Motley Moose – Archive

Cross-posted at River Twice Research.

So bipartisanship isn’t dead. By a vote of 348-79, Democrats and Republicans alike put aside their acrimonious differences and agreed, at least for a moment, to stop blaming each other for the sad state of American economic life. Instead, they agreed to blame China.

The bill authorizes the president of the United States to impose tariffs on Chinese goods in response to what it considers an illegal subsidy of Chinese exports in the form of an undervalued currency. It helps that the supporters in the House know that this bill has precious little chance of becoming law; it will not pass the Senate and it is unlikely that it would be signed into law by Obama if it ever came to that. As a result, the bill is the perfect campaign gesture, bombastic, angry, self-righteous, and without much real-world consequence.

The office AFL-CIO union leader Richard Trumka issued a statement that encapsulated the thinking behind the bill: “the House of Representatives voted to put an end to the Chinese government’s currency manipulation, which has destroyed millions of good American manufacturing jobs. For more than a decade, the Chinese government has deliberately manipulated the value of its currency, ballooning our trade deficit with China and costing American communities good jobs….Working people continue to mobilize to elect candidates who will put America’s workers first and are committed to rebuilding an economy that values working people. This November we will send a powerful message that we will support those who vote for an economy that works for everyone.”

Cross-posted at River Twice Research. This article first appeared in The Atlantic.

Over the past two months, the planned construction of a Muslim cultural center in the vicinity of the World Trade Center site has become the fulcrum of an acrimonious debate about religion, freedom of expression, and the place of Islam in the United States. You would have had to be living off-the-grid somewhere not to have noticed the hundreds of opinion pieces, thousands of blogs, and considerable airtime on television and radio. As characterized by Newt Gingrich, the planned center is no less than the latest chapter in a war of civilizations: “America is experiencing an Islamist cultural-political offensive designed to undermine and destroy our civilization.”

Cross-posted at River Twice Research.

The Greek debt crisis finally spilled over in full force to U.S. markets, aided and abetted by extreme statements emanating from such esteemed and prominent voices as Muhammed El-Erian of the large bond investor Pimco, who warned that Greece could be just the beginning of sovereign debt catastrophes. In the space of minutes, the major U.S. indices plunged more than 10%, fueled by the same programmatic electronic trades that were part of the battering in late 2008 into 2009. And then in the space of 15 minutes, they recovered, without – it’s fair to say – much human decision-making during that interval (and if an individual even tried trading during those 30 minutes, they would have found it difficult or impossible, as web sites such as schwab.com were completely overwhelmed with traffic).

Cross-posted at River Twice Research.

This week, the Chinese government announced that China’s economy had expanded by a stronger-than-anticipated 10.7 percent in the last quarter of 2009 and that it had grown 8.7 percent for the entire year. This news, however, was not greeted with relief but with the skepticism that has typically met such news emanating from China in recent years. The Wall Street Journal ran a story on its front page with the headline “China Seeks to Tame Boom, Stirs Growth Fears.”  

Cross-posted at River Twice Research.

In his current Asian trip, President Obama visits Japan, then addresses a forum of leaders in Singapore, and eventually ends up in Seoul to discuss nukes and North Korea. But make no mistake, the axis of this week is the time Obama will spend in China, which has catapulted to the forefront of international affairs and is on its way to joining the United States as the alpha and omega of the global economic system.

That China has emerged is secret to no one, but the consequences haven’t been fully integrated – either by the United States or by China. The level of intertwinement between the two economies has reached the point where they have effectively merged, forming what I’ve called an economic “superfusion.” But that fusion hasn’t yet altered political and cultural mindsets.

The ministers of the world still beseech the United States to “do something” about a weakening dollar, and U.S representatives on the eve of this trip announced that after the financial morass of the past 15 months, the United States “is back.” Yes, the United States remains the world’s largest economy – though technically the combined income of the European Union is greater. But size isn’t everything – just look at Japan, which is still the world’s second largest economy but whose influence and impact are substantially less. China may be poor on a per capita basis (perhaps $5000 per person relative to nearly $50,000 in the United States), but it is changing more rapidly and consuming more hungrily that any other society in the world. It is the change factor in the global system.

Cross-posted at River Twice Research.

For years, Americans have been fulminating about China and its policy toward currency. While many of the debates are technical and laden with econo-speak, they boil down to the simple conviction that China is unfairly manipulating its currency to keep it undervalued against the dollar. The result is to give China unfair advantages in trade – flooding the US with cheap goods, hurting labor wages world-wide, and accumulating massive surpluses in the process. That view is again articulated by Paul Krugman in today’s New York Times (http://www.nytimes.com/2009/10/23/opinion/23krugman.html?ref=opinion) which ends with the firm statement: “Something must be done about China’s currency.”

Cross-posted at River Twice Research.

The economic relationship between China and the United States is the defining issue of our day. While debates over health care are vital to American society, and while challenges ranging from Iran to Afghanistan to North Korea are real, nothing will determine the arc of the coming decades – or will shape domestic life and prosperity in the United States – more than the emergence of China as a global economic superpower unrivalled except by America.

The rise of China is hardly a secret, but because it is a complex economic that is constantly evolving, it gets less attention than hot-button issues. Absent a real crisis between the two, the relationship is more about the flow of capital and the nature of global business than it is about heated battles inside the Beltway or on Main Street. And while the rise of China and America’s increased dependency on Chinese loans to fund its deficits certainly generates anxiety, it’s mostly amorphous barring some specific issue to focus it.

How that relationship came to be is the subject of my new book, Superfusion: How China and America Became One Economy and Why the World’s Prosperity Depends On It. While this economic fusion has taken more than two decades to evolve, with the crisis of the past year, it has become both a tighter embrace and one more fraught with tension. It’s to the credit of both governments – for now – that those tensions have not boiled over.

Cross-posted at River Twice Research.

While Washington is glued to the drama over health care, over the past few days, Russian Prime Minister Vladimir Putin has been in Beijing meeting with Chinese leaders including Premier Wen Jiabao and President Hu Jintao. In a series of communiqués, they celebrated the “strategic partnership” between the two countries and charted a course of future close relations.

Among others things, Putin – Russia’s man behind the curtain who has also been spending considerable time in front of the curtain – signed off on six billion dollars worth of trade deals Chinese counterparts, including moving ahead with a natural gas pipeline to open up the vast Chinese market to Russia’s equally vast supply of natural gas. The two sides also discussed policies to contain and manage North Korea. Trade between the two countries is approaching $60 billion a year, and while that is a faction of the more than $300 billion a year between China and the United States, it is hardly negligible.

Cross-posted at River Twice Research.

With Wall Street – and the Federal Reserve – in a headlong rush to declare the recession over, the economic data has indicated that the simple binary recession-no recession framework obscures more than it reveals. Yes, defined purely in terms of Gross Domestic Product (GDP), the recession looks to be winding down, with strong indications that GDP is about to turn positive after a long and painful swoon.

But GDP alone is a pretty poor proxy for the lived experience of many millions of people. Wall Street may be booming, the market rising, and many companies reporting strong profits relative to weak global economies. Yet that says little about any one national economy, even one as large and prominent as the United States (see my recent Wall Street Journal piece here http://online.wsj.com/article/…  

As the United States and China wrap up their two-day “Strategic and Economic Dialogue,” it’s more apparent than ever that the two find themselves in a marriage that neither can easily dissolve and that neither fully wants.

(Cross-posted at River Twice Research.)

The speeches struck all the rights notes – “the United States and China share mutual interests,” President Obama announced. “If we advance those interests through cooperation, our people will benefit, and the world will be better off – because our ability to partner with each other is a prerequisite for progress on many of the most pressing global challenges” Those sentiments were echoed by both Hillary Clinton and Timothy Geithner in an op-ed published in the Wall Street Journal. The Chinese delegation spoke of the two nations as traveling in the same ship, a ship which was wracked by the global financial storm of the past year. In general, the rhetoric could not have demonstrated more clearly that both see themselves as locked in a relationship of mutual dependence.