Latest News Clips 2016.03.03.07

                 

1.      Mitt Romney Aims at Donald Trump, Hits G.O.P.

The New York Times   MARCH 3, 2016

Holy Mitt, what a meltdown.

Add this one to Donald Trump’s lengthening list of firsts: He’s forced a Republican Party reckoning overdue for years, all in a few days. It took the Trump-dominated Super Tuesday contests to awaken Republican leaders to the fact that the darkest elements of the party’s base, which many of them have embraced or exploited, are now threatening their party.

Last week, Marco Rubio and Ted Cruz, elected to the Senate partly on their appeal to extremists, seemed to realize that they weren’t attractive enough to win Mr. Trump’s crowd. Just in time for Super Tuesday, they could see that ignoring or cozying up to Mr. Trump wasn’t working, and began attacks that have so far done nothing to slow his march. They were then joined by the G.O.P. campaign money machinery, which this weekbegan frantically tossing more millions at — what? An anti-Trump ad campaign? A third-party effort?

Then came an open letter from 95 Republican national security experts, who declared themselves “united in our opposition to a Donald Trump presidency.” Of Mr. Trump they wrote: “He swings from isolationism to military adventurism within the space of one sentence.” Yet some among them have swung wildly in those same directions. Some were Bush administration officials who supported some of the worst foreign policy disasters this country has ever experienced, including the Iraq war. It is rich that they should now criticize Mr. Trump for policies that could make America less safe.

Then, on Thursday morning came Mitt Romney’s rambling indictment of Mr. Trump. After months of silence, Mr. Romney spent 20 minutes calling Mr. Trump a fraud and a phony with a record of business failures, whose economic ideas would put the United States into recession and whose foreign policy approach would endanger Americans.

Mr. Romney did not endorse any specific alternative to Mr. Trump. Instead, he seemed to advocate a course of action that would force a nomination brokered by party leaders, saying that Republicans should vote for the Republican candidate who has the best chance of beating Mr. Trump in each state. Of course, in terms of domestic and foreign policy positions, Mr. Cruz is probably more extreme than Mr. Trump, and Mr. Rubio is hardly different.

It was a surprising moment, since Mr. Romney relished Mr. Trump’s endorsement in 2012. And Mr. Romney, who was rejected by the Republican electorate in 2008 and the rest of the country in 2012, is exactly the kind of politician that the aggrieved crowds backing Mr. Trump are voting against. Indeed, Mr. Romney’s denunciation might well help Mr. Trump with his supporters.

At one point, Mr. Romney said: “Mr. Trump is directing our anger for less than noble purposes. He creates scapegoats of Muslims and Mexican immigrants” — with absolutely no sense of self-awareness. Mr. Romney himself played to the worst kind of xenophobia when he proposed getting rid of 11 million undocumented immigrants by forcing them to “self-deport.” He also listed Mr. Trump’s offenses — “the bullying, the greed, the showing off, the misogyny, the absurd third-grade theatrics.” Did Mr. Romney have any sense of irony when he said those words? For far too long, they could have been used to describe many in his party: legislators, congressional leadership, its policy makers.

It is an excellent thing that the Republican leaders have noticed the problem they’ve fostered, now embodied in the Trump candidacy. But until they see the need to alter the views and policies they have promoted for years, removing Mr. Trump will not end the party’s crisis.

2.      China's National People's Congress: What You Need to Know

 The Bloomberg   March 3, 2016

     

Each year, some 3,000 of China’s most powerful officials descend on Beijing for about 10 days of parliamentary pageantry known as the National People’s Congress.

While the country’s top legislature is constitutionally charged with vast powers, the mechanics of one-party rule ensure most important decisions are hashed out in closed-door Communist Party meetings long before reaching the floor. That said, the public proceedings at the Great Hall of the People represent the one time each year that many of the people who run the world’s second-largest economy face the press, providing rare insight into their thinking and policy plans.

Who are they?

This year’s NPC consists of 2,943 party chiefs, government officials, company executives and military commanders hailing from 35 constituencies, including provinces, regions, municipalities and the semi-autonomous former colonies of Hong Kong and Macau. Members include everyone from so-called model workers to President Xi Jinping.

Delegates have even been assigned to represent Taiwan, which China still considers a province even though it’s been ruled independently for almost seven decades. The party officially holds 72 percent of the seats, with the remainder occupied by eight authorized "non-Communist" parties and people with no affiliation. In reality, only one party picks the delegates.

Are they a rubber stamp?

Yes, mostly. With its membership controlled entirely by the ruling party, the legislature largely serves to ratify decisions handed down from other organs of state power. The government drafts most new legislation, and the full session of the NPC has never turned down a bill put to it for a final vote by government agencies, according to a Caixin magazine report citing research by the late China University of Political Science and Law Professor Cai Dingjian. 

The party pledged in 2014 to "perfect the NPC’s constitutional rights to supervise and monitor" the government. But there’s a catch: the body must also "unswervingly adhere to the leadership of the Chinese Communist Party."

Why should you care?

The NPC’s impact pales next to the plenums that the party’s Central Committee usually holds in October or November, but those gatherings are largely discreet affairs, with decisions announced by communique after the fact. The NPC, along with a concurrent meeting of the country’s top political advisory body, the Chinese People’s Political Consultative Conference, fill the void, drawing thousands of journalists from around the world seeking any clue to the government’s thinking. 

This year’s meeting will focus on crafting China’s development plan for the next five years. And the proceedings may provide crucial details on how the government plans to control a slow down in growth while avoiding the dreaded "middle-income trap."

The highlight will be Premier Li Keqiang’s closing press conference. The remarks made at the event can echo through the vacuum for months such as last year, when Licompared China’s economic reform plans to "taking a knife to one’s own flesh."

Who’s missing?

The NPC has not been spared as Xi’s anti-corruption crackdown reverberates around the government, with the campaign now into its fourth year. Of the 48 delegates from last year who are not attending this year’s session, at least 25 were suspected of violating state law or party disciplinary rules, according to Caixin. 

The highest-ranking is former Hebei party secretary Zhou Benshun. Zhou, an ex-secretary to disgraced security chief Zhou Yongkang, was kicked out of the party in October and faces trial on bribery charges. Nine of the 48 died since last year’s NPC.

3.      North Korean leader urges nuclear readiness

BBC  2016.03.04

Image copyrightReutersImage captionKim Jong-un made his announcement at a military drill, KCNA reported

Kim Jong-un has said North Korea's nuclear weapons should be ready for use "at any time", state media report.

He told military leaders North Korea would revise its military posture to be ready to launch pre-emptive strikes, the Korean Central News Agency said.

On Wednesday the UN imposed some of its toughest ever sanctions on North Korea, following its recent nuclear test and missile launch.

In response, the North fired six short-range projectiles into the sea.

KCNA said Mr Kim was speaking at a military exercise on Thursday, which is thought to be when the projectiles were fired.

He said North Korea "must always be ready to fire our nuclear warheads at any time" because enemies were threatening the North's survival.

"At an extreme time when the Americans... are urging war and disaster on other countries and people, the only way to defend our sovereignty and right to live is to bolster our nuclear capability," he was quoted as saying.

Such rhetoric is not unusual from North Korea, but despite its recent nuclear and ballistic tests, analysts still doubt it has the ability to make a nuclear bomb small enough to put on a feasible missile.

Kim Jong-un's announcement brought a swift response from the US.

"We urge North Korea to refrain from provocative actions that aggravate tensions and instead focus on fulfilling its international obligations and commitments," Pentagon spokesman Commander Bill Urban said.

The US and South Korea began talks on Friday on the possible deployment of a US missile defence shield in the South.

Initial talks will focus on the costs, effectiveness and environmental impact of installing the Terminal High Altitude Area Defense (THAAD) system, among other issues, the Yonhap news agency reported.

What exactly is banned?

• The export of coal, iron and iron ore used for North Korea's nuclear or ballistic missile programmes.
• All gold, titanium ore, vanadium ore, rare earth minerals and aviation fuel exports.
• Any item (except food and medicine) that could develop North Korea's armed forces.
• Small arms and light weapons are now included in an arms embargo.
• Upmarket watches, watercraft, snowmobiles and other recreational sports equipment added to a ban on luxury goods.
• No vessels or planes can be leased or registered to North Korea.

What are the other measures?

• Member states must inspect all cargo to and from North Korea, not just those suspected of containing prohibited items.
• An asset freeze on North Korean funds linked to nuclear and missile programmes.
• Foreign financial institutions cannot open new offices in North Korea without approval, and North Korean banks cannot open offices abroad.

Latest News Clips 2015.12.21

                 

1. China Steps Up, but Its Currency Still Has Dues to Pay 

Strategies 

The New York Times   DEC. 5, 2015 

An ad depicts the renminbi with the United States dollar and other major world currencies. The renminbi will join the euro, yen, dollar and pound in the I.M.F.’s basket of reserve currencies in October. CreditTyrone Siu/Reuters 

The dollar lost a bit of its exalted status last week and the Chinese renminbi gained some luster. That was the straightforward meaning of an announcement in Washington by the International Monetary Fund, which decided to admit the renminbi to an exclusive group of elite currencies. 

But global markets told quite a different story: The renminbi remained no more than a promising but relatively inconsequential currency, while the euro weakened and the dollar remained at the center of world events, with effects that rippled through the world economy. 

To make sense of these apparently conflicting pictures, first examine the I.M.F. decision on the renminbi. It was long awaited and, in some ways, portentous, signaling China’s growing political clout, if not the ascendance of its currency. 

The international organization decided that for the first time, the Chinese currency would join the dollar, the euro, the Japanese yen and the British pound in a prestigious, if obscure, club: The big four currencies together form a global reserve asset known as the I.M.F.’s Special Drawing Rights (S.D.R.) basket. Next October, the renminbi will become the fifth member. 

Making Room for Renminbi 

The changing makeup of the International Monetary Fund’s accounting system reflects the rising economic power of China, while Europe’s influence wanes. 

S.D.R.s aren’t a currency, but they can be used as a claim on currencies in the basket, indirectly bolstering the role of the renminbi as a potential reserve currency. While this doesn’t have much day-to-day significance right now, it certifies that China’s currency, which could barely be traded on world markets only a few decades ago, has already come a long way. In order to qualify for inclusion, an S.D.R. member needs to be the currency of a major exporter, and the renminbi certainly is that. 

The other main qualification is ticklish: A currency needs to be “freely usable.” Using a strictly technical definition, the I.M.F. declared that the renminbi meets that test, even though its price doesn’t move freely in currency markets and it isn’t traded or held nearly as much as the other major currencies. 

The I.M.F. acknowledged that “challenges” remained for the renminbi and stressed “the importance of continuing and deepening” the financial and economic reforms that have taken place in China. These reservations are substantial. 

Nonetheless, Xinhua, the official Chinese news agency, said quite correctly that the I.M.F. decision amounted to “landmark recognition” of China’s growing economic power. In order to make room for the renminbi in its S.D.R. basket, the I.M.F. shrank the other four currencies, especially the euro. The dollar lost a little of its stature. 

But if the renminbi’s rise in status signaled the incipient decline of the dollar, you wouldn’t have known it from the action in the foreign currency markets, or from any other major markets last week. The dollar did fall against the euro on Thursday, after the European Central Bank issued policy guidance that surprised some traders. But if anything, the almighty dollar, as Washington Irving once called the greenback, retained every bit of its global importance. 

It was striking that on the very day of the I.M.F.’s announcement about the renminbi, the dollar actually rose to an 11-year high against major currencies, according to Bloomberg trade-weighted data. And on Wednesday, the value of the dollar reached new heights. 

It was bolstered by comments from Janet L. Yellen, the Federal Reserve chairwoman, suggesting that the Fed would soon raise short-term interest rates after holding them close to zero for nearly seven years. Ms. Yellen’s testimony before Congress on Thursday added to that general conviction in the markets, though the dollar briefly gave up ground against the euro after the European Central Bank in Frankfurt loosened monetary policy less than had been expected. 

Still, the market consensus remains that diverging policies in Europe and the United States will solidify a trend that has been underway for many months: The euro will weaken further and the dollar will grow ever stronger. 

What’s more, the rising dollar over the last year has already had profound effects. It has helped account for the drop in commodity values, which are commonly priced in dollars. The soaring greenback has also pummeled producers of coffee, cotton, copper, zinc, oil and gold, and it has punished many commodity-producing nations, like Brazil, Russia, Saudi Arabia and Canada. 

At the same time, the dollar has helped put a lid on inflation in the United States, the Federal Reserve said last week in the periodic surveyof American economic conditions known as the beige book. “The strong dollar put downward pressure on prices,” the Fed said. It also concluded that the dollar had hurt the competitiveness of American exporters and contributed to weakening global economic demand. 

And in earnings calls with financial analysts, a range of American companies reported that the dollar had created significant headwinds for their businesses, and was likely to do so in 2016. As Goldman Sachs reported in its most recent beige book — a survey of corporate America that it periodically performs: “A strong U.S. dollar continued to weigh on earnings, particularly for companies with significant international exposure.” 

Those effects are widely expected to strengthen, not weaken, in the months ahead. The dollar remains the main currency in which the world does business. It accounted for more than 43 percent of foreign currency turnover in 2013, the most recent I.M.F. figure, compared with less than 17 percent for the euro, the second-most-widely-used currency. At 1.1 percent, the renminbi barely showed up on the radar. 

Still, the renminbi is being traded frequently in Asia, the I.M.F. found, if not much in Europe or North America. And because China is already among the world’s biggest exporters — it is the biggest, by some measures — it has leverage to shift commerce toward the renminbi rather than the dollar. 

China has already demonstrated that a small shift in the value of the renminbi can have major effects on global markets. In August, it announced that it would allow the renminbi to float in a broader range — a shift that helped China receive the benediction of the I.M.F. last week — but when the currency briefly lurched downward, world currency, stock and commodities markets fell sharply. 

In Beijing last week, Yi Gang, deputy governor of the People’s Bank of China, said the bank intended to “keep the renminbi’s exchange rate stable at a reasonable level,” yet would also gradually allow the currency to move more freely. Those goals may prove to be difficult to achieve simultaneously. Having disrupted the markets only recently, China could do so again. 

But China’s rising status at the I.M.F. could have a calming effect. It will lead to a small rebalancing of global reserves at central banks, which are likely to begin to modestly increase their renminbi holdings. Eventually, the renminbi could become a haven in times of trouble, a place where investors seek security, not a currency from which people flee, as has recently been the case. 

In order to achieve that transformation, the renminbi will have to become much more freely and dependably usable than it already is. It is becoming more important and will undoubtedly grow in stature. But the dollar remains at the fulcrum of world trade and global economics. 

2. A New Century for the Middle East 

The Project Syndicate   DEC 19, 2015  

NEW YORK – The United States, the European Union, and Western-led institutions such as the World Bank repeatedly ask why the Middle East can’t govern itself. The question is asked honestly but without much self-awareness. After all, the single most important impediment to good governance in the region has been its lack of self-governance: The region’s political institutions have been crippled as a result of repeated US and European intervention dating back to World War I, and in some places even earlier. 

One century is enough. The year 2016 should mark the start of a new century of homegrown Middle Eastern politics focused urgently on the challenges of sustainable development. 

The Middle East’s fate during the last 100 years was cast in November 1914, when the Ottoman Empire chose the losing side in World War I. The result was the empire’s dismantling, with the victorious powers, Britain and France, grabbing hegemonic control over its remnants. Britain, already in control of Egypt since 1882, took effective control of governments in today’s Iraq, Jordan, Israel and Palestine, and Saudi Arabia, while France, already in control of much of North Africa, took control of Lebanon and Syria. 

Formal League of Nations mandates and other instruments of hegemony were exercised to ensure British and French power over oil, ports, shipping lanes, and local leaders’ foreign policies. In what would become Saudi Arabia, Britain backed the Wahhabi fundamentalism of Ibn Saud over the Arab nationalism of the Hashemite Hejaz. 

After World War II, the US picked up the interventionist mantle, following a CIA-backed military coup in Syria in 1949 with another CIA operation to topple Iran’s Mohammad Mossadegh in 1953 (to keep the West in control of the country’s oil). The same behavior has continued up to the present day: the overthrow of Libya’s Muammar el-Qaddafi in 2011, the toppling of Egypt’s Mohamed Morsi in 2013, and the ongoing war against Syria’s Bashar al-Assad. For almost seven decades, the US and its allies have repeatedly intervened (or supported internally-led coups) to oust governments that were not sufficiently under their thumb. 

The West also armed the entire region through hundreds of billions of dollars in weapons sales. The US established military bases throughout the region, and repeated failed operations by the CIA have left massive supplies of armaments in the hands of violent foes of the US and Europe. 

So, when Western leaders ask Arabs and others in the region why they can’t govern themselves, they should be prepared for the answer: “For a full century, your interventions have undermined democratic institutions (by rejecting the results of the ballot box in Algeria, Palestine, Egypt, and elsewhere); stoked repeated and now chronic wars; armed the most violent jihadists for your cynical bidding; and created a killing field that today stretches from Bamako to Kabul.” 

What, then, should be done to bring about a new Middle East? I would propose five principles. 

First, and most important, the US should end covert CIA operations aimed at toppling or destabilizing governments anywhere in the world. The CIA was created in 1947 with two mandates, one valid (intelligence gathering) and the other disastrous (covert operations to overthrow regimes deemed “hostile” to US interests). The US president can and should, by executive order, terminate CIA covert operations – and thereby end the legacy of blowback and mayhem that they have sustained, most notably in the Middle East. 

Second, the US should pursue its sometimes-valid foreign-policy objectives in the region through the United Nations Security Council. The current approach of building US-led “coalitions of the willing” has not only failed; it has also meant that even valid US objectives such as stopping the Islamic State are blocked by geopolitical rivalries. 

The US would gain much by putting its foreign-policy initiatives to the test of Security Council votes. When the Security Council rejected war in Iraq in 2003, the US would have been wise to abstain from invading. When Russia, a veto-wielding permanent member of the Council, opposed the US-backed overthrow of Syrian President Bashar al-Assad, the US would have been wise to abstain from covert operations to topple him. And now, the entire Security Council would coalesce around a global (but not a US) plan to fight the Islamic State. 

Third, the US and Europe should accept the reality that democracy in the Middle East will produce many Islamist victories at the ballot box. Many of the elected Islamist regimes will fail, as many poorly performing governments do. They will be overturned at the next ballot, or in the streets, or even by local generals. But the repeated efforts of Britain, France, and the US to keep all Islamist governments out of power only block political maturation in the region, without actually succeeding or providing long-term benefits. 

Fourth, homegrown leaders from the Sahel through North Africa and the Middle East to Central Asia should recognize that the most important challenge facing the Islamic world today is the quality of education. The region lags far behind its middle-income counterparts in science, math, technology innovation, entrepreneurship, small business development, and (therefore) job creation. Without high-quality education, there is little prospect for economic prosperity and political stability anywhere. 

Finally, the region should address its exceptional vulnerability to environmental degradation and its overdependence on hydrocarbons, especially in view of the global shift to low-carbon energy. The Muslim-majority region from West Africa to Central Asia is the world’s largest populous dry region, a 5,000-mile (8,000 kilometers) swath of water stress, desertification, rising temperatures, and food insecurity. 

These are the true challenges facing the Middle East. The Sunni-Shia divide, Assad’s political future, and doctrinal disputes are of decidedly lesser long-term importance to the region than the unmet need for quality education, job skills, advanced technologies, and sustainable development. The many brave and progressive thinkers in the Islamic world should help to awaken their societies to this reality, and people of goodwill around the world should help them to do it through peaceful cooperation and the end of imperial-style wars and manipulation. 

3. The Fed awakens 

The Federal Reserve has at last raised interest rates 

But the economy’s reaction to the Fed’s rate rise is hard to predict 

The Economist   Dec 16th 2015 

AFTER a build-up worthy of a blockbuster, the Federal Reserve has at last raised interest rates, putting an end to six years at close-to-zero. From December 17th the target band for rates will be 0.25% to 0.5%, a quarter of a percentage point higher than today (see chart 1). Now that rates have at last lifted off, what will they mean for the American economy? 

In theory, higher rates have three main effects. First, they slow spending as credit becomes more expensive and the return to saving increases. Second, they strengthen the dollar by attracting foreign capital. Third, they reduce asset prices by increasing the discount rate applied to future profits. The reality, however, is not always in line with the theory. On average, in the years following the start of the past five rate-rising cycles, the dollar held steady and share prices continued to rise (see charts 2, 3 and 4). 

The impact of changes in interest rates is not usually felt on announcement, as the Fed tends to signal its intentions in advance and the markets to respond accordingly. That explains the stickiness of the dollar and shares. The response of the real economy also comes with a delay. Most reckon it takes time for monetary policy to shift spending habits, and one rate rise is more an easing of the accelerator than a U-turn. Unemployment continued to fall in each of the past five tightening episodes (see chart 5). That will probably happen again: most economists forecast unemployment of around 4.7% at the end of 2016, compared with 5% today. 

The most uncertain variable is inflation. This fell rapidly following rate rises in 1983 and 1988 as the Fed established its hawkish credentials. Yet in 2016, the most likely direction for inflation is up (the rate rise is aimed at restraining its ascent). Whether wages follow suit depends on productivity growth.