Articles by " vding"
15 May
2007
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Protectionism Rears Its Ugly Head in Congress

One of the most well-respected macro strategists on Wall Street, Morgan Stanley’s Stephen Roach, recently testified in Congress on China trade.

His comment after leaving Capitol Hill: “the protectionist train has left the station.”

He says China bashing could backfire and endanger the balance of the global economy.

Bottom line? “The U.S. Congress just doesn’t do macro.”

20 Mar
2007
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Terror-Free Investing

California has joined a growing number of states to promote the so-called “terror-free” investing, namely, to force pension funds to sell their holdings in companies doing business with the likes of Iran, North Korea, Sudan, Syria and Cuba.

Financial Times wrote this morning:

Interpreted loosely, a ban could affect a number of US companies that have exploited existing loopholes as well as a large chunk of Europe’s multinationals – from engineering companies, banks and oil producers to the likes of Nokia and NestlĂ©.

Also in the news today, Chiquita Brands International, the world’s biggest banana producer, has pleaded guilty for paying protection money to Colombian paramilitaries from 2001 to 2004.

Most people would hesitate to argue against corporate responsibilities for stakeholders like workers, communities and society at large, beyond the overarching mandate of making profits. However, fighting the war on terror should not be an extra layer of burden, especially when business and finance are so interconnected globally now.

What’s more, despite their formidable prowess to create jobs and generate earnings, companies are in fact quite vulnerable to governments with military at their disposal and no accountability. Chiquita had the choice of losing money and paying up to the druglords. With a simple cost-benefit analysis, a rational business would tend to choose the latter option.

So is legislating against such wheeling-dealing a solution? Far from it. It’s the government’s job to fight terrorism, not the business’s.

Consider this, countries like China and Russia are now on a deal-making binge with the rogue regimes of the world. It is not a time to tie the hands and feet of our profit machines and choke the engines of our growth.

12 Mar
2007
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Anxiety Over China’s military buildup

While the U.S. is heavily engaged with China economically, the Chinese military buildup is in full swing, announcing an unprecedented 18% increase in the official defense budget last week.

What this means is heightened regional anxiety and potential ammunition for isolationists in the U.S. Congress for more trade protection.

As the great British economist historian Niall Ferguson wrote, China and the U.S. are now tightly linked in a symbiotic relationship which has been fueling global growth and bolstering international financial markets. For better or for worse, this “Chimerica” relationship is a reality whose undermining will have huge, negative consequences for the world economy and the living standards for billions of people.

Is China playing smart here by taking the U.S. economy hostage? Can they get away with such rapid and unaccountable military buildup? How should the U.S. respond?

The level of anxiety is certainly due for a major rachet-up as the U.S. and China get even closer economically.

2 Mar
2007
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John Bolton: “Regime Change” for Iran

John Bolton, a bona fide Renaissance Man, is now a senior fellow on foreign policy at the American Enterprise Institute. He appeared on Bloomberg TV yesterday and showed a true conservative attitude towards foreign policy… the attitude that combines realism with imperialism — the only attitude that has worked since the start of nation states.

As a private citizen, Bolton is now free to express what he believes is the right, most effective policy towards volatile dictators in rogue states.

He said the “persistence of the bureaucracy” was to blame for lack of action against Iran and, insightfully, he said:

Unless you’re prepared to believe that the Iraniansare voluntarily going to give up the pursuit of nuclear weapons, the idea of pursuing negotiations is ultimately going to be fruitless.”

He also said the Bush administration has “abandoned the principles it pursued for much of its first several years in office.” Searing but still true.

13 Feb
2007
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Our Record Trade Deficit

The U.S. trade deficit widened to a record for 5th straight year in 2006. And here’s the fine print: our imports are growing faster than exports (so in the long run, the deficit will gradually shrink); and the trade gap with China actually was smaller in December on a month-by-month basis.

But these fine points will not stop fearmongers like Lou Dobbs from getting very upset that “we’re borrowing $3 Bln a day just to pay for our imports.”

Truth is, it’s glorious that foreigners are buying more financial products than manufactured goods from the U.S. (hence our current account deficit and our capital account surplus). It’s taking in massive investments from foreigners. And it’s a vote of confidence in the capital markets here.

As Walter Williams wrote in Town Hall that

During [the 10 years of the Great Depression], we had a significant trade surplus, with exports totaling $26.05 billion and imports totaling only $21.13 billion. So what do trade surpluses during a depression and trade deficits during an economic boom prove, considering we’ve had trade deficits for most of our history?

And it’s simply not true that the U.S. is borrowing foreigners’ money to pay for their products. Except for T-Bills, the investments foreigners make in the American capital market are not a form of debt we incur. Trade deficit is by no means an IOU run wild.

4 Feb
2007
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Why liberals fear global warming

A bunch of climate-change bills in Congress is gaining support. For some perspective, here’s a fine article on the burgeoning “global warming” movement.

Highlights of the article:

“The Left is prone to hysteria. The belief that global warming will destroy the world is but one of many hysterical notions held on the Left. As noted in a previous column devoted to the Left and hysteria, many on the Left have been hysterical about the dangers of the PATRIOT Act and the NSA surveillance of phone numbers (incipient fascism); secondhand smoke (killing vast numbers of people); drilling in the remotest area of Alaska (major environmental despoliation); and opposition to same-sex marriage (imminent Christian theocracy).

“The Left believes that if The New York Times and other liberal news sources report something, it is true. If the cover of Time magazine says, ‘Global Warming: Be Worried, Very Worried,’ liberals get worried, very worried, about global warming…

“Leftists tend to fear dying more. That is one reason they are more exercised about our waging war against evil than about the evils committed by those we fight. The number of Iraqis and others Saddam Hussein murdered troubles the Left considerably less than even the remote possibility than they may one day die of global warming (or secondhand smoke).

“One day, our grandchildren may ask us what we did when Islamic fascism threatened the free world. Some of us will say we were preoccupied with fighting that threat wherever possible; others will be able to say they fought carbon dioxide emissions. One of us will look bad.”