— However much the Obama administrations stimulus program staved off an even worse crisis – a point to be argued by economists until the end of time — it has run out its string. Public opinion now demands a curb on deficit spending. But how to do so, against the pressures of “special interests” (your interests always are, mine are heaven-blessed), is a conundrum taxing the American political system. It’s a time when parliamentary government — with its ability to bring down a government’s failed strategy instantaneously — is to be envied. Instead, more than a year’s worth of political mudslinging appears only to have produced near-paralysis in Washington. And despite widespread denials — including fudging the numbers with inventions like “core inflation” — higher prices could couple with stubborn underemployment/unemployment and the unresolved housing bubble to increase the misery.
China — The cracks, long seen by the few who questioned sustainability of the miracle of “the world’s factory”, are widening. Beijing central planners — despite their rationale only rapid growth could legitimate “Communism with Chinese characteristics” by providing jobs and stability — have curbed unlimited infrastructure expansion which with now slowing exports was the engine of growth. “Creative accounting” takes on new meaning for government banks hiding “non-performing loans” in new set-aside organs now making their own bad loans. Beijing’s inability to “feed” local Party hacks leads them to “squeeze” workers and farmers in turn leading to growing violence. Inflation, especially food where most Chinese live, grows despite monetary devices borrowed from Western systems largely ineffective on what still is a Soviet skeleton.
Japan — The world’s third largest economic power drifts, mysteriously bereft of political leadership, caricatured in its inability to address the destruction of the earthquake-tsunami with characteristic “Yamato Damishi” [fortitude]. In Japan’s hot, muggy summer, only 19 of 54 reactors are operating in the face of anti-nuclear sentiment. With more to shut down, cutbacks of 15 percent already haunt large electricity customers and boosts expensive fossil fuel imports. Consumer confidence falls to record lows, ominous for Japan’s rapidly ageing population. Government debt, already the world’s highest ratio at 200 percent of GDP, will rise as Tokyo borrows $100 billion to rebuild and GDP shrinks. Luckily, Tokyo borrows at home at floor-scraping 1.5 percent. But, Japan, too, has its echo of the American argument: Economy Minister Kaoru Yosano opposes Tokyo selling itself bonds as the Fed and Treasury have done, warning resulting higher finance charges would hit Japanese banks.
But how does it all connect? We saw how Japan’s disaster put a crimp in the manufacturing supply chain from Shanghai to Detroit. But, for example, what call have German and other European banks on their U.S. colleagues if Greece defaults? Japan, which has been lending the world $175 billion annually in investment capital, is out of that business. Nobody wants to talk about the impact on Spain [20 percent of the EU GDP] if Greece [3 percent of the EU GDP], followed by Portugal and perhaps Ireland, “goes”. What will that do to Latin America where Spanish banks have invested heavily as the Brazilian boom simultaneously now threatens to go “bust”? Australia’s roaring dollar is already feeling Chinese cutbacks as will all commodities producers, perhaps even the Mideast petrosheikhs.
In one of his serio-comic sequences, Charlie Chaplin’s little tramp starts pulling a thread from his crumpled suit. Before long, his whole miserable costume dissolves. Is there that kind of loose thread here?
Sol W. Sanders, (firstname.lastname@example.org), writes the 'Follow the Money' column for The Washington Times . He is also a contributing editor for WorldTribune.com and EAST-ASIA-INTEL.com. An Asian specialist, Mr. Sanders is a former correspondent for Business Week, U.S. News & World Report and United Press International. >
"It’s a time when parliamentary government — with its ability to bring down a government’s failed strategy instantaneously — is to be envied."
Spot-on oberservation. The Founding Fathers, in their zeal to distinguish the American system from the British one, wanted our country's leader, the President, to have independent powers to provide a check on a runaway legislature, one designing to trample on the citizens' indivdual rights. I know they didn't assume all future Presidents would be near-saints, like George Washington. But with their reverence for God, ultra-low federal taxes (import tariffs mostly, with no income- or sales-taxes), and no large bureaucracies or institutions to contend with, they really couldn't envision a manchurian psycho who would actually try to bankrupt his country in the four years of his term, in an anti-freedom, anti-capitalist revolution. It's a HUGE flaw in the modern age of affluence, envy and godlessness.
10:36 a.m. / Thursday, July 14, 2011