Dec 29 2011

Year of the Euro

Category: Economy,Politics — Admin @ 00:56

2011 is dedicated to the eurozone’s fortitude. Despite the surmounting pessimism surrounding the fate of the 17-nation area and a prediction from Credit Suisse’s Fixed Income Research team last month that “we seem to have entered the last days of the euro”, the eurozone is showing signs of a long term makeover more so than signs of impending failure.

Avi Tiomkin of Forbes Magazine quoted in a 2008 article, “It is only a matter of time, probably less than three years, until the euro experiment meets its end…Tensions between inflation-obsessed Germany and growth-hungry Latin countries will spell its end.” As rising inflation continued to plague the eurozone in 2008, comparable to today’s eurozone environment, Avi Tiomkin’s argument was that the “Latin” countries’ (France, Italy, and Spain) thirst for growth ran counter to their more inflation-wary counterparts in the German bloc (Austria, Luxembourg, the Netherlands). Although he makes a valid point for the demise of the euro, he ignores the fact that the much stronger German bloc has both the most to gain if the Euro survives and lose if the Euro fails. For example, Germany’s competitiveness and balance of payments have far outpaced those of its eurozone counterparts since the introduction of the Euro than if it were to have a stand-alone currency.

Talks of a eurozone bailout from other countries and the ECB, earlier this year, have since dissipated significantly due to the potential moral hazard and increased inflation risk they pose, respectively. Unlike the 1997 Asian “capital account” Crisis, global financial contagion, in the event of a eurozone member default, is more of a threat in the current European Debt Crisis due to the highly intertwined and indebted Western financial system. Raising capital via the debt markets has been and continues to be a challenge for eurozone members due to the likely exploitation of the Crisis by bond speculators. 2012 is no doubt crucial for the future of the eurozone, and as the ECB continues to lend cheaply to eurozone banks, risk exposure will only increase; however, default by a member state is no longer a viable option.

At the end of the crisis, many expect the complete dismantling of the monetary union, but I think a slimmer eurozone is more realistic with Portugal and Greece being the first victims. However, before this process can begin, borrowing costs must decrease as recently experienced during Italian bond auctions.

Jun 01 2011

Summer Hurt in Short

Category: Economy,Politics — Admin @ 19:17

An unnamed person in favor of one-party political systems once pointed out that opposition parties only do one thing: oppose. With the recent rejection of a preliminary House bill, intended to increase America’s debt limit, by its very proponents, the GOP, that point rings true. The combination of the current European sovereign debt crisis and an uncertain U.S. debt landscape will only encourage a highly volatile environment for the financial markets, in particularly bonds. The Capitol Hill political sideshow should continue  through the summer to eventually end in a Faustian-esque ‘midnight’ deal from both parties prior to the August deadline set by Treasury head, Tim Geithner.

Furthermore, the Fed’s QE2 stimulant program is scheduled to end by the end of June amid rising food and gas prices and high unemployment.

Mar 19 2011

United Nations Security Council Resolution 1973 (S/RES/1973)

Category: My Web Log,Politics — Admin @ 14:31

My critique of S/RES/1973 isn’t particularly on its goals, which includes “authorising all necessary means to protect civilians and civilian-populated area”, but rather on its sheer hypocrisy. Bosnia-Hercegovina, Colombia, Gabon, Lebanon, Nigeria, Portugal, South Africa, and permanent Security Council members France, the United Kingdom, and the United States should very well have come outright to supporting anarchy and declaring war on Libya rather than hiding S/RES/1973 under the code name “no fly zone”. As a side note, it’s no surprise that the strongest proponents of the measure, France and the United Kingdom, were once Libya’s former colonial rulers.

Disapproval of the measure, in the form of abstention, came from Brazil, China, Germany, India, and Russia; its not that these five countries are not interested in the welfare of civilians but rather that they simply disagree with a “trigger happy” military action against a sovereign country. Oil-rich Libya may very well be in a civil war, putting the lives of civilians at risk, but the Libyan crisis is one of a handful of ongoing civil wars. The Somali Civil War, ongoing since 1991, and the most recent Ivory Coast crisis are two more that come to mind. The Security Council’s resolutions/international community’s actions that have been geared to both conflicts had more of an emphasis on peackeeping and humanitarian aid as supposed to the outright declaration of military support for one group/political ideology. Furthermore, the UN Security Council’s actions on the Ivory Coast crisis have been nothing more than “condemnation”.

Rather than focusing on more serious conflicts involving unarmed civilians in places like Yemen or Bahrain, the United Nations Security Council has chosen to inappropriately intervene in a conflict that it simply cannot win, given that Muammar Gaddafi, a true patriot, has no plans of ever leaving his country. If genocide was a factor as it has been in countless crises then S/RES/1973 would be tolerable, but in its current form, it will simply prolong the crisis into a stalemate civil war. The irony of the situation is that Ghaddafi came to power in a bloodless coup.

Jan 15 2011

2011 & Beyond: High Stakes

Category: Economy,My Web Log,Politics — Admin @ 12:09
In matters pertaining to the future, I’m not certain as to whether the “good news” and “bad news” category is an appropriate vantage point or not; after all, both “good” and “bad” are relative terms. However, I believe the term “High Stakes” better captures my perspective on such matters, because 2011 and the upcoming decade will be pivotal in determining the future global opportunities for the post-Gen X generations and in defining a new paradigm for global affairs.

The world economy still remains fragile as key economies continue to maintain near-zero interest rates amid record food and commodity prices, increasing natural disasters, and global political instability. To elaborate on the political instability issue, the International Crisis Group (ICG), a non-governmental organization, estimates that there are about thirty three ongoing conflicts in the world today, ranging from Afghanistan to the drug war in Mexico. The organization expects these conflicts to only exacerbate and new ones to begin in 2011. Of their predictions for 2011, three that are of concern involve the Ivory Coast, Sudan, and Guatemala.

  • The Ivory Coast(Cote d’Ivoire )—> The ICG expects President Laurent Gbagbo to either step down and concede defeat or stay and risk civil war; but, I think that that the former, which would be the best case scenario, is unlikely to happen after the failed diplomatic talks. A power-sharing agreement such as Zimbabwe’s may be the next best scenario for both parties.
  • Sudan—> With Southern Sudan leaning closer towards becoming the world’s newest country, the ICG believes that there isn’t much cause for celebration yet. “The border remains undecided — no small matter since the contested middle ground happens to sit on a large oil field. Meanwhile in Juba, the nascent capital, institutions and services would urgently need to be built from scratch.”
  • Guatemala—> As Mexican cartels continue to expand the drug war into South American countries such as Guatemala, the ICG sees the potential for increased corruption during Guatemala’s upcoming Presidential elections in August, which currently has no clear frontrunners from its ~20 candidates.

Despite the ongoing conflicts, there is still a lot to look forward to in the upcoming decade such as space tourism, the advancement of existing and new technology, and an ever more cooperative Taliban, to name a few. However, the most anticipated event of this decade is set to occur by the end of the decade. The consensus among the world’s top economists is that China’s economy will supersede the United States’ as the world’s largest by 2020. There is no need to reiterate China’s impressive resume or its growing importance on the global stage, but China is a country that is hard to ignore.

Although many countries readily accept China’s economic prowess, many, including Japan and the United States, are wary of its expanding military strength. This distrust of China’s current military growth is unfounded due to the fact that history has taught us that economic growth and military growth should have a perfect correlation. After all, in the early 1830′s, China was arguably the world’s largest economy but was easily defeated by the British and other foreign powers in the Opium Wars that began in 1839.

Despite what happens in the coming years, I look forward to a new decade of new insights and intriguing news.

Sep 23 2010

Hu in Shenzhen

Category: My Web Log,Politics — Admin @ 12:30

Where else in the world, other than in China, can a country’s profound affinity for its leader, provoke a bus driver to stop in the middle of his bus route, simply to get a short glance of his President giving a speech on one of the bus’ LCD monitors? This so was my experience, earlier this month, during a morning errand run. However, context is always important, and this was neither an ordinary Presidential speech nor an ordinary President.

The context: Shenzhen’s 30th anniversary as China’s first Special Economic Zone (SEZ) since its founding in 1980 by the late President Deng Xiaoping; and the Communist Party of China’s (CPC) high approval ratings by the Chinese and expat community in China. The China Development Research Foundation (CDRF) and Horizon Research Consultancy Group reported in the first quarter of 2010 that 97% of Chinese and 81.8% of expats are optimistic of China’s future, which is more so than most world leaders can say for their administrations, especially in the West. But lest I digress, back to the topic at hand.

The General Secretary of the CPC and President of the People’s Republic of China (PRC), Hu Jintao, was in Shenzhen, China’s third busiest port, to celebrate Shenzhen’s economic progress. According to excerpts obtained from the Agence France-Presse (AFP), President Hu labeled Shenzhen as a “miracle” city that has “contributed significantly to China’s opening up and reform.” China’s state-run Xinhua News Agency also quoted President Hu saying, “The central government will, as always, support the brave exploration of the special economic zone as well as its role of testing and carrying out reforms ahead of others.”

President Hu Jintao made key stops in Shenzhen including the Statue of Deng Xiaoping, University Town in Xili, several firms, including Tencent’s headquarters, as well as with local residents. According to both the Shenzhen Post and the Chutian Metropolis Daily, President Hu Jintao’s visit to Tencent concluded with its CEO, Ma Huateng, presenting the President with a personalized QQ ID number. For those not familiar with QQ.com, it is one of China’s largest web portals and is comparable to America Online’s AIM during its popularity peak.

After President Hu’s three-day tour of Shenzhen ended on September 6, it wasn’t just back to business as usual for southern China. Once overshadowed by Hong Kong, the southern part of China, including Shenzhen, is set to remain under the spotlight in the next couple years as it prepares to host the 2010 Asian Games in Guangzhou this November and the 2011 World University Games (Universiade) in Shenzhen next August.

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