Sticks and Stones

James Fallows wrote an illuminating article about the economic interdependence of China and the US, expounding on a series of topical questions. How independent is the US economy? How strong is it? What is the likelihood of a US economic collapse? Most worrying was the question it dealt with at the end: What would happen if China sold its $1.4 trillion in US Treasury bonds?

The answers are not simple; China buys billions of US dollars daily through a complicated series of fiscal regulations forcing banks to surrender USD to the central bank which then buys US bonds with the dollars. Fallows summarises it neatly:

Spent at CVS, passed to Oral-B, paid to the factory in southern China, traded for RMB at the Shenzhen bank, “surrendered” to the PBOC, passed to SAFE for investment, and then bid at auction for Treasury notes, it is ready to be reinjected into the U.S. money supply and spent again—ideally on Chinese-made goods.

The problem is that this forces interdependence onto both the US and China. While a controlled system in China ensures the US has the money to continue consuming, political tensions and distrust from both nations toward each other makes this a fragile situation. We all remember when the USS Kitty Hawk was not allowed to dock for Thanksgiving in Hong Kong. Another military incident that worries the US was when the Chinese blew up one of their own satellites, spraying debris in the path of many US orbital probes.

Whether these actions are innocent and simply procedural or menacing cannot be known because China’s government is so secretive. Was the blocking of the USS Kitty Hawk a demonstration of regional domination? Was the destruction of the satellite China flexing its technological muscle? Perhaps these situations were, as claimed, simply miscommunications either between the US and China, or within the Chinese government. We cannot know because they won’t let us know.

As China continues fuelling US consumption - which has grown to the extent that it is greater than US production: a very dangerous situation when not propped up by China - both nations will need to be ever more delicate about their political connections and demands. Human rights for the Chinese, free access for CNOOC to buy U.S.–based Unocal… demands abound on both sides.

The next president will have to face this complicated situation, and possibly a devastating fallout if someone misunderstands something (as when Chinese Premier Wen Jiabao, said last November, “We are worried about how to preserve the value” speaking about their US dollar foreign reserves). It is a delicate situation, and both sides need it to exist to maintain economic stability, even as both sides square off politically over a plethora of issues: Tibet, Taiwan, North Korea, Iran, Nigeria… the list goes on.

Read the article in this month’s Atlantic, or online at theatlantic.com

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The fire had ravaged across the plains for days, taking with it many acres of gnarled barley, burled corn, and a few ramshackle towns. The authorities had arrived on time but just one year after the collapse of the markets, the farmers could no longer afford the insurance necessary for protecting their lands.

Poor and without hope, Dara knew his father’s farm would be lost. He also knew the racist firemen would not waste their water on a black man’s property. So, he sat on the corner of his measly half-acre and worked out his losses on a spare piece of news-sheet. Mr. Crow’s farm would have been saved by now, no doubt his ranch house protected and his family safe. Who knew where Tyrone and Nigella were; an hour ago they would have been panicking, forced to pick whatever cotton they could save on Mr. Crow’s land even as the flames licked at their heels.

Dara sighed. Nightfall was approaching, after which his mother and brother would not be able to return home safely. His prematurely wizened features crinkled as he thought of their fate. The withering flames crackled and cackled, their soft glow casting shadows and highlights on his dirty oily skin. Brow furrowed, he sighed once more and dropped his heavy face into his leathery hands.

He heard the steady rhythmic pattern of Nigella’s feet. He looked up and saw what he thought was Jim Crow’s Model A. It seemed unlike that Mr. Crow would show kindness to poor black folk, but there he appeared to be, having driven Tyrone and Nigella to safety.

But the orange haze and choking smoke plays tricks on his mind yet again. He wakes up anxious and fearful. Vietnam is dangerous this year. Lying there he can’t forget his family, dead in the burning prairies on old Jim Crow’s watch.

Saigon is drenched in choking smoke and covered in orange haze today; just like Oklahoma was, that day, three decades ago.

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Today, Monday 21st January 2007, is officially the most depressing day of the year. Yep that is right, it is Blue Monday.

By using a formula involving the weather, debt, time since the festive season and general motivation levels, today is that day that nobody looks forward to. I must say I probably have to agree. I arose this morning and saw out the window nothing but grey skies, rain and trees blowing in the wind. I followed the news to see that £77bn has been wiped off the value of stocks in London (Northern Rock’s 46% increase being a notable exception). I then saw that government finances are £46.3bn in the red, and looking at most of the personal finances of the nation, a similar situation of debt is occurring.

I was now really searching to find some good news, but sadly to no avail. The government has lost more data (the MOD at fault this time), a British soldier has been killed in Iraq, flights are still delayed in Heathrow, the Diana inquest still appears to be going nowhere, and the Home Secretary is afraid of walking the streets of London alone at night.

So what good is left in the world. I could only find two things: this blog is continuing and the DFS sale is still on. Yipee!

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There’s something truly romantic about the roaring twenties and the ocean liners that gracefully glided across vast oceans to transport the rich, famous, and beautiful from one continent to another. In many ways, the ocean liner - specifically the Titanic, although it sank in 1912 - was the embodiment of the twenties: glorious, decadent, and doomed for failure. As the US sank into depression, fewer people could afford the lavish indulgence of spending weeks aboard a floating palace.

The popularity of commercial aviation around this time signalled a death-knell for ocean liners, which were no longer cost or time effective. Skipping past eighty years of transportation history and nowadays Royal Caribbean, Princess, Carnival, and even Disney are sailing huge malls-on-hulls across the tropical hotspots of the world. While a popular holiday, they have very little in common with the ocean liners of yore.

Despite the fact that cruises are far more profitable than trans-Atlantic voyages, Cunard sailed its three Queens (Elizabeth 2, Mary 2, and Victoria) into New York harbour last night; marking the first time three Queens have ever met. Those there on that below-zero-degrees Manhattan evening reported that it was truly a spectacle: a fine parade of ocean liners, not cruise ships. A simple comparison: ocean liner is to cruise ship as Waldorf Astoria is to Holiday Inn. Economists like to say we are in another Gilded Age; it only seems fitting that three vessels grand enough to exist harmoniously alongside the first Queen Mary should meet for the first and only time in New York harbour; barely miles from Wall Street where today, like eighty years ago, the rich keep getting richer.

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This weekend has seen London’s first incandescent light-bulb amnesty. With many believing we need to rid the streets of “the most successful city in the world” (to quote the Mayor’s office) of guns, knives and drugs, people are right to question why so much energy is being devoted to make war on the traditional light bulb. The humble bulb has been illuminating our lives and our homes since Swan and Edison began production in the 1880s, but now the eco-warriors want to see its final blow.

The rival, an energy efficient bulb. The ones being given away this weekend are all produced by Phillips and are sponsored by British Gas and B&Q. The idea is that the Mayor colludes with three big corporations in order to try to pull off a publicity stunt. The “amnesty” ignores the facts that energy efficient bulbs do not produce the same quality of light, take considerably longer to turn on, don’t work with dimmer switches which are extremely common, take a lot of energy to produce, will leak mercury into your home and look hideous. All of the sorry excuses for the inadequacies of the energy efficient bulb can be found on the official web-site.

However one accusation remains unanswered. By driving to B&Q, just to exchange one (or two) bulbs, will the carbon emissions from my car not greatly exceed those that I will save by switching to energy efficient bulbs?

It really is time to focus our energy on real improvements to our lives.

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