EU Freezing Over: UK Adopting Euro, Turks Joining

♠ Posted by Emmanuel in , at 11/30/2011 10:30:00 AM
Even while commentators as mainstream as the FT's Wolfgang Munchau are already counting the days towards EU breakup and the Economist ponders its inevitability, we have some interesting countervailing forces at work. They're something to think about if you've tried totting up the trillions upon trillions said to be necessary to keep the monetary union intact.While the current Tory-led coalition is very Thatcher-esque in pooh-poohing the EMU, remember that there remains an older generation of Conservative politicians who believed the UK would eventually adopt the single currency. Remember Kenneth Clarke and Chris Patten. To this list we should add Michael Heseltine:Former Deputy Prime Minister Lord Heseltine has said he still expects the UK to eventually join the euro. The Conservative peer, one of his party's most pro-European figures, said the eurozone had real problems but he hoped it would survive as its collapse would be "catastrophic" for the UK.All three of the largest...
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Mitt Romney & the Republicans' Sinophobic Turn

♠ Posted by Emmanuel in ,, at 11/28/2011 01:23:00 PM
Obama the candidate in 2008: What we need to do is to just be better bargainers and say, 'Look, here's the bottom line: You guys keep on manipulating your currency; we are going to start shutting off access to some of our markets,'Romney the candidate in 2011: We can't just sit back and let China run all over us. People say, 'Well, you'll start a trade war.' There's one going on right now, folks. They're stealing our jobs. And we're going to stand up to China. We have right now something they need very badly, which is access to our market. And our friends around the world have that same power over China.Fareed Zakaria has...
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Attn World: Eurozone Will End on 7 December

♠ Posted by Emmanuel in , at 11/28/2011 12:50:00 PM
This assertion may brand Wolfgang Munchau a genius or a laughingstock for life on the level of Francis "End of History" Fukuyama or the Dow Jones 36,000 jokesters, but for what it's worth, the German commentator is definitely going all-in:I have yet to be convinced that the European Council is capable of reaching such a substantive agreement given its past record. Of course, it will agree on something and sell it as a comprehensive package. It always does. But the half-life of these fake packages has been getting shorter. After the last summit, the financial markets’ enthusiasm over the ludicrous idea of a leveraged EFSF evaporated after less than 48 hours.Italy’s disastrous bond auction on Friday tells us time is running out. The eurozone has 10 days at most.Mark your calendars for December 7 and look for that old R.E.M. greatest hits CD if your Internet connection isn't fast enough for streaming vid...
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Marx Revisited: Overproduction & Inevitable Crises

♠ Posted by Emmanuel in , at 11/27/2011 01:18:00 PM
I am teaching Marxist perspectives in International Political Economy class this week in the usual sequence of tackling it together with liberalism and mercantilism/realism. In other words, the three main perspectives in the discipline. Those with just a passing familiarity with Marxist theory probably know Das Kapital's Chapter 32 of "one capitalist always kill many" and "the expropriators are expropriated" fame. While looking around for additional material, I came across a (relatively) expanded and more up-to-date take on the Historical Tendency of Capitalist Accumulation by the late Ernest Mandel that to me makes quite...
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All the Way to Reno: UK Gilts Outdo German Bunds

♠ Posted by Emmanuel in , at 11/25/2011 06:41:00 AM
Humming...all the way to RenoYou've dusted the non-believersAnd challenged the laws of chanceNow, sweet--you're so sugar sweetYou may as well have had 'kick me'Fastened on your sleeveReno, Nevada of R.E.M. song fame is a popular gambling destination for Northern California residents alike some of my relatives in the Bay Area. While nowhere near as large a gambling mecca as Las Vegas, its location near the California-Nevada border makes it more accessible to Californians fancying a game of chance on a day or overnight trip. Reno further bills itself as "The Biggest Little City in the World."In more ways than one, the United...
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Japan's Trading Houses Vie for Copper Supremacy

♠ Posted by Emmanuel in ,, at 11/23/2011 12:04:00 PM
In competitive market economies, the battle for the commanding heights is conducted by corporations as well as countries. Now, Japan's massive trading houses that underpin the keiretsu system of business groups (Mitsui, Mitsubishi, etc.) have often been criticized as inefficient middlemen by Westerners who deal with them. However, the recent global financial crisis may have provoked a reassessment of their worth. Given the credit squeeze that resulted when trust became scarce in "arm's-length" financial markets, these trading houses kept the credit flowing given that they were more trust-based institutions. Count it as another demerit for neoliberal orthodoxy.Another important function they are performing nowadays though is securing raw material availability for the manufacturing arms of their groups (alike Mitsubishi Steel, Motors, and what else have you). What, after all, would Japan Inc. be without such RM inputs to create world famous export-oriented outputs?Although the...
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Honest Jian's Used Cars: China's Next Auto Market

♠ Posted by Emmanuel in , at 11/22/2011 10:45:00 AM
In 2009, China ended the United States nearly century-long reign as the world's largest auto market. But, we probably should add a qualifier--that's the new car market. Also, although the Chinese make some nifty products, let's just say that mostly homegrown products may not yet have similar stature with Western brands (who many Chinese concerns make for on an OEM basis anyway). In cultural anthropology, there is a phenomenon of "colonial mentality" that may be at work of colonized countries displaying an inferiority complex towards the products or even the culture of the former colonizer. The reasoning is that they must be...
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Yanks Foresee Yuan as World's Top Currency?

♠ Posted by Emmanuel in ,, at 11/21/2011 12:49:00 PM
There's interesting stuff from Reuters on the contents of the just-released 2011 Annual Report to Congress of the US-China Economic and Security Review Commission. The latter body, as most of you probably know, was created by the US congress in 2000 with some foresight that China was becoming an increasing force in the global political economy that the US had to deal with. Although some members of this commission are definitely scaremongers, their views are for the most part counterbalanced by more nuanced opinions.I have yet to sift through this mammoth 400-page report which you can avail of by e-mailing a request to USCC.gov. However, the parts concerning the yuan AKA renminbi (RMB or people's money) becoming an international standard currency are quite interesting. Indeed, these folks may be playing up the role of the yuan more than their Chinese counterparts who still follow a strategy of not drawing too much attention to their currency machinations. Rest assured, though,...
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Twitter Revolution My Sassafrass: Back to Egypt

♠ Posted by Emmanuel in , at 11/20/2011 04:40:00 PM
The self-styled American digerati has me ROFL even more now with their belief about the central importance of digital media in the Arab Spring events. A few days ago, we gathered that Egypt was in many ways worse off economically now than under President Mubarak. For, without a figure to provide basic law and order, the result would be what it is at present-chaotic. From today's headlines, we now gather that they're back in Tahrir Square. With civilians getting shot once more, we've seen this movie before.So far, what can we reasonably deduce?Digital technologies are mere communication tools, not instruments for lasting change...
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Let US Debt Supercommittee Finish Off America

♠ Posted by Emmanuel in at 11/19/2011 04:12:00 PM
It's hilarious that some delusional Americans think they're getting the better of things by putting off fiscal adjustments Europeans have either voluntarily undergone or are being forced to undergo. (Ditto with the EU itself.) In many ways, it's the same kind of deficits-don't-matter happy-go-lucky attitude they've exuded right before the global financial crisis they literally financially engineered and afflicted the Eurozone with for good measure. Trot out all the old reasons for good measure: the dollar remains the world's standard currency, the US makes problems for everyone else and not the other way around, we can still...
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Of EU-Wide Bonds & Gerhard Schroeder's 'Harikiri'

♠ Posted by Emmanuel in at 11/16/2011 02:19:00 PM
There's interesting stuff c/o the Globalist's Stephan Richter on how German austerity measures under previous German Chancellor Gerhard Schroeder of the Social Democratic Party (SPD) actually set the stage for his CDU successor Angela Merkel to reap the benefits. The straightforward narrative here is that he effectively sealed his political fate as his traditionally left-leaning party could not stomach downsizing the welfare state. Ironically, Schroeder's actions set Germany as a pace-setter for European reform that have now put it in good stead when various economic commentators were literally crying Wolf way back when:A key ingredient of Germany’s success in today’s increasingly dismal global economic environment was that a former chancellor, Gerhard Schroeder, mustered the courage to jump over his shadow.Thanks to the fact that he, a man of the center-left, was principled enough to launch structural reforms to Germany’s welfare state via the so-called (and aptly titled) Agenda...
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Austerity Victim: APEC Leaders' Fancy Dress Party

♠ Posted by Emmanuel in at 11/15/2011 09:08:00 AM
Once upon a time there was a tavernWhere we used to raise a glass or twoRemember how we laughed away the hoursAnd dreamed of all the great things we would do...Those were the days, indeed, as Mary Hopkin once sang. Remember in bygone years when Asia-Pacific Economic Cooperation (APEC) leaders would show unity by wearing national costumes that made Western heads of state in particular look ridiculous? I am afraid that we may have moved on from that tradition when the world was younger and somewhat more innocent. In a twisted form of hegemony, it appears that our American friends started and have now done away this tradition--at...
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PRC SWF Official: European Welfare Undid Europe

♠ Posted by Emmanuel in ,, at 11/12/2011 03:09:00 PM
In the past, I have poked fun at poor investments the China Investment Corporation (CIC) has made as the PRC's sovereign wealth fund. If there ever was an example of a buy at peak price strategy, then CIC would have it: Blackstone, Morgan Stanley...the list goes on and on.Now, however, its Chairman Jin Liqun offers an assessment that partly gets at the rather mixed performance of some of CIC's Western investments. Having reportedly been approached by European powers-that-be to invest in European debt--again, it beats me why an SWF whose normal purpose is to diversify away from sovereign debt of reserve currency issuers should buy more of that--he also needs to explain his newfound reluctance. As many Asians believe, the culprit for Western budgetary woes is the unsustainable welfare state as per a recent Al Jazeera interview:If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think...
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Does US Want to Isolate China Via an APEC FTA?

♠ Posted by Emmanuel in ,,,, at 11/12/2011 12:49:00 PM
Oops, I may have spoken too soon when I mentioned that the US would not seek to antagonize China by excluding it from an Asia-Pacific FTA. This is just a brief follow-up to a recent post I made pooh-poohing prospects for an expanded Trans-Pacific Partnership composed of APEC member countries.First, after dilly-dallying a bit, PM Yoshihiko Noda now says Japan will join the negotiations:Japan's decision to join talks on a trade deal spanning the Pacific marks a major boost for the US bid to shape the new order in Asia, but it will likely mean longer, rockier negotiations...The move by Japan, announced by Prime Minister Yoshihiko Noda just before heading to Honolulu, leaves China as the conspicuous outlier in the emerging trade deal which will now encompass more than one-third of the global economy.Second, it may be or likely is the case that Japan--a heavyweight with a complex domestic political economy similar to the US--will further complicate negotiations. Think of the WTO Doha...
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Japan Returns to 'Stealth Intervention' Tactics

♠ Posted by Emmanuel in at 11/11/2011 09:00:00 AM
Since we once more encountered Japanese intervention to drive down the value of the mighty yen in September of 2010 after a hiatus of about six years, there has been a pattern in place. Tha Bank of Japan makes a big announcement concerning market volatility or the unduly strong yen. In turn, this is followed up by the BoJ wading into the spot market, selling yen and buying dollars in a major way to achieve an implicitly desired dollar/yen level.Let's just say that this has not been an approach that has yielded sustainable results from the Japanese point of view. Forex traders have learned to wait the BoJ out insofar as its recent efforts have been one-day wonders not backed up by subsequent dollar buying. It appears though that Japanese officials are returning to what they hope are subtler, more effective tactics. That is, the past week has not seem any dramatic BoJ denunciation of forex market evils accompanied by massive intervention. Instead, it is more or less keeping silent...
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US & Roping Japan Into Trans-Pacific Partnership

♠ Posted by Emmanuel in , at 11/10/2011 09:46:00 AM
There's a new article in Foreign Affairs by Bernard K. Gordon on further broadening the mooted expansion of the Trans-Pacific Partnership (TPP) to include Japan. Right now, the existing hole-hearted TPP includes trade-deal hungry countries Brunei, Chile, New Zealand and Singapore. The US is in a group of countries including Australia, Malaysia, Peru and Vietnam that is currently negotiating to join the TPP. A large part of TPP's appeal to America is that it includes many issues near and dear to the US alike intellectual property and services trade.By contrast, I've been quite sceptical of this grouping from the get-go. The latest US tack is expanding a pre-existing Asia-Pacific "coalition of the willing" to ensure that it remains deeply involved in this fast-growing region. As I've mentioned though with regard to Hillary Clinton's recent and rather hackneyed speech on why the US should remain involved in this region, it's yet another in a long line of failed American initiatives...
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Decline's Bright Side: BRICs Tourists Do America

♠ Posted by Emmanuel in ,, at 11/09/2011 12:36:00 PM
If there's any consolation to going down the plumbing system of economic history, it's probably this: Chinese and Brazilian tourists are taking advantage of their strengthening currencies to go on shopping binges in America--where goods are admittedly still among the cheapest in the world. They're also seeing the sights while they're at it:The U.S. is struggling to keep up with surging demand for visas in China and Brazil, as the growing middle class in the world’s two biggest emerging markets flock to American shopping malls and tourist meccas.The U.S. plans to boost by 100 people this year its staff dedicated to processing visas in the two countries after it issued 35 percent more travel permits in China this year and 44 percent more in Brazil, Ed Ramotowski, managing director for U.S. visas, said in a conference call with reporters yesterday.“It’s a function of the robust economy in Brazil,” Donald Jacobson, who oversees visa operations at the U.S. Embassy in Brasilia, said...
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You're 'Developed'? Italian vs LDC Bond Yields

♠ Posted by Emmanuel in ,, at 11/08/2011 12:59:00 PM
Ah Italy, G7 member country and the land of bunga bunga parties (but until when?) With Italian bond yield spreads over German Bunds now in orbit somewhere above Brussels and Strasbourg, I came across an interesting chart from Trading Economics that compares 10-year bond yields of a number of developed and developing nations. From this (abridged) list alone we see that Singapore (kinda obviously), Thailand, China, Malaysia, South Korea, Brazil, Russia, Mexico, Indonesia are able to borrow at cheaper rates for debts due in a decade than Italy's 6.59%--or fellow EMU members Ireland, Portugal or Greece for that matter. Moseying...
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CSR: Milton Friedman Would OK Both Jobs & Gates

♠ Posted by Emmanuel in at 11/03/2011 05:21:00 PM
There's a much-read article taken from Harvard Business Review by Maxwell Vessel circulating on the Businessweek website. He argues that while the late, great Apple chief Steve Jobs and his Microsoft counterpart were both admirable business leaders, Bill Gates deserves to be idolized more for his subsequent philanthropic work after leaving day-to-day operations at MS:As much as I love Apple, Inc, I would happily give up my iPhone to put food on the plates of starving children. Steve Jobs turned his company into a decade long leader in the truly new space of mobile computing. Bill Gates decided to eliminate malaria. Who do...
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Will a US Tax Holiday Boost US Interest Rates?

♠ Posted by Emmanuel in , at 11/03/2011 10:11:00 AM
There's an interesting video clip over at Reuters Breakingviews on how measly yields on interest-bearing instruments may increase Stateside in the aftermath of the declaration of a tax holiday. Designed to repatriate profits that US multinationals hold abroad by offering concessions on the statutory 35% tax rate to, say, 5.25% (which most corporations dodge anyway--witness those allegedly paying no taxes despite being profitable), the seemingly unrelated and surprising result may be higher yields.In a nutshell, the argument is that firms which hold a collective $1.4 trillion or so overseas would have to liquidate their existing US Treasury holdings to bring home their foreign income. While I do have doubts about (a) the amount of Treasury holdings firms have and (b) the need to sell such holdings to effectuate repatriation, the video clip presents some thought-provoking ideas.There's also talk of tax holiday "Dutch disease" insofar as benefits from additional government revenue...
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Business "B-20": Screw the $, Internationalize RMB

♠ Posted by Emmanuel in ,, at 11/02/2011 04:07:00 PM
Darn, just when you thought the states-and-markets IPE literature was becoming increasingly stale comes this news. But first, did you know that there's now a "B-20" parallel to the "G-20" composed of 200 major companies from G-20 countries? I suppose that firms desire a larger stake in the current global governance picture. So, just as the World Economic Forum spawned a concurrent alter-globalization doppelgänger (of sorts) in the World Social Forum, we now have a B-20 convening alongside the upcoming G-20 summit in Cannes, France.There will of course be less of The Beautiful People in Cannes this time around, and a heckuva...
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