Administration Vows to Get Tough with China?

Due to the large amount of U.S. government debt currently being held by China, we are pretty much at its mercy and remain beholden to it as one of our largest (i.e., most manipulative) debt holders.  This is not a good position to be in!  We can make demands and issue hollow threats all we want, but when we need to borrow more money or refinance the huge debt of ours that the Chinese currently holds, then we end up having to acquiesce to doing things their way again (i.e., the same old broken record).  Insisting  that China should implement the same types of labor laws, products pricing mechanisms, and currency regulations that put us in an uncompetitive position in the global economy is laughable when they are the major holder (i.e., manipulator) of the U.S. government’s debt.  The U.S. dollar itself is also a potential hostage here as China’s large $2.45 trillion collection of foreign exchange reserves consists of a tranche of U.S. dollars that makesup approximately 67  percent of the entire collection, giving China some absolute leverage over the USD’s value should it decide to make significant “policy” changes.

So, per the old saying “Those who pay ($) have the say”, China is definitely in the driver’s seat in terms of driving the global economy; they are definitely beating us at our own game.  I assume that Richard Nixon and Henry Kissinger never foresaw this in their wildest dreams when they implored Maoist China to open up to the West in the early 1970’s.  The recent paradigm shift over there has been amazing; I just keep waiting for their oversized (and state induced)  bubble to pop.  If and when it does, then watch out rest of world as the resulting collateral economic damage will be widespread!

Cuba Updating the State’s Role in the Economy?

If the Cuban government (i.e., Castro) is really serious about taking a stab at state capitalism, then let’s offer to close out the Guantanamo Bay Naval Base and convert it into a mega-resort and cruise ship terminal complex for Caribbean destined tourists.  The idle Cuban work force could be employed as laborers for the project and then trained as hospitality workers to be employed at the complex once it has been completed.  Cuba has a lot of potential as a Caribbean tourist destination and the Cuban government needs to recognize this fact and start trying to “capitalize” on it in order to pull the nation out of its current state of economic malaise.  The conversion of the Guantanamo Bay Naval Base (which is no longer needed these days) into a pristine resort complex by a top-flight entrepreneurial group would be a “win-win” proposition for all parties involved. And communist countries such as China (and now Viet Nam) are proving that state capitalism is far better than no capitalism at all, so the Cuban government needs to take heed and take action before it is too late.

Ten Most Disruptive Technologies of 20th and 21st Centuries!

My choices for the ten most disruptive technologies of the 20th and 21st centuries per the related Discussion issue in LinkedIn professional group “Disruptive Technologies” are as follows:

20th Century –

01).  Advent of nuclear technology, which drastically changed the balance of power in the world via its weapons applications, and it is still a burgeoning factor as the technology spreads.

02).  Advent of the automobile and airplane, which revolutionized the transportation industry and made traversing the world alot more feasible in terms of time, distance covered, and costs.

03).  Advent of Wernher von Braun’s rocket technology, which revolutionized the communications industry (via satellites), made space travel possible, and drastically changed military strategies and power structures.

04).  Advent of digital data processing at the large mainframe level (starting with Rand’s Eniac).

05).  Advent of the transistor, which replaced vacuum tube technology and allowed for start of integrated circuit technology.

06).  Advent of the integrated circuit technology from transistors, which enabled the commoditization of computer technology via the resulting dissemination of higher speed, lower cost computers (and more portable computers due to the resulting miniaturization).

07).  Advent of the personal computer, which replaced the mainframe as the primary means of computing and has greatly expanded access to computer technology to the masses.

08).  Advent of the world wide web (Internet), and the resulting information and communications revolution that it has invoked.

21st Century (so far) –

09).  Advent (emerging) of nanotechnology and its potentially huge impact on medical technologies and society in the not-too-distant future (e.g., “Singularity” type issues, etc).

10).  Advent (emerging) of teleportation technology at the level of the atom, which is in the beginning stages of greatly increasing the speed and overall power of computer technology (i.e., quantum information processing); its crossover to other applications includes possible revolutionary changes in travel technology at the surreal level by the end of the century.

Addendum1:  Taking item 10’s discussion a step further within the context of disruptive microchip techology, I still like the idea of developing data teleportation technology at the level of the atom, which stands to greatly increase the speed and overall power of computer technology (i.e., quantum information processing). The possible crossovers to other product applications, including surreal, revolutionary changes in travel and shipping technology, is what has really piqued my interest. But in discussing this issue with an executive at one of the major chip firms over the holiday, it was conveyed to me that the atomic teleportation of data is still at least twenty years away in terms of becoming feasible enough to be a disruptive technology per the quantum information processing genre. I would think that the speeding up of the development process for this entity would have to represent a major competive advantage for a developer within the microchip (or academic) industry, especially considering the possibilities represented by revolutionary crossover product development (i.e., major disruptive technologies)!

Addendum2:  the fulfillment of emerging items 09 and 10 is hghly contingent on the continued mitigation of item 01.

Note: From an IT standpoint, I especially like the world-class Gartner Group’s clear, concise definition of what constitutes a disruptive technology from a business systems standpoint: “…[as] one that causes major change in ‘the accepted way of doing things’, including business models, processes, revenue streams, industry dynamics and consumer behaviour”: http://www.gartner.com/it/page.jsp?id=681107

Interested LinkedIn members are invited to join the ”Disruptive Technologies” professional group (URL below): http://www.linkedin.com/groups?about=&gid=1027037&trk=anet_ug_grppro

Need for Massive Government Intervention Policies?

At a sporting event, having no officiating at all would result in a very chaotic situation, whereas having  too much officiating would result in a game that might as well not be played.  Extending this analogy to the regulation of the American economy and securities industry, we  will always need a certain amount of “officiating” in order to maintain a level (and efficient) playing field for all players and to keep things from getting chaotic.  But a “massive” amount of officiating on a permanent basis (per Paul Krugman’s latest mantra) can result in the total fettering of the financial systems and the capital markets that they propagate, possibly resulting in societal chaos. The governmental approaches of the late1920s through the entire 1930’s should serve as a good case study (in general) of what works and what does not work in terms of particular actions taken and not taken (Ben Bernanke’s expertise), while keeping in mind that the playing field is now a lot bigger, faster, and more complicated (which again reinforces the need for some officiating, but not “massive” officiating). The premise here is that we want to continue to propitiate the competitive creativiity within the American financial industry, but we also need to define and enforce certain reasonable boundaries at the same time in order to keep the markets as efficient and seemless as possible.  Overall, my basic premise is that “enough” regulation needs to be in place in order to keep the speculation side of the coin from overwhelming (i.e., destroying) the risk management side of the coin, but not to the point where the markets become grossly inefficient due to a paucity of speculation.  So Paul Krugman’s “throwing out the baby with the bath water” mantra is not a good policy mandate in my book.

Quote: “The case for free markets never was that markets are perfect … [but] that government control of markets, especially asset markets, has always been much worse”. 

University of Chicago professor John Cochrane, in response to criticisms from Paul Krugman, New York Times columnist and proponent of massive government intervention policies (click on link to peruse “How did Paul Krugman get it so Wrong?”). 

http://faculty.chicagobooth.edu/john.cochrane/research/Papers/krugman_response.doc

The Political/Economic Costs of Being a Debtor Nation

Per President Obama’s trip to the People’s Republic of China, Karl Marx did say that we free-capitalists would sell his ideologues the rope they would use to hang us with.  Perhaps he was right in that we are doing that exact thing with China right now.  By being our primary financial benefactor these days, China pretty much owns us and is also beating us at our own game via its controlled (or state) version of capitalism (i.e., definitely a competitive edge for the Chinese government-owned businesses).  So in the end, it might take the “nationalizing” of China’s huge investments in US Treasury securities and Dollars in order to get the rope removed from the vicinity of our proverbial neck.  And if things do take a turn for the worse, then why not;  other debtor nations tend to invoke the “nationalizing” card on our investments in them quite frequently once the timing is right.

Deregulated Market Marginalizes Gazprom’s Gas Supplier Monopoly Attempt in Europe

Per Washington Post columnist George Will’s recent editorial on the punishment of highly excessive corporate behavior by deregulated markets (i.e., his expounding upon economist David Harrington’s argument per the same), Gazprom’s natural gas supply/transportation strategy (business model) for Europe serves as an excellent example of this fairly non-intuitive concept.  Harrington argues that sellers of goods who initially price their products on the extreme high end are often forced to relinquish these same goods at deep discounts later on due to the efficiencies of deregulated markets.  As a result, global regulation (or re-regulation) on the part of governments becomes unnecessary over the long run.  This is because the efficiencies of the deregulated markets that set in over time cause these markets to become more transparent in nature, thus resulting in better informed buyers, as well as more options being made available to these buyers.  In addition, there is the time decay of the value of the goods that occurs as time passes on as well, which is somewhat similar to what happens to the value of call options as they approach their expiration dates (i.e., the “theta” concept).  As a result, price gougers such as Gazprom become the victims of their own marketing (or  pricing) ploys in the end as they are unable to overcome the inevitable deregulated market adjustments that occur over time. 

Gazprom’s recent attempt to secure a monopoly over the supplying of natural gas to European countries has been marginalized by deregulated market forces, which have adjusted to Gazprom’s excessively high prices by reducing the demand for the product, thus resulting in lower natural gas prices (on a global level).  This coupled with the current economic downturn across the world has contributed to the demise in the global demand for natural gas since less of it is being consumed now.  And while attempting to establish a European based gas supplier monopoly, Gazprom became committed to long-term contracts for gas from Central Asian suppliers at a cost which is now far in excess of the current (or resulting) global natural gas prices.  As a result, Gazprom is now sitting on huge contractual amounts of over-valued natural gas supplies that it must continue to purchase from Central Asian suppliers and then sell at large losses.  This could conceivably result in years of major losses for Gazprom if the world’s natural gas prices continue to moderate, thus resulting in the decimation of both its current business model and its influence (i.e., Russia’s influence) as a major player in the global economy.  And based on Vice President Biden’s recent “blistering criticisms” of Russia per its failing economy, loss of face, and a lack of effective leadership, the Kremlin’s declining influence within the global economy (and power) structure is becoming apparent among the world’s leaders.  But all of this is still not stopping the Kremlin from attempting to forge a gas supplier monopoly in Europe in order to use it as a foreign policy “tool” with its neighbors during times of political conflicts, etc.

Note:  The invoking of some type of  eleventh-hour “force majeure” clause could be a last resort action taken by Gazprom in an effort to extract itself from having to contractually purchase high priced gas from Central Asian suppliers and then sell at large losses to European buyers.