Tuesday, March 24, 2009

Well today in the Wall Street Journal China flexing its Muscles

Yesterday I posted the link to the Sony executive Management presentation which reaffirmed the question in my mind: When would China become more dominant than the States as an economy? The following article from the Wall Street journal shows China challenging the USD as the currency of global choice!


China Takes Aim at Dollar

BEIJING -- China called for the creation of a new currency to eventually replace the dollar as the world's standard, proposing a sweeping overhaul of global finance that reflects developing nations' growing unhappiness with the U.S. role in the world economy.

The unusual proposal, made by central bank governor Zhou Xiaochuan in an essay released Monday in Beijing, is part of China's increasingly assertive approach to shaping the global response to the financial crisis.

China's a Bellwether


David Semple of Van Eck Emerging Markets Fund outlines opportunities in China's real-estate and retail sectors, along with greater stability in Russia. But the situation in Eastern Europe is still uncertain. Polya Lesova reports.

Mr. Zhou's proposal comes amid preparations for a summit of the world's industrial and developing nations, the Group of 20, in London next week. At past such meetings, developed nations have criticized China's economic and currency policies.

This time, China is on the offensive, backed by other emerging economies such as Russia in making clear they want a global economic order less dominated by the U.S. and other wealthy nations.

However, the technical and political hurdles to implementing China's recommendation are enormous, so even if backed by other nations, the proposal is unlikely to change the dollar's role in the short term. Central banks around the world hold more U.S. dollars and dollar securities than they do assets denominated in any other individual foreign currency. Such reserves can be used to stabilize the value of the central banks' domestic currencies.

Monday's proposal follows a similar one Russia made this month during preparations for the G20 meeting. Like China, Russia recommended that the International Monetary Fund might issue the currency, and emphasized the need to update "the obsolescent unipolar world economic order."

[Dollar Dominated]

Chinese officials are frustrated at their financial dependence on the U.S., with Premier Wen Jiabao this month publicly expressing "worries" over China's significant holdings of U.S. government bonds. The size of those holdings means the value of the national rainy-day fund is mainly driven by factors China has little control over, such as fluctuations in the value of the dollar and changes in U.S. economic policies. While Chinese banks have weathered the global downturn and continue to lend, the collapse in demand for the nation's exports has shuttered factories and left millions jobless.

In his paper, published in Chinese and English on the central bank's Web site, Mr. Zhou argued for reducing the dominance of a few individual currencies, such as the dollar, euro and yen, in international trade and finance. Most nations concentrate their assets in those reserve currencies, which exaggerates the size of flows and makes financial systems overall more volatile, Mr. Zhou said.

Moving to a reserve currency that belongs to no individual nation would make it easier for all nations to manage their economies better, he argued, because it would give the reserve-currency nations more freedom to shift monetary policy and exchange rates. It could also be the basis for a more equitable way of financing the IMF, Mr. Zhou added. China is among several nations under pressure to pony up extra cash to help the IMF.

[Zhou Xiaochuan, governor of the People's Bank of China.] Reuters

Zhou Xiaochuan, governor of the People's Bank of China.

John Lipsky, the IMF's deputy managing director, said the Chinese proposal should be treated seriously. "It reflects officials' concerns about improving the stability of the financial system," he said. "It's interesting because of China's unique position, and because the governor put it in a measured and considered way."

China's proposal is likely to have significant implications, said Eswar Prasad, a professor of trade policy at Cornell University and former IMF official. "Nobody believes that this is the perfect solution, but by putting this on the table the Chinese have redefined the debate," he said. "It represents a very strong pushback by China on a number of fronts where they feel themselves being pushed around by the advanced countries," such as currency policy and funding for the IMF.

A spokeswoman for the U.S. Treasury Department declined to comment on Mr. Zhou's views. In recent weeks, senior Obama administration officials have sought to reassure Beijing that the current U.S. spending spree is a short-term effort to restart the stalled American economy, not evidence of long-term U.S. profligacy.

"The re-establishment of a new and widely accepted reserve currency with a stable valuation benchmark may take a long time," Mr. Zhou said. In remarks earlier Monday, one of his deputies, Hu Xiaolian, also said the dollar's dominant position in international trade and investment is unlikely to change soon. Ms. Hu is in charge of reserve management as the head of China's State Administration of Foreign Exchange.

Mr. Zhou's comments -- coming on the heels of Mr. Wen's musing about the safety of China's dollar holdings -- appear to be a warning to the U.S. that it can't expect China to finance its spending indefinitely.

[The Haves and Have Mores]

The central banker's proposal reflects both China's desire to hold its $1.95 trillion in reserves in something other than U.S. dollars and the fact that Beijing has few alternatives. With more U.S. dollars continuing to pour into China from trade and investment, Beijing has no realistic option other than storing them in U.S. debt.

Mr. Zhou argued, without mentioning the dollar by name, that the loss of the dollar's de facto reserve status would benefit the U.S. by avoiding future crises. Because other nations continued to park their money in U.S. dollars, the argument goes, the Federal Reserve was able to pursue an irresponsible policy in recent years, keeping interest rates too low for too long and thereby helping to inflate a bubble in the housing market.

"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Mr. Zhou said. The increasing number and intensity of financial crises suggests "the costs of such a system to the world may have exceeded its benefits."


People past the headquarters of the central bank of the People's Republic of China in Beijing Feb. 16, 2009.

Mr. Zhou isn't the first to make that argument. "The dollar reserve system is part of the problem," Joseph Stiglitz, the Columbia University economist, said in a speech in Shanghai last week, because it meant so much of the world's cash was funneled into the U.S. "We need a global reserve system," he said in the speech.

Mr. Zhou's idea is to expand the use of "special drawing rights," or SDRs -- a kind of synthetic currency created by the IMF in the 1960s. Its value is determined by a basket of major currencies. Originally, the SDR was intended to serve as a shared currency for international reserves, though that aspect never really got off the ground.

These days, the SDR is mainly used in the IMF's accounting for its transactions with member nations. Mr. Zhou suggested countries could increase their contributions to the IMF in exchange for greater access to a pool of reserves in SDRs.

Holding more international reserves in SDRs would increase the role and powers of the IMF. That indicates China and other developing nations aren't hostile to international financial institutions -- they just want to have more say in running them. China has resisted the U.S. push to make an immediate loan to the IMF because that wouldn't give China a bigger vote. Ms. Hu said Monday that China, which encourages the IMF to explore other fund-raising options, would consider buying into a bond issue.

The IMF has been working on a proposal to issue bonds, probably only to central banks. Bond purchases are one way for the organization to raise money and meet its goal of at least doubling its lending war chest to $500 billion from $250 billion. Japan has loaned the IMF $100 billion and the European Union has pledged another $100 billion.

—Terence Poon in Beijing, James T. Areddy in Shanghai, and Bob Davis and Michael M. Phillips in Washington contributed to this article.

Monday, March 23, 2009

What Sony played to their Execs at the begining of this year

Why this is interesting? It shows the role of information dispersion and the Internet. It also puts in perspective the size of the rest of the world relative to India and China.
Once England used to rule the waves. England outsourced production to a cheaper producer in the early part of this century. That cheap producer was no other than the USA.
How long will it take for India and China to replace the USA as the predominant economy as the USA did with the UK?



Sunday, March 22, 2009

Is man to blame for global warming?

An article from the New Scientist. I leave it for you to decide


From http://www.newscientist.com/article/dn11650

Climate myths: Global warming is down to the Sun, not humans

See all climate myths in our special feature.

Switch off the Sun and Earth would become a very chilly place. No one denies our star's central role in determining how warm our planet is. The issue today is how much solar changes have contributed to the recent warming, and what that tells us about future climate.

The total amount of solar energy reaching Earth can vary due to changes in the Sun's output, such as those associated with sunspots, or in Earth's orbit. Orbital oscillations can also result in different parts of Earth getting more or less sunlight even when the total amount reaching the planet remains constant - similar to the way the tilt in Earth's axis produces the hemispheric seasons. There may also be more subtle effects (see Climate myths: Cosmic rays are causing climate change), but these remain unproven.

On timescales that vary from millions of years through to the more familiar 11-year sunspot cycles, variations in the amount of solar energy reaching Earth have a huge influence on our atmosphere and climate. But the Sun is far from being the only player.

How do we know? According to solar physicists, the sun emitted a third less energy about 4 billion years ago and has been steadily brightening ever since. Yet for most of this time, Earth has been even warmer than today, a phenomenon sometimes called the faint sun paradox. The reason: higher levels of greenhouse gases trapping more of the sun's heat.

Amplified effect

Nearer our own time, the coming and going of the ice ages that have gripped the planet in the past two million years were probably triggered by fractional changes in solar heating (caused by wobbles in the planet's orbit, known as Milankovitch cycles).

The cooling and warming during the ice ages and interglacial periods, however, was far greater than would be expected from the tiny changes in solar energy reaching the Earth. The temperature changes must have been somehow amplified. This most probably happened through the growth of ice sheets, which reflect more solar radiation back into space than darker land or ocean, and transfers of carbon dioxide between the atmosphere and the ocean.

Analysis of ice cores from Greenland and Antarctica shows a very strong correlation between CO2 levels in the atmosphere and temperatures. But what causes what? Proponents of solar influence point out that that temperatures sometimes change first. This, they say, suggest that warming causes rising CO2 levels in the atmosphere, not vice versa. What is actually happening is a far more complicated interaction (see Ice cores show CO2 only rose after the start of warm periods).

Sunspot trouble

So what role, if any, have solar fluctuations had in recent temperature changes? While we can work out how Earth's orbit has changed going back many millions of years, we have no first-hand record of the changes in solar output associated with sunspots before the 20th century.

It is true that sunspot records go back to the 17th century, but sunspots actually block the Sun's radiation. It is the smaller bright spots (faculae) that increase the Sun's output and these were not recorded until more recently. The correlation between sunspots and bright faculae is not perfect, so estimates of solar activity based on sunspot records may be out by as much as 30%.

The other method of working out past solar activity is to measure levels of carbon-14 and beryllium-10 in tree rings and ice cores. These isotopes are formed when cosmic rays hit the atmosphere, and higher sunspot activity is associated with increases in the solar wind that deflect more galactic cosmic rays away from Earth. Yet again, though, the correlation is not perfect. What is more, recent evidence suggests that the deposition of beryllium-10 can be affected by climate changes, making it even less reliable as a measure of past solar activity.

Recent rises

Despite these problems, most studies suggest that before the industrial age, there was a good correlation between natural "forcings" - solar fluctuations and other factors such as the dust ejected by volcanoes - and average global temperatures. Solar forcing may have been largely responsible for warming in the late 19th and early 20th century, levelling off during the mid-century cooling (see Global temperatures fell between 1940 and 1980).

The 2007 IPCC report halved the maximum likely influence of solar forcing on warming over the past 250 years from 40% to 20%. This was based on a reanalysis of the likely changes in solar forcing since the 17th century.

But even if solar forcing in the past was more important than this estimate suggests, as some scientists think, there is no correlation between solar activity and the strong warming during the past 40 years. Claims that this is the case have not stood up to scrutiny (pdf document).

Direct measurements of solar output since 1978 show a steady rise and fall over the 11-year sunspot cycle, but no upwards or downward trend .

Similarly, there is no trend in direct measurements of the Sun's ultraviolet output and in cosmic rays. So for the period for which we have direct, reliable records, the Earth has warmed dramatically even though there has been no corresponding rise in any kind of solar activity.

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This from a coffee cup! Profound!

The irony of commitment is that it's deeply liberating - in work, in play, in love. The act frees you from the tyranny of your internal critic, from the fear that likes to dress itself up and parade itself around as rational hesitation. To commit is to remove your head as the barrier to your life.
Starbucks coffee cup