During Obama’s visit, China secured everything it wanted – the political dividends of funding $800 billion debt to an ailing US economy. Having locked the US into economic inter-dependence, it also used American vulnerability to legitimise a much larger role for itself. Hitherto China was the greatest champion of “national sovereignty” which it deftly contrasted to the West's intrusiveness. The seemingly innocuous reference to India and Pakistan marks a new willingness to step into an emerging void. China is not going to flex its muscles in a hurry. It has set the markers for a new, global architecture of power that will follow its inevitable emergence as the world’s biggest economy. India has reason to worry. (via China has tamed India with help from Obama – The Times Of India).

The US strategy

Most ‘future-of-China’ debates are incomplete as they miss a very important element -  the American template for co-opting client states. Let us call this as US-Client-Acquisition Programme (USCAP). The outcome and China’s economic future is tied to access to US markets, capital, technology, businesses – very closely.

Club de USA

The US has successfully executed US-Client-Acquisition-Programme (USCAP) a most out-sized ‘conquest’ in history. By using these economic levers, it has successfully created client states across Europe, SE Asia, Japan, etc. Some economies have taken the bait, used US incentives and become ’successful’ client states.

Some prospective  clients states have fallen by the wayside. South American failures, the Middle East, post-Gorbachev Russian reluctance has been signal failures of  American recruitment.

The strategy has 5 five corner-stones: -

1. High dollar value – vis-a-vis the client state currency.
2. Export led growth
3. US multinational corporate investments
4. US softpower allowed un-impeded run (Hollywood, Rock and Roll, Coca Cola and McDonalds, etc.)
5. US enemies are the enemies of the client states

The most ambitious target and the biggest challenge in the execution of this strategy is China. But before we examine China, we need to see the US pattern of recruitment and involvement.

In the aftermath of the WW2

After nearly 6 years of WW2, Europe was prostate, more than 25 million killed (including the Holocaust). European economies were shattered. 10 years after WW2, Europe lost most of its colonies. In the midst of this, the US stepped in with the Marshall Plan and IBRD. Most European currencies were set on at a low exchange rate, exports to the USA were boosted, and Europe made a comeback.

Money makes the world go round ...

In return for US aid, Europe agreed to be a junior partner in the NATO alliance. Unlike most overlords and masters of the past, under the USCAP allowed significant leeway to their European client states in matters of culture, language, political, economic and religious freedom. The US yoke around the European necks was never too heavy or irksome. Mostly.

Italy, Germany, France, Austria, Sweden, Denmark, The Netherlands made a brilliant recovery. The only laggard was Britain – living on past glory and trying to unwind the past, at the same time. As European economies stabilized, the US ‘allowed’ European currencies to appreciate against the dollar, triggering 25 years of economic stagnation in Europe.

The end of the Japanese miracle

As European success stabilized, US turned its attention to Japan. The Japanese star started ascending in the 70s. From the 80s, right upto the 90’s, the business and economic world were agog with the coming of the Japanese. The ‘Japan-MITI-keiretsu-Quality management system’ combination seemed unstoppable. The world waited with bated breath for the Japan to rail-road everyone else. Every businessman, first tried to learn Japanese etiquette.

Hollywood made films showcasing Japanese business and economic systems – like Black Rain (Michael Douglas teaches a few things to the Japanese Yakuza and the Tokyo Police); Die Hard (Bruce Willis fights terrorists in Nakatomi Plaza), Rising Sun (Sean Connery, Wesley Snipes investigate murder in an American subsidiary of a Japanese company).

1973-1985. The Japanese were strutting on the world stage. In their hubris, one Japanese businessman declared that the only world class product made in USA was maple syrup.

Japanese management was the first lesson and the last word in business schools. Companies like Xerox, Fedex, Motorola adopted various ‘QIP’ systems – quality improvement processes. The miracle of European Reconstruction and EU was not even in the consideration set any more. The USSR was still a power to reckon with. Berlin Wall looked like a permanent fixture across the heart of the Western world. And the Japanese manufacturing juggernaut seemed unstoppable.

Finally, the Americans decided to bell the cat – and the yen-dollar exchange rate was rejigged.

In 1985, the US worked out a deal, whereby the US dollar was devalued, without a formal devaluation. The dollar was allowed to sink against the Japanese Yen – only it was not called a devaluation, but was called the Plaza Accord. Whereby the dollar would be allowed to depreciate against other currencies – especially the Japanese Yen. Intense negotiations spread over nearly a decade followed. During crucial negotiation in Japan, in 1992, George Bush Sr., vomitted and fainted.

Endaka – and the end of the Japanese run

After the Plaza Accord, the Japanese team went back home and prepared their industry for endaka – high yen prices. From August 1971 through April 1995, the yen’s value ratcheted up from 360 to the dollar to 80 to the dollar. This was primarily because some U.S. industries, anxious about their eroding share of world markets, put political pressure on American politicians.

The American government in turn put pressure on Japan’s politicians and central banking officials to keep raising the value of the yen against the dollar. With some support from academic economists, American producers argued that a higher-valued yen would help their products sell better in competition with Japanese products and therefore reduce the American trade deficit. In 1993, for the first time, a non LDP Government was formed in Japan – The Shinseito (Japan Renewal Party) came to power. And the Japanese goose was truly cooked.

Net outcome, by the mid 1990s, the Japanese juggernaut was halted. Japan had to remain contented with being the world’s second largest economy. George Soros thought,

the prospect of Japan’s emerging as the dominant financial power in the world is very disturbing, not only from the point of view of the United States but also from that of the entire Western civilization

For the next 10 years, the Japanese economy stagnated, investments stagnated. Their dream of supplanting the US as the world’s largest economy were over – for now at least.

Stuffed Tigers

After Japan, the 90s was decade of the Asian Tigers – Korea, Malaysia, Thailand, Indonesia, Singapore were all set to replace Japan as the ‘new axis’ of world economy. India especially came out as a distant plodder against these countries. Lee Kuan Yew, held forth on the Indian character as faulty – and could not compete with the Chinese-Confucian value-set. Commentators tripped over themselves, predicting an Asian century.

Then followed the Asian Crisis. Mahathir Mohammed claimed that the 1997 Asian Crisis was a foreign conspiracy. Specifically, he named George Soros as the master mind behind the Asian Crisis. 9 years later, Mahathir made up with George Soros – and retracted his charge.

Has It Come To This?

The ostensible reason for the Asian crisis was that investors in the Asian Tigers were funding long term investments from short term borrowings – a classic mismatch. The rapid withdrawal of foreign funds impacted development of these economies to the extent of a decade.

The real reason possibly was in the scheme of USCAP, it was the turn of the Chinese.

The 2 trillion trap

Similar to the success of the Europeans, the Japanese, Koreans and the Asian Tigers, China too has embraced the US-client state model. Booming exports to the US, massive FDI by the US in the Chinese economy, has put China in the earlier position of Japan and Korea – prime sub-contractors to the US economy. Where the Chinese economy seems to ‘partially different’ is the military side. On foreign policy and ‘American’ culture, the Chinese have been ’superficially’ resistant and assertive.

The Chinese miracle, much like the ASEAN, Japanese and European miracles before, is using exports to the USA as a stepping stone. Chinese growth and expansion depends on access to the US markets and a devalued currency. For how long will the US allow the Chinese to do that? Another 5 years – or is it 10 years. Was Obama’s China visit, the first round – in a 50 round bout, spread over the next 7 years?

What is China's future ...

The US dollar-renminbi tango will continue over the next 5-7 years. US pressures will be steadily increasing pressure on the Chinese. After the Asian crisis, China was in a much better position to resist American pressure for renminbi revaluation. That resistance to renminbi revaluation, in turn, caught China, in another trap. China has US$ 2 trillion worth of rapidly depreciating foreign reserves.

Which brings us to India!

What will it be

What are the threats to the Indian economy! Will it be a ‘sudden’ collapse in software and outsourcing? Or will it be a severe contraction in gems and jewellery exports? Can it be a a 3 year drought due to global warming? Many in India are panting for the day, when the US will deign to look India-wards and make India also into a client state.

Most recently, we had the privilege of Shashi Tharoor, our Honourable Minister, who sees India replacing Israel in the US camp!

The Economist.com puts it simply:  

“…in some ways, Brazil outclasses the other BRICs. Unlike China, it is a democracy. Unlike India, it has no insurgents, no ethnic and religious conflicts nor hostile neighbours. Unlike Russia, it exports more than oil and arms, and treats foreign investors with respect. Under the presidency of Luiz Inácio Lula da Silva, a former trade-union leader born in poverty, its government has moved to reduce the searing inequalities that have long disfigured it. Indeed, when it comes to smart social policy and boosting consumption at home, the developing world has much more to learn from Brazil than from China. In short, Brazil suddenly seems to have made an entrance onto the world stage.”

A publicação afirma que o País deve se tornar a quinta maior economia do mundo em uma década após 2014, ultrapassando o Reino Unido e a França. No entanto, avalia que o maior risco para a nação é a “arrogância”.

A revista lembra que, quando o Goldman Sachs lançou o acrônimo BRIC, a presença do Brasil, ao lado da Rússia, Índia e China, era questionada. No entanto, o País supera as demais nações do grupo em alguns pontos. “Ao contrário da China, é uma democracia. Ao contrário da Índia, não tem insurgentes, conflitos religiosos ou étnicos ou vizinhos hostis. Ao contrário da Rússia, exporta mais do que petróleo e armas e trata os investidores estrangeiros com respeito”, diz a extensa reportagem.

A economia brasileira está crescendo a uma taxa anualizada de 5% e deve ganhar mais velocidade nos próximos anos com as grandes descobertas de petróleo, aponta a publicação. “Sob a presidência de Luiz Inácio Lula da Silva, um ex-líder sindicalista que nasceu na pobreza, o governo tem se movido para reduzir as marcas das desigualdades.”

Para a The Economist, parece que o Brasil entrou no cenário mundial repentinamente. Sua chegada foi marcada simbolicamente pela escolha do Rio de Janeiro para as Olimpíadas de 2016, dois anos depois de o País ser definido como sede da Copa do Mundo de 2014. No entanto, a revista avalia que o Brasil emergiu de forma estável, já que os primeiros passos foram dados na década de 1990, com a nova política econômica.

“Assim como seria um erro subestimar o novo Brasil, também seria encobrir suas fraquezas. Algumas são deprimentemente conhecidas”, afirma a revista. Entre os problemas, a The Economist cita o crescimento acelerado dos gastos públicos, os baixos números de investimentos, a violência, e problemas na educação e infraestrutura, que deixam o País ainda atrás da China e Coreia do Sul – como lembrou o blecaute desta semana.

Além disso, há novos problemas no horizonte por trás das descobertas de petróleo, na avaliação da Economist. O real já se valorizou 50% em relação ao dólar desde dezembro. Se isso aumenta o padrão de vida da população, ao baratear as importações, também torna a vida dos exportadores mais difícil. Para a publicação, a taxação imposta recentemente ao capital estrangeiro não irá interromper a apreciação da moeda, principalmente depois que o petróleo começar a ser explorado.

A resposta instintiva do presidente Lula para esta questão é a política industrial, já que o governo vai exigir que os equipamentos para o setor de petróleo sejam feitos localmente e vem “mandando” que a Vale construa uma nova siderúrgica. Apesar de a política pública ter ajudado a criar a base industrial brasileira, foram a privatização e a abertura que deram seu formato, avalia a revista.

Para a Economist, o governo “não está fazendo nada” para eliminar os obstáculos aos negócios, principalmente as “regras barrocas” de impostos sobre a contratação de pessoal. “Dilma Rousseff, a candidata de Lula para a eleição presidencial de outubro, insiste que não é necessário reformar a arcaica lei trabalhista.”

Na avaliação da revista, este é o maior perigo que o Brasil enfrenta: a arrogância. “Lula está certo em dizer que o País merece respeito, assim como ele merece muito da adulação que hoje desfruta”, diz a Economist. “Mas ele também tem sido um presidente de sorte, colhendo as recompensas do boom das commodities e operando a partir da sólida plataforma para o crescimento feita por seu predecessor, Fernando Henrique Cardoso.”

Para manter o desempenho do Brasil, o sucessor de Lula terá de tratar de alguns problemas que o atual presidente ignorou, acredita a publicação. “O resultado da eleição pode determinar a velocidade com a qual o Brasil avançará na era pós-Lula.”

A capa da The Economist vem uma semana depois do destaque obtido pelo País no Financial Times, após seminário realizado em Londres com o primeiro escalão do governo e o presidente Lula.

Fonte: Agência Estado

Divide et impera

Vietnam suffered from a prolonged war (1956-1976) – and finally peace had a chance after 20 years of war. Korea remains divided. The Cyprus problem between Turkey, Greece and the Cypriots has been simmering for nearly 100 years.

The role of the Anglo Saxon Bloc, in Indonesia, the overthrow of Sukarno, installation of Suharto and finally the secession of East Timor is another excellent example. The Israeli-Palestinian conflict (1935 onwards) will soon enter its 75th year. The entire Arab-Israeli-Palestinian conflict is a creation of the Anglo-French-American axis. The many other issues in the West Asia and Africa are living testimony of the Western gift to the modern world.

The track record

Closer home is the Kashmir problem. After 60 years of negotiations, India-Pakistan relations have remained hostage to the Kashmir issue. Similarly, between China and India, the border issues remain 60 years after the eviction of Britain from India.

The Anglo-Saxon habit of partitioning countries is a disaster!

1. Cyprus between Greece and Turkey
2. Israel between Palestine, Jordan and Syria
3. Chinese Singapore in Malaysia
4. Northern Ireland out of Ireland
5. Two Koreas
6. Taiwan and China

and of course a Pakistan out of India.

With a benign, ‘democratic’ dictator like Lee Kuam Yew, in the frame, the Singapore out of Malaysia is too small and too short term a success to make any impact.

The other thing is the Western ‘nation’ model has been a huge failure. How many countries have been successful in this quest for ‘nationhood’?

Macro

Bernanke and the Butterfly – Revisited

Right, slowly but surely I’m getting this off my chest. So, we’re vaguely aware of what inflation is, what the Monetary Base of the banking system is and how this feeds the Money Supply of an economic system. We understand that the central bankers are running extreme monetary policy which is in part a reaction to the risk of a Balance Sheet Recession, which has surfaced due to an explosion of debt among both consumers and (now more than ever) the governments themselves.

We’ve also touched on how, over time, “establishment” has endorsed dubious techniques to derive inflation levels – like substitution methods, hedonic adjustments and Core CPI (or, what I call “inflation without all the nasty inflationary bits”). Finally, we recognize that this quiescent image of inflation clouded our vision, and encouraged an era of excessively accommodative monetary policy (low interest rates, set by the central banks), which led, not only to the creation of asset bubbles, but a culture of debt and an unhealthy reliance on the levels of asset prices (e.g. stock markets, property etc).

However, you may recall a couple of days ago, in my November 4th comment, I mentioned that: “suppressed inflation reporting was just one of the prerequisites for runaway money supply and irresponsibly lax central banking”. The truth is more complicated than this – mistakes on such a gargantuan scale tend to be founded on shreds of truth. To be completely above board, the reality is, there was some justification for responsibly running relatively accommodative monetary policy for the past 20 years. Not least because of a little phenomenon called Globalization, which flooded the World with assembled goods and consumer products via a viable structural unit-labour-cost imbalance which became known as “The Labour Arbitrage Gap”.

The fact that employees in the developing World could work diligently to produce goods at only a fraction of the domestic cost to the consumer nations was a powerful thing. That this productivity suddenly became viable after the fall of the Iron Curtain was more than just symbolic, it was the soil upon which the seeds of a privileged generation were sewn. Most of us have never known how or what a “normal” economic environment is (I’ll give the late Henry Allingham  an exemption!) we are wide-eyed children of the bull market. Rather than re-write the argument for other factors which influenced complacent monetary policy, I’m simply going to refer you to something I wrote a couple of years ago, way before the market crash and Lehman Bros bankruptcy (please bear that in mind when reading it!). It was a lengthy piece called Bernanke and The Butterfly, but I’ve extracted the relevant section, below:  

It started in Berlin

It is said that, by the fleeting power of consequence, a butterfly flapping its wings can, over time, conceivably create a hurricane on the other side of the World. The notion that something small can have huge repercussions in shaping something big is a powerful concept: we’ve come to call this “The Butterfly Effect”. Indeed, as one looks back over one’s lifetime, it causes one to wonder how things began, what were the proverbial butterfly-flutters that sparked the changes?

Could it be that, what started as just a glint in Gorbachov’s eye, evolved into Perestroika which, with the cooperation of far-sighted Western Leaders, led to perhaps the most captivating single political event of my lifetime: the fall of the Berlin Wall? The most daunting symbol of the Iron Curtain was destroyed and, with it, this book-marked the beginning of the end of The Cold War.

The Cold War was a World War, The Third World War, in many respects. This was not just about a couple of titanic superpowers engaged in an Arms Race for the sake of flexing their military muscles. For instance, over time, the repercussions of The Cold War snaked their way through the entire global economic system. Whether you were a city boy in London, a peasant farmer in Afghanistan or a government official in Korea, The Cold War was a true World War in the sense that it entrenched deep political divisions throughout the World and seemed to polarize the entire population of the Planet. Previously allied states, which shared prosperous and harmonious histories, were suddenly not on speaking terms and giving each other the Cold War Shoulder. The Barriers went up not just physically but culturally as well – in many instances even within countries and occasionally (as was the case in Berlin) the butterfly effects of fear, misunderstanding and animosity segregated neighborhoods within the same town and even families.

While the politicians and bureaucrats were in global gridlock, economic activity was always going to be constricted to a level significantly below its potential. The progression of raising global living standards suffered as a consequence and, as we are often made aware of, it was the people at the bottom of the pyramid, throughout the World, who probably had to bear the brunt of the distress. While occasionally appearing deceptively inactive to the masses, this latent war was, indeed, a silent killer in so much as is held back the rate of promotion of: more constructive symbiotic international politicking, free cross-border trade and so the obvious benefits of a well-lubricated global and international economic system, a phenomenon which we’ve come to know today as “globalization”.

Where am I going, what has this got to do with Investing?

Well, let’s just take one tiny step back…

The Dawn of a New Era

1987 saw the introduction of a bright, new Federal Reserve Chairman called Alan Greenspan, who immediately bolstered his credentials as a crisis manager during the great market crash in the latter half of that year. While this may have been (so far!) the most dramatic market correction of my lifetime, Greenspan stepped up to the plate to manage the situation. By making sure that the Financial System could still operate, despite the cataclysmic losses incurred by many, confidence was swiftly assured and the financial markets got back to doing what they do best: promoting ideas, sponsoring ingenious entrepreneurialism and occasionally letting poor companies fall, “creative creation with creative destruction”, I like to call it. This was central banking at its best and, here, Greenspan was at his most effective.

During the three decades after the 1989 collapse of The Iron Curtain the global economy has experienced unprecedented growth and remarkably benign inflation – albeit with a few hiccups along the way. But let us get one thing straight: while Greenspan deserves enormous credit for his management of the economy during the late 80’s, he did not bring down The Iron Curtain – the timing of the end of the Cold War was coincidental to the beginning of his tenure!

While much of the symbolism was occurring in Berlin, the economic effects were not only felt in Germany (or the US or USSR for that matter), indeed, there were far-reaching implications all over the World. The Barriers came down almost overnight, and so, with it, came the reversal of all the economic potential which had been held back in restraint during decades of political stalemates and frictional, trade-less stand-offs. The fall of The Iron Curtain opened the proverbial floodgate for free trade and it was here that the seeds of Globalization were sown.

The Evolution of Globalization

As we entered the 1990’s, the World seemed destined for a new era of prosperity and growth and nothing was going to stop us. I was only 13 years old when Greenspan began his tenure as the Chairman of the Fed and I was more interested in skateboards when The Iron Curtain came down, so you’ll excuse me if my recollection is a bit hazy. But, whether one agrees with my perception of the effects of these historic events or not, one cannot deny this: the build-up of tension as a result from The Cold War was a forceful, yet gradual, tectonic process. When that ended it was (relatively) very sudden and that released the pressure-valve on international and cross-border economic activity which was the precursor to the amazing growth and benign inflation that we have been experiencing for the past two decades. I’m not saying that central bankers did not have their role to play in the 1990’s, I’m just saying they were sailing with a significant tailwind. Times were good, and, as they say, a rising tide lifts all boats – this was the birth of globalization. There were massive global economic, sociological and political forces at play all working in the same direction: an unprecedented display of global economic harmony which would dwarf the reach and power of any single nation or institution and, in particular, any single person – even Greenspan. This was the dawn of inflation-free growth (everything is relative, of course!).

But this was just the foundation, just the beginning. Throw in the greatest gleaming innovation of this era, a little something called “The Internet“, and mix it with the backdrop of post Cold War optimism and you have globalization on steroids. And in many senses the stock market rally we experienced in the first half of the 90’s was entirely justified. There was genuine reason to believe we were in a new era, “this time it was different”.

Fantastic! The Global Economy had a double whammy, we had our cake and, by golly, we were eating it. Not one, but two massive forces working: demographically, socially, politically and economically to simultaneously elevate business and innovation and GROWTH higher while pushing poverty, unemployment and INFLATION lower. Yes I’m simplifying a lot, to get my point across about the change in sentiment, but at times it almost seemed that, no matter who or where you were in the World, life was getting better – for businesses, workers and consumers alike. But wait, just when we thought things were too good to be true, welcome the third contributor to the party: the emergence of the Emerging Market Economies – especially the BRICs and China-related economies. Suddenly, a new era of optimism and healthy growth gave way to a feeding frenzy among consumers and a spiral of euphoric optimism among the financial think tanks, business leaders and media pundits. Not only that, we all co-habit what is commonly regarded as “The Global Village”, synergies could be worked within the system. Cue: the massive Labor Arbitrage between the consumers (The Western Economies) and the producers (the then Emerging Market Economies – especially Asia).

The tidal wave of products, services, materials, opportunities flowing out of Asia was, not only contributing greatly to global growth, it too enhanced the tailwind of disinflation that Globalization was already providing. Not only were these (now three) phenomena a gigantic influence on the supply side of the equation, the surge of optimism and the spawn of an easy monetary policy style (“The Greenspan Put”, as it had come to be known), stoked confidence in The West to hysteric consumption patterns. By the turn of the century, we had grown intoxicated on our own potent cocktail of inflation-risk-free growth to the point that Greenspan himself (now, widely dubbed by the growing band of investment groupies and media junkies as “The Maestro”) called for an end to the “irrational exuberance” of asset price inflation. Alas, that was the last we ever saw of Greenspan’s attempts to diffuse bubbles and over-inflated asset prices.

Credit Only Where it is Due

Greenspan deserves only a fraction of the credit he gets for keeping inflation under control and stimulating growth for the past twenty years. It is quite likely that low inflation, globalization and higher growth would have presided irrespective of who was at the helm of the Central Bank for the last quarter of a century. In fact, by over-use of The Greenspan Put, our “Maestro” encouraged confidence to give way to complacency.

This unique globalization dynamic reinforced justification for the policies that central bankers were running. Give people in power a generation of World Peace and there’s no limit to the amount of damage they can do, eh? Seriously, though, the felicitous era of nineties set the tone and justification for the policies that central bankers plunged into the economy to the hilt. To an extent, they began to believe their own hype.

Notice, for the first time in all these lengthy (sorry) musings I mentioned China. In particular something called the Labour Arbitrage Gap. That’s for another day, perhaps. But China’s role in the financial crisis is far from inconsequential. That’s not to say that I believe China is “at fault”, as some politicians would have you believe, they are not. Let’s be clear, this was a disaster made in the West which spread to the East. As Stephen Roach says: “China didn’t force us to take on massive amount of debt”… more on China’s important role and the Labour Arbitrage Gap later…

Macro Data to Watch:

• Non-Farm Payrolls Jobs numbers in the US

Markets

Massive rally on great economic data. Unit Labor costs plunged. Now I can understand why the stock market would go up on that, it’s good for companies – but is it really good for the economy if everybody is earning less? What is particularly interesting about this rally though is that Gold rallied at the same time stocks rallied hard. Platinum hitting new highs as well.

European markets hauled back a pretty ugly drop to close comfortably up on the day.

The American equivalent of Boots, CVS, bucked the trend and plummeted 20% after losing pharmacy benefits contracts – one company’s loss is another one’s gain.

The volatility index (VIX) plunged but is still a way off it’s lows.

Global Stocks to Watch:

• This rally was pretty borad-based so there’s no specific sectors to watch.
• MacDonalds just hit a high.
• Unilever stock got hit despite sales beating estimates.
• Earnings:
  • DBS Bank (Singapore)
  • Lafarge
  • AIG
  • Berkshire Hathaway
  • Blackstone

RBI’s decision to shore up its gold reserves needs to be seen in the context of other central banks across the globe increasing their gold reserves. Among them are the central banks of China, Russia and a few countries in the European Union.

In the last one year, China has increased its gold holdings, by weight, by 75.69%, Russia by 18.78%, the Philippines by 18.50% and Mexico by 108.91%.

Compared with this, India’s central bank did not add anything to its gold reserves in the last one year, according to Bloomberg data. (via RBI to buy 200 tonnes of IMF gold – Home – livemint.com).

Two years ago …

2ndlook had estimated that the Chinese could possibly (and they have)  increase their monetary gold reserves. On April 24th, 2009, Bloomberg reported that China had increased

its (gold) reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in an interview with the Xinhua News Agency today. China, the world’s biggest gold producer, has increased its holdings before, Hu said in the interview carried on the administration Web Site. They rose from 394 tons to 500 tons in 2001 and to 600 tons in 2003. The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons, according to the council.

Another report, from Market Watch, a WSJ web publication added,

The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons. Although Hu did not elaborate on where China had sourced the additional bullion, her comments were interpreted as meaning they came from domestic sources and may included refining of scrap metal.  Traders also say the gold was accumulated systematically over a number of years. Last year China ranked as the world’s largest gold producer with 12.2% of world output, equivalent to 288 metric tons. The U.S. ranked second with a 9.9% share, or 234 metric tons.

What are the future plans of the Chinese? A report quotes an analyst

China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks, said Teng Tai, an economist of China Galaxy Securities Company.

Exactly …

This really does not mean much – except that it may keep gold prices on boil. Whether a currency is backed by 5% or a 10% gold reserve makes no material difference, especially in this era of rampant use of (not just by the US of A) “a technology, called a printing press” as an economic tool. For long term economic stability, gold needs to be in the hands of individuals – and not Governments.

Why India

Since China is a significant gold producer by itself, it may not get a shot at buying IMF gold. India has negligible domestic gold production -and was possibly therefore given preference by the IMF. Of course, preference may have been given to RBI’s purchase, given its ‘responsible’ and ‘mature’ behaviour during the current Great Recession.

What does RBI’s gold purchase mean

RBI’s gold purchase means two things.

The Indian Government which has had a rather low percentage of gold holdings as their currency reserves will now bolster these reserves. Even after this purchase, Indian official reserves, will only be the ninth largest in the world in absolute terms.

On average, countries hold about 12.6% of their reserves in gold, up from 9.9% a year ago. Some of this represents an increase in gold holdings, but another driver of the increased proportion is the rise in the value of gold. (from India propels gold to new high.)

The overhanging threat of open market sales by the IMF, speculated by many and discounted by 2ndlook, now stands neutralized. This will be a kicker to gold prices in the short term.

The ideal thing …

Sell gold to individuals. Governments should not have such large holdings of gold. Gold in the hands of Governments is the prime cause of war. Gold holding should be widely dispersed, as widely as possible, amongst individuals – like the Indian gold possession model. No national government, in the new financial architecture should be allowed to have more than 250 tons of gold – to progressively reduce to 50 tons.

A LUV shaped recovery for the world economy:

L for the West

U for  the US

V for Brics and the ‘next 11′

In a business and media world obsessed by synthesis and simplification this is a  a good insight into the mind of Martin Sorrell whose Group WPP which is firmly focused on the V stating: ‘brand investment is still in check, particularly in the West’

What does this mean for approaches to sustainable consumption?

For me, it means the focus for anyone interested in frames, identity campaigning and sustainability needs to be exclusively on these V countries attracting companies like WPP in their droves.

Consumers in the West, overleveraged, and worried about employment prospects just cant spend like they used to…

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The four largest developing economies which make up the acronym BRIC (Brazil, Russia, India and China) are studying the possibility of substituting the US dollar in trade operations, according to Brazil’ Central Bank Chairman, Henrique Meirelles.

According to Meirelles, the implementation of trade operation payments in a currency other than the US dollar is already underway between Argentina and Brazil. Exporters from both countries are able to liquidate their operations either in Brazilian reais or Argentine pesos. A similar implementation process is also being finalized between Brazil and Uruguay.

 “Brazil and China’s central banks are working to ease trade (between the two countries) through local currencies. We’re doing something similar with the central banks from Russia and India”, Meirelles was quoted telling daily newspaper Folha de Sao Paulo.

According to the local media, Meirelles said he was told by President Lula da Silva to begin talks with Chinese authorities regarding the use of the Real and the Yuan in bilateral trade transactions.

Do Vi o mundo

.

Carta Capital: A agenda lotada do G-20 ( 28/09/2009)
Crédito: Nouriel Roubini

As ações políticas coordenadas e unilaterais adotadas pelos líderes do G-20 – incluindo estímulos monetário e fiscal agressivos, aumento das verbas do FMI e o apoio global aos sistemas financeiros – ajudaram a conter a queda livre econômica. O cenário melhorou desde a última reunião em abril, mas o desafio de navegar para o crescimento sustentável é igualmente difícil e o próximo período traz o risco de erros políticos, enquanto os países começam a planejar suas estratégias de saída. Na véspera da reunião do G-20, em Pittsburgh, permanecem divisões importantes sobre o momento e o âmbito das estratégias de saída da acomodação monetária, o caminho para a consolidação fiscal e o impulso das reformas financeiras.

A regulamentação continuará sendo uma peça-chave da discussão entre os líderes. Novas exigências de capital parecem mais prováveis, na linha das sugestões levantadas pelo Banco de Compensação Internacional (BIS, em inglês) e o Conselho de Estabilidade Financeira. A recente reunião dos ministros das Finanças e presidentes de bancos centrais do G-20 apoiou essas medidas. Mas a reunião terminou sem um acordo sobre as mudanças na forma de remunerar os agentes do mercado, de modo a evitar o enfoque nos retornos a curto prazo, uma política defendida pela União Europeia.

Todos os países do G-20 prometeram manter a adaptação fiscal e monetária, enquanto for necessário, para garantir uma recuperação estável. Com isso, os países e os bancos centrais adotarão diferentes ritmos. Alguns países começaram a remover os excessos de acomodação monetária (Israel e China talvez sejam os mais notáveis), e outros provavelmente os seguirão através de aumentos de juros ou outras medidas ainda este ano e em 2010. O crescimento recorde da dívida interna vai obrigar alguns países a uma consolidação fiscal em um futuro não muito distante, embora os aumentos de impostos possam enfraquecer a recuperação da demanda privada.

Enquanto os líderes do G-20 provavelmente repetirão sua promessa de apoiar a Rodada de Doha de negociações multilaterais sobre comércio, o movimento real para remover as barreiras comerciais não deverá ocorrer nos próximos meses, já que o comércio continua fraco. Alguns países, como o Canadá, removeram unilateralmente barreiras em setores que beneficiam o investimento interno, mas, de um modo geral, o comércio mais lento vai aumentar o incentivo às barreiras comerciais. Na verdade, as disputas comerciais estão crescendo, especialmente entre os Estados Unidos e a China. Em setembro, os EUA aumentaram as tarifas sobre pneus chineses, medida que foi retaliada por investigações pela China das práticas comerciais americanas. Embora essas disputas possam não aumentar e se espalhar, parece improvável uma decisão sobre o comércio.

Os EUA querem enfocar a redução dos desequilíbrios globais e promover o tipo de reformas estruturais que aumentariam a demanda interna em economias voltadas para exportações, como a China. Os desequilíbrios diminuíram desde o início da crise financeira, com o déficit de conta corrente dos EUA caindo para 98 bilhões de dólares no segundo trimestre de 2009, mas resta ver se essa redução será sustentável quando o consumo começar a crescer novamente.

Mesmo que os desequilíbrios globais sejam um problema, ainda não está claro se o G-20 é o melhor fórum para abordá-los. Talvez seja um grupo grande e diversificado demais para isso. Os EUA e a China concordam que os EUA precisam poupar mais e a China precisa consumir mais; mas eles diferem sobre o momento dessa mudança e como realizá-la.

Apesar de quase todos os grandes países darem passos para promover a energia renovável – em parte por conta da esperança na geração de empregos –, eles continuam divididos sobre o momento e o âmbito dos cortes das emissões. A maioria dos líderes do G-20 participou da cúpula sobre o clima da ONU na terça-feira 22, patrocinada pelo secretário-geral da entidade, Ban Ki-moon, que tentou reduzir os obstáculos no caminho para a cúpula de Copenhague, em dezembro.

Enquanto os países concordam com as metas de cortes de emissões a longo prazo, duvidam da sinceridade ou capacidade de seus parceiros de fazerem os sacrifícios a curto e médio prazo. Em particular, as economias em desenvolvimento relutam em aceitar limites de emissões que possam conter seus crescimentos, e os líderes europeus estão cansados dos atrasos na aprovação da lei de mudança climática nos EUA. No entanto, a redução das emissões globais em 2008, com a queda do consumo e da produção industrial, cria algum espaço para se respirar. Embora pareça difícil alcançar um acordo abrangente, as políticas internas estão mudando – mesmo nos EUA e na China, os maiores poluidores

 Fonte: http://www.mre.gov.br/portugues/noticiario/nacional/selecao_detalhe3.asp?ID_RESENHA=623554

Postado por

Luiz Albuquerque

Economista-chefe do Banco Goldman Sachs, Jim O’Neil tornou-se conhecido por ter cunhado a sigla BRICs (Brasil, Rússia, Índia e China) para se referir às novas potências emergentes. Na época, demorou para incluir o Brasil. Agora, pensa-se em tirar a Rússia.

Em palestra em São Paulo, ontem, O’Neil refletiu o entusiasmo atual pela economia brasileira que se alastra pelo mercado mundial. Alguns anos atrás, disse O’Neil, o desafio maior era explicar porque o Brasil havia sido incluído nos BRICs. Após a maneira como o país enfrentou e superou a crise global, as dúvidas dissiparam-se.

Como porta-voz do mercado financeiro, a preocupação maior de O’Neil é com a estabilidade monetária e com o papel do Banco Central. Nem mesmo a preocupante valorização do real reduziu o otimismo de O’Neil. “Tudo parecia tão positivo que vim ao Brasil pensando em ver o que poderia haver de errado”, disse ele, “mas ainda não descobri”.

***

Em sua palestra, assumiu o otimismo militante adequado ao seu papel de porta-voz do sistema financeiro. Declarou-se surpreso com o pessimismo de acadêmicos e de outros bancos, em relação ao fim da crise.

Embora as previsões econômicas tenham sido desmoralizadas pela crise, O’Neil arrisca que a economia mundial poderá crescer de 4 a 4,5% ao ano na próxima década. Dependendo do que ocorrer nas próximas eleições, o Brasil poderá crescer mais do que 5% ao ano.

Mesmo assim, salienta que é um palpite. O’Neil é crítico em relação à certeza de alguns economistas em relação às previsões. Economia é uma ciência social, diz ele, não uma ciência exata.

Na opinião de O’Neil, a economia mundial não foi permanentemente afetada pela crise de crédito, embora reconheça que Estados Unidos, Japão e Europa tenham grandes desafios pela frente. Em relação ao futuro do dólar, não acredita na moeda chinesa substituindo a americana. Para tanto, ela necessitaria ser livremente negociada para flutuar e definir a paridade com outras moedas. Mas o governo chinês não admitiria essa possibilidade, razão pela qual o dólar continuará sendo a moeda de reserva preferencial.

O’Neil chamou o Brasil de “novo país sortudo”. A combinação da posição em commodities, as novas descobertas de petróleo e a concentração em energia alternativas são uma combinação vitoriosa.

O risco maior é da doença holandesa – o país exportar tanto, em commodities, que o câmbio acaba se apreciando e matando a indústria.

“Existem incertezas sobre se o Brasil será igual Noruega ou Canadá, ou se será como outros que desperdiçaram patrimônio em commodities”, disse ele. “É perigo supor que coisa de commodity é algo tão bom como visão de muitos”.

Além do trabalho do BC, um dos méritos do governo Lula foi o trabalho de inclusão social, diz O’Neil. Crescimento sem inclusão não é sustentável. Alertou para o perigo do aumento de gastos públicos em outros setores, não em educação e infra-estrutura.

Ele diz que o governo deve se preocupar menos com as agências de rating e mais em preparar o país para o longo prazo

Fonte Último Segundo Coluna Econômica 15/10/2009

Pescado do Nassif : http://colunistas.ig.com.br/luisnassif/2009/10/15/o-brasil-segundo-o-criador-dos-brics/#more-35938

 Postado por

Luiz Albuquerque

 Foreign Policy: Amorim, “o melhor chanceler do mundo”

07 de outubro de 2009

The world’s best foreign minister

David Rothkofp, no blog da revista

Esse pode ter sido o melhor mês do Brasil desde cerca de junho de 1494. Foi quando o Tratado de Tordesilhas foi assinado, dando a Portugal tudo no mundo a leste de uma linha imaginária que foi declarada existir 379 léguas a oeste das ilhas de Cabo Verde. Isso garantiu que o que viria a se tornar Brasil seria português e, portanto, desenvolveria uma cultura e identidade diferentes do resto da América Latina hispânica. Isso garantiu que o mundo teria samba, churrasco, Garota de Ipanema e, através de uma incrível e tortuosa corrente de eventos, a Gisele Bundchen.

Embora o Brasil tenha levado algum tempo dando razão à máxima de que “é o país do futuro e sempre será”, há poucas dúvidas de que o amanhã chegou para o país, ainda que muito tenha de ser feito para superar sérios desafios sociais e aproveitar o extraordinário potencial econômico do país.

A prova de que algo novo e importante está acontecendo  no Brasil começou alguns anos atrás, quando o presidente [Fernando Henrique] Cardoso gerenciou uma mudança para a ortodoxia econômica que estabilizou o país-vítima de ciclos de crescimento e crise e inflação de tirar do sério. Ganhou força, no entanto, durante o extraordinário governo do atual presidente, Luis Inacio “Lula” da Silva.

Algum desse impulso se deve ao compromisso de Lula de preservar as fundações econômicas assentadas por Cardoso, uma decisão política corajosa para um líder sindical de oposição do Partido dos Trabalhadores. Parte do impulso se deve a sorte, uma mudança do paradigma energético que ajudou o investimento de 30 anos do Brasil em biocombustíveis dar retorno importante, as descobertas maciças de petróleo na costa do Brasil e a crescente demanda da Ásia que permitiu ao Brasil se tornar o líder exportador da agricultura mundial, assumindo o papel de “celeiro da Ásia”. Mas muito do impulso se deve à grande capacidade dos líderes brasileiros de aproveitar o momento que muitos dos predecessores provavelmente teriam perdido.

Desses líderes, muito do crédito vai para o presidente Lula, que se tornou uma espécie de estrela de rock na cena internacional, juntando a energia, a disposição, o carisma, a intuição e o senso comum tão eficazmente que a falta de educação formal não se tornou empecilho. Algum crédito vai para outros membros de sua equipe, como a chefe da Casa Civil Dilma Rousseff, a ex-ministra da Energia que se tornou uma ministra dura e possível sucessora de Lula. Mas eu acredito que uma grande parte do crédito deve ir para Celso Amorim, que planejou a transformação do papel mundial do Brasil de forma sem precedentes na história moderna. Ele é o ministro das Relações Exteriores de Lula desde 2003 (também serviu nos anos 90), mas penso que se pode argumentar que é atualmente o chanceler mais bem sucedido do mundo.

É impossível apontar um único momento de mudança nas tentativas de Amorim de transformar o Brasil de um poder regional com influência internacional duvidosa em um dos países mais importantes no mundo, reconhecido por consenso global para jogar um papel de liderança sem precedentes.

Pode ter sido quando ele teve um papel central na engenharia do “empurrão” dado pelos países emergentes contra o “poder-de-sempre” dos Estados Unidos e da Europa durante as negociações comerciais de Cancun em 2003.

Pode ter sido o jeito que o Brasil adotou para usar questões como a dos biocombustíveis para forjar novos diálogos e influência, com os Estados Unidos ou com outros poderes emergentes.

Com certeza envolveu a decisão de Amorim de abraçar a idéia de transformar os BRICs de uma sigla em uma importante colaboração geopolítica, trabalhando com seus colegas da Rússia, da Índia e da China para institucionalizar o diálogo entre os países e coordenar sua mensagens. (Dos BRICs quem se deu melhor nesse arranjo foi o Brasil. Rússia, China e Índia todos conquistaram seus lugares na mesa através de capacidade militar, tamanho de população, influência econômica ou recursos naturais. O Brasil tem tudo isso, mas menos que os outros).

Também envolveu muitas outras coisas, como o aprofundamento das relações com países como a China, a promoção do Brasil como destino de investimentos, a reputação do Brasil como comparativamente seguro diante de problemas econômicos globais, o conforto que o presidente dos Estados Unidos sente em relação a seu colega brasileiro — a ponto de encorajar o Brasil a jogar um papel como intermediário junto, por exemplo, aos iranianos. Concorde ou não com todas as decisões de Amorim, como em Honduras ou em relação a Cuba na Organização dos Estados Americanos, o Brasil tem continuado a jogar um papel regional importante ainda que seu foco tenha claramente mudado para o palco global.

Nada ilustra quanto evoluiu o Brasil ou quão eficaz é o time Lula-Amorim quanto os eventos das últimas semanas. Primeiro, os países do mundo largaram o G8 e abraçaram o G20, garantindo ao Brasil um lugar permanente na mesa mais importante do mundo. Em seguida, o Brasil se tornou o primeiro país da América Latina a ganhar o direito de sediar as Olimpíadas. Ontem o Financial Times noticiou que a “Ásia e o Brasil lideram na confiança do consumidor“, um reflexo da reputação que o governo vendeu eficazmente (com a maior parte do crédito indo para o ressurgente setor privado brasileiro). E nesta semana as notícias sobre o encontro do FMI-Banco Mundial em Istambul mostraram a institucionalização do novo papel do Brasil com um acordo para mudar a estrutura do FMI. De acordo com o Washington Post de hoje: “As nações também concordaram preliminarmente em reestruturar a estrutura de votação do Fundo, prometendo dar mais poder aos gigantes emergentes como o Brasil e a China até janeiro de 2011″.

Nada mal para alguns dias de trabalho. E embora seja o ministro da Fazenda que representa o Brasil nos encontros do FMI-Banco Mundial, o arquiteto dessa marcante transformação no papel do Brasil foi Amorim.

Muito ainda precisa ser feito, com certeza. Parte tem a ver com o novo papel desejado. O Brasil quer uma vaga permanente no Conselho de Segurança da ONU e mais liderança nas instituições internacionais. Pode conquistar isso, mas terá de manter o crescimento e a estabilidade para chegar lá. Além disso, o Brasil parece inclinado a minimizar ameaças regionais como a representada pela Venezuela (Os brasileiros tendem a olhar com desprezo para seus vizinhos do norte tanto quanto o fazem para os argentinos, vizinhos do sul… e, portanto, subestimam a habilidade de homens como Hugo Chávez de causar danos). E o Brasil tem diante de si uma eleição que pode mudar o elenco de jogadores e, naturalmente, pode mudar a atual trajetória de uma série de maneiras — boas e ruins.

Mas é difícil pensar em outro chanceler que tenha tão eficazmente orquestrado uma mudança tão significativa no papel internacional de seu país. E se alguem pedisse hoje que eu votasse no melhor chanceler do mundo, meu voto provavelmente iria para o filho de Santos, Celso Amorim.

David Rothkopf é autor de Superclass: The Global Power Elite and the World They are Making (Superclasse: A elite do poder global e o mundo que ela está construindo) e Running the World: The Inside Story of the National Security Council and the Architects of American Power (Governando o Mundo: A história do Conselho de Segurança Nacional e os Arquitetos do Poder Americano).

Fonte: http://www.viomundo.com.br/voce-escreve/foreign-policy-amorim-o-melhor-chanceler-do-mundo/

Postado por

Luiz Albuquerque

Publicação no blog de Paulo Henrique Amorim http://migre.me/8AQf

Saiu no Financial Times, em texto de Gideon Rachman:

The choice of Rio de Janeiro as the venue for the 2016 Olympics seems a confirmation of the mood of the moment – Brazil is on the way up; and the shine has come off Barack Obama, who turned up in person to lobby for Chicago only to see his home town eliminated early. It seems to be setback after setback for the US president at the moment – healthcare, Iran, the Afghanistan mess, unemployment up at nearly 10 per cent.

As for Brazil – never has the country been so fashionable. The Brazilians are hosting the World Cup in 2014 and now the Olympics, two years later. They provide the first letter of the much-touted group of emerging economic superpowers – the Brics. They are key members of the G20. In Lula, Brazil at last has a leader who is a recognised global figure. He gave the lead-off address at the UN General Assembly last month. (Just before Obama, symbolically enough.) And Brazil has also just discovered massive reserves of offshore oil. Oh lucky country!

“Com o noticiário dos Jogos Olímpicos, Copa do Mundo, pré-sal e participação nos BRICs, o Brasil nunca esteve tão na moda” (…) Finalmente o Brasil tem como líder uma figura reconhecida globalmente (…) Oh, país sortudo! ”

Saiu na Associated Press:

RIO DE JANEIRO (AP) — He is the Pele of politics, knighted the “most popular politician on Earth” by another contender for the title – Barack Obama. Brazilian President Luiz Inacio Lula da Silva draws praise from Havana to Wall Street for an economic boom that has brought millions out of poverty. He has attended socialist rallies with Venezuela’s Hugo Chavez less than two weeks after extending a fishing invitation to George W. Bush.

Now, after landing his continent’s first Olympic Games, the former labor leader with a grade-school education is seeing his star burn hotter than ever, leaving some to wonder about Brazil’s life after “Lula” – as he is known – when his term ends next year.

“Ele é o Pelé da política, o político mais popular da Terra, segundo Barack Obama. Lula é louvado de Havana a Wall Street e fez amigos de Ahmadinejad a Bush e Obama. Como será a vida do Brasil após Lula?”

Joshua Goodman-Bloomberg, 10/05/2009

Plans to increase the influence of developing nations at the International Monetary Fund don’t go far enough, Brazilian Finance Minister Guido Mantega said after meeting with his so-called BRIC counterparts.

Brazil, Russia, India and China will continue to push for greater representation at the Washington-based lender, Mantega told reporters today in Istanbul, where he’s attending IMF and World Bank meetings. While Group of 20 leaders last week committed to move “at least 5 percent” of the IMF’s quota share to developing countries from over-represented ones, the BRICs agreed to insist on their original request for a 7 percent shift, Mantega said.

He also said the BRICs want to use their planned purchase of $80 billion of bonds from the IMF to gain a greater say in how that money is managed through the IMF’s New Agreements to Borrow facility, or NAB. The securities, the culmination of months of talks between the fund and its members, offer the largest emerging-market nations a new way of making IMF contributions while they seek a greater say at the fund.

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