Power And Dollar

What Do You Care About Greek Default? Or Andrew Jackson?

My employer has no business ties in Greece.  I have nothing Greek: no property in Greece, no mutual fund based in Greece, no IRA fund based in Greece, relatives in Greece.  So, what do I care about Greek?  You got to be kidding me.  Eh…. Do you care about the US recovery?

Greece is part of Euro.  A fiscal instability leads to the instability of Euro, or more precisely the depreciation of Euro.  Now, that is the beginning of problems.  First off, US exports get more expensive in the Euro land, i.e. the continental Europe that Rumsfeld called the Old World.  Euro’s depreciation is no good if it happens when US wants to export more.  But then, where can US export?  China?  Even when Chinese are buying Walmart products, how does that help US unemployment rate when those products were made in China to begin with?  Of the products that are US made, how many of them can be sold in China without violating either US embargo (regulated high tech products) or Chinese sanctions (produced by companies who sell arms to Taiwan)?  Do you think US can sell solar panels to China when China is the largest solar panel producer (by footage) in the world?  How many jobs can be produced in the US if Chinese eat more MacDonald’s?  It certainly gives a higher return for your pension funds, your 401k funds and IRA funds.  But jobs? No. 

Secondly, it is not a good idea when US wants to sell assets in Europe and the bring cash home.  It will either make the sale less appealing to the buyer if the seller wants it to be a US dollar deal, or it will make the sale less appealing to the seller if the buyer wants it to be a Euro deal. 

GM for sure will not be happy since they are selling SAAB.  Although the deal for SAAB is in US dollars, it certainly makes it more difficult for the buyer to finance the deal.  And if you have bought a house before, you may recall that the deal is often contingent on funding availability. 

Third, it certainly makes US assets more expensive to Euro investors.  NYSE (or NASDAQ) stocks are looking for more expensive to Euro investors now, although US and/or UK assets may have to become the safe harbors for the time being.  But they certainly are looking more expensive. 

The value of a currency (Euro or USD) has a great deal to do with the expectation how well that currency’s assets are.  The assets in Greece, i.e. Euro, are not looking good due to Greek fiscal policies.   A comparison of Greece in Euro land has been made to California.  While that may resemble somewhat in economics sense, I tend to think of this crisis as the early United States where the federal government was still responsible to foreign debts incurred during the Revolution War but all the states retained their rights to print currencies.  European Union has long been criticized as an elitist creation.  Voters mistrusted it in Ireland (2008), France (2005), Denmark (2000).  Urbanite/merchant Hamilton created the central bank to monopolize monetary power and ruralite/agrarian Andrew Jackson removed it.  As a result of multiple currency issuer and each currency has its own exchange rate (inevitably), interest rate, and ultimately credibility, the United States became worthless monetarily.  

The striking difference here is US were debating about the monopoly of monetary power whereas Europe already got their monopoly of monetary power.  Is this a lesson where Europeans have to reflect on their European federalism or a lesson where urban elitist (in the sense of Sarah Palin’s “East Coast Elites”) creations, European Union, never work?  The answer will prevail if Brussels elites managed to figure it.


February 11, 2010 Posted by | banking, Current Affairs, Current Events, politics, US politics, wordpress-political-blogs | Leave a comment

What Does Your Wallet Or Your Politics Care If Japan Were Ready For Change?

The 2009 general election in Japan is the first time any opposition party won a mandate with meaningful margin.  Does it matter to the United States/Obama?  What does your wallet care about a Japanese election?

DPJ won this election with a landslide, 60% of the seats.  LDP, the incumbent who lost, still has 20%.  However, its electoral power is greatly reduced.  DPJ should have no difficulty in implementing changes it advocates. 

Election result often is a reflection on the perception of their economic lives for most voters.  This one is no different.  Challengers have no experience in governing.  And the voters do not care.  They want the incumbent out. 

Opposition DPJ promises more government checks for babies to lift fertility rates (negative population growth) and for seniors (20% for Japan vs 13% for US).  How are they going to pay for this when the labor force is shrinking and Japan has been avoiding the talk of an immigration policy?  if you think Obama is irresponsible in drowning your grand children with eternal debts or that French were crazy, then consider Japan’s public debt ratio: 162% back in 2007
and expect to be 200% in 2009.

Japan will eventually do what Obama is already doing, lower the exchange rate.  It will make the bonds they are making worth less (I do not know want to say worthless), not that they aim to cut down the prices of their products (Honda NYSE:HMC, Toyota NYSE:TM, Nissan not trade outside of Japan, Mitsubishi NYSE:MTU, Sony NYSE:SNE).  Will these companies be more profitable?  At least they will have one more factor.  Will Walmart’s (NYSE:WMT) spreadsheet make a dent (Yes it operates in Japan)?  Probably not. 

Reforms to boost productivity is obvious a step they will have to take.  However, the easiest way to score points for DPJ is to shrink the power of bureaucrats.  Opening trade barrier is not one of them.  Americans will probably continue to make most of their money through large heavy industrial sales or trading outposts in Japan.  How much can Obama lean on them? 

DPJ advocates for more fraternity in the face of US led capitalism which makes “human dignity is lost”.  Is DPJ socialist?  The NYT speaks well of Liberty, Equality, Fraternity.  Japan will be more interested at balancing itself between China and US rather than an ideological shift, although US never really helped with Japan’s ambition in the international politics (like getting a seat in UN Security Council).  After all, The NYT editorial mentions America twice and China 9 times.  All references about China are about its economic power.  And China can afford to make large inter-governmental purchase that US cannot in the near future.  Will this be a geopolitical shift?  Hardly, if Japan recovers quickly with great confidence about itself.  If Japan recovers with pace and DPJ wins re-election, then a whole new generation of voters will mature through the benefit of China trade.  That will make a shift.

August 31, 2009 Posted by | Current Affairs, Current Events, election, Japan, opinion, politics | Leave a comment

AIG The Sacrifice: The Reflection Of America’s Political Risk


I agree quite a few points of this article in regard to the AIG episode.


Of course, nothing is perfect.  I would change a word here:

It will certainly make Mr. Obama’s task much more difficult when he tries to sell the public [my version would be:  investors] on his administration’s ability to manage the rest of the bailout, and when he tries to sell private firms on the public-private partnership that will be needed to make the recovery work.”


Obama will have more difficulty to convince investors his future plans work (already stated in the article).  Also, Obama will have more difficulty to get troubled entities to take the bailout.  Look at AIG.  This bailout actually bites! 


AIG was politically insensitive.  This story alone will make firms in the future to invest more to mitigate political risk or at least reputation risk (branding), which is not a good news.  


In addition, a good portion of the reason for these companies to require a bailout is that their valuation (capitalization) fluctuated so greatly they were literally worthless.  So, some companies may realize taking themselves off the exchange is not a bad idea, at least they can insulate themselves from the volatility.  Is that what we want: fewer choices for mutual fund managers and pension fund managers?  If they have fewer options and social security is running out, then what are to do?


Fewer choices on the exchange also means quicker wealth concentration.  Gini coefficient will spike up very quickly.  Is that what Obama wants?

March 20, 2009 Posted by | activism, advocacy, america politics, banking, business, Current Affairs, Current Events, 美國, Democrats, economics, legislation, mccain, obama, opinion, politics, Regulation, Republican, US politics, wordpress-political-blogs | Leave a comment

Relevance Of Talking To Al Qaeda?

UK’s former Northern Ireland police chief Sir Hugh Orde says “talking and engaging” is the way to end terrorist campaigns.  Having the policing experience against the terrorist campaign by IRA makes his statement a lot more news worthy than some academic or peace activist.  What justifies his argument?  How is his argument relevant to us?  Who should listen to his argument other than the US?  May be China?


What supports the argument?


He pointed out that no terrorist campaign has been ended without negotiation.  Terrorism is very cost effective.  Terrorism takes very little resources to be operational and terrorism consumes a lot of resources to police, be it Afghanistan military operation style or Northern Ireland civilian style of policing.  


This is a result of modern technology.  Technology makes destructions effective.  It took a lot of man power, weapons, management and communication to kill 2,974 lives when you are using swords or even rifles.  However, it took 19 people and other back-end support operation personnel with 4 airliners to kill 2, 974 lives. 


How much does it take to remove Taliban from Afghanistan? 

Operation Enduring Freedom – Afghanistan cost 400 – 800 million USD for its 25 days operation and ½ to 1 billion / month afterwards.  


This is the cost on the US military alone and not including cost by UK and other countries and no including the lives lost at both sides.  Did it achieve the objective of neutralizing Al Qaeda?


That is only the direct cost, the military expenditure.  What about the economic impact?  Increase in fiscal expenditure at that scale will decrease civilian output, create credit crunch, i.e. crowding out effect.  


What is the relevance?


Certainly, terrorists are running in fear of being captured.  But is it about their fear or about our “domestic Tranquility”, “general Welfare”, “Liberty”, and “our Posterity”?  Do we enjoy spending 500 million dollars to make a few hundred or thousands terrorists running and hiding in fear of being captured?  


Religion is blamed for terrorism.  However, religion is only a lighted match thrown to the gasoline, no different than an inspiring political ideology.  The cause is about the living conditions and the social injustice of those participating populations (Remember the quote from Harry Truman?).  That is the brewing ground. 


Negotiating to the terrorists is no different than negotiating to another power broker.  The refusal to negotiate is not about right or wrong, it is about refusing to negotiate to a non-state actor (we already have enough countries in this world.  How many more do we have to deal with?).  One becomes a terrorist when one sees nothing else to lose in life and motivated by ideology for a higher calling.  How can they lose in a war?


Military conflicts are not about winning.  Wars are waged to resolve differences.  

When the US becomes more independent of oil, the US will adopt a foreign policy that is less manipulative in the Middle East.  When that happens, a lot of root causes will slowly move out of the way.  Otherwise, we will just be muddling along. 

That is what China needs to keep in mind when they think of Tibet again.

The $ Relevance

So, what Obama promises will have positive effects to resolve conflicts.  And they are destined to be tactical.  The fundementals cannot be changed during his presidency.  Therefore, the fundementals of security companies (not necessary military, defense type) will not change.  This type of security stocks would be emergency response, monitoring, data encryption, and auditing.  Credit will continue to be expensive, aside from the fact it has been too low for the last decade and many other factors.

May 30, 2008 Posted by | Barack Obama, Current Affairs, Current Events, Democrats, economics, election, Election 2008, obama, opinion, politics, Thoughts, wordpress-political-blogs | Leave a comment

Lessons Learned? What About Tibet?

The latest toll from CNN is more than 20k deaths, 160k injured, 15k still missing, 5 mil homeless, 4400 aftershocks, and unspecified number of dams are in danger, what can we learn from this natural disaster?  China has successfully minimized, thus far, the domestic political fall out of this natural disaster, can China turn this natural disaster into a contribution to the rest of us?  Will China use this event to let the Tibetan issues drop off the radar?  This could be one event that China can score some points before the Olympics starts.  


First of all, China finally learnt to take the initiative to release information themselves.  On the contrary, Myanmar is reluctant to release any information.  Although the freedom of the press is still very limited, by taking the initiative to release the news, even the bad news, China has now become a reliable source of information.  The threat of rumor (of disease, of higher death toll, of dam damage, of corruption in the local areas, inefficiency of government led relief effort) has been starved off.  This leads to a government of higher mandate, rubbing the next round of unrest off to appreciate the governance of the Beijing government.  


Secondly, accepting foreign experts to help eases the diplomatic tensions with Japan and leads a more peaceful atmosphere with Taiwan.  It also shows the confidence of Beijing government. 


Thirdly, China used different military units to assist the relief effort.  This earned a lot of credit among the overseas Chinese for the Chinese military due to Tiananmen Massacre back in 1989.


The west will see if China will use this event to divert all international media attention away from Tibet and quietly cancel all the Tibetan talks that have been in progress.  Is China using this as a pretext to their advantage?  If China can honor the promise of another round of talk with Dalai Lama’s representatives, then China can show some positive outcome in this issue, China may be able to weaken the international pressure on this front.  


A painful lesson China may have to learn is big infrastructure project are not only costly to build and maintain, but also risky to sustain over a long period of time.  Man is infinitely small before any kind of natural disaster.  Although no nuclear energy facility has been damaged, the stati of different nuclear related production facilities remain unknown to the outside world.  Many dams in the region are still under threat.  Now millions of residents are now under threat.  If China can share the lessons with the rest of world, China can now truly make a tragic disaster into a lesson for all to benefit.  


What kind of dam designs is more stable?  What kind of fault line makes an ideal dam location unsustainable?  Once we factor in the risks involved, are these dams still as financial viable as the electricity they generate?  Even though Japan may have the best expertise in earthquake, Japan never has that kind of experience in dams.  Netherland probably is the expert in dams, but they never experience with dams on fault lines.  Can China overcome this event and share the experience?  This will convince the hawks in the west that China is truly a peaceful stakeholder.  

May 16, 2008 Posted by | China, Current Affairs, environment, opinion, politics, Thoughts, wordpress-political-blogs, 中國 | Leave a comment

Double Standard On Myanmar vs China?

Updated information about China Earthquake And Your Money is edited into the same link.  Myanmar is not accepting aid staff.  What about China?  There is no news about China accept to date.  China still has 26,000 people under debris.  However, we do not see any media response to this refusal.


In fact Thailand got a very firm answer that Myanmar will not be accepting aid either.  There was an international outcry.  Robert D. Kaplan, a national correspondent for The Atlantic and a fellow at the Center for a New American Security even used Albright’s argument that human rights trumps state rights to justify unilateral aid assistance.  


Myanmar’s worried about these aid staff.  Myanmar suspects the aid staff will facilitate some covert operations of the west, or some sort of color (Orange in Ukraine) revolution will come out of these aid staff.


Currently, China only accepted civilian, non-governmental organizations’ (NGO) aid. 

China has declined aid offered from Taiwan, not responded the offer of rescue dogs from Czech, among many others.  Is China embarrassed about accepting aid?  Is China also worried about foreign governmental staff?  Is this a double standard of the media?  Or does it actually expose some special interests of the countries offering aid staff to Myanmar?  This uneven media/international response toward China may only make Myanmar more suspicious.

*The Institute for Radiological Protection and Nuclear Safety said China’s governmental research nuclear reactors and reactor fuel production facilities in China could be damaged.  They are within 44 miles to the center.  Nuclear generation sites are 600 miles away and should be fine.

May 14, 2008 Posted by | China, Current Affairs, Myanmar, nonprofits, opinion, politics, Thoughts, wordpress-political-blogs, 中國 | 3 Comments

Obama vs Clinton: A Lesson on Advocacy / Non-Profit

This 2008 election proves to be a textbook material for advocacy, fundraising and electioneering, even better than 2000 election.  Clinton’s victory will certainly encourage her to continue her race.  What Clinton shows this time in Pennsylvania is similar to what Obama showed when he was the underdog: money does not buy election victory all the time.  Clinton won by 10%, CNN reports.




An indecisive Obama Super Tuesday victory brought this “lengthening, torturous” race because, as always, an indecisive result invites the loser for a re-match.  And Clinton gladly took on the challenge of a re-match.


Obama out spent Clinton by 2 to 1.  Obama enjoyed the positive media attention.  And he had the momentum, the most important thing of all.  And he yet he was behind by 10%.  A lot of people may expect him to win and would not be surprised by a loss.  But 10% probably is the threshold for “failure”. 


The real loss of this race so far is Ralph Nader.  He and/or his party have not improved their platform, i.e. the product, much since 2000.  Neither did they improve their election techniques.  Ralph Nader does not have the charm Obama has.  However, the electioneering could have been improved when in fact Obama took the great leap.


Clinton won by canvassing, the most important virtue of a politician.  Politics is a service industry.  Responsiveness to voters, not leadership, is the virtue promoted by democracy.  She canvassed hard in every county, in every city hall.  And she mobilized her daughter and husband in the state.  The air war of TV and Radio ads rained down by Obama did not bring him a victory just like money did not the Iowa victory for Clinton.  Obama won Iowa by the activists.  Clinton won by her hard work and her organization’s (or Governor Ed Rendall’s organization) hard work.  


This race broadened the voter base of Democrats in Pennsylvania.  And this is what advocacy / non-profit groups want.  The organization itself need not lend its name in the campaign in order to reap the benefit of it.  It’s the board members responsibility to participate in individual campaigns in order to gain the political access to the politicians, even though they may be the city council politicians.  It is this type of occasion that the cause focused groups can cultivate the next group of volunteers, big ticket donors, board members, fundraisers.  A broadening base means a longer list of “concerned citizens”.


When an election gets voters excited, voters are more willing to increase their level of civic participation, be it scrutineer, dropping flyer for an advocacy group, phone bank caller for a fundraising campaign of MADD, or even better attendance for the local recycling organization.  Although this race is dragging on, this serves as an opportunity for all non-profit groups to enlarge their voice and base.  


Leadership is wanted when voters are unable to specify their needs.  When change is wanted without a laundry list is change for the sake of change.  A victory by promoting leadership shows people want to be led, people expect someone who knows better than they do.  

April 23, 2008 Posted by | advocacy, clinton, Current Affairs, Democrats, election, Election 2008, environment, fundraising, nonprofits, obama, politics, wordpress-political-blogs | Leave a comment

Meeting Dalai Lama = Rooting Out Violence

Many compare the Tibetan riot to the protests in 1989.  The protest back then did not involve riot.  This riot involved organization: targeted location, date; weapons were transported and were unavailable in the city.  Violence has also spurred to the Hui people, in addition to Han.  This is also a new turn of history.  Clean up is finally there for the Hui quarter.  When will Mainland China start to clean up this Tibet question?


Dalai Lama is over 70 years old.  His influence is determined to wear out.  New generation of Tibetans demand more power from the Tibetan elites in exiles.  What is to gain for Mainland China from meeting Dalai Lama? 

Dalai Lama continues to be the spiritual leader of all Tibetan causes, be it independence, cultural preservation, environmentalism, human rights, etc.  Meeting with him will turn Mainland China from being defensive to a proactive stand.  

The younger generation of Tibetans is getting frustrated with Dalai Lama’s approach to their goal.  The riot is a good example.  This generation of activists does not have the baggage of Tibetan Bhuddism, they are willing and able to carry out indigenously organized violence.  It will only be a matter of time for these activists to be funded by other state institutions.  When that occurs, Tibet will be the Palestine in the East.  

Tibetan cause may still not succeed.  However, how much resources will be drained out to restrain Tibet?  The goal of Mainland is to keep Tibet.  Why wouldn’t Mainland China want to keep Tibet in the most cost effective manner?  At least a more cost effective manner than fighting out an endless battle in the future Palestine in the East?  That more cost effective manner is to prevent a peaceful Tibet to become a costly Palestine in the East.  

Meet Dalai since he does not seek independence anyway.  Take the Tibetan anti-government violence off the television not for a day, but for years to come.  Turn it into screens of hand shakes.  Dalai is old and wants to return home.  Remove the unifying figure of all Tibetan causes.  That will make these different organizations lose their focus.  Out of sight, out of mind.  

They different organizations will become a lot more manageable, be it the battle for TV coverage or outside of TV coverage.  It is always difficult for organizations to win against state institutions.  

Mainland China may think time is on their side in the international political arena.  And time is not in favour of Dalai Lama.  Every one and everything has its time.  Time will run out on Dalai Lama.  And when that happens, that option will forever be shut, for there probably be two Dalai Lama next time around and Mainland China cannot control them all.  

March 28, 2008 Posted by | China, china politics, chinese, Current Affairs, Current Events, 西藏, opinion, politics, Thoughts, Tibet, wordpress-political-blogs, 中國 | | Leave a comment

Some Progress on Taiwan Strait

It seems like a match can finally begin.  Hu may not be able concentrate on too many items.  He is more inclined to deal with a positive opening (Taiwan) than a hot spot for now (Tibet).Important press releases by both US and China, below.  Read the question started by the keyword “Olympics”.  And follow all the subsequent questions by the keyword “China”.  http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080327005800&newsLang=en


March 27, 2008 Posted by | america politics, China, china politics, chinese, Current Affairs, Current Events, opinion, politics, Taiwan, Thoughts, US politics, wordpress-political-blogs, 台灣, 中國 | Leave a comment

What Is Next In Residential Mortgage Regulation? It’s Election Year!

Nothing looks good.  Today’s data are weak.  US dollar falls against yen, reports CNN.  In real time, US is bouncing up against Yen and Euro.  GDP grew very little.  Durable orders are down.   


Essentially, everything depends on this mortgage crisis.  And politicians are offering all kinds of things.  What for? To occupy your TV box so that you forget about the other ones. 

Depending on your time horizon, all the political fuss about the mortgage crisis may or may not have an impact on you.  This is the newest round of talk, from Wall Street Journal:


The most visible talks related to mortgage crisis come from the presidential candidates.  They make get you excited.  However, you need to start align this temporal emotional development to TIME.  It’s election year!  All bets off!

The new president will take office next January.  It takes a month of 2 to transition the administration.  So, any work for such an important topic will be some time in Feb, almost a year for anything to be put on the table.  So, don’t let Clinton’s auction talk, Obama’s credit card solution or McCain’s inaction be a factor on your today’s decision.  If your horizon spans > 18 months, then I would say you need to pay attention to their talks.  For instance, you are about to buy an existing internet foreclosure auction site, due diligence is about to complete and on to develop a term sheet.

What is really relevant is about what Treasury Secretary Paulson says.  Below is not exactly news any more since it is almost 2 weeks old.  However, it is relevant:


It may look inconsistent to this:


They are not inconsistent of each other.  Paulson does not want a quick fix.  He wants a “solution”.  That translates to regulatory risk (not compliance risk.  A lot of people mistake regulatory risk as compliance risk.).  And if one looks at the Feb 7 press release of the Undersecretary Robert Steel, Paulson will definite create new regulations in a very short term.  

 Related industries will not only be FIs or mortgage insurance companies, but from suppliers to appraisal firms to ABC Papers packaging shops.  Paulson seems to be undeterred by the election politics.  Or Bush is not? Paulson is the real deal.

March 27, 2008 Posted by | banking, business, Current Affairs, Current Events, economics, election, finance, Money, politics, Regulation, US politics, wordpress-political-blogs | 2 Comments