China should be spending like a Keynesian.

Throughout the post second world war period, America’s economy played the role of a shock absorber to the global economy by being the spender of the last resort. Now, with the government and private American in debt, it is up to the savers of foreign currency reserve to spend.  (i put China in the title because they are the largest holder of foreign reserves.) These savers has been buying huge stockpiles of American debt partly for the purpose of keeping  their currency cheap to encourage Americans to buy their export. Its time to spend what they have saved by cashing in their American debt to buy American export.

Buying American Export will kill 2 birds with one stone. Since many savers are developing countries where there are many opportunities to gain productivity (and living standard) by investing and spending. The productivity gain alone can easily pay for the initial investment, result in few or no debt in the long run. This is lest true for developed countries that are already sitting on the technological frontier, and are thus at the inefficient end of diminishing return scale.

Buying American, will mean that the American government wont have to embrace the Keynesian option of trying to raise even more debt to spend their way of a recession, again. It will selectively boost America’s most competitive industry while reducing American debt and spread confident all around.

Why is there no sign of this happening? A lot of this has to do with the other rational for the build up of foreign reserves by the savers. Namely, to accumulate enough dollar to counter any excessive devaluation of their currency. In current crisis, the savers are even less likely to spend their savings, without which the savers would be vulnerable to currency fluctuation.

End game. In order for the savers to be comfortable enough to spend their savings, two things need to happen. (1)  a coordinated spending plan with the participation of all major dollar holders and (2) a guarantee to bail out in case of excessive currency devaluation by stronger and more independent IMF would be needed.

related stuff to read.
On liquidity crunch – “Baby-Sitting the Economy.”
On “The Causes and Consequences of the Economic Collapse“

UPDATE 090403: G-20 Leaders To Give $1 Trillion To IMF, World Bank

G-20 participants announced a tripling of loans available to the International Monetary Fund, to $750 billion, a $250 billion expansion in a special IMF fund to help members\’ foreign exchange reserves, and $250 billion to the IMF to support trade. They also agreed to sell IMF-held gold to poor countries.

Thats an okey amount of money, but the point is that they prove that they are willing to use IMF and WB and they are willing to put resources into it. However whether this will be enough to get the savers to start spending will depend a lot on how exactly this money will be use, and who will have power over it. I personally knows too little about the inner working of the IMF and WB to offer any insight.

UPDATE 090405: World Wad
A world currency is another way to eliminate currency shocks, naturally. SDR, if its rely upon more, it has a change to become a predecessor to a world currency, just like ECU is to Euro Lets hope so.

Taiwan strait gambits read Georgia carefully

The latest from the war in Georgia

For some background on the buildup to the conflict, click here, here, here, or here.

So lucky there is a strait between China and Taiwan.

Being proud of a Tradition

Just starting using Facebook. After hooking with a few friends, i was not surprised to see a friend of mine belonging to the “Face It – Taiwan IS NOT Part of China” group, as a political student, naturally i took a look. and,

look what i found, a thread with the title “可悲，可悲。。。“

The tread starts with this paragraph

作为在一个外国成长的中国人，看到这里的一些thread, 我真的觉得十分的悲哀。这么多人不想做中国人，不想做华夏子孙，不想继承我们华夏5000年优美的文化和传统。

read the rest

translation: Being a Chinese who grow up overseas, seeing all these threads here, really saddens me that there are so many people who do not want to be Chinese, do not want to inhere our 500o years of beautiful culture and tradition.

In my response to it i wrote

I understand what you are trying to say, and

I agree with you in that, Chinese speaking of people of PRC, ROC and else where in the world does in fact have a shared heritage, we use the same language, eat similar food and are fascinated by the romance of the three kingdom (三國演義).

should we be proud of this tradition?
sure, why not.

But i am more proud of being part of the global revolution that begun with enlightenment which eventually lead to the development of modernity, democracy, free market, globalization and liberal ideals.

These ideals are what shape my life and our society the most, and i am very thankful for it.

so, as a native son of Taiwan, i guess what i am saying is, i do recognize our share heritage with the mainland, but i think i would much rather for Taiwan to be rule by Taiwanese people. and i hope you guys over there can self rule one day instead of taking orders from the grand old communist party.

there is no need for unification, Taiwan do fine by its own as long as the communist party don’t meddle with our internal affairs and foreign policy.

i guess, its fair to say, hey, we are all Chinese, but lets have at least two state, one of it be Taiwan.

or, we are all human beings, but hey, lets have 200 states or more, and governments by and for the people.

Discourse on American hegemony and Asia-Pacific geopolitics.

After America, by Ian Buruma.

Every so often, a grand thesis captures the world’s imagination, at least until it is swept away by events or by a newer, more plausible thesis. The latest one to do so, in policy think tanks, universities, foreign ministries, corporate boardrooms, editorial offices, and international conference centers, is that America’s time of global dominance is finished, and that new powers, such as China, India, and Russia, are poised to take over. It’s an idea that has had as much currency within the United States as elsewhere.

All great empires set too much store by predictions of their imminent demise. Perhaps, as the Greek poet Constantine Cavafy suggested in his poem “Waiting for the Barbarians,” empires need the sense of peril to give them a reason to go on. Why spend so much money and effort if not to keep the barbarians at bay?

Read the rest.

After reading four long pages of Ian Buruma, one thing is certain – The discourse on the relevant issues has not change at all since the time I was an international relation graduate student in the year 2003.

A good read if you are not familiar with these issues, if you are, don’t bother.

A Chinese Propaganda on Tibet

I am not a historian, I am not going to dispute the “facts” stated in this video.
Nor will i defend the now indefensible European imperialism, Japanese imperialism and Han-Chinese imperialism of the past.
(yes China was and still is an empire forge together by conquest over neighbouring nations)

I just have one thing to remind viewers,

If there is only one moral principle that is universally share among all people on earth, it would be freedom. As demonstrated by the fall of Soviet Union, application of democratic governance by all cultures and voice of oppressed people, the principle of freedom is as true to the heart of man and woman as it was the day American Declaration of Independence was written. All other moral principle that supposedly legitimise Beijing’s rule over Tibet come second to the principle of freedom and self determination. Set Tibet free.

And, if Dalai Lama’s regime was so awful, and Chinese rule is great, then there is nothing Beijing need to worry.

So, let the people of Tibet and all oppressed people of the world decide freely how they want to live their life and how they want to be governed, if at all.

UPDATE: Found this analysis on how Beijing strategies against Dalai Lama and Tibet.

By linking the Dalai Lama to the unrest—which he opposes (and the Chinese know he opposes)—the Chinese are forcing the Dalai Lama either to repudiate the Tibetan militants and split the emigre Tibetan movement, or endorse the insurrection and permit the Chinese to portray him as an impotent captive of extremist forces.

For those unfamiliar with the Chinese pattern of denunciation, polarization, division, and destruction this is a classic tactic–call it Police State 101–intended to isolate the target of a purge by forcing him to denounce his associates—or force the target to incriminate himself by not forswearing alliance with a vulnerable, isolated, and discredited element that the Chinese government is about to land on like a ton of bricks. [...]

The most immediate result of Tibetan militancy will be to unite the Chinese and isolate the moderates on the Tibetan side, while undermining the political standing of Tibet’s most effective political figure, the Dalai Lama, as spokesman for a unified, internationally popular political and diplomatic movement.

That’s bad politics and dumb tactics…and it’s exactly what the Chinese have been trying to accomplish for the last five decades.

The worst case is that the Tibetan unrest and toothless Western censure unite Chinese elite and Chinese public opinion in favor of another one of those major security actions against Tibet’s isolated people and fragile institutions that seem to happen every twenty years.

This one might end up destroying the Dalai Lama’s authority as a leader, encourage the Chinese to further interfere in Tibetan politics and culture by aggressively inserting itself into the search for the next reincarnation, split Tibetan Bhuddism between a PRC-sponsored Dalai Lama in Lhasa and an untested child in Dharamsala, redefine the emigres as a collection of secular, angry–and vulnerable–dissidents, and put the Tibetan regions securely under Beijing’s thumb for another generation.

That’s a potential win big enough to compensate for some embarrassment at the Olympics.