You Big Mouth, You!

Very, very, very wrong.

Once they develope a taste for crazy man, you have to shoot them. Or they’ll go after the government ministers.

For Sale, on Goat Bay, Chelsea Clinton. I’ll see your herd and raise you a John Deere tractor.

Sky News

Former US president Bill Clinton has been offered 40 goats and 20 cows for his daughter by a love-struck African government official. Mr Clinton was offered the deal on a recent trip to Kenya.

He was offered the animals as a traditional African way of getting a father to give away his daughter’s hand in marriage. The dowry is a very generous one by the country’s own standards.

In a jaw dropping essay, Larry Kudlow of CNN infamy, suggests that currency reform belongs in the “to do” list of the West, and not China. In fact, he praises the stability of the yuan for the last decade.

Kudlow

The failure of the G-7 economic powers to generate greater currency stability is a glaring omission. Currency stability is a key building block of economic growth, while radical fluctuations of major currencies have been a detriment to growth. Just look at the stagnant economies of Japan and Western Europe. This subject is swept under the rug time and again at major economic summits, favoring economic failure rather than success.

Free markets function best when the basic monetary unit of account is steady and predictable. While others cry “currency manipulation”, I counter that China�s stability relative to the dollar is a success story. More, the interactions of the dollar, euro, and yen have been manipulated on a grand scale. Yet we only bash China.

Global currency reform to promote monetary stability and maximize economic growth has been completely ignored by Europe, Japan, and the U.S. Instead of blaming China, the major powers should take a hard look at their own failures.

I’ve pondered yesterday’s actions by the Chinese government, and my post from last evening seems accurate. I have strengthened my conviction, however, that the actions were intended as an attack or an economic action against the United States. First and foremost, they allow the Chinese government to claim that it has complied with the demands of the West to revalue its currency without really doing so. Secondly, by decreasing the value of the dollar against the yuan, the Chinese have made it more expensive to invest on the mainland with dollars. This hurts American companies, and also Taiwanese. And, finally, there is the Middle Kingdom view that if the dollar is weaker against the yuan, it must be weaker world-wide.

This may not be the primary purpose of the actions. There are plenty of other problems that these moves can help address. I just cannot help but feel, though, that a move out of the strongest currency in the world is political and not economic.
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Well, like Gomer Pyle used to say “Surprise! Surprise! Surprise!”

I’ve had some time to digest China’s move today, read some pundits and analysis, and draw some firmer conclusions.

Let me begin with a description of the Chinese economy as I see it.

China is people, well over a billion people. The overwhelming majority of these folks live in either Third World or Second World conditions. Yet, through the miracles of modern communications, they have access to information about how the West, their fellow Asians, and the “better off” Chinese live. Most Chinese are farmers still, though that is changing. You see, it’s tough to keep them down on the farm once they’ve seen gay Shanghai.

Farming has changed in China in the last two decades. A serious push has been made by the authorities to move towards agriculture that can be exported, or that generates the most value for the effort. Some traditional, labor intensive crops have been discouraged in favor of crops where machinery can be used, such as wheat or soybeans. That means that China is both an agricultural exporter as well as an agricultural importer. Depending on your source, they either break even at this or export more farm product than they import.

Moving to a mechanized agriculture means fewer bodies are needed in the country. While China has dramatically lowered its reproductive rate, they began with a big number and even a non-replacement rate of 1 or 1.5 children per couple still means that there are a whole lot of Chinese. Underemployed or unemployed Chinese.

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Sorry, but Karl Rove just doesn’t do a thing for me. Here’s a rule of thumb, however, for the future. The more the left frothes at the mouth, the more likely it is that the object of the frothing is innocent.

Were I at all interested in the issue, my primary concern would be to determine what Valerie Plame’s qualifications were to be a CIA WMD analyst. Other than being a warm body in front of a computer.

Don’t forget! Mary Jo died and Teddy lied!

Ted Kennedy doesn’t dare swim in the Pacific. The Japanese whaling fleet is still offshore.

John Kerry lost the election, right? Isn’t it customary for the loser to keep his yap shut?

Is it time for me to buy a natural gas generator for the house? Hmmmm… The house electrician says that the cycles aren’t precisely correct and it will damage appliances. However, I would suggest, not as much as my beating on them during an eight hour blackout.

All I know about electricity I learned by holding a live outlet between my thumb and forefinger.

Stargate: SG-1: B- for the opening. Didn’t need a two part opening, and Teal’C mailed in his part.

Stargate: Atlantis: B+. Railguns, dude, railguns! The Ford side story was unnecessary, unless they have something inventive up their sleeves. And howcome nobody just looked at him and screamed “Dude! Your eyes!”? Memo: It sucks to be Lt. Colonel John Sheppard’s immediate superior.

And it’s not even the dog days of summer.

Lunch with PG tomorrow.

We watched an old Ann Margaret movie called The Swinger over the weekend. It was not the worst movie ever made. I can say, however, that it is in the top ten. Lovely wife liked the music.

Note a couple of things in this story. A corruption trial that took 2 days. Would that it could be so in the United States at times. Ask Marth Stewart. Secondly, this points out the reality of the banking system in China, not at all like the regulated and protected versions we’re familiar with in this country. It’s a whole ‘nother country, folks.

AFP via Yahoo

Former vice chairman at state-run Bank of China in Hong Kong (BOCHK), Liu Jinbao, has been tried on corruption charges, more than two years after he was removed from his post. Prosecutors accused Liu of embezzling 14.48 million yuan (1.75 million dollars), of which he personally pocketed 7.72 million yuan. He also received bribes amounting to 1.43 million yuan and was unable to account for 14.78 million yuan in personal assets, the Xinhua news agency said.

Fellow top bank executives Zhu Chi and Ding Yansheng were in the dock at the same court in the northeastern city of Changchun. They were charged with conspiracy to embezzle 9.27 million yuan, of which they personally gained 2.11 million yuan, the report said. A third official, Zhang Debao, former head of BOCHK’s general office and a close aide of Liu, was charged with embezzling 9.72 million yuan, of which he siphoned off 1.42 million yuan.

The court reserved judgement after the two-day trial concluded Wednesday.

…China’s 2004 state audit report made public last month uncovered billions of dollars of graft and misappropriation even as the state-run media questioned the government’s resolve in fighting corruption. It record 9.06 billion yuan (1.1 billion dollars) in misappropriated funds by central government departments and 14.5 billion yuan by top state companies.

I’ve been reporting on the Chinese economy for a while. now. Flash analysis - China may be teetering on the brink of economic turmoil. The central planners don’t understand that they have involved the world in their economy just as much as China has entered the world economy. Resource poor and with a mountain of bad debt, the Ponzi scheme that is China is troubled. Here’s a snapshot of the current situation:

• Asia Times
  

  To oil producing countries, a yuan revaluation and the revaluation of other Asian currencies would mean the US dollar’s devaluation. Their revenues from oil exports will get smaller, and consequently problems would arise such as lower purchasing power, rising inflation, worse unemployment, slower economic growth and less investment in expanding capacity. Roughly speaking, if the yuan revalues by 10%, Saudi Arabia alone will have to pay 224 million additional dollars to import the same level of Chinese goods (based on the import volume and the price level in 2004). In other words, Saudi Arabia will have to export an additional 6.5 million barrels of oil to import the same amount as before. Collectively, the Gulf Cooperation Council (GCC) member countries will have to export an additional 8 million barrels of oil to compensate for the losses in purchasing power resulting from a yuan revaluation. But the production of these countries is already at full capacity and the only way to make this compensation would be to increase oil prices.

• China Daily
  

  China will soon start a third revision of its national land development plan, which will providea “golden rule” for the country’s land management and urban-rural construction through 2020. Sun Wensheng, minister of Land and Resources, said that the revision would be based on a thorough field survey and objective evaluation of the existing land resources. Policy appraisal and topical workshops will also be included in the preparatory work. Sun, at a special symposium held here Tuesday, required all provincial branches to wrap up their evaluation of existing development plans by December and complete data collecting and field survey reports by next March so that a nationwide formal revision can be started as early as possible.

  Sun also stressed that current land development plans remain valid and must be faithfully realized. “No departments or individuals are allowed to change their original plans without prior approval from higher authorities,” hesaid.

  Since 1986, China has twice revised its national land development plans, which are a crucial foundation for the central government to conduct macro-regulation of land resources. “With the fast development of China’s economy, the previous plan already in use for eight years is kind of behind the times and needs to be revised,” Sun said.

• Business Week
  

  China’s hunger for oil has been blamed for rising prices and a drop in the world’s spare capacity of petroleum, but Morgan Stanley economist Andy Xie believes demand from the mainland is slowing.

  “At some point, the oil market will abandon the fiction of endless Asian or Chinese demand,” Xie said in a research note Wednesday. “China’s economy is beginning to slow down due to overcapacity … I have never seen people buying something on what I believe is so much misinformation.”

  Focusing on Chinese imports revealed by customs figures, Vienna’s PVM Oil Associates said they showed a 45 percent drop for most categories of oil products in the first half of the year, helping put “a lid on prices.”

• CRI
  

  Japan has granted Teikoku Oil permission to test-drill a gas field in the East China Sea contested with China, after talks on the dispute broke down amid deteriorating ties. Minister of Economy, Trade and Industry Shoichi Nakagawa told a news conference on Thursday that they authorized Teikoku Oil test drilling rights in a response to an application from the Tokyo-based company.

  China immediately protested the decision to let the company explore the waters in the area. Chinese foreign ministry spokesman Liu Jianchao expressed “serious concern” over the move. He said Japan’s decision will constitute a serious infringement of China’s sovereignty and will complicate the East China Sea situation. Liu urged Japan not to take any actions that are unfavorable to the stability of the East China Sea and would damage China-Japan’s overall relations.

  Teikoku Oil said it was notified it could explore three areas covering a total of 400 square kilometers. The sites are east of the border set by Japan but not recognized by China.

  Japan has previously protested that China may be drilling beyond what Tokyo considers the median line. China has insisted its exploration is not in the disputed portion of the waters and has instead called for joint exploration of the gas fields. The two nations are among the world’s biggest energy importers as they try to keep their huge economies running. A Japanese survey in 1999 estimated the disputed fields had a massive 200 billion cubic meters of gas. Japan and China have held a series of high-level meetings to address their growing disputes but they have reached little agreement on the gas fields other than to keep talking.

• Tekrati
  

  Despite massive additions to China�s generating capacity in recent years, demand for electric power still outstrips supply by about 15 percent,� according to Senior Analysts David Clayton and Raja Arcot, authors of ARC�s Electric Power Industry Plant-level Expenditure Outlook for China. Arcot and Clayton further add, �In response to the country�s power shortage, the industry plans to add roughly 30 GW of generating capacity every year over the next five years. Spending on automation hardware and software for China�s electric power industry alone is forecast to exceed $6 billion over the next five years.

• Reuters
  

  China’s foreign exchange reserves rose $51.9 billion in the second quarter to a record $711 billion as a swelling trade surplus made up for a slower pace of hot-money inflows betting on a yuan revaluation. China has the world’s largest stockpile of reserves after Japan’s. In the second quarter it added to its hoard at the rate of $570 million a day, or nearly $24 million an hour.

  The rapid growth in reserves complicates China’s efforts to manage monetary policy because the central bank has to issue yuan in exchange for foreign currencies to maintain the yuan’s fixed peg of near 8.28 to the dollar. Toshikatsu Kimura, Greater China economist at Daiwa Securities in Shanghai, said he expected the reserves to swell further, giving the government a headache. “China has been able to ignore pressure from the U.S. and Europe to revalue the yuan, but if the trade surplus and foreign exchange reserves continue to expand China will face more pressure,” he said.

  China’s forex reserves jumped $101 billion in the first half of 2005 and rose $20 billion in June alone, the People’s Bank of China said on Thursday on its Web site, www.pbc.gov.cn.

• China Daily
  

  China won’t raise interest rates in the near term, for fear of attracting more overseas capital betting on the revaluation of the country’s currency yuan. That’s the statement from a top central bank official made Wednesday.

  According to Yi Gang, assistant governor of the People’s Bank of China, hot money sent into the country, as a bet on a higher yuan won’t bring the returns speculators are looking for. Yi added three factors that ought to cool speculation: the exchange rate has remained stable, property prices have stabilized, and money-market interest rates are steadily falling.

  Yi also said the central bank has to balance the two conflicting challenges of maintaining a stable exchange rate and cooling investment.