The average American pays little attention to news from Asia. American culture is insular, sparing little attention to developments in other countries. The nation’s focus is on the wars in the Middle East and the expansion of domestic welfare programs – an expansion demanded by handout-seeking voters who may now be starting to understand the downside of getting what they wanted.
The US media traditionally spends little attention on economic news from the rest of the world, and even President Obama’s current trip to Asia has not generated much coverage of the back story behind his visit – the fact that the US and Chinese economies are now inextricably intertwined. Neither nation can make grand economic decisions independently. America may have to a certain degree surrendered its economic sovereignty to the Chinese government, but China finds itself equally constrained – if their largest debtor decides to default, Chinese economic expansion could be in very big trouble.
Asia’s rise got America’s attention back in the 1970’s and 1980’s, when anti-Japanese sentiment was rampant in Detroit and the Rust Belt and fears of Japan rising to achieve economically what they had failed to accomplish on the battlefields of the Pacific a generation earlier seemed justified. Until the overheated Japanese economy collapsed in 1989, beginning a twenty year period of economic stagnation that has left the Nikkei to this day well off its all-time highs.
Americans quickly forgot about the Japanese “threat”, though occasional grumblings have been heard in conservative quarters throughout the last decade about the military threat from ascendant Chinese Communism. In truth, these complaints seem like nothing more than a political movement in search of an enemy – and they have today faded from the headlines as the extraordinarily divisive President Obama attracts all of his opponents’ energy, and the authoritarian Chinese government has proven to be a stronger exponent of capitalist principles than the typical Wall Street investment bank.
Asia may not register in the public’s mind, but American companies have certainly noticed the healthier business climate and are continuing to move work to China. Even the so-called “green” jobs talked up by the Obama Administration aren’t for Americans – they, too, are headed East:
Evergreen shifts work to China
Bailed out GM to Spend Millions Overseas (Europe, China, South Korea)
Asia’s rise is one of the reasons the American worker is faced with a rapidly decaying job market. Heading overseas to work is not a realistic option, since the majority of the laid-off do not possess skill sets that travel well. Barring the rise of new domestic industries (which seems unlikely under the current Administration), the United States may be forced to undertake a huge expansion of its already vast welfare state – just to keep unemployed voters quiescent. Middle America will certainly start to notice Asia’s rise at that point – for they will question why Asians are able to achieve a standard of living that once was commonplace in the United States.
Millions and millions...
The annual Hurun Report said China has 130 known dollar billionaires, up from 101 last year. The number in the United States is 359 while Russia has 32 and India 24, according to Forbes magazine.
China’s rich are getting richer, with the average wealth on the list $571 million, up almost one-third from last year, said compiler Rupert Hoogewerf.
“With the greatest wealth destruction in the west of the last 70 years, we’ve seen China buck the trend and the wealth seems to be still growing,” Hoogewerf told Reuters on the sidelines of an event to unveil the 2009 rich list.
“They’ve put the credit crunch behind them,” he said. “The key driver has been urbanisation. You’ve got all these cities being built, and that requires property developers, iron and steel manufacturers. The latest thing is cars.”
Paul Achleitner, head of finance, Allianz
“The market rally right now is — my personal view is — way ahead of real-life developments,” Paul Achleitner, head of finance at Munich-based Allianz, said yesterday in an interview at Bloomberg headquarters in New York. “The expectation level is so high, you’re going to have the risk that there’s going to be a discrepancy in expectation” and economic data, Achleitner said.
The stock market rally has led many commentators to declare the recession over, claiming that a “V-shaped” recovery is underway. Sober comments from critical observers like Achleitner are less popular on the business channels.
The "Ten Time Bombs"
The nuclear threat from North Korea is, of course, the greatest danger – not only to South Korea, but the entire world economic system. It is hard to see equity markets surviving even one nuclear detonation anywhere in the world.
The Standard reports that the Wynn Macau, the casino business of Las Vegas mogul Steve Wynn, jumped as much as 13 percent on its Hong Kong stock market debut today buoyed by expectations for growth in the Chinese gaming industry.
HSBC CEO Michael Geoghegan
The Telegraph is reporting that Michael Geoghegan, the chief executive of HSBC, has said he fears the global economy faces a “second downturn”. Aside from a rise in equity prices, however, there is no significant evidence that the “first downturn” ever came to an end. Equity prices have not been reflecting the reality of the economic situation, especially in the US, where a rising tide of unemployment is threatening to choke off any chance at a real recovery. Still, it is significant that leading executives are starting to admit that the economic outlook is not so positive as government/media cheerleaders would have everyone believe.
Arab states try to break the dollar
The Independent reports that the Arab states are working with China, Russia, and France to end pricing of oil in dollars, moving instead to basket of currencies to include the Chinese yuan and the Japanese yen. The change is not slated to occur until 2018, but it is a clear shot across the bow of United States and British government interests.
This Financial Times opinion column by Jeffrey Garten predicts that Shanghai and Hong Kong will emerge as the new centers of world finance, surpassing New York and London.
A quick glance at current job postings on eFinancialCareers.com tends to support this view.
Mt. Fuji - Japan
The Telegraph reports that Japan is slipping into a deflationary spiral. Evidence of similar deflationary trends is appearing in Europe and the United States, as well, despite the general opinion that recent US Government actions have been inflationary. Deflation is a contraction of the money supply, which includes both money and credit. Credit destruction has been occurring so quickly that government expansion of the supply of real money has so far had no inflationary effect.
Japan chose to keep its big banks alive after the 1989 crisis instead of letting them fail so small, better-managed competitors could take their place. The United States has apparently chosen to follow the same path. It’s been twenty years with no real recovery in sight for Japan – how long will the United States have to wait?
The Ghost Fleet - Myth or Reality?
This Daily Mail Online article got a lot of attention a couple of weeks ago, as the image purports to show a vast fleet of empty cargo ships lying at anchor of the coast of Johor Baru, not far from Singapore. The image seems in fact to show mostly vessels a good deal smaller than cargo ships, and there appears to be a “vast fleet” of ships at anchor off Singapore even in healthier economic times. So is this Ghost Fleet a myth or reality?
