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What good is a blog if you can't stop in and post some doom and gloom speculation once in a while. Watching the Big Three automakers demanding handouts so they can keep making SUVs that people can no longer afford is one thing, but other things are going on around the world keeps some of my alarm bells jingling.
One thing I mentioned in September was China's factory slow downs and my worry that should their economic growth falter, the result could be social turmoil. A story recently pubished via the New Republic elaborates on that concern quite effectively. [HT: 1913 Intel]
Something else that showed up in today's news, however, was that a high-level defence official in Estonia has been operating as a Russian spy and leaking sensitive NATO information to Russia. To what extent, it's unknown, but since he was also responsible for issuing security clearances in that country, any number of Russian sleeper agents could now be lurking there and passing on even more secrets.
This is on top of the story during the war in Georgia, that Georgian special forces agents were captured by Russia with information including NATO's GPS codes on them. Russia, it would seem, is in possession of a lot of once-in-a-lifetime intelligence that would give them a tremendous edge were they to perhaps take advantage of the current economic situation to kick off a major attack on the West, the likes of which they've been hinting at a lot lately.
The situation is illuminating some strategic disadvantages in current NATO policy. Essentially you now have an organization that has been expanded to act as an alternative to United Nations forces (e.g. Afghanistan) but now includes, or is set to include, countries that have never dipped a foot in the Atlantic. Furthermore, these countries of which many are former soviet republics, may have been a great way to rub in the insult of Russia's diminished influence, by luring them to our side, but it's obvious from news like today's that Russia still has many loyal eyes and ears riddled throughout their former stomping grounds -- enough to be a significant security breach in light of their inclusion in NATO's inner circle. The West may have swallowed a slow-acting poison in bring them into our security arrangements so soon.
At the very least, with Russia reasserting itself, they're a new source for tension and the Bear is pushing back. That happened with Georgia and there's a lingering fear it could come to Ukraine, which is of even greater strategic importance to a reinvigourated Soviet spectrum. Poland is not escaping their sights either, over the issue of the US missile defence shield, and now will be facing Russian missiles newly deployed across their border. Russia is threatening to pull out of the Conventional Forces in Europe agreement over it and that's likely just a start.
Bush's preemptive strike doctrine is something else that they want to seize and claim as their own, to defend both themselves and their friends. The problem is that they are cozying up to new allies by signing arms deals with countries like Venezuela and Syria (as well as partaking in such congenial activities as naval visits to their ports), and investing heavily in Iran. It's only a matter of time before Russia seeks to station their own missiles in those countries. After the US made a strike inside Syria last month, I was surprised they didn't play that card then.
Perhaps there will be a grace period for the new US president but I wouldn't count on it. The fear is that a Depression is coming and conventional wisdom is that it takes a war to end a Depression. Maybe the automakers aren't getting an easy ride toward a handout in Congress but the Pentagon might be more cooperative. Instead of making SUVs, the Big Three could be in line for armoured tank and HUMVEE contracts soon.Labels: China, economy, International, Russia, the West, United States
posted by Ian at 7:53 PM -
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[Country Gentleman, October 1928]I'm getting caught up on some reading over the weekend and made a comment on a friend of mine's blog, One-sided Argument. El Cid, the author, is bully on the Canadian banking system and despite my usual doom and gloom, I think he's probably right. The fact that Harper is not engaging in a bail out for the banks in Canada is a good sign that ours are stable. However, I'm still of the mind that this election call was rushed due to the knowledge that things are going to get pretty tight soon. Best try to get re-elected now. One of the biggest hits to Canada may come when the U.S. dollar plunges, which is going to be inevitable now that Washington is absorbing the debt of Wall Street. However, according Reuters, we've been weening ourselves off reliance on the greenback in favour of Euros, while our exposure to Fannie May and Freddie Mac is limited to 6% of reserves. On the upside, countries with greater exposure may lose big too, keeping things at least partly level. U.S. debt is everyone's debt these days. China has expressed concern over what amounts to the U.S. printing money to cover the losses (see a post on Piglipstick, for example.) If my meagre economic understanding is right, this would sink the dollar but theoretically home values would remain numerically constant. Your house would still be worth $250,000 U.S., but $250,000 U.S. would be worth a lot less. There's a lot of fear that this situation would solidify China's dominance but I think they're going to have more problems when their major market implodes. More recalls of Chinese products isn't helping either. China needs to sustain a high rate of growth to keep its awakening citizens happy. On top of the prospect of decreased exports, they could be faced with an exodus of foreign firms soon. Not only is trade protectionism becoming an election issue in the U.S. but those Chinese who are demanding better lives for themselves will be buoyed when the government there forces the creation of labour unions in international corporations doing business in China. While their economy has been on fire for the past decade, this might start to starve the oxygen out of it. And if the seriousness of things still hasn't sunk in, the Marmot's Hole had a few choice quotes on the matter from the American press. UPDATE: Maybe it's just me being at home alone tonight, but it sure feels like somethings up. The moon was deep red over Toronto when it came up, and now the CBC is showing " The Grapes of Wrath" as their midnight movie. Real funny, guys. We're doomed. Labels: China, economy, election, National Politics, United States
posted by Ian at 10:46 PM -
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 The dollar hit an extraordinary high last night, in foreign markets, as Chinese pressure pushed the loonie to over $1.10 US.
They haven't stopped there, however. More rumours and speculation are becoming more widespread that China is getting prepared to divest itself of American greenbacks in favour of more stable currencies.
Meanwhile, Canadians seeking to benefit from cross-border savings are complaining about being hit coming and going. American retailers who normally exchange currencies as a service to Canadian customers (who, for some reason, don't visit a bank to change their money over before leaving the country) are refusing to recognize the Canadian dollar at parity and in some cases cling feebly to the idea that a Canadian dollar is worth sometimes as little as 60 cents U.S.
Then, upon their return, they face long delays at the border due to the volume of traffic, and in some cases experience verbal abuse and affronts to their patriotism over their shopping habits.
Maybe the border guards should save it for Canadian retailers who were slow to adjust and are just now modifying their prices to the new economic reality. Or barring that, how about the Canadian manufacturers who charge different prices for products on either side of the border and then command their U.S. reps to blackball Canadian shoppers, forcing them to buy their products domestically at inflated prices.
 Now, I've never been around enough money to consider myself much of an economist so someone should explain this to me: The price of oil is also leaping to record heights, achieving $98 dollars a barrel overnight, last night. However, if oil is sold in U.S. dollars, and the Canadian dollar is actually rising faster against the U.S. dollar than oil is increasing in price, wouldn't that actually mean that oil is staying the same or, maybe even getting cheaper?
Back when it was $60 dollars a barrel, the Canadian dollar was at about 60 cents to the U.S. dollar, so a hundred bucks CAD would get you a kegger. Now it's $98 bucks USD but that only costs us about $90 dollars Canadian now.
Should we really be panicking? What's the source of concern over oil? It seems to me that it's not increasing in price, so much as adjusting for being saddled with a weaker unit of commerce.
I think it won't be long before more than Chinese investments shed the U.S. dollar. Oil will also move to a Euro standard soon, I suspect. The greenback is just too volatile right now and most of the major oil-rpoducing nations are luke warm to the United States at best, or have found themselves in American bombsites.Labels: China, economy, natural resources, oil, United States
posted by Ian at 3:56 PM -
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 Monday marked a substantional milestone in Canada's foreign policy when both Prime Minister Stephen Harper and Governor General Michaelle Jean met with the Dalai Lama, in an official capacity -- officially putting a bee in the bonnet of the Chinese embassy which responded in the Globe & Mail.
There is a noticeable shift toward China these days. Whereas the West has embraced them as a supplier of goods while ignoring its human rights and environmental record, there seems to be less of a desire to gloss over things in recent weeks. It began with recalls of Chinese goods, specifically children's toys which therefore have even more of an emotional element inherent in them. Before that was pet food, no exactly an unemotional subject either for Western animal lovers, millions of whom were the affected.
In response, the Chinese have been rumoured to be threatening a dump of U.S. investments which would send shockwaves through the already struggling U.S. economy. They're even selling high-tech J-10 fighters to Iran, in a billion-dollar deal (though both China and Iran deny it.)
These may be the first posturings of the real war. All that messing about in the Middle East being simply the hors d'œuvre before the main table is set. I've long maintained that such a conflict is inevitable. But I think it has little to do with politics and everything to do with demographics. In a little over a decade, China will have 40 million bachelors of military age, unable to find wives due to the results of China's one-child policy.
Normally, societies rely on marriage to settle down the testosterone of its young men. That's partly why militaries support PMQs off base. China will have no such stabilizing factor. Also, any other time in history that governments had a build up of young men, they had to find ways to get them out of the cities lest they turn to crime and violence.
I've mentioned before that in the Depression of the '30s, according to the old fellows in Nova Scotia, the government had this same problem. They solved it by attaching all the young men they could to road-building crews in the countryside. They made the roads as twisting and turning as they could, to maximize the time spent on site, and they paid just enough money to keep the boys in beer and cigarettes. Eventually, they ran out of roads to build and along came the war.
Take it back a couple of hundred years, to my first ancestor in Canada, and you get the same policy in place. He was enlisted in the Black Watch after the Highland Clearances went into effect. The regiment soaked up all the young men of Scotland that could potentially cause rebellion, then they were stationed abroad for over three decades, in Holland, Ireland and the Americas.
But, not only will they run out of wives but they are consuming vast resources as their economy and industry rev up. Those will also need to be found outside of China.
It's a standard, repeating episode in the history of many nations. China will have to deal with these things also and, if history is our guide, it may lead to a re-emergence of even greater Chinese expansionism.Labels: Asia, China, International
posted by Ian at 11:19 PM -
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