The fall of the American Empire?

A college buddy of mine responded to a Facebook message I placed on my wall. He was asking me why was I commenting on America all of a sudden? However, when the President of China, Hu Jintao, visited Washington DC in the month of January he and American counterpart, Barack Obama, commentators wondered what will America do about a seemingly, increasing, threat, China poses to US interests. I explained to my buddy that international news is what I comment on and not to take it too personal. But it did lead me to think: is the sun setting on the American Empire?

I must say that America has been our greatest ally- even taking into consideration the Chinese assistance with many projects in the Bahamas- and it's a relationship I truly treasure as a Caribbean individual.

The American media went into overdrive for President Hu's trip, from talking about a full scale attack on Chinese technology and military systems, to the milder, trade and commercial based sanctions and measures to curb Chinese exports and the undervalued Chinese currency. Whatever it is, it has to be said that China has the world's largest standing army and has the second largest economy in the world and growing at a rapid pace while the American economy is in a decline.

The first point that people notice is the huge military build up of arms that the US has not been able to persuade the Chinese not to build. Reports from the Pentagon estimate that the Chinese nuclear arsenal has increased some 25 percent since 2006. The People's Liberation Army of China has a standing army of over 2.5 million men and another 500,000 on reserve. The United States has just under a 1.5 million standing army with about the same amount of official reservists.

While that total seems startling, especially considering China's population, but the way warfare has changed and weaponry has developed since the Atomic Bomb dropped on Hiroshima, a country like the United States, doesn't have to engage in an "on the ground" invasion. With a military expenditure of over $680 billion dollars (with a Republican congress promising to increase this amount), with much of that spending going towards satellites, surveillance systems, long range missiles, anti-ballistic missiles (like the Patriot missile) and sea to air combat vehicles, the Unites States seems more fortified than China.

But, there is more to having military power than size or advanced technology alone. You need the universal, intellectual right, to use your moral authority to get the job done, as we have seen with the invasion of Iraq with America and the inability of China to persuade North Korea, or anyone else for that matter, to put their aggressions aside.

The second issue is that US economic power seems to have faded. The Free Market ideology has flaws and the salience of its subscriptions has been severely challenged in the international arena. The market system has been criticized by Chinese officials, of all things, as well by other emerging economies such as Brazil’s former President, Lula da Silva.

America has not kept captive the imagination of the rest of the world through the philosophical underpinnings of the capitalist free market ideology. One has only to look at the mess the global banking sector has gotten the rest of the world in and you can understand why there needs to be a better way of doing business. Massive worldwide unemployment and business closures, led to massive protests and instability.

While some proponents of the free market system feel that this is just a blip on the radar and that this system is the best way to transfer wealth to the economically under-served, they believe that by increasing the amount of wealth and money to be dispersed without government interference should increase income equality. Opponents on the other hand would argue that if this were the case, the American financial system and automobile sector would not need government bail-outs or government facilities for housing in the US (Fannie and Freddie Mac) nor other regulations that work to ensure that wealth is not concentrated into the hands of the few, would not be necessary now or ever.

Slate Magazine's Tim Noah estimates that income inequality is a major issue in America as the top fifth of Americans, who earn more than $100,000 a year, received nearly 50 percent of all income in the U.S., while the bottom 20 percent received just 3 percent. However, income inequality in China is a growing problem as well, with a Socialist system. A report from China's Ministry of Labour and Social Security estimate that 20 percent of China's population at the poverty level accounts for only 4.7 percent of the total income or consumption and 20 percent of China's population at the affluent level accounts for 50 percent of the total income or consumption and the gap is widening.

One can say that the demonstrations in China in 2008 and 2009 indicated that the Chinese people were clamouring for more reform to their system. Conversely, Tea Party protests in America, while a little milder and somewhat more civil, has brought about threats of political assassinations and actual attempted assassinations , with protestors brandishing semi-automatic weapons at the rallies doesn't quite bode well for America either. (I have to add that the French and Greeks take to the streets with more fervour and animosity than China and America combined)

China's export driven economic model, to China's credit, is changing towards an inward, domestic spending and consumption pattern of growth, isn't exactly socialist either. In fact, China is exactly where the Western world was back in the 1700's with a "beggar they neighbour" mindset and Mercantilist practices. China, now the largest exporter in the world, surpassing Germany in 2009 and now the second larger economy surpassing Japan in 2010- has the economic might to make demands on global interests worldwide, with or without fully subscribing to any ideology moving forward.

America has other internal challenges as well. Their media is on steroids with the 24 hour news cycle model that accelerates the velocity of political and negative social rhetoric at record speed while breeding social discontent. Their congress has bottlenecks as well, with it always in deadlock with threat of filibuster, made worse by a large gap with regard to the transformation of policy information to the masses about how the American economy and society works with a democratic system and congress.

China doesn't have those internal problems as they have a strong check on the information that flows through China, and as a one party democratic system, makes decisions more quickly than the American two or, multi-party, system.

Which country will self destruct, artificially inflate their economy and over extend their reach without the influence to back it up, first, or who has the resilience to overcome those obstacles to attaining ultimate global power over the next 100 years? America appears to have the lead!

January 14th, 2011!

KEMP GLOBAL was born. Great day for the President and CEO, Youri Aramin Kemp, indeed!

Political Rhetoric to blame?

Well, it's been all over the news- the shooting of several people in Tuscon Arizona, with one of the critically wounded being Congresswoman Gabrielle Gifford.

People are jumping to the idea that political rhetoric is to blame. But, there hasn't been any evidence to suggest that. It appears that the young man responsible for the shooting, was a nutter on his own run and not tied to anyone political action committee or side.

So, to me, rhetoric from the GOP or the Democrats aren't truly to blame. Now, the shooter may have gotten a few ideas from some sides of the divide, but it appears as if he had his mind made up on his issues from jump street.

It was so incredibly shocking that the cable news networks- CNN and MSNBC- were quick to jump to political rhetoric being to blame, before even having an idea on what was behind the shooting or who the shooter was themselves.

This is how media influences, or, at least, tries, to influence the debate and how it is structured. The irony of it all: is that the media is blaming the politicians for spewing rhetoric for insighting the shooter to violent action, but they are flaming the debate themselves by choosing sides and casting blame in a negative light. They didn't get away with it as some reporters with integrity, particularly Wolf Blitzer from CNN, caught it right away and asked them to change their tune-- much to the shock of the other talking heads who were trying to shade the debate.

It's not a good thing to hear these types of assassination attempts. It's also not goo to flame the debate and jump to conclusions. We will have to see how this develops over the next few weeks.

Oil is rising again...

Same ol'e story... See Business Week article.

Well, it seems as if the battle we had for 2009 and 2010- the battle on derivatives trading and futures, especially in the commodities market- will be the battle again for 2011.

Don't look for the GOP to make any substantial headway in this issue. They are more in line with Wall St. than the Democrats. Even though a few key staff from the Obama administration have gone on to work for Wall St. and he also has plucked a few Wall St. folks to work for his administration.

Will we see $5.00 a gallon oil by 2012? Yes, if the trend continues and nothing is done about the futures market for oil. What does that mean for the rest of the world? Well, for China is means higher costs for production, which means higher cost for the inexpensively made goods many people import from China.

For the Caribbean, it means another year of skyrocketing prices in almost everything. Damaging the prospects of strong growth. The Bahamas has been well over $4.00 for a gallon of gasoline. Everywhere, except for Trinidad, has seen oil prices at ghastly levels. In fact, Trinidad produces oil and they have kept their oil per gallon price to under $1.00. Can you imagine that? Gas for a buck US?

It isn't fair... but, blame the US congress for not acting more strongly on separating the oil market from the dollar. And, now, also blame Ben Bernanke for mulling- in open forum- the possibility of a $600 billion dollar injection of cash into the American economy- which no one has made the attempt to ensure that the flow of this injection, goes only to Main St. and not at all Wall St.

This is the life.

Merry Christmas folks..

From the staff- mainly me- from Global View Today, I wish to send out a very Merry Christmas and a Happy New Year!

Have a blast!

Blessings!

Youri

All hopeful for a better 2011!

As it turned out, 2010 certainly is a year most people could afford to forget, if the traumatic effects of economic uncertainty weren't so fresh. I haven't given up on predictions, but just that predictions are predicated on what the nature of the policy prescriptions allow. As with the fluid nature of the tender times in economic history, projections, can be changed or affected within day's notice. With that, growth forecasts perhaps need to adjust to what are the drivers and causes for fear or misconception on the economy currently and about what could, should, is and has been allowed to happen on a month on month basis!

Regionally, there hasn't been any Caribbean country, aside from Trinidad and Tobago, that had anything to be gleeful about- T&T has natural resources, mainly oil, so, the cost of production of local goods as well as the export of oil and oil bi-products to supplement their economic model, served them well. For everyone else- political issues aside- it has been dismal.

Latin America, as with the African continent, began and is going through the structural adjustments that many have wanted for at least 50 plus years! Hence, their seeming stability, through the worst of it, should be of no surprise. They have embraced freer markets, began curbing the tendencies of an over saturating the public sector, as well as received Chinese investment, to the tune of billions. Also, moving forward in a most progressive manner, they have taken a diagnostic approach to their development and have, as policy, employed the techniques- while still under review- of diagnostic methodology like the Human Development Index and Human Opportunity Index, as a staple of economic adjustment and performance barometers.

Switching gears towards our neighbor to the North: America is still in the doldrums. It's so seriously difficult to address that commentators have stopped talking about the economic numbers and simply reverted to the old method of tax policy to affect some type of change in the circumstance. In addition to the fact that 2010 was an election year, the economy took a back seat to the Tea Party, posing as paragons of economic virtue. The "comprehensive" economic stimulus was ineffective as well as with the tax policy as a component of it, as employment still hovers around 10 percent. While much was done in the past two years president Obama was in office structurally, it appears as if not enough was done to stimulate American productivity and boost exports in addition to unlocking consumer loans from banks.

Additionally, the USA is now mulling over what analysts would coin "American Stimulus 2!" To be fair: it's American Stimulus 3! The Troubled Asset Relief Program (TARP) of 2008- while it was coined as a bailout for financial firms and the toxic assets they were exposed to- was a stimulus plan in itself, in that it attempted to stimulate banks to lend by removing the risk to exposure to the investment products that were creating higher risk portfolios, which in effect were preventing them from lending. The second plan was the American Reinvestment plan of 2009, which did more to add value to an uncertain American future on the global economy, rather than it providing short term strengthening domestically.

Europe isn't any better. The Euro-zone is in a particular and severe crisis. The problems with Portugal, Ireland, Greece and Spain (PIGS), has put the idea of the largest currency union at its harshest testing point. The risk of a disintegrating Euro-zone through the debt contagion of weak performing Euro-zone economies has everyone concerned. While inflation has been stable, the euro isn't- the Euro, being the glue that holds the zone not only together in strength, but together in anguish.

The European Central Bank (ECB) can do nothing about the risk of a devaluing euro as a result, if countries continue to fudge their financial statistics and report, falsely, on the dynamism of their economies, in addition to them having the lack of political fortitude to revalue their economies to what it should be- i.e., weak performing, Euro-zone economies, not on the scale of France and Germany, especially as it relates to agriculture, manufacturing and financial markets. Furthermore, the markets have dealt, severely, with the PIGS as sovereign bond yields have risen as well as the market for homes has collapsed with the financial sector, frozen in fear.

Additionally, the ECB has done very little about inflation, even though it has remained stable. The issue with inflation is that employment is still very soft. So, glittering reports on a stable inflation rate in the Euro-zone may be misdiagnosed, due to a lack of appreciation on the real reason behind inflation drivers in Europe.

Inflation in Europe is tied directly to production and production is tied directly to employment. Employment is tied to consumer demand and consumer demand, is soft because of uncertainty in the labor market as the labor market as with the United States is affected by higher productivity levels in Asia- China and South Korea, respectively. When understanding that the unemployment rate through Europe is over 10 percent, while bond yields have plummeted- which signifies a state financing issue that was caused by weakness in the general economy- the issue shouldn't be low inflation, but current deflation with the risk of hyper inflation when the economy picks up again, if the drivers for current inflation statistics remain misdiagnosed.

China looks stronger than normal over any other Asian countries. The Renminbi has been revalued, almost simultaneously as the Chinese stimulus package began to turn consumer spending inward, as opposed to their export focused economic model This not only giving the Chinese consumer more purchasing power, but makes investment into China more expensive at value. Additionally, the Chinese government has taken steps towards cooling their overheated real estate market, which was grossly inflated due to speculation- the revaluing of the Renminbi is a part measure as it would limit investments in all areas and not just real estate, in addition to an imposition of a real estate tax as well as imposing a higher down payment requirements for persons wishing to purchase a second home.

As for the Bahamas: we are in a cast to ourselves. The market for tourists in the US is still soft, while tourist arrivals are up in The Bahamas from last year this period, but not back to their previous levels.

Foreign Direct Investment related projects are getting a fresher look. Baha Mar, as well as with the fourth phase of the Atlantis/Kerzner development, should be enough to keep many Bahamians busy in 2011.

There should be greater assurances that these developments impact on a greater, more meaningful scale. One can only wait to see how the dynamics of the socio-economic agenda push matters moving forward. Certainly there should be a close eye on all and sundry, as money begins to be spent on these developments.

With all things of note, I wish for everyone, from family, to friends, to my loyal readers and the editors of the news outlets that keep my commentary in the public square for all to share, a very Merry Christmas and a Prosperous New Year!

Raising the price on the poor...

Cool article from the McKinsey Quarterly about the success in Bangladesh with Grameenphone and their ability, through commercially driven methods, of delivering more socio-economic benefits to the poor rather than government sponsored programs for the telecommunications market.

See article.

The only issue is that this is only in terms of undeveloped markets in telecommunications. Also, undeveloped markets where services is not only sub-optimal, but also unavailable to many people, let's say, at least 1/4th of the population, enough for initial private investment to gain scale from new consumers.

Other than that, it was great insight into some of the complexities of private led vs. govt. sponsored programs.