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Fareed Zakaria: Are America's Best Days Behind Us?

posted Mar 8, 2011, 1:51 PM by Anthony Tang   [ updated Jul 6, 2011, 10:20 PM ]

From: Simon Tang [mailto:]
Sent: Monday, March 07, 2011 5:04 PM
To: anthony@
Subject: Re: The Decline of America? Please read.

This week's Time Magazine's cover discuss the future of America: Are America's Best Days Behind Us? There are two articles, one says yes and the other says no.

I recommend the first one. I implore you to read it. I picked the "Yes" one not only because it is written by my most favorite writer, but because only by recognizing our problems; we Americans can once AGAIN overcome them.


World Chinese Venture Model Association Invitation

posted Mar 8, 2011, 11:46 AM by Anthony Tang   [ updated Jul 6, 2011, 10:20 PM ]

Congratulation to Aunt Eva who has recently received an invitation to an award presentation ceremony from the World Chinese Venture Model Association

Eva Tang Invitation

Eva Tang 世界华人创业楷模 Invitation

How to Stay Friends With China

posted Jan 3, 2011, 4:41 PM by Anthony Tang   [ updated Aug 11, 2016, 11:33 PM ]

THE visit by President Hu Jintao of China to Washington this month will be the most important top-level United States-Chinese encounter

since Deng Xiaoping’s historic trip more than 30 years ago. It should therefore yield more than the usual boilerplate professions of mutual esteem. It should aim for a definition of the relationship between the two countries that does justice to the global promise of constructive cooperation between them.

I remember Deng’s visit well, as I was national security adviser at the time. It took place in an era of Soviet expansionism, and crystallized United States-Chinese efforts to oppose it. It also marked the beginning of China’s three-decades-long economic transformation — one facilitated by its new diplomatic ties to the United States.

President Hu’s visit takes place in a different climate. There are growing uncertainties regarding the state of the bilateral relationship, as well as concerns in Asia over China’s longer-range geopolitical aspirations. These uncertainties are casting a shadow over the upcoming meeting.

In recent months there has been a steady increase in polemics in the United States and China, with each side accusing the other of pursuing economic policies that run contrary to accepted international rules. Each has described the other as selfish. Longstanding differences between the American and the Chinese notions of human rights were accentuated by the awarding of the 2010 Nobel Peace Prize to a Chinese dissident.

Moreover, each side has unintentionally intensified the suspicions of the other. Washington’s decisions to help India with nuclear energy have stimulated China’s unease, prompting increased Chinese support for Pakistan’s desire to expand its own nuclear energy potential. China’s seeming lack of concern over North Korea’s violent skirmishes with South Korea has given rise to apprehension about China’s policy on the Korean peninsula. And just as America’s unilateralism has in recent years needlessly antagonized some of its friends, so China should note that some of its recent stands have worried its neighbors.

The worst outcome for Asia’s long-term stability as well as for the American-Chinese relationship would be a drift into escalating reciprocal demonization. What’s more, the temptations to follow such a course are likely to grow as both countries face difficulties at home.

The pressures are real. The United States’ need for comprehensive domestic renewal, for instance, is in many respects the price of having shouldered the burdens of waging the 40-year cold war, and it is in part the price of having neglected for the last 20 years mounting evidence of its own domestic obsolescence. Our weakening infrastructure is merely a symptom of the country’s slide backward into the 20th century.

China, meanwhile, is struggling to manage an overheated economy within an inflexible political system. Some pronouncements by Chinese commentators smack of premature triumphalism regarding both China’s domestic transformation and its global role. (Those Chinese leaders who still take Marxist classics seriously might do well to re-read Stalin’s message of 1930 to the party cadres titled “Dizzy With Success,” which warned against “a spirit of vanity and conceit.”)

Thirty years after their collaborative relationship started, the United States and China should not flinch from a forthright discussion of their differences — but they should undertake it with the knowledge that each needs the other. A failure to consolidate and widen their cooperation would damage not just both nations but the world as a whole. Neither side should delude itself that it can avoid the harm caused by an increased mutual antagonism; both should understand that a crisis in one country can hurt the other.

For the visit to be more than symbolic, Presidents Obama and Hu should make a serious effort to codify in a joint declaration the historic potential of productive American-Chinese cooperation. They should outline the principles that should guide it. They should declare their commitment to the concept that the American-Chinese partnership should have a wider mission than national self-interest. That partnership should be guided by the moral imperatives of the 21st century’s unprecedented global interdependence.

The declaration should set in motion a process for defining common political, economic and social goals. It should acknowledge frankly the reality of some disagreements as well as register a shared determination to seek ways of narrowing the ranges of such disagreements. It should also take note of potential threats to security in areas of mutual concern, and commit both sides to enhanced consultations and collaboration in coping with them.

Such a joint charter should, in effect, provide the framework not only for avoiding what under some circumstances could become a hostile rivalry but also for expanding a realistic collaboration between the United States and China. This would do justice to a vital relationship between two great nations of strikingly different histories, identities and cultures — yet both endowed with a historically important global role.

Zbigniew Brzezinski was the national security adviser in the Carter administration.

When Dr. B speaks, I listen. 


CAGW Campaign Ad Imagines China-Dominated Future (VIDEO)

posted Oct 22, 2010, 6:37 PM by Anthony Tang   [ updated Nov 21, 2010, 6:58 PM ]

CAGW Campaign Ad Imagines China Domination

Happy Birthday Sidney Tang

posted Aug 5, 2010, 10:51 AM by Anthony Tang   [ updated Mar 8, 2011, 11:31 AM ]

Congratulations to Nee and Moon

Rene's latest oil painting

posted Jan 28, 2010, 10:21 AM by Anthony Tang   [ updated Mar 8, 2011, 11:28 AM ]

From Yet Another Realist

posted Jan 27, 2010, 6:07 PM by Anthony Tang   [ updated Mar 8, 2011, 11:30 AM ]


Hubert Védrine is one of France’s foremost foreign affairs thinkers, articulating a “realist” view on what he calls a “West in disarray.” Mr. Védrine served as foreign minister of France from 1997 to 2002. Philip Gordon, the new US point man on Europe, translated Védrine’s latest book, “History Strikes Back,” shortly before joining the Obama administration.

The Monitor sat down with Védrine last week at his Paris office overlooking the Seine to discuss to “a post-American world,” the China threat, and whether Europe will cease to regard itself as a “great Switzerland,” as Vedrine puts it.

Q: The so called “Eurabia” question is a hot one in Europe – how to deal with new cultures and peoples, especially Muslims. The Swiss vote in November to ban minarets is one of many examples. Does this have repercussions for international relations?

A: My starting point is that “the West” was a conceptual revolution. The Europeans, then Americans, had total mastery over power, concepts, and values for several centuries. This is coming to an end, with huge consequences. Two issues arise as things change: One is how the West will react. Will it be defensive or violent? Or, will there be an intelligent management toward “relative leadership” – shared power and order.

The second question is globalization and its meaning. In my view, globalization is both extraordinary on an economic level -- but also extraordinarily violent on “identity” and the politics that flow from that. On this, I don’t share Thomas Friedman’s point of view.

Q: What are the main differences here between US and Europe?

A: American policy has gone through different moments and trends. Robert Kagan’s view in “The Return of History” is a caricature, but not entirely wrong. The US has retained a culture of power and force. They are not deluded idealists, whereas, since World War II, Europeans cultivated an illusion of becoming a great Switzerland. The Europeans have hope in a post-historic, post-traumatic, post-identity world -- a great international community. It would be possible if there were 6.5 billion Europeans on the planet! That’s why I think America’s attitude is in general more realistic, even though sometimes, the US uses force badly.

Q. You sound like Europe is in denial.

A: Partly. The European states have all pursued nationalistic, colonial policies and used force in the past. They now nurture the illusion that these policies are over for everyone. The fall of the [Berlin] wall gave way to absurd interpretations. The US thought it had won, history was over since there were no disagreements any longer. The European had a Kantian interpretation. Even now, the Europeans have a hard time getting back into the strategic debate. My view is a minority one here. When I was foreign minister, I told my socialist friends that we were not an international community yet, and power struggles still existed. They told me I was a cynic. I’m more comfortable with the American debate. I’m interested in what Kissinger, Scowcroft, Fukuyama, and what some neocons say. They are relevant, whereas the European thinking is sometimes irrelevant. With Americans, even when we disagree, we know what the discussion is about. European speeches, especially those of the commission, the parliament or other European institutions, sometimes make you wonder what world they are living in.

Q: Obviously, the rise of China concerns both Europe and the US, centrally.

A: China’s rise is unsettling. It was also foreseeable. Chinese energy, liberated by [Paramount leader] Deng Xiaoping and multiplied by the number of inhabitants, is very worrying. If there were 50 million Chinese people, we wouldn’t be discussing China’s rise. We should have anticipated that a long time ago. Jiang Zemin feared the West’s reaction to the point that he coined the expression ‘Pacific emergence.’ China is now in a position to say ‘No,’ which is evidence of the end of the West’s monopoly.

Also, let us not forget that the final compromise within the WTO [World Trade Organization] was blocked by India. This is a huge challenge for the West, and the different approaches taken by the West. The Bush-Cheney-Rumsfeld approach is not that different from the colonial powers’ approach in the 19th century, which was working at the time but is not working now. The neocon approach of bringing democracy everywhere, relayed in France by [Foreign Minister Bernard] Kouchner under the concept of democratic intervention, doesn’t work, either. We can’t even manage to change a dictatorship like Burma.

Those who think that the West remains at the center of everything and is still able to prevail by force are wrong. Of course, in the end, our ideas still prevail, as Fareed Zakaria points out in his book, “The Post-American World.” Western ideas will become everyone’s ideas. These ideas, like the market economy, are now used against us by players like China. Likewise, our idea of democracy will gradually prevail everywhere, which does not mean the rest of the world will align with us. India’s attitude in the WTO is proof of that. They can now say ‘No’ to us. So, the West’s main concern is to manage the global evolution from global domination to relative leadership. To achieve that, we must be both very intelligent, and coordinate, especially Europe and the US.

Q. How do you appraise the different US and European approaches?

A. The US is not accepting the idea of relative leadership. Managing change will first require coordination. Then it will require Europeans to get back into strategic analysis. Let us suppose for a moment that these ideal conditions are fulfilled. In that situation, there are cases in which the US has a greater interest in taking sides with an emerging country than with Europe. At Copenhagen, there was an agreement between the US and China to hold things back. It was a one-off, defensive agreement. In the build-up to Copenhagen, [French President Nicolas] Sarkozy tried a deal with Brazil on climate change in order to pressure Obama. But it didn’t work. Obama’s margin of maneuver is too small in the US Senate.

Actually, the multipolar world is a multipolar scuffle, pitting everyone against everyone. That is why it is very difficult for the West to agree on its main interests and present a common position vis-à-vis China. Nor are the Europeans able to do that, which allows China to play one against another very easily. The Europeans should say, all together, that they want a strategic partnership with China, and that they will greet the Dalai Lama once a year. We weren’t able to do that but that’s what we should do -- vis-à-vis the US as well. But the future is not written yet. It depends on us, partly. China will try to go as far as possible, without making serious commitments. China now sees its emergence as a legitimate revenge on history. Conversely, our interest is to integrate China as much as we can.

Q: China was comfortable with the Bush team. The war on terror worked for Beijing. Now China worries that Obama will sell missiles to Taiwan and stress transparency in Chinese banking, Internet, and its institutions. How difficult will this be?

A: China’s going to be a problem for the next 30 years! Besides, the Chinese question is more complex than the Soviet one. The Soviet question was basically a dilemma between rollback and containment. We need China, whereas we didn’t need the Soviet Union. But China is a threat that you can’t contain through nuclear deterrence only.

It is true that China was more comfortable with Bush. So were many countries: the Iranian regime, Chinese and Russian nationalists, the Likud in Israel, the Poles. With China, we must combine partnership, cooperation, deterrence, and power struggle. Achieving that requires cooperation and coordination between Europe, the US, Japan, India, etc. That is, not to create a conflict with China -- but to reinforce elements in China in favor of cooperation with us.

Q: During US elections, Obama read Zakaria’s book, which you wrote the introduction to in the French edition. McCain was reading Kagan. Are we in a post-American world?

A: The content of Zakaria is somewhat different than the title. Zakaria talks of a post-monopolistic world, but he thinks the US will retain its lead. I coined the word ‘hyperpower’ in 1998. In French, there is no pejorative dimension to the word; it is purely descriptive. I still think that the US remains the greatest power of all time, even though China may outgrow the US in statistical terms one day.

Q. Middle East problems seem always with us. Does Europe still have a say there?

A: The question of the Near East remains of paramount importance. In this respect, I completely disagree with the American and Israeli right. The Israeli/Palestinian question has huge repercussions on the Muslim world and constitutes a permanent argument for terrorists all over the world. That is why our strategic, vital interest requires us to solve the issue.

Secondly, I think that no one has a real influence on the question. The Europeans certainly don’t have a say, out of cowardice and lack of coordination. The Israelis don’t care. The solution lies within Israel. The Palestinian are a state they have been put in by Israel, a state of chaos. The debate lies, in Israel, between those who want a two-state solution, now a majority of 60 percent, and those who refuse it. The only country in the world that matters is the US. The US president will need to push for a solution, and cooperate with an Israeli leader who has the courage to implement it and is then rewarded by the public for that. The Europeans can play a complementary role. They are not in a position to play a major role.

Q. Is France in a paradigm shift away from traditional Arab solidarity?

A: Sarkozy represents the old, anti-Gaullist French right. This inheritance is combined with another element, which is to do the opposite of everything [former President Jacques] Chirac did. And, since Chirac himself had contradictory positions on many things, it is hard to get something coherent from such a stance. Sarkozy wanted to embody “la rupture” [change] and show that France is America’s friend. The problem is that he displayed his friendship not to the US but to George Bush, which is the cause of his fraught relationship with the Obama administration. The latter thinks that there are no urgent problems to be solved in Europe, and that France is not a priority. That’s the starting point of our relationship with the US. Sarkozy has managed to correct a few things mainly thanks to his intuition. He managed to make a few intelligent deals. As a whole, Sarkozy’s policy is not all bad, but quite disjointed and hard to interpret.

Q. France pushed for a “Mediterranean Union” to solidify French and north African interests. But not much has happened.

A: The idea was ill-conceived from the start. First, with the EU as it is now, it is impossible to set up a big project involving only some European states and leaving Germany and the Commission outside. So there was an error of conception from the outset. Secondly, you can’t build a union between countries that are deeply divided. Comparing the UPM with the EU is folly. The UPM was a nice idea with no possible results in effect. It couldn’t work. It’s development is thwarted by the Gaza attack. What is working, however, is cooperation between both sides of the Mediterranean: NGOs, companies, investors, forged ties. But from an institutional point of view, it can’t work.

Q. Turkey is a more important regional player. Sarkozy opposes Turkey’s accession to the EU, as has Merkel. Is Turkey lost to Europe?

A: It depends on your conception of Europe. In the political, very integrated view of Europe taken by the federalists since the '50s, Turkey has no place because it belongs to another world. Turkey is hugely important, very useful from a strategic point of view, but it doesn’t fit in the original European project. The people who conceived the European community couldn’t imagine for one second that Turkey would be part of it. The mention of Turkey’s ‘European destiny’ in a commercial agreement in 1963 was purely formal. It referred to the exchanges, but not membership.

But as Europe enlarged, as Europeans sought to be friends with everyone but with no clear-cut positions, we ended up accepting the Turkish application in 1999, at the Helsinki European council. Whether the decision was good or bad, it was taken. We can’t tell Turkey we gave it the wrong form and start from scratch! We should have told Turkey long ago that, while it was a key partner strategically and economically, it didn’t belong to Europe, just like Morocco. But since we began membership negotiations, we can’t put these negotiations into question by arguments that look artificial.

Sarkozy’s position finds an echo with the French and European right, as many people think that Turkey does not belong to Europe. But it is politically unmanageable and a minority view among European leaders.

Would we lose Turkey if the negotiations failed? I don’t think so. I can’t see Turkey forging an alliance with China against Europe just for spite. Turkey’s strategic interest is to maintain relations with everyone: the US, Europe (whether through membership or not), Central Asia, the Arab world.

It is a complex question. Advocates of Turkey’s integration contend that it would show a Europe reaching a hand to Muslim countries and proving the clash of civilizations wrong. But Turkey’s integration wouldn’t go down well among Arab states. After all, Turkey is the country that colonized them. Why Turkey and not Morocco? That’s why I don’t think it is a good argument. There is another argument put forward on the French left, especially former prime minister Michel Rocard. He says that although he believed in political Europe, it is now over. The EU is something else, strongly integrated from an economic point of view but weakly integrated from a political one. In this new configuration, there is no reason to deny Turkey’s membership. At any rate, we must go on with negotiations. Turkey has no interest in turning its back to Europe.
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Q: Germany and Russia are improving ties, worrying some in the EU. Do you think, as many in Berlin do, it is German destiny to bring Russia into Europe?

A: I don’t think that Russia wants to enter Europe at all. Russia wants its power to be recognized anew and to use what is left of its nuisance power. They don’t want to be humiliated. They hated the period after the end of the Soviet Union, the Yeltsin years. They are pursuing a restoration of Russia’s dignity. They don’t want to enter a complex system in which decisions are voted by a majority. They want to reconstitute power. Whether they’ll succeed is another matter: they didn’t manage to create a modern economy, their demography is in freefall, they depend heavily on gas and oil.

The German project, put forward by the CDU [Christian Democratic Union] as much as the SPD [Social Democratic Party], even though it’s articulated more clearly by the SPD, is to forge a special partnership with Russia. It is not incompatible with a Europe-Russia partnership, provided that Germany accepts to share its approach with the others, and that we overcome disagreements between members that traditionally seek a partnership with Russia (UK, Germany, France, Italy), and Poland and the Baltic states, who feel threatened by Russia and are worried by Obama’s policy. I think that Obama is right in this matter. I find the German policy towards Russia normal, not worrying and compatible with a common EU policy, which remains to be forged.

Q. A London conference on Afghanistan is about to convene. How do you feel about Obama’s Afghanistan-Pakistan policy announced late last year?

A. Obama rationally took the least bad decision within the constraints imposed on him which include the Bush legacy. He can't simply withdraw. Setting a start date for withdrawal is not bad, provided he does not rule out a long-term residual presence of strategic vigilance. He is right to drop the expression 'nation building,' a pretentious and fanciful notion. Other options: 1. More involvement of European and other states now on the ground [the London conference] that will force them to clarify their views and explain them to their citizens. 2. No direct involvement in Yemen. 3. Broad participation by other powers with no interest in a return of Al Qaeda in Afghanistan. 4. Dispense with an assumption that we can choose ideal local leaders ourselves 5. Bring India into a policy of détente and trust with Pakistan.

Q: As a former foreign minister, what are the difference between the world you faced for five years starting in 1997 and today?

A: To me, historical moments are divided between World War II, the cold war, and, starting in ’92, the globalized world. There hasn’t been a radical change since then. In ’92, the West thought it had become the master of the world. Instead, we are faced with significant powers like China. We are still in the same trend, in which the West defends its values and interests in a globalized world. Relative leadership is very complex. To me, there is no difference in nature between the world whose emergence I witnessed [in those years] and today’s world -- except that the trend has accelerated and intensified. World leaders are now aware of the challenges. Will we face them separately or collectively? The questions remain the same. True, there have been important events like 9/11, a huge tragedy. But they didn’t change the frame.

Q: Europe’s Lisbon treaty, now agreed to, and creating a 'federal' Europe, is hard for many Americans to grasp. What does it mean for the EU to now have a president and foreign minister?

A: Europe will never be the United States of Europe. The comparison is nice, exciting – and wrong. The US gathered people who were the same to start with. Europeans are different. Europe will remain a confederation of nation states. For years, the Europeans have been negotiating. There were the Rome treaties in 1957, the great Kohl-Mitterrand-Delors period, the Maastricht Treaty (in which I participated), the Amsterdam Treaty that yielded nothing, the Nice Treaty that yielded controversial results, then the Constitutional Treaty (which is not a constitution), and finally the Lisbon Treaty, which is a rehash of most elements of the Constitutional Treaty. But in reality, the changes are not huge. The European system remains structured by three entities: the European Council of heads of state and government, the Commission, which at one point thought it would become the European government, and the Parliament. From that point of view, the Lisbon Treaty is not a revolution.

The treaty brings some visible changes, some less visible. A very important one is the calculation of votes at the Council: an element of demography will greatly reinforce the weight of Germany, and marginally that of France, Italy, and Great Britain. That is the reason Germany was so keen on passing the treaty. The other big change, of course, is the creation of a president of the European Council and high representative, which is uniting the former functions of Javier Solana and Benita Ferrero-Waldner. Again, this is not a huge change: the president of the council, Herman van Rompuy – who will do a good job – won’t be the “President of Europe.”

As to Catherine Ashton, in charge of foreign affairs -- she will only be in charge of the common part of the 27 members' foreign policies, which there is agreement. She will jointly manage what was managed before by Mr. Solana [the former high representative] and Ms. Ferrero-Waldner [commisioner for external relations]. But Ashton is not in charge of merging French and German foreign policies! That is why we shouldn’t expect too much, and why we shouldn’t be dismissive either. It is ridiculous to dismiss Mr. Van Rompuy’s lack of charisma, as if we had been expecting George Washington!

Ashton is not in a position to impose a common policy on Paris, Berlin and London. However, if Paris, Berlin, and London agree on a common position about Russia, China, Iran, the transatlantic alliance, etc., real change will happen. If the three big countries don’t agree, Ashton won’t be able to do much about that.

Happy Birthday Paxton Tang

posted Dec 11, 2009, 12:21 PM by Anthony Tang   [ updated Nov 21, 2010, 6:56 PM ]

Congratulations to Nee and Moon. 

The Great Wallop

posted Nov 18, 2009, 4:45 PM by Anthony Tang   [ updated Mar 8, 2011, 11:29 AM ]


Published: November 15, 2009

A FEW years ago we came up with the term “Chimerica” to describe the combination of the Chinese and American economies, which together had become the key driver of the global economy. With a combined 13 percent of the world’s land surface and around a quarter of its population, Chimerica nevertheless accounted for a third of global economic output and two-fifths of worldwide growth from 1998 to 2007.

We called it Chimerica for a reason: we believed this relationship was a chimera — a monstrous hybrid like the part-lion, part-goat, part-snake of legend. Now we may be witnessing the death throes of the monster. The question President Obama must consider as he flies to Asia this week is whether to slay it or to try to keep it alive.

In its heyday, Chimerica consisted largely of the combination of Chinese development, led by exports, and American overconsumption. Thanks to the Chimerican symbiosis, China was able to quadruple its gross domestic product from 2000 to 2008, raise exports by a factor of five, import Western technology and create tens of millions of manufacturing jobs for the rural poor.

For America, Chimerica meant being able to consume more and save less even while maintaining low interest rates and a stable rate of investment. Overconsumption meant that from 2000 to 2008 the United States consistently outspent its national income. Goods imported from China accounted for about a third of that overconsumption.

For a time, Chimerica seemed not a monster but a marriage made in heaven. Global trade boomed and nearly all asset prices surged. Yet, like many another marriage between a saver and a spender, Chimerica was not destined to last. The financial crisis since 2007 has put the marriage on the rocks. Correcting the economic imbalance between the United States and China — the dissolution of Chimerica — is now indispensable if equilibrium is to be restored to the world economy.

China’s economic ascent was a result of a strategy of export-led growth that followed the examples of West Germany and Japan after World War II. However, there was a key difference: China made a sustained effort to control the value of its currency, the renminbi, which resulted in a huge accumulation of reserve dollars.

As Chinese exports soared, the authorities in Beijing consistently bought dollars to avoid appreciation of their currency, pegging it at around 8.28 renminbi to the dollar from the mid-1980s to the mid-’90s. They then allowed a modest 17 percent appreciation in the three years after July 2005, only to restore the dollar peg at 6.83 when the global financial crisis intensified last year.

Intervening in the currency market served two goals for China: by keeping the renminbi from rising against the dollar, it promoted the competitiveness of Chinese exports; second, it allowed China to build up foreign currency reserves (primarily in dollars) as a cushion against the risks associated with growing financial integration, painfully illustrated by the experience of other countries in the Asian crisis of the late 1990s. The result was that by 2000 China had currency reserves of $165 billion; they now stand at $2.3 trillion, of which at least 70 percent are dollar-denominated.

This intervention caused a growing distortion in the global cost of capital, significantly reducing long-term interest rates and helping to inflate the real estate bubble in the United States, with ultimately disastrous consequences. In essence, Chimerica constituted a credit line from the People’s Republic to the United States that allowed Americans to save nothing and bet the house on ... well, the house.

Nothing like this happened in the 1950s and 1960s. At the height of postwar growth in the 1960s, West Germany and Japan increased their dollar reserves roughly in line with the American gross domestic product, keeping the ratio stable at about 1 percent before letting it move slightly higher in the early 1970s. By contrast, China’s reserves soared from the equivalent of 1 percent of America’s gross domestic product in 2000 to 5 percent in 2005 and 10 percent in 2008. By the end of this year, that figure is expected to rise to 12 percent.

The Chimerican era is drawing to a close. Given the bursting of the debt and housing bubbles, Americans will have to kick their addiction to cheap money and easy credit. The Chinese authorities understand that heavily indebted American consumers cannot be relied on to return as buyers of Chinese goods on the scale of the period up to 2007. And they dislike their exposure to the American currency in the form of dollar-denominated reserve assets of close to $2 trillion. The Chinese authorities are “long” the dollar like no foreign power in history, and that makes them very nervous.

Yet there is a strong temptation for both halves of Chimerica to keep this lopsided partnership going. Despite much talk of the need to reduce global imbalances, the biggest imbalance of all persists. This year, America’s trade deficit with China will be around $200 billion, the same as last year. And China has again intervened in the currency markets, buying $300 billion to keep its currency and hence its exports cheap.

United States policy makers, meanwhile, seem equally willing to prolong America’s addiction to cheap money as long as economic recovery seems so fragile, regardless of the effect on the dollar’s exchange rate with other currencies. (When American officials insist that they favor a “strong dollar,” it’s usually a sure sign that they want the opposite.) And why would Americans want to discourage the Chinese from buying yet more dollar-denominated securities? With trillion-dollar deficits as far as the eye can see, the Treasury needs all the foreign buyers it can get.

The reality, however, is that an end to Chimerica is in the American interest for at least three reasons. First, adjusting the exchange rates between the currencies would help reorient the American economy — primarily by making American exports more competitive in China, the world’s fastest-growing economy.

Second, an end to Chimerica would lessen the potentially dangerous reliance of American economic policy on measures to stimulate domestic purchasing. American fiscal policy is clearly on an unsustainable path, and the Federal Reserve’s negligible interest rates and the printing of dollars are artificially inflating equity prices.

Finally, renminbi revaluation would reduce the risk of potentially serious international friction over trade. The problem is that as the dollar weakens against other world currencies — notably the euro and the Japanese yen — so does the renminbi, magnifying China’s already large advantage in global export markets. The burden of post-crisis adjustment falls disproportionately outside Chimerica. Unless China’s currency is revalued, we can expect an uncoordinated wave of defensive moves by countries on the wrong side of Chimerica’s double depreciation. Already we are seeing the danger signs. Last month Brazil imposed a tax on “hot money” — large, volatile flows of foreign investment that may exit an economy as quickly as they appeared — to try to slow the appreciation of its currency, the real. A number of Asian economies last week intervened to weaken their own currencies relative to the dollar. Similar currency games were a feature of the worst economic decade of the 20th century, the 1930s.

Historically, as production costs and income levels in countries have risen, their currencies have adjusted against the dollar accordingly. From 1960 to 1978, for example, the deutsche mark appreciated cumulatively by almost 60 percent against the dollar, while the Japanese yen appreciated by almost 50 percent. The lesson is that exporters can live with substantial exchange rate revaluations so long as they are achieving major gains in productivity, as China still is.

To be sure, China’s central bank has suggested that it might be willing to switch from the dollar peg to some form of exchange-rate management, taking account of “international capital flows and movements in major currencies.” But, like the recent Chinese comments about replacing the dollar as the premier international reserve currency, this may be no more than rhetoric.

During his visit to China this week, President Obama must resist the temptation to respond to these overtures with rhetoric of his own. This is not the time for big speeches, but for subtle diplomacy. Right now, Chimerica clearly serves China better than America. Call it the 10:10 deal: the Chinese get 10 percent growth; America gets 10 percent unemployment. The deal is even worse for the rest of the world — and that includes some of America’s biggest export markets and most loyal allies. The question is: What can the United States offer to make the Chinese abandon the dollar peg that has served them so well?

The authorities in Beijing must be made to see that any book losses on its reserve assets resulting from changes in the exchange rate will be a modest price to pay for the advantages they reaped from the Chimerica model: the transformation from third-world poverty to superpower status in less than 15 years. In any case, these losses would be more than compensated for by the increase in the dollar value of China’s huge stock of renminbi assets.

It is also in China’s interest to kick its currency-intervention habit. A heavily undervalued renminbi is the key financial distortion in the world economy today. If it persists for much longer, China risks losing the very foundation of its economic success: an open global trading regime.

And this is exactly what President Obama can offer in return for a substantial currency revaluation of, say, 20 percent to 30 percent over the next 12 months: a clear commitment to globalization and free trade, and an end to the nascent Chinese-American tariff war.

For as long as the People’s Republic has existed, the United States has been the principal upholder of a world economic order based on the free movement of goods and, more recently, capital. It has also picked up the tab for policing the oil-rich but unstable Middle East. No country has benefited more from these arrangements than China, and it should now pay for them through a stronger Chinese currency. Chimerica was always a chimera — an economic monster. Revaluing the renminbi will give this monster the peaceful death it deserves.

An Agenda for NATO Summary

posted Sep 13, 2009, 11:14 PM by Anthony Tang   [ updated Sep 25, 2009, 4:47 PM ]


NATO's 60th anniversary, celebrated in April with pomp and circumstance by the leaders of nearly 30 allied states, generated little public interest. NATO's historical role was treated as a bore. In the opinion-shaping media, there were frequent derisive dismissals and even calls for the termination of the alliance as a dysfunctional geostrategic irrelevance. Russian spokespeople mocked it as a Cold War relic.

Even France's decision to return to full participation in NATO's integrated military structures -- after more than 40 years of abstention -- aroused relatively little positive commentary. Yet France's actions spoke louder than words. A state with a proud sense of its universal vocation sensed something about NATO -- not the NATO of the Cold War but the NATO of the twenty-first century -- that made it rejoin the world's most important military alliance at a time of far-reaching changes in the world's security dynamics. France's action underlined NATO's vital political role as a regional alliance with growing global potential.

In assessing NATO's evolving role, one has to take into account the historical fact that in the course of its 60 years the alliance has institutionalized three truly monumental transformations in world affairs: first, the end of the centuries-long "civil war" within the West for transoceanic and European supremacy; second, the United States' post-World War II commitment to the defense of Europe against Soviet domination (resulting from either a political upheaval or even World War III); and third, the peaceful termination of the Cold War, which ended the geopolitical division of Europe and created the preconditions for a larger democratic European Union.

Uncle Simon, this is recommended by your favorite author Fareed Zakaria GPS, CNN.

I don't find NATO very interesting anymore so I didn't buy the PDF, but here's a very similar recent article from Dr. Brzezinski published on New York Times.

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