Sample this.

Outside endemic corruption, uncertain or wholly absent rule of law, and relatively low per capita income and life expectancy, there wouldn’t appear to be much that unites this disparate collection of nations. But there are at least two things that do – high growth and trade.

via Why a Brics-built bank to rival the IMF is doomed to fail – Telegraph.

See this statement in wider context.

Rule of Law

On the rule of law, I would agree.The is West is truly the land of law.

Between the US and EU, on a population base of little over 80 crores, the West has about 27 lakh (2.7 million) prisoners – EU (total pop. 50 cr.; prison pop. – 6.07 lakh) and the USA (total pop. 31 cr.; prison pop. 21 lakh). With 27 lakh prisoners, the West is a world leader in imprisonment. Coincidentally, the West labels itself as the Free World.

Graphic source and courtesy – economist.com.

Exclude children, the old and women from the population ‘eligible’ for imprisonment, we are left with around 27 crore adult males. This would mean that one out of every hundred Western males is in prison.

Comparably, in India, with an overall population of 120 crores, the numbers in prison is around 3 lakhs. Of the nearly 30 crore males, India has just 3 lakhs in prison. Just one in thousand, adult Indian male is in prison.

To enforce the rule of law, the West has also become a Prisoner Planet. Is that what is missing in BRICS? Brazil and Russia have lower imprisonment rates, compared to the US – but it is still high compared to India.

No, thanks!

Corruption … or Collusion

On the matter of corruption, again he is  right.

After the rule of law, with strict rules about libel and slander, corruption cannot see the light of day. But if corruption is all about cornering wealth, power and resources, look at the …

The West-dominated global financial system has pioneered a system that depends on mass-employment, low-entrepreneurial activity, excess production coupled with excess pollution and waste. | 2003 Cartoon by David Baldinger

Concentration Of Power

How does one measure concentration of power.

Today the most popular method is the Fortune /Forbes /Businessweek /FT 500 listing of Top corporates.

These listings demonstrate that half the world’s economic output is controlled by about 5000 companies run by about 25,000 individuals. Add another 25,000 politicians and bureaucrats. We have about 50,000 people controlling the lives of 800 billion people of the West – and influencing the lives of non-Western societies.

Between the mega-corporations and State, 60%-75% of the work force is employed or paid for being unemployed.

In some of the inefficient states like India, mega-corporations and the State employ less than 3 crore people – which is less than 5% of the Indian labour force.

Forget Western correspondents, there are quite a few NRI chelas for such Western journalists. Like Hong-Kong based, Venky ‘Chumboo’ Vembu. (Don’t know what Chumboo is? Never mind, Vembu knows what chumboo is).

To get an unprovoked reaction of rage and anger, BRICS must be doing something right.

More power to BRICS.

Related Articles

• BRICS Comes Of Age At Durban – Analysis (eurasiareview.com)
• BRICS Lessons From Durban – OpEd (eurasiareview.com)
• BRIC by brick (thehindu.com)
• BRICS has arrived, so will the mortar (Comment) (news.in.msn.com)
• BRICS Countries Dump The Euro, Establish Bank (eurasiareview.com)
• Durban Summit: BRICS to launch its own bank to counter WB/IMF (foreignpolicyissues.wordpress.com)
• Jim Willie’s “Most Important Article Ever”- USDollar: Ring-Fenced & Checkmate (silverdoctors.com)

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Insider Trading: Why is the US-SEC going after Immi-grunts

US-SEC seems to be particularly effective in convicting immi-grunts on insider trading charges – including some Indian-American immi-grunts.

Insider trading is such a vague concept that the SEC cannot win | December 2011 Cartoon by Ed Stein; source & courtesy – usagold.com

ffectively Rajat Gupta and Rajarathnam are the only people who have been convicted by US courts – based on the prosecution launched by Preet Bharara.

Travails With Yummrika

Rajat Gupta is an Indian – and Rajarathnam is a Indian by proxy. There is the less known case of  Ramesh Chakrapani, who was arrested, his career ruined – and let off with no sentence, and a sword hanging of a possible future prosecution over his head.

The case against Rajat Gupta was especially flimsy.

Vain Gains

If we go by value of ill-gotten gains, the cases against Ivan Boesky and Michael Milliken were far more grave. After benefiting to the tune of hundreds of millions in ill-gotten gains, Boesky and Milliken got away with minor jail terms.

The other element on which we can judge the seriousness of the insider-trading is to see it by the criticality of information. People like David Loeb, from the same Goldman Sachs or David Skol, from Warren Buffett‘s stable. Or see the case of Brothers Wyly (Samuel and Charles Wyly). The SEC quietly dropped charges against 3-company investment consortium (of Coudree Capital Gestion SA, Chartwell Asset Management Services, Compania Internacional Financiera SA) in the Lonza-Arch case.

SEC’s Gyrations

These and many more cases show a SEC that is blatantly blind, random and ineffective in its persecution – except when it comes to Indians, and other immi-grunts.

The latest is the case where the beneficiary and instructor, hedge fund manager Steven Cohen is not being prosecuted, but his employee Mathew Martoma, 38, is being prosecuted for probably following his employer’s diktats and directions.

US law-makers enjoy legal immunity; leading to rampant insider trading | Insider Traders in Congress-By RJ Matson, Roll Call; 16 November, 2011

StonePelters United

From Yummrika did the usual running down of India and Indians.

No debate, analysis on the case or the rising tide of disproportionate convictions and sentencing against Bharatiya-Americans?

Not a whit!

David Sokol’s escape from an insider-trading probe further fogs an already hazy law. Warren Buffett’s fallen heir-apparent was a prime investigation target for buying $10 million of Lubrizol shares shortly before Berkshire Hathaway acquired the company for $9 billion.

Yet, Sokol’s lawyer says the US Securities and Exchange Commission (SEC) dropped the matter. Even with a broad insider-trading crackdown since the affair was disclosed almost two years ago, the crime’s contours remain elusive.

It’s illegal to trade on material, non-public information in breach of some duty. At least based on what was disclosed publicly, that would seem to be exactly what Sokol did. He bought Lubrizol stock a day after bankers pitched the company as a possible Berkshire takeover target. He sold those shares and then bought more after he was informed by bankers that Lubrizol’s chief executive would raise Buffett’s interest at a meeting of the lubricant maker’s board.

Sokol’s inside information may not, however, have been material. He couldn’t be sure Berkshire would offer to acquire the company when he purchased the shares. It’s also unclear whether he necessarily breached a legal duty of trust.

These weaknesses could be what persuaded the SEC to drop the case, though it’s hard to know for sure. The agency isn’t saying. What is clear is that the evidence wasn’t as strong as in, say, the prosecution of Rajat Gupta, the former McKinsey boss and Goldman Sachs director. Sokol’s situation did, however, come off as similar to another insider-trading case the SEC has opted to pursue, against billionaire brothers Samuel and Charles Wyly.

On balance, the regulator may have saved some face by not pursuing Sokol if it wasn’t sure it could win. After embarrassing losses like last year’s acquittal of Citigroup employee Brian Stoker on securities fraud charges, the watchdog is probably wary of being too aggressive.

Despite scores of recent insider-trading convictions, many since the Lubrizol trades came to light, it’s still unclear what is and isn’t allowed. The bitter taste that lingers from the Sokol affair is that insider trading isn’t always what it seems.

via Sokol haze.

Related Articles

• SEC ends investigation of David L. Sokol (upi.com)
• Rajat Gupta to stay free on bail pending appeal (thehindu.com)
• Rajat Gupta should pay $15 million as penalty, says US Govt (ndtv.com)
• Rajat Gupta Should Pay Maximum Civil Penalty, SEC Says – Bloomberg (bloomberg.com)
• ImmiLounge Gets Noticed as the Number One Humanitarian Social Network for Connecting American Immigrants (prweb.com)
• SEC Charges Oil CEO in Insider Trading With Colorado Insurance Exec (insurancejournal.com)
• Can the Federal Government Really Deter Insider Trading? (business.time.com)
• SEC drops probe of former Buffett protege: WSJ (marketwatch.com)
• Insider Trading Scandal: Are the Feds Closing In on Billionaire Hedge Fund Mogul Steven Cohen? (business.time.com)
• SEC Seen Waiting for Prosecutors Before Pursuing SAC – Bloomberg (bloomberg.com)

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Population Control in China: Govt. Think-tank Calls For Immediate End To One-child Policy

For four years now, various Chinese groups and publications, have proposed abolition of China’s one-child policy. For the Chinese State, population control cannot be a subordinate policy.

A caricature of China’s one-child policy. Creative credits not available.

While the Indian Government by blaming Indian society or female feticide, think-tanks backed by Chinese Government have clearly and squarely blamed the faulty intervention of the State into family lives.

This population planning policies were implemented in India and China under pressure of World Bank, IMF, USAID etc. Western aid was clearly and explicitly tied to family planning targets.

The real impact of birth control. Image source & courtesy – global-sisterhood-network.org

Though the government credits the policy with preventing hundreds of millions of births and helping lift countless families out of poverty, it is reviled by many ordinary people. The strict limits have led to forced abortions and sterilizations, even though such measures are illegal. Couples who flout the rules face hefty fines, seizure of their property and loss of their jobs.

Many demographers argue that the policy has worsened the country’s aging crisis by limiting the size of the young labor pool that must support the large baby boom generation as it retires. They say it has contributed to the imbalanced sex ratio by encouraging families to abort baby girls, preferring to try for a male heir.

The government recognizes those problems and has tried to address them by boosting social services for the elderly. It has also banned sex-selective abortion and rewarded rural families whose only child is a girl.

Many today also see the birth limits as outdated, a relic of the era when housing, jobs and food were provided by the state.

via Chinese think tank urges end to one-child policy.

Graphic source & courtesy – wsj.com

Chairman Mao in China and Sanjay Gandhi in India were some of the people who were convinced on the ‘merits’ of this State intervention in family life.

A Chinese government think tank is urging the country’s leaders to start phasing out its one-child policy immediately and allow two children for every family by 2015, a daring proposal to do away with the unpopular policy.

Some demographers see the timeline put forward by the China Development Research Foundation as a bold move by the body, which is close to the central leadership. Others warn that the gradual approach, if implemented, would still be insufficient to help correct the problems that China’s strict birth limits have created.

Xinhua news agency said the foundation recommended a two-child policy in some provinces from this year and a nationwide two-child policy by 2015. It proposes all birth limits be dropped by 2020, Xinhua reported.

“China has paid a huge political and social cost for the policy, as it has resulted in social conflict, high administrative costs and led indirectly to a long-term gender imbalance at birth,” Xinhua said, citing the report.

However, it remains unclear whether Chinese leaders are ready to take up the recommendations. China’s National Population and Family Planning Commission had no immediate comment.

Known to many as the “one-child policy,” China’s actual rules are more complicated. The government limits most urban couples to one child and allows two children for rural families if their first-born is a girl. There are numerous other exceptions as well.

via Chinese government think tank calls for immediate end to one-child policy – Taipei Times.

China’s population is reducing with lesser births than deaths. This trend will soon mean that fewer workers will pay more taxes and take care of more elderly than ever before. GDP on horizontal scale and fertility on vertical axis. Graphic credits not available.

More recently the Chinese Government has linked climate change with population control – which further led to development of the Carnegie Institute to label Genghis Khan’s massacres as acts of benevolence.

According to Zhao Baige, vice-minister of National Population and Family Planning Commission of China (NPFPC), as a result of the family planning policy, China has seen 400 million fewer births, which has resulted in 18 million fewer tons of CO2 emissions a year, Zhao said.

The UN report projected that if the global population would remain 8 billion by the year 2050 instead of a little more than 9 billion according to medium-growth scenario, “it might result in 1 billion to 2 billion fewer tons of carbon emissions”.

Meanwhile, she said studies have also shown that family planning programs are more efficient in helping cut emissions, citing research by Thomas Wire of London School of Economics that states: “Each $7 spent on basic family planning would reduce CO2 emissions by more than one ton” whereas it would cost $13 for reduced deforestation, $24 to use wind technology, $51 for solar power, $93 for introducing hybrid cars and $131 electric vehicles.

She admitted that China’s population program is not without consequences, as the country is entering the aging society fast and facing the problem of gender imbalance.

She said some 85 percent of the Chinese women in reproductive age use contraceptives, the highest rate in the world. This has been achieved largely through education and improvement of people’s lives, she said.

via Population control called key to deal.

If the planet is your concern, abortion comes later. Before that you are a part of the excess population. Kill yourself.

Much before China’s draconian one-child policy, there is a long history of population control.

Tyrene White in her book China’s Longest Campaign: Birth Planning in the People’s Republic, 1949-2005

draws on a wealth of diverse data from the political literature relating to internal reforms (principally rural economic reforms), and to the mass campaigns from the beginning of the 1950s to the end of the 1990s. She brings together numerous local regulations, official circulars, and articles drawn from the Chinese press as well as from journals specialising in questions relating to family planning. Moreover, field notes and observation, and interviews with political leaders, local cadres, and individual citizens provide a finely shaded picture of the application of birth control. Drawing on extracts from interviews and specific cases recounted throughout the book, White draws a picture of the tensions and contradictions of the campaigns launched in the country and the city to restrict the number of births.

Rich studies and analyses of mass sterilisation campaigns are then presented (Chapter 6). The human cost of forced sterilisation and abortion is revealed in detail: White’s argumentation is full of statistics covering the whole country, enriched by interviews carried out mainly in the provinces of Anhui and Hebei. She also shows how implementation of birth control has been limited when provoking serious rebellion in the population. Chapter 7, entitled “Strategies of Resistance,” observes and classifies the various attitudes of the population towards birth control: evasion, collusion, cover-up, confrontation, and accommodation. These forms of resistance show clearly the interaction between the population and local cadres: mediation between society and the state, where each individual chooses his means of survival, resorting to corruption, temporary exile, non–registration, or direct confrontation with the authorities. The author emphasises the importance of a vital instrument: regular massive propaganda campaigns, without which no population control would have been possible. Yet the tragic repercussions of these campaigns are numerous: problems of infanticide, abandonment, and adoption are mentioned, (3) as well as the alarming imbalance in the sex ratio (Chapter 8). White reminds us of the dilemma of abortion practices, in which selective abortion plays a large part. Moreover, the large numbers of unregistered births has increased the ranks of a floating population that more or less evades all forms of control and causes the government anxiety over the future of the country.

via Tyrene White, China’s Longest Campaign: Birth Planning in the People’s Republic, 1949-2005.

If people are your problem, start by killing yourself.

Before closing this topic, it is a good idea to look at the background.

The report by the China Development Research Foundation comes amid mounting speculation that Beijing may be preparing to introduce reforms to the 32-year-old policy after annual population growth fell to 0.57 per cent from 2000 to 2010, down from 1.07 per cent in the previous decade.

China’s population – the world’s largest at more than 1.3 billion – is heading for negative growth and an ultra-low fertility rate, it said, citing a string of problems caused by a policy intended to end a population explosion that threatened China’s ability to feed its people.

Although Beijing has faced calls for the controversial policy to be relaxed or abandoned, this report received unusual publicity in a sign that it may be more influential.

Many scholars, however, do not expect a swift change to the policy and cite recent instances – such as in the southern city of Shenzhen – where rules have even been tightened.

Family planning officials defend the policy, saying that it has prevented 400 million births and lifted even larger numbers out of poverty in the past three decades.

Some demographers, however, say the time is ripe for change. When the Communist Party implemented the family-planning rules in 1980, it said that in 30 years the problem of rapid population growth would be solved and the road cleared for a different policy.

The leadership has so far expressed a desire to maintain the status quo. Officials have said that no changes are expected until at least 2015.

via One-child policy to hamper economic growth, Chinese think-tank reports | The Australian.

Birth Rates in India and US Remain High; View from 2005. – Graphic source & credit – WSJ.com

The effect of population control is within sight – on the horizon.

China had a fertility rate of 6.2 in the first half of the 1950s; the report puts the current figure at 1.6, down from 1.7 last year. By 2040, China will have a higher percentage of people over 60 years old than the U.S., researchers predict.

“Mainland China has the distinction of being the first major economy to grow old before they grow rich,” said Richard Jackson, director of the Global Aging Initiative of the Center for Strategic and International Studies, a Washington think tank.

The population of India is expected to surpass that of China by 2050, according to the report.

By comparison with China, India’s slower pace of development and decline in fertility may help it avoid the potential dilemma wrought by China’s industrial revolution, rapid economic growth and efforts to lower its population, Mr. Jackson says.

“India will have a more gradual and stabilizing transition,” he says.

via U.S. Birth Rates Remain High – WSJ.com.

Buffered by strong growth and comfortable financial situation, China’s problems seem academic to many Chinese for now. What is it to live in an aging society?

Ask the Japanese.

Related Articles

• Chinese Think Tank Urges End to One-Child Policy (abcnews.go.com)
• Chinese think tank urges end to one-child policy (cnsnews.com)
• China considers ending unpopular one-child policy (behindthewall.nbcnews.com)
• China think tank urges gov’t to end 1-child policy (news.yahoo.com)
• Think-tank calls for end to one-child policy (todayonline.com)
• China thinktank urges end of one-child policy (guardian.co.uk)
• Chinese think-tank urges end to one-child policy (straitstimes.com)

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US$ 150 Billion FII Inflows: India’s Next 10,000 Businesses

In the last twenty years some ten thousand Indian business attracted US$150 billion investments. What is India doing to grow the next ten thousand businesses?

Creating the next 10,000 small businesses will secure India’s economic future. | Cartoon titled Big Bad WalMart By J.D. Crowe, Mobile Register – 12/6/2005 12:00:00 AM; via PoliticalCartoons.com Cartoon.

India’s total forex reserves are now around US$300 billion. Simplistically, one could claim that half of this was contributed by investments in Indian businesses by foreign investors who seeks to share profits – without aiming for control.

Even as foreign institutional investors (FIIs) have crossed the $150-billion mark in net investments in Indian stocks over the past two decades, domestic investors are concerned about the markets’ dependence on foreign money.

According to the data published by capital markets regulator Securities and Exchange Board of India (Sebi), FIIs have had a net investment of $152 billion till October 30. In October alone, FIIs put in $3.5 billion, which took the total value above the $150-billion mark.

Sebi’s data since November 1992 show FIIs have made $119.6 billion of net investment in equity and $32.4 billion in debt through stock exchanges, primary investments or other routes.

According to the regulator’s records, there are 1,751 registered FIIs in India. Sensex, the benchmark index of the Bombay Stock Exchange, has risen to 18,415 from 2,929 in this period.

via FII inflows top the $150-bn mark in India – (Links supplied).

Small business – over-regulated and underfunded. | Cartoon source and credit embedded

Between Foreign Direct Investment (FDI), which is usually accompanied by case-specific exemptions, permissions, policies, rebates, FII seeks simpler systemic and transparent exemptions, permissions, policies, rebates. Indian businesses have attracted FII flows rather easily – and India has always been a laggard in FDI inflows.

Between 1970-1990, India created many small business that needed some capital to become world class. It is mostly these companies that got the US$150 billion. These are about 10,000 companies – mostly listed on the stock exchanges.

India’s main issue is that today the next 10,000 companies that can attract US$150 billion are nowhere in sight.

The Indian Government is busy protecting and fixing older businesses – while next-generation of 10,000 businesses are on no one’s radar.

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• Re likely to move around 52-54 level this month: Experts (news.in.msn.com)
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• FII holding in Indian companies near record high (news.in.msn.com)
• Chidambaram meets FIIs (thehindu.com)
• SEBI to frame uniform guidelines for all foreign investors (thehindu.com)
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British Banks: We Are Crooks. Dont Trust Us.

Wonder what lessons James Crabtree has for British business and political elites! What SEC claims Rajat Gupta did, cost the market less than US$1 mn. What the LIBOR scandal has done has cost global consumers trillions? No one goes to jail?

Banks have told us they cannot be trusted. The character of the State we know | Pugh of dailymail.co.uk on the Barclays bank LIBOR scandal; Friday, Jun 29 2012 | Click for image.

Ba, ba Black Sheep

Wonder what lessons British captains of industry, commerce and business have learned?

By asking the State to take over, they are admitting they are a untrustworthy lot.

As for the British State, you can take the opinion of millions of Indians that the British State can definitely be trusted.

Only as far as you can throw it.

Baby wants more …

That leaves us with the Common Brit.

Stripped of all control and power over his life, the Common Brit whimpers for more of the State. Dependent on the State for food, shelter, education, jobs, medical assistance, the Common Brit no longer knows, whether he is coming or going.

What independent opinion, judgement can you expect from those who are dependent on a Criminal State and Klepto-Elite?

Wonder what lessons British media has for British business? | Cartoonist David Simonds on February 11, 2012; source & courtesy – guardian.co.uk | Click for image.

The British Bankers’ Association has asked the UK government to consider regulating and supervising the setting of the London interbank rate offered rate at the heart of Barclays’ £290m penalty for rates manipulation.

Under a historical quirk, the process of setting Libor has always been considered a private activity run by the banking trade body, although the banks who participate in the rate-setting process are regulated by the Financial Services Authority.

Barclays admitted Wednesday that its submissions to the Libor process were improperly affected by requests from traders to move the rate to the benefit of their derivative positions, as well as by a desire to make the bank look stronger during the financial crisis.

The BBA is currently reviewing the way Libor, which is the basis for $350tn in contracts world wide, is set amid probes that have swept in nearly 20 banks and a dozen regulators on three continents. (via BBA urges government to oversee Libor – FT.com).

What Peter says about Paul, says more about Peter than about Paul.

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Related Articles

• Libor explained: the real cost of money or just a fix? (telegraph.co.uk)
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• Barclays is fined record £290m for fixing Libor (standard.co.uk)
• Barclays fined for attempts to manipulate key bank rates – BBC News (bbc.co.uk)
• A Rate-Setting Mechanism of Far-Reaching Effects (dealbook.nytimes.com)
• Barclays chief Bob Diamond gives up 2012 bonus over £290m fine (guardian.co.uk)

Peaceful America in a Disturbed World: How Obama Will Win his Second Term

How is it that things are so eerily favorable for an Obama reelection.

So unfair to the US | Cartoon by Bendib, source bendib.com | Click for source image.

Euro-Forest fires

Euro-zone on the verge of a break-up, says main-stream English media. British and American leaders repeat ad nauseam the global catastrophe if the Euro-currency breaks up.

Islamic World afire

Middle East is in flames. After a one-year struggle, Egypt has finally chosen a President. See how ‘we’ handled Gaddafi and Osama Bin Laden. As for Pakistan … In case, Syria or Iran take one wrong step …

Just one wrong step.

Even Julian Assange is running now.

Hot BRICS

BRICS are a major problem. China’s leadership change is struggling with Bo Xilai scandal. China’s economy is in trouble – and tanking. Putin’s election has been facing protests for 6 months now. By the way,  which wife of Jacob Zuma is coming for the G20 summit.

These pretentious poseurs – the BRICs.

See where they are.

The largest emerging markets, whose economies grew more than four-fold in the past decade, are making losers out of everyone.

For the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies, while the yuan has depreciated more than in any other period since its 1994 devaluation.

Investors are fleeing the four biggest emerging markets, known as the BRICs, after Brazil’s consumer default rate rose to the highest level since 2009, prices for Russian oil exports fell to an 18-month low, India’s budget deficit widened and Chinese home prices slumped. Investors are bracing for more losses as economic growth slows.

Currencies from Brazil, Russia and India will probably decline at least 15 percent by year-end, said Jen, the former head of global currency research at Morgan Stanley.

Brazil’s real lost 12 percent so far this quarter, the biggest drop among the 31 most-actively traded currencies tracked by Bloomberg. The 11.5 percent depreciation in the ruble and 10 percent drop in the rupee was almost twice the retreat in the euro. China’s yuan, which was kept unchanged during the global financial crisis in 2008 and 2009, fell 1.2 percent since March after the government widened the amount the currency is allowed to fluctuate each day.

A decade after Goldman Sachs Group Inc. (GS)’s Jim O’Neill coined the term BRIC, China has become the second-largest economy while Brazil, India and Russia are among the 11 biggest worldwide. Their combined gross domestic product rose to $13.3 trillion last year from $2.8 trillion in 2002 as their share of the global economy increased to 19 percent from 8 percent, according to IMF data. Together, they control $4.4 trillion in foreign-exchange reserves, about 40 percent of the total.

The MSCI BRIC Index (MXBRIC) of shares has surged 281 percent during the past decade, compared with 34 percent for the Standard & Poor’s 500 Index (SPX) as the real and the yuan strengthened more than 30 percent. Local-currency debt in the BRIC nations returned an average 86 percent in dollar terms since data for JPMorgan Chase & Co. indexes on all four countries began in October 2005, versus a 48 percent increase in U.S. Treasuries. (via BRICs Biggest Currency Depreciation Since 1998 to Worsen – Bloomberg).

Asian Tigers are de-fanged and without claws for now. Japan is stagnating for the last 20 years now. With Hugo Chavez dying of cancer and Castro speaking in less than 160-character haikus, there are no noises from Latin America.

That leaves us only with Yumm-Rika!

US soldiers trying to prop up the house of cards | Cartoon by Clay Bennett; taking off on the iconic Joe Rosenthal’s Iwo Jima Pulitzer Prize photograph taken on February 23, 1945, of US Marines raising the US flag | Click for image.

Pax Americana

But the US economy seems to on the mend.

Unemployment figures have reduced. Oil prices are declining. Dollar has gained against nearly all currencies. Gold prices (in USD) are down – and dollar is stronger.

You want a Black President. Y’all will get one for two terms. Hell! You want a purple-colored President, we got one for ya …

You got what yer wanted.

Now can we jes git back to work …

One question … any answer

For the rest of us, with so much pain and mayhem in the world, the only only question left was

“One has no clue where it is going to end,” Ashok said in a June 22 phone interview from Mumbai. “The uncertainty and the volatility is the biggest concern.”

Try this answer.

Till US elections are over.

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When China Becomes The Biggest Economy?

The future of China is taking up a lot of time in the West – and in China, too.

The China-US currency tango | Cartoon by Jim Morin; on August 20, 2010; source & courtesy – seekingalpha.com | Click for image.

The last 30-years has seen China emerge a huge exporting nation. This export-bias was reinforced by the devaluation of the yuan against the dollar – under a system termed by 2ndlook as USCAP. This game-plan has run its course and China has been put on a diet of currency appreciation.

Like Europe, Japan, Asian Tigers have been in the past.

This devaluation-appreciation cycle has given China a huge economic boost – and made it dependent on exports to the US.

After the internal settlement rate was abolished the authorities continued to devalue the currency, to a rate of RMB3.2 by mid-1986 and then, in a single step on July 5, 1986, an additional 15 percent, to RMB3.7 (Lardy 2002, 49). A further devaluation in December 1989 took the rate to RMB4.7. Over the next four years the government devalued the currency until it reached RMB5.8 at year-end 1993. Then on January 1, 1994, the government unified the official and swap market rates by moving the official rate to the then prevailing swap market rate, RMB8.7. Over the next 18 months the government revalued the currency until it reached RMB8.30 in June 1995, and then slowly moved it to RMB8.28 by October 1997.4 From that time until the reform initiated on July 21, 2005, the nominal value of the currency vis-à-vis the dollar fluctuated in a very narrow range around RMB8.28. (from 1 Evolution of China’s Exchange Rate Regime in the Reform Era.).

Can China eclipse USA in the short-term – say 25 years? | by David Horsey on December 28, 2010 at 6:55 pm; image source & courtesy – http://blog.seattlepi.com/davidhorsey | Click for image.

As the experience in Europe, Japan and Asian Tigers has shown that withdrawal effects after this devaluation can be rather stagnating.

There is no question that as China’s share of the global economy grows, Chinese influence will grow in some respects as well.

It is interesting to contemplate what this might mean if China were to become economically dominant, because it is historically unprecedented; in the past, the world’s dominant powers have also been the world’s richest.

As a matter of geopolitics and power, the size of a country’s economy by itself is not a great measure. If it were, then China would have been the world’s strongest power in 1800, when it had the largest share of global GDP. So the next question is whether China can translate its economic power into geopolitical influence. Again, it will undoubtedly do so to some extent. But power and influence do not stem from economic strength alone, and China is already the best proof of this. Over the past couple of years, as the U.S. economy has been slumping and China’s has been booming, the United States has significantly improved its standing in East Asia and Southeast Asia, while China’s position has deteriorated. In fact, the more China uses its newfound muscle, the more it sparks a reaction in the region, which then looks to the United States for succor.

The fact that China is the top trading partner of all these countries does not necessarily increase China’s clout. As many have pointed out, in 1914 Germany and Britain were each other’s largest trading partners too. (via The Rise or Fall of the American Empire – By Robert Kagan, Gideon Rachman, and Daniel W. Drezner | Foreign Policy).

How does China see itself?

Below is an extract from globaltimes.cn – a Chinese online publication, with links to the Chinese Government. Global Times is seen by most in the media business as a spokesman for the Chinese public policy.

China has great respect for the American model of governance – and frequently blames its own ‘stage of development’ for various social and political issues. | Cartoonist Liu Rui in Global Times on July 27, 2011 21:52; source & courtesy – globaltimes.cn | Click for image.

On July 13, the Pew Research Center published its latest global opinion poll. It shows that the US now faces a new challenge, since superpower status is increasingly doubted worldwide. In 15 of 22 nations, people believe that China either will replace or has already replaced the US as the world’s leading superpower.

China was one of those 22 countries polled.

Indeed over the past decade, China’s economy has become the second largest in the world. If this could be sustained, China would have a chance to greatly narrow its gap with the US in the present decade. China’s economic prowess will be translated to the spheres of science and defence, as currently seen in its space and maritime development.

But, it would still be prudent not to unrealistically exaggerate China’s prospects.

While China is positively expanding its influence, its newly acquired strength and posturing has created distance with some of its neighbors. Beijing has a lot to reflect on in diplomatic matters.

Though the US is overburdened, underbudgeted, and overstretched, it is still a superpower. In those ares where China is weak but is catching up, Beijing still has a lot more to learn from the US, such as balancing interest groups at home, balancing various public interests between development and safety and sustainability, balancing accountability and effectiveness, and balancing hard as well as soft and smart power.

China is already an incomplete superpower.

China has not reached the level of global leadership, and will not for quite some time, especially without dealing fairly with its fragile domestic affairs. (via China remains a hopeful but partial superpower).

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• China’s exports jump 15.3 percent in May (sfgate.com)
• Chinese Economy Shows a Second Month of Anemic Growth (nytimes.com)
• China Cuts Lending Rate as Its Economic Growth Slows – New York Times (nytimes.com)

Problem With Europe

US think tanks and experts are making the worst assessments of Europe and the Euro. Can they be believed?

Can the attempted Euro-dollar duopoly work? | Cartoonist R.J. Matson of Roll Call; source & courtesy – Politicalcartoons.com / msnbc.msn.com | Click for image.

In the last five hundred years, Europeans have fought with each other and the rest of the world. Over slaves, gold, coffee and sugar, religion and territory, seas and rivers.

In short, everything.

The European Union is a classic example of an organization built around a “win-win” economic logic. The idea of the EU’s founding fathers was that economic cooperation and shared prosperity would create a positive political dynamic. And for 50 years it worked beautifully. But that win-win logic has gone into reverse. Instead of feeling stronger together, EU countries increasingly worry they are pulling each other down. The result is a surge in political tensions inside Europe and, in particular, an outbreak of anti-German sentiment.

This has global implications; for one, America’s pivot to Asia is posited on the idea that Europe will no longer require attention — a premise I somehow doubt. (via The Rise or Fall of the American Empire – By Robert Kagan, Gideon Rachman, and Daniel W. Drezner | Foreign Policy).

Gideon Rachman, the author of the extract above, has made a career by being paranoid about the future of the West. He sees an enemy of the West under every bed. Fact is the West is its own worst enemy.

Looking at the crisis in EU and the USA, could Gideon Rachman be right.

Just this time around?

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• China’s ‘naked’ officials (2ndlook.wordpress.com)
• Pakistan: The Hidden Chapter (quicktake.wordpress.com)
• Indian diplomacy: Heavy Lifting (2ndlook.wordpress.com)

India & Bangladesh – A Worried West

Even as it keeps West at a distance, Bangladesh has got the West worried.

Muhammad Zahoor (Peshawar, Pakistan)
via Cartoon Competition Winners Announced!.

the squabbling has turned into a crisis (see article) which threatens to make life still worse for the 170m poor Muslims who suffer under one of the world’s worst governments. Since Bangladesh’s political leaders show no interest in their fate, outsiders need to do so.

The outside world is trying to do its bit. The World Bank has scrapped a deal to pay for a big bridge because of its suspicions of corruption. EU ambassadors have denounced the treatment of Mr Yunus and the harassment of activists. Hillary Clinton flew to Dhaka this month to stand by Mr Yunus.

But the government seems unmoved. In a snub to Mrs Clinton, it announced a review into ownership of Grameen, a move to take over (and probably destroy) the bank. The only country to have much influence in Dhaka is India. Until recently the regional superpower tolerated Sheikh Hasina’s excesses, in part because Bangladesh has cracked down on Islamists. India now seems to be hedging its bets between the two parties. But if it still wants to have a functioning democracy next door, it needs to speak out far louder in favour of it. (via Bangladesh’s toxic politics: Hello, Delhi | The Economist).

First …

The Economist is wrong on one count – to start with.

Bangladesh is not exactly the hottest or happening economy in the world – or even the region.

Never was. Can’t get worse for Bangladesh.

In the past, Bangladesh’s political leadership has not displayed the calibre to win anything – except opprobrium. So, the new direction chosen by Bangladeshi leaders can only take Bangladesh up. Is there is a downside.

Talking about ‘political leaders (who) show no interest in their fate, outsiders need to do so’. In a certain part of the world, people have been complaining loudly.

Visibly.

Two …

Across Europe, riots, protests, elections, have only shown that the people of Europe have shown trust or confidence on their leadership.

Looking at Europe’s decline in the last 50 years or even the last 100 years, the lack of trust and confidence is logical. Across the pond, in USA, the Occupy Wall Street (OWS) will soon see its first anniversary on September 11, 2012.

Now compare European leadership with India and China. From historic lows, 100 years ago, even 50 years ago, China and India have assumed positions of significant importance in the world. Going by performance between Western leadership, Indian and Chinese leadership wins hands down.

Time for outsiders from China and India to ‘ensure’ that Europe gets its’ act together.

Three …

That brings us to the third point. Why is The Economist so worried about India having a voice in Bangladesh?

Maybe Bangladesh leadership is more intelligent than Western leadership. Maybe Bangladesh has learned lessons from Pakistan! We have seen how Pakistan has descended into incendiary situation on a permanent basis. Bombs, explosions, guns, assassinations, civil war – all the benefits of Western attention.

Still blame Bangladesh for not wanting the Pakistan Experience?

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• Politics in Bangladesh: Banged about (economist.com)
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• Clinton Warns Bangladesh on Grameen Bank (blogs.voanews.com)
• Bangladesh announces probe into Grameen Bank units (seattletimes.nwsource.com)
• MARK TULLY: India must downsize for region (dailymail.co.uk)
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Are we not lucky?

Why does the global debate revolve around One idea. Spend more on mega public sector projects, that will create more jobs and create ‘demand’.

Same ideas; different ‘authors’ | Eureka cartoon from newyorker.com; artist & publication date absent at source | Click for image.

Bad times bring out bad ideas

With the global economy in a slowdown now for the fourth year, there is ‘consensus’ that the ‘government must do something’.

Apart from the problem of economic distortion that State intervention brings, there is an additional problem of consensus on what the governments must do.

Spend more.

The world, eurozone and UK economies are in a far worse state than expected. Yet Mr Cameron insists that “we are moving in the right direction”. Who is this “we”? UK gross domestic product is stuck at 4 per cent below its pre-crisis peak in what is the longest such slump since the 19th century, with no end in sight. Even if one believes that part of the pre-crisis output was an illusion, why should one accept that the UK economy has lost the capacity to grow altogether? How can Mr Cameron believe the economy is moving in the right direction when it is not moving?

As Jonathan Portes, director of the National Institute of Economic and Social Research, argues in a recent blog post: “With long-term government borrowing as cheap as in living memory, with unemployed workers and plenty of spare capacity, and with the UK suffering from both creaking infrastructure and a chronic lack of housing supply, now is the time for government to borrow and invest. This is not just basic macro-economics, it is common sense.”

With real interest rates close to zero – yes, zero – it is impossible to believe that the government cannot find investments to make itself, or investments it can make with the private sector, or private investments whose tail risks it can insure that do not earn more than the real cost of funds. If that were not true, the UK would be finished. Not only the economy, but the government itself is virtually certain to be better off if it undertook such investments and if it were to do its accounting in a rational way.

Yet, instead of taking advantage of the opportunity of a lifetime to repair and upgrade the capital stock, as Mr Portes notes: “Public sector net investment – spending on building roads, schools and hospitals – has been cut by about half over the past three years, and will be cut even further over the next two.”

He recommends a £30bn investment programme (about 2 per cent of GDP). I would go for far more. Note that the impact on the government’s debt stock would be trivial even if it brought no longer-term gains. Indeed, it would be modest at many times this level.

The result is likely to be a permanent reduction in the output of the UK, not to mention permanent damage to a whole generation of the unemployed. I have words for such behaviour. Not on this list is the word “sensible”. (via Cameron is consigning the UK to stagnation – FT.com).

Create life and death situations – and then present, only one option | Old tricks served me well cartoon from newyorker.com; artist & pub. date absent at source. | Click for source.

What’s wrong

And the spending must be on ‘productive’ asset building.

Build more schools, roads, bridges, airports, docks, et al. Anything wrong with this, could seem like a valid question.

Plenty. Plenty wrong.

Big Bucks for Big Guys

We already have a situation where a paltry twelve corporate entities control our food supplies, another selected ten control news and thought flows; fewer than ten companies control the global car industry.

How about an interest subsidy of GBP30 billion to small businesses? That will mean GBP600 billion of lending to small business – based on lending equal to 20 times of interest. If it takes GBP100,000 to create a job, we are talking of 6 million jobs – @10,000 jobs for each GBP1 billion.

But this is, I am sure, not ‘possible’. So, lets go back to …

Big Spending …

Who will get the contracts for all these roads, buildings, airports, schools, docks. The same 10-20 major construction corporations that dominate the global economy.

And we will get jobs.

Aren’t we lucky that so many people in the academia and media think about our jobs – and our welfare.

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• Cameron should admit the truth about the UK economy (blogs.telegraph.co.uk)
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