The China Syndrome

Forgive me but I must digress. I recently was involved in a discussion on an article of misinformation that was doing the rounds. As you can tell by the overture on my website I am a big believer in US innovation and invention. Our trade relation in China is often misconstrued. Things are not quite as they seem. The following is my response and the source article by a veteran journalist, Eric Margolis, who wrote it for Pakistan's Dawn Newspaper is below the response.

My Response:
The article is quite biased and ignorant too. The US has been importing global production for decades, its nothing new. Right after the 2nd WW the US guaranteed an exchange on its currency against gold so that Europe and the world could use USD as practically gold reserves and re-build. It has also been very generous with import tarriffs - also to help stabilize countries by providing economic assistance given the sheer strength of its economy - something that Japan and now China have been unfairly escaping with. The US Fed deficit is a bad thing but it is also complicated. Despite a monsterous deficit, when the global recession hit in 1997, the safe-haven choice to park your money was the US. Particularly, US treasury bills that feed right into the deficit. Japan suffered from a lack of confidence in its economy as the its towering surpluses lead to grave inefficiences in its banking system that reported hundred of billion of dollars in losses. Even Australia tops Japan as an investment choice. The writer himself mentions that if China was to float its currency there would be a run to buy US Dollars. Why is that if China supposedly has a better economic system? This explains that money alone is not enough. The strong trade surplus that China has is directly agains the US meaning that its a product of US consumption of Chinese goods. And not just Chinese goods, American goods produced in China as Americans would rather have the Chinese make them cheaply and focus on hi-tech domains such as Internet, telecommunications, aerospace, semi-conductors, computer chips, capacitators, bio-tech research and others like it. Areas where China is still an outsider. Just because they are sent out to be produced in China does not mean they really made them.
And lastly, don't forget! The entire trade surplus that China and Japan have is almost instantly invested right back in US treasury bills to fund the deficit. There is no real power in this formula. You have a surplus yet your income and employment is dependant on your buyer. The buyer (US) likes it because they can get it done cheap and durable which helps their economics too. Hopefully, this keeps things stable. If anyone has the upper hand, it would be the buyer.
As for western devils, well that's another matter. Perhaps, Eric Margolis could use a lesson or two in finance, economics and history. He seems to be quite apt at devils and demons.


Chinese loans for the US
------------------------
By Eric Margolis

WHILE American voters were finally giving President George Bush and his southern-fried Republican Party a richly-deserved, long-overdue drubbing, I was off in China observing a nation that while rigidly authoritarian, is at least governed by capable, intelligent people. The same, alas, could not be said of the Bush administration that has saddled America with two lost wars, costing over eight billion dollars monthly, soaring budget deficits, and the intense dislike, if not downright hostility, of many people around the world.Here in Beijing for my umpteenth visit since 1975, I’ve seen the future, and it still says, ‘Made in China’. This gigantic metropolis of 25 million seems destined to become the world’s new capitol city — provided China’s economy, still surging at over 10 per cent per annum, remains strong, and political stability continues.Beijing’s massive new skyscrapers, huge government blocks, broad, traffic-clogged avenues and miasma of smog and dust give it the look of an imperial capital in a science fiction film.Recently, China staged a grandiose summit for 48 African leaders summoned to Beijing to receive $10 billion in aid from President Hu Jintao.Energy voracious China now gets 30 per cent of its oil from Africa. Angola just passed Saudi Arabia as China’s leading oil supplier. China is bent on securing the lion’s share of Africa’s supplies of oil and other strategic resources. China-Africa trade has surged 30 per cent to $50 billion in 2003. Interestingly, during the height of the Cold War in the late 1980s, the Soviet Union tried the same strategy, but was thwarted by the CIA and South Africa.China’s non-interference policy in foreign affairs means its trade and aid come without strings, a major plus for authoritarian or boycotted African regimes. But at least China is not hypocritical. While Washington boycotts Sudan and Zimbabwe over human rights, it cosies up to other African nations like Egypt, Morocco, Algeria and Tunisia that are routinely accused of serious violations by international rights groups.The summit was a lavish spectacle, with convoys of bigwigs in armoured limousines racing down the avenues, dancers, drummers, acrobats, small armies of tough security details, and regiments of China’s feared, ramrod-straight paramilitary police, the Wujing, scowling at everyone.This week, China announced a third quarter trade surplus of US $102 billion. Beijing’s monetary reserves have finally topped one trillion dollars, surpassing the former cash king, Japan. Much of China’s reserves remain in US dollars. Beijing continues to finance America’s spending binge by lending it billions, and keeping its reserves in dollars, though their value is under increasing pressure. Communist China, in effect, continues to prop up the capitalist dollar in the face of growing pressure for its devaluation.China’s mammoth trade surplus, and a rising flood of foreign investment, has swamped the nation’s banks with cash. This, in turn, has fuelled indiscriminate speculative investments, particularly in real estate and factories, and ignited a gold rush frenzy that often obscures China’s solid economic achievements.This flood of hot money poses a serious danger. Indiscriminate investment leads to overproduction, which then causes a deflationary crisis that could end in financial meltdown.China’s government has been struggling without much success to restrain this investment dragon. Beijing refuses, however, to allow its controlled, seriously undervalued currency, the yuan, to float, as its trade partners keep demanding.The undervalued yuan has given China its huge surplus, the motor of growth that has pulled the nation out of poverty. China still needs to deal with hundreds of millions of struggling farmers, state industry workers, and unemployed.So it refuses to allow the yuan to inch up by more than five per cent. If the yuan were allowed to float, say Chinese bankers, people would rush to convert to dollars, causing a dire financial crisis.Who would have ever imagined that it would take Chinese loans to keep the US financial system from imploding?US Republicans would do well to take pointers on capitalism from China’s communists who have beaten the western devils at their own game. — Copyright Eric S. Margolis 2006

Link to Eric Margolis's article in Pakistan's Dawn periodical

Crafty Concepts

Here's a couple of crafty concept cars built on technologies that looks to conserve and looks that seek to tempt. Both are from car companies at the fore front of advancement. Toyota has taken charge of the Hybrid Electric market while Honda's Variable Cylinder Management is a cool mechanism.

Toyota's FT-HS Concept pictured above is a hybrid electric that is likely drawing on the Lexus GH450 3.5L V6 drive-train and will deliver 400bhp as well as 0-60mph in less than 5 seconds with an MPG boast too. The best number may still be the expected less than $40,000 price tag. Times certainly have changed. These figures used to be the domain of for-the-rich-only cars.

Honda has released its 8th generation styling for the Accord Coupe. Honda promises added performance (possibly 300bhp which should be good for 0-60 in less than 6 seconds) and its Variable Cylinder Management (VCM). VCM is a great mechanism that shuts down 2 cylinders in the V6 at higher speeds when due to inertia the extra 2 cylinders are practically worthless. This technology is already available in the 2006 and newer Honda Odyssey models. A hybrid electric version could follow in 2009. Pricing is expected in the low $30,000s.

Crude Oil at $52 (20 month low !)

I wasn't planning on this blog entry. But I am being forced to. Crude oil has dropped to $52 per barrel. A level it hasn't seen since May of 2005. I had recently written about the subject a month ago on December 7, 2006 when it was $10 higher. Naturally, I was pleasantly surprised. I immediately started scooping around to see what the professional reasons would be. It took a while to find a decent bit of reflection but I think I got a pretty good one. Apart from the usual assignment of fundamental reasons, it appears that the strong one is that market bulls have abandoned ship. This is a frequent occurring in financial markets which today consist of more speculative trading than actual buying and selling. When a lot of speculators take a position or bet which becomes popular, things happen if matters don't turn out as expected. The market appeared to be eyeing the $72 peak levels for crude oil and good old OPEC was talking about cutting production to 'stabilize' prices. When the climb was largely resisted at the $65 level people started to get worried. Pretty soon they started unwinding their bets to cut losses or book whatever profit is in the bag. Prices usually tumble in these situations which reach a state of frenzy. And when the frenzy is over, prices will recover somewhat but should be in a sober state.


Gas prices at the pump in the US are yet to follow suit. As per Gasbuddy.com they are only 3 cents lower than a month ago. The average price is in the low $2s. Seems hardly true, doesn't it?

Related:

Why gas prices move like "rockets up and feathers down" at AUTOBLOGGREEN

Natural-gas futures end almost 7% lower
Crude futures fall under $52 a barrel to end near a 20-month low

WHY I BLOG

As the old Chinese saying goes……may you live in interesting times. Better still, interesting times of betterment and advancement. My first blog entry for 2007 is not about alternative energy. Though indirectly it is about alternative energy and everything else. It’s about why I am here and how I got to be here.

All ages would have had their versions of advancement and what passes as captivating and interesting. For our age, Computers and the Internet have got to go down in history alongside Electricity, Telephone, Cars and Planes as a turning point that compelled and propelled us into fundamental change. I feel remarkably fortunate and fantastically gleeful to be part of the age that saw the initiation of the Internet, the blogosphere, the rapid shaping of its young, nascent life and its mighty thrust into our day-to-day lives. I am not one for a broad status quo. I like to see things change and mold. New requirements to compel us. And new ideas, innovation and invention to meet them. Even the invention of a new requirement: things and ways we did not know to be needs for us unless someone showed us a great idea and soon it became a need: much like the internet. I believe that change and innovation is in our nature. And if we don’t receive the compulsion for change then we usually end up inventing it. Nothing is quite as fascinating as engineering an invention or change that fuels a completely new culture or market. One that had not existed before. If necessity is the mother of invention, then desire is its guardian angel. Even the most exciting of alternative car energy may not be in the same class of invention as the motor car itself. Blogging, however, I beg to disagree. Blogging holds inside it a tremendous shift in our world. Its beginnings appear basic enough. Using the internet as a broadcast tools just about anyone with a computer and an internet connection (a figure that I would imagine to be around one billion today) could broadcast their thoughts, journals, essays, articles and what else took to their fancy. A few may have realized at the time that this stood to shake the very foundations of broadcast media itself. Those few would be well rewarded today.

Some 70 years ago, the channeling of Television took its place along side print media in our hearts and minds. Despite what some pundits may be proclaiming at the time, TV never looked to replace print media which is alive and well today. The arrival of TV must have had the generation livid and buoyant at the technological-marvel that could receive transparent signals and convert them into living, breathing images. The vastly superior enhancement over sound signals was fascinating enough and purchase of the wonder box was inevitable for everyone. Soon there after if you didn’t have one then you were just strange and weird. As with print media, TV sought to report, inform, entertain and titillate. But in TV character would not just subscribe to prowess in articulation and style but also appearance, movement and delivery. Given the magical quality of video image few people at the time may have stopped to think over the similarities and disadvantages it carried to print media. Like Paul Graham, the Internet guru, says ‘You don’t realize how bad something is until you have something else to compare it to’. And that my friends, is the kind of invention I am talking about: the Blogosphere. The greatest similarity that TV and print share is their institutionalization. And the characteristic that decision formulation in terms of what programming or articles the subscribers get to choose from will flow mostly top down. Even if this did not happen and let’s say a popular news anchor or writer could sway what stories he or she wanted to cover then instead of the institution we are placed at that person’s disposal who themselves could never exercise with complete detachment from the institution. In either case, the end subscriber has no say in the content that is delivered. Nor can they challenge it in any form or investigate it. This may be the greatest single benefit that internet and blogging bring to the merit and process of the business of media. News has taken up another dimension. Already in motion and soon to dominate: the business of News will continue to be crafted by its makers but not delivered. It will be acquired. News makers will be delivering their contents on to internet portals where the public will choose with a variety of criteria what they wish to receive and view. Not only that, they will rate it on quality, veracity, bi-partisanship and whatever else the community decides upon. Commercial institutions, despite the fact that they perform in a competitive environments do hold some inherent disadvantages. They are run by powerful men and women and while some have benefited from good judgment others have been ruined by a lack there of. Most of these power beings hold terrible egos which inevitable end up clashing with one another at some point to the detriment of all. Large institutions not only have their weight of internal politics but also sway to the political will of influential government figures. All of which are factors that can fly right into the face of efficiency and purity. When such impurities occur they funnel all the way down and right into our living rooms. Print, in fact, may be the purer of the two mediums in the sense that at least it avoids a level of brevity. With a magazine or a newspaper, I can browse and choose which story I would like to read and when I can read it. I can skim over various headlines and headers. Choose the depth to which I want to read a particular story. Options that TV never permitted. Even before TV content was available over the internet I felt the annoying notion that I was stuck with whatever programming was on offer and would miss the shows I really wanted to watch. This must be an arch reason for the success of the TEVO device that allows scores of hours of recorded TV transmission that you can watch at your leisure. The internet promises a whole lot more. In a matter of a few years, the Internet will become the default medium and channel for the distribution and acquisition of Radio programming, music and television programming and even movies (of course theatre will live on unharmed). Google’s $1.65b acquisition of YouTube, which will appear cheap in retrospect, marks the beginning of this awesome future. While Google forges ahead with a portal where aggregators and programmers can deliver material for acquisition, Microsoft with its Vista operating system and Apple with its iTV are laying the ground work for the platform in our homes. There are 2 great prospects here: one is that you see and hear what you want to, when you want to which can be geared to your specific interests. Secondly, we will not be limited to the large institutions and their domination of the airwaves. The brave new world is about to step it up a few notches for the cause of meritocracy and talent promotion. Institutions have done well to search and promote talent but they have carried grave inefficiencies and sins in the process. A large institution that does an overall better than average or better-than-its-competitors job of talent search and promotion can afford for a lot to slip through the cracks. For one thing, layers of middle managers are a problem. An individual writer or journalist may be high on talent and low on form. Such an individual could easily earn the dislike of the recruiting chain. Or sometimes an institution that is largely favored may get bottle necked with a large tide of applicants to join its ranks. Sometimes it will resort to a seemingly cruel process of computers searching through resumes looking for key words and criteria while real talent get shunned down the algorithm circuitry. Unable to absorb the volumes adequately talent easily spills over the wayside. In the new world, the chances of this happening would be far less as individuals have a direct access to the audience. Talented individuals can publish writing, reporting, movie scripts and even video on their own. And their content is fully exposed to anyone who cares to view it. They can generate their audience on their own and get a favorable recruitment response which otherwise may not have occurred.

I can validate a lot of this from my own experiences and of several people that I come into contact with. As the world of blogging and Internet aggregators grew my subscription to Print media and TV news subsided. Most of the time I would be accessing a professional source or news media organization on the internet but I would do it through an aggregator like ‘del.icio.us’ or ‘newsgator’. I can sift through dozens of headlines in minutes and pick only the ones I want. I can then want to go ahead and and check out the blogs on the subject. I can use the news item tags and easily pick out probably 10,000 bloggers on a given subject. Is that a silly thing? NO! That’s good. If there are 10,000 out there some of them are likely to be really good and it don’t take much to find them. For example, I read a number of conflicting reports that conditions in Iraq are either improving or deteriorating. I then have the option of further investigating and looking up blogs of Iraqi villagers in the cross fire or a US soldier in the battlefield. A far more fulfilling and less polluted process than the ghastly and old worldly way of submitting and subverting oneself to the mind and heart of an authority projecting newscaster who really bleeds and bumbles like the rest of us. Ever since the popularity of YouTube and a number of websites following suite I acquire almost all of my news content on the computer while the TV box has taken to a fire-place like back drop item that adds color and sound to the living area. That is less there is a compelling episode of ‘Everybody Loves Raymond’ on. I even look to entertainment on the net and follow some YouTubers whom I know will pick out the most hilarious clip out of a talk show or comedy. I would say that with entertainment I watch half the content coming from established institutions and the other half from amateurs. And guess what, the two are competing. Another plus for me cause I can really use the save in time. I don’t have to manage myself to the TV schedule. Another brilliant feature of acquiring your content online is that you can communicate with other viewers/readers by leaving comments. This gives a live critique to content and sometimes people who are too gullible have a chance to save themselves. For me, the old way of sitting down in front of the TV and watching a news personality that is malevolent with its own biases and choices for news now appears so pagan, ignorant, shameful and old worldly that I have a hard time living with the fact how I subverted myself to it all these years. And even believed a lot of it when I shouldn’t have. Despite my apparent distaste for institutional programming, I do get most of my TV news content from these programmers. But using a portal like YouTube allows be to explore a lot of lesser known institutions, international view points and take a look at what the audience really thinks of the content. I love it.

An equally powerful aspect of open distribution and open acquisition is that it allows the smaller player to reach a large audience who otherwise would have been blocked. With equipment and broadcasting capabilities becoming inexpensive and accessible these talented individuals have already started to show promise. Just take a look at the top viewed content on YouTube whether its creative or substantial. I myself have always enjoyed writing. Readership is gratification for any writer. In the past I have sent a variety of material to various publications only to be shunned because it probably wasn’t anything a few hundred thousand people would want to read. But I don’t need 100,000. I may want it. I have the 1,000 or so that I need. Now, all this does not mean that large institutions are gamed out. A lot of them are very good and run by talented individuals. But they will have to respond. And the smarter ones are already doing that. Hewlett-Packard has already inculcating a culture that spews innovation and invention with a bottom up model. In one of their such tactics they set up web sites where researchers can pitch product ideas. Then ‘players’ who may be other employees of the company view all the ideas and put their wagers on which ones will succeed. While ideas are being developed by the researchers, the players trade their wagers. Eventually, the idea with the most buy-in wins. This may be a small part of the institutional framework today but it can only expand.

I think that a lot of the I have put together here things look pretty inevitable because they make such powerful sense. Its not news to a lot of us. It is the reason why I blog.

Following is a speech by Paul Graham from the 2005 Open Source Convention. Paul is an internet entrepreneur and guru and this is a highly relevant and one of the most refreshing speeches I have heard in a long time. The speech was pivotal for me to pursue certain avenues. Check it out…….

Paul Graham OSCON 2005 at IT Conversations