Thursday, July 21, 2005

Outraged for Weeks at the Roberts Pick

Andrew Sullivan has this:

Jon Stewart's show got it right, according to an e-mailer:

Stewart: So after yesterday's announcement of Bush's pick for the Supreme Court, how is the left wing reacting?

Correspondent: Well, Jon, they're outraged over Bush's pick, and they have been for weeks."

It might have been Rush who said yesterday that the only way the Democrats wouldn't be outraged at whoever Bush picked would be if the nominee offered to perform a live partial-birth abortion during the judicial committee hearings to demonstrate his/her commitment to Roe v. Wade.

Watch China

Following on Bill's post below on the growing economic rift between China and the United States comes an article by Max Boot describing the seriousness of the conflict we find ourselves in with China, and will continue to find ourselves in, over the course of the next decade or two. It's important reading. Here's an excerpt:

[China] recognizes that it is practically impossible to challenge the U.S. on its own terms. No one else can afford to build mega-expensive weapons systems like the F-35 Joint Strike Fighter, which will cost more than $200 billion to develop. "The way to extricate oneself from this predicament," the authors write, "is to develop a different approach."

Their different approaches include financial warfare (subverting banking systems and stock markets), drug warfare (attacking the fabric of society by flooding it with illicit drugs), psychological and media warfare (manipulating perceptions to break down enemy will), international law warfare (blocking enemy actions using multinational organizations), resource warfare (seizing control of vital natural resources), even ecological warfare (creating man-made earthquakes or other natural disasters).

Cols. Qiao and Wang write approvingly of Al Qaeda, Colombian drug lords and computer hackers who operate outside the "bandwidths understood by the American military." They envision a scenario in which a "network attack against the enemy" - clearly a red, white and blue enemy - would be carried out "so that the civilian electricity network, traffic dispatching network, financial transaction network, telephone communications network and mass media network are completely paralyzed," leading to "social panic, street riots and a political crisis." Only then would conventional military force be deployed "until the enemy is forced to sign a dishonorable peace treaty."

This isn't just loose talk. There are signs of this strategy being implemented.

The question we have about the U.S./Chinese conflict is that, aside from the dispute over Taiwan, it's hard to see how our interests are at odds. Conflict is usually born of competition for resources, especially land. There may be competition for oil between the two nations, but it doesn't seem that it is severe enough to drive China to initiate a war with us. There is an ideological contest between communism and capitalism, but China is moving toward a mixed economy that would appear to blunt the sharper edges of that rivalry. Moreover, the American market has been the main reason for China's economic success. Why would they wish to jeopardize that?

There may be something else in China's strategic thinking that is inducing them to prepare for war with the U.S. China aspires to be a world hegemon and sees the United States as the only obstacle - military, ideological, or economic - in their path. Thus, in their view, either they defer their dream of world dominance or they accept the inevitability of war with the United States. Perhaps they have opted for the latter.

The twenty first century looks like it may be even more bleak and less peaceful than the twentieth.

China Severs Peg To Dollar

To better understand the implications of this announcement today, one should consider the financial mechanics of the relationship between the US Dollar and the Chinese Yuan for the last decade.

China had pegged its currency, the Yuan, or RMB, or Renminbi (i.e. Peoples Currency), to the US Dollar at a rate of 8.2 yuan to 1 dollar so as the dollar strengthened, the yuan strengthened. When the dollar weakened the yuan weekend. This meant that the US could never gain a trade advantage over China because the two currencies were linked. But this linkage didn't happen simply by Chinese decree, there was a mechanism that made it so.

That mechanism was basically a manipulation of the two currencies so that if the dollar started to weaken against the yuan, China would purchase dollars with yuan. This would take dollars out of the market creating a demand for dollars and consequently increasing their value. At the same time, the yuan would experience the opposite affect and since more yuan were coming into the market, their value would decrease.

The other scenario is that if the dollar would increase in value against the yuan that was declining in value, China would sell dollars and buy up the yuan.

The net result in either case was that the "peg" would be maintained.

Today, China announced that they have discontinued this policy and, instead, have pegged the yuan to a "basket" of currencies. They haven't announced which currencies are in the basket but they certainly would include the dollar and the euro, and the yen.

There are three observations of particular importance about this development. First, if China has decided to make a change in policy, it is reasonable to assume that the previous arrangement no longer serves their purpose but one can only speculate as to what their ultimate objective is. Two, since the Yuan is now pegged to multiple currencies, the need for China to buy dollars to maintain the peg is diminished proportionally to the mix of the basket of currencies. And three, and most significantly, the need for China to be a buyer of US dollars could be practically eliminated all together.

Consider this:

However, the pressure on China to prop up the dollar will be greatly diminished. To maintain the peg against its new basket, Chinese monetary authorities will most likely now be buyers of those other currencies likely to be included in its basket, such as the Euro or Yen. Since its reserves are already disproportionately held in dollars, it will likely rebalance those reserves to more accurately mirror the basket to which the yuan will be pegged. Such a rebalancing will only exacerbate the dollar's decline. However, a declining dollar will not automatically require offsetting dollar buying by the Chinese as it has during the period of the yuan-dollar peg. As long as dollar weakness is offset by strength in others currencies in its basket, the peg can be maintained.

There's much more important information regarding the consequences of today's action at the link such as:

1. Higher consumer prices.
2. Higher interest rates.
3. Reduced profits for American companies, particularly those dependent on domestic consumption and consumer debt.
4. Lower stock prices, as earnings decline and multiples contract.
5. The busting of the housing bubble, as tighter credit standards and higher interest rates squeeze current home prices.
6. Rising unemployment, as higher interest rates and vanishing home equity slow consumer spending and reduce jobs dependant on that spending.
7. A severe recession as a result of all of the above.
8. Rising federal budget deficits, as recession reduces tax revenue, while higher interest rates and escalating outlays increase expenditures.

One can only wonder what congress was thinking as they threatened China to break the peg to the dollar or we would slap a 27% tariff on the goods we import from them. D'oh!

New Blog at Hearts and Minds

Friends of ours, Beth and Byron Borger, own and manage what is perhaps the best mom and pop bookstore around. Hearts and Minds, the apt name of their bookshop, sells books which will satisfy your mind, touch your heart, and nourish your soul. They're expanding now into the cyber-world and Byron has begun a blog designed to share his thoughts on books and bookselling.

His current post is a wistful look at the joys and difficulties that a Christian bookseller experiences in carrying books that some customers may think inappropriate for a store which promotes a strong Christian witness.

The books currently drawing an occasional critical comment are Steve Stockman's Walking On: The Spiritual Journey of U2 and, of course, J.K. Rowling's latest installment in the Harry Potter series. If you're a fan of either U2 or Harry Potter, which encompasses just about everybody, I guess, you should check out Byron's blog. I'm sure you'll find his ruminations interesting.

What It's All About

Lest there be any doubt as to what's driving the Karl Rove/Valerie Plame brouhaha, Skinner at Democratic Underground spells it out for us in the context of an urgent plea to his ideological co-belligerents to fight the Roberts nomination hammer and tong:

Some people have been arguing that the Roberts nomination is a "distraction" from the Karl Rove affair. This is simply wrong. Wrong. Wrong. Wrong. A nominee to the Supreme Court is not a "distraction" from anything. This is as serious as politics can get. The Supreme Court is losing a moderate voice, and the Bush Administration is trying to place an extreme right-wing ideologue in her place. This is a lifetime appointment, for a guy who is only 50 years old! He might be on the court for thirty years.

The effects of placing another conservative on the court are VASTLY MORE SERIOUS than anything that could happen because of this Rove situation. In Rove, we could cripple a GOP Administration for a couple years, tops. In Roberts, there is the potential to change the course of this nation for decades.

Ah. So hounding Karl Rove is all about crippling the Bush administration. It's not about justice. It's not about protecting the identity of covert CIA agents. It's not about doing what's right or best for the country. It's just ugly political street-fighting. Kneecap the administration so they can't function for a couple of years, and they'll be so discredited that the Democrats will be able to reclaim their rightful grip on the levers of power in 2008.

The amazing thing about this is that millions of Americans in the Democratic party think it perfectly acceptable and indeed cheer it on. Sad.