Thursday, May 19, 2005

Just a few thoughts

The retraction by Newsweek's editorial board of the controversial article about Guantanamo Bay has not helped matters, let's be frank, who doesn't have the slightest suspicion that it's a government coverup of an issue that's outraged Muslims internationally. After all, it's better to sacrifice the reputation of a publication than to have a political mess. The entire retraction reeks of damage control; like a prosecution witness developing amnesia just before testifying.

The Japanese stealth bid

Recent comments by Japanese government officials indicate that its UN security council bid has nothing to do with history - the very existence of the security council has everything to do with history -the establishment and composition of the UN security council is in part due to WWII and post WWII considerations; the very history Japan wishes to revise.
Prime Minister Koizumi has commented that according to Confucius one should hate the crime and not the criminal but what about a criminal that wishes to "revise " his criminal record?! Aren't these criminals despicable?! Koizumi justifies his visits to controversial shrines (commemorating the war dead and war criminals) by saying that they should be remembered as Japan's present prosperity is grounded in their sacrifices during the war - how about the victims who were sacrificed by the Japanese during the war?
That UN reform is important is undeniable but should reform reflect the present power balance or should it be more forward looking? If it is the latter, then more developing countries should be given a seat and a voice. If true representation is the goal, abolish the permanent member status and simply give the general assembly the power without any veto rights assigned to any country.
The members up for a seat are curiously " sold " as a pack- does that mean that certain individual members aren't confident of passing the test individually ? This only reminds the world that just as unpopular legislation needs to be appended to larger bills to be passed unobtrusively, so this stealth bid is to ensure success which may not materialise otherwise.

Why The USA should reconsider the case for renminbi /yuan liberalisation
The USA has blamed almost every economic woe on the yuan peg. Whilst the peg should be revised and liberalisation is a matter of time, it should not be blindly or hurriedly implemented. Is the system ready for a liberalised yuan and the problems that it may bring?
Of foremost consideration is the volatility that accompanies every liberalisation effort, would there be sufficient safeguards against speculative attacks similar to those that sparked the currency crisis of 97/98 ? If a similar crisis is sparked in China, few countries will be spared partly because the world is so interconnected by trade. Instead of slowing down the fast growing economy , it may mean a crash landing for the Chinese economy and all that's riding along
Forget liberalisation, a hefty revaluation will shake several sectors.The first victim of revaluation might well be property speculators, the widely anticipated capital gains might not materialise partly because a sizeable proportion of new developments have been priced beyond the "affordability " range of ordinary Chinese, even the executives amongst them. As it stands,a large % of investors are foreign investors and increasingly, they seem to be able to sell (at present pricing levels) mostly to other foreigners. With revaluation, current investors may have to endure a huge reduction in renminbi prices to facilitate sales. The increasing perception that rental returns are decreasing fast will only increase selling pressure and mean the end of the property bubble.
With the increase of costs, the manufacturing jobs may well be transferred, not back to the USA, but rather to the less developed provinces particularly western China where the wage differentials are greater. The fact is , because the American standard of living is still a dream to most Chinese, cost differentials will be a tough factor to eradicate in the short run
As long as cost considerations and profit margins are of major concern, it would be hard to see corporations end operations in China and transferring jobs back to the USA. And as long as the USA does not focus on other factors contributing to the trade deficit, the deficit will not vanish even if the yuan is revalued or liberalised. Instead, the USA may run out of excuses to explain the sorry state of its economy even as the president lives up to the republican tradition of leaving the country in a worse economic state than when he first became president.