Given this “deal”, Obama seems to be a used car salesman’s dream, but I’ve come to believe there is a method to this madness. And it is madness:
President Barack Obama announced Wednesday that the U.S. has set a new goal to reduce emissions of greenhouse gases by between 26 percent and 28 percent over the next 11 years as part of a climate change agreement with China.
The new target is a drastic increase from earlier in Obama’s presidency, when he pledged to cut emissions by 17 percent by 2020. By contrast, Obama’s counterpart, Xi Jinping, did not pledge any reductions by a specific date, but rather set a target for China’s emissions to peak by 2030, or earlier if possible. Xi also pledged to increase the share of energy that China will derive from sources other than fossil fuels. China’s emissions have grown in recent years due to the building of new coal plants.
“This is a major milestone in the U.S.-China relationship,” Obama told a news conference in Beijing, with Xi at his side. “It shows what’s possible when we work together on an urgent global challenge.”
No. No it’s not anywhere near a “milestone” at all. If that’s the “deal”, he was owned by the Chinese premier. Instead it is another bad deal used to push an ideological desire. This certainly won’t be ratified as a treaty with a GOP Congress (if it is even submitted as a treaty). And anyone who thinks China won’t ignore, or unilaterally extend its 2030 peak use simply knows nothing about how China works.
So the “King” will, apparently, do further damage to the economy by using this bit of nonsense as his catalyst for umpteen executive orders because, you know he has a pen, a phone and an ideology.
Thank goodness that only lasts for 2 more years with a GOP Congress (assuming the GOP Congress has any fiscal balls when it comes to defunding the stupidity he commits to his “executive actions”). If you loved ObamaCare you’re going to rave about this bit of economic stupidity.
In the meantime, grab your wallets and bend over, here it comes again.
But open the same amount of federal land to fossil fuel exploration and exploitation?
The Obama administration will open public lands in six Western states to more solar projects as part of a solar energy road map it publicized Tuesday.
The Interior Department set aside 285,000 acres in Arizona, California, Colorado, Nevada, New Mexico and Utah for the initiative. Firms can apply for waivers to develop projects on an additional 19 million acres.
Imagine 19 million acres covered in solar installations. That won’t have any environmental impact on eco-systems, will it?
And if it does, well, they’ll just “waiver” them, because, you know, this is a favored industry. Regulation? Yeah, most likely not at all as stringent as those applied to those old “dirty” fuels.
Which brings us to an ironic point. Remember in years past when we fought against the dumping of government subsidized products from other countries on our shores.
Guess what? We’re now the target for much the same argument:
China’s Commerce Ministry said Friday that it is investigating possible solar equipment subsidies by the U.S. and South Korea and their impact on Chinese manufacturers, widening a trade spat at a time of oversupply and weakening demand for solar power equipment.
The ministry has launched an anti-dumping and anti-subsidy probe into polysilicon imports from the U.S., as well as an anti-dumping probe into imports from South Korea, it said in separate statements on its website.
Yes I know, China is as hypocritical as they come, but, apparently, so are we.
It’s called crony capitalism (or as mentioned previously, venture socialism). Again government, using your money, is subsidizing an industry that can’t make it alone because in reality there’s no market demand for their product. By subsidizing them, government is socializing their losses. This administration has heavily subsidized the domestic solar industry (and even then we see industry business failures right and left) and is forcing a product on the market to satisfy a political agenda even when alternate and more viable (but unfavored) products are available much more cheaply.
The administration has since approved 17 major solar projects on public lands producing about 6,000 megawatts of power, Salazar said.
“We have made huge strides in the last three-and-a-half years, but we realize we are only at the beginning of this effort and that there’s a lot more to do,” Salazar said. “I have no doubt that the United States will lead the world in solar energy development.”
My guess is those 17 solar projects will end up on more acreage than has been approved by the administration for oil exploration.
“Huge strides”? Not in any market sense. What he’s talking about is the administration making “huge strides” in forcing a product into a market that is not in demand by that market, ignoring the environmental impact of such projects (even while being more restrictive on fossil fuel development) and generally playing the “central planning” game. Government knows better than you and the markets about what we need, or didn’t you know that?
Sort of reminds me of those new light bulbs they forced on us which are now being found to cause skin damage due to UV light leakage.
But hey, I’m just a prole, what do I know?
Oh, and here’s where you have to read between the lines. Note the spin involved in this sentence:
The areas selected in the plan minimize “resource conflict,” Salazar noted, meaning they avoid regions where solar development would edge out exploration for other natural resources.
What that also means is the administration has successfully exempted up to 19 million acres of federal land from fossil fuel exploration.
The plan released Tuesday would expedite solar project approval while cutting some up-front costs for developers, Steve Black, counsel to the Interior Department, said Tuesday.
Translation: The favored industry will get favored treatment all paid for by your dollars (or borrowed ones, most likely).
Environmental groups? Forget about it. You haven’t a chance on this one. You’’ll be steamrolled just like the rest of the country. Save your money and effort for something you can tie up and delay – anything to do with fossil fuels. You know, the life blood of our commerce?
Yeah, concentrate there. The administration will be glad to help.
A post to update you on what is happening, economically around the world.
Manufacturing activity in China and across a wide swath of Asia slowed in May, heightening fears that the turmoil in Western economies is dragging down one of the few remaining engines of global growth.
Two purchasing managers indexes for China fell in May, briefly rattling investors Friday and stoking speculation Beijing may have to respond aggressively to support growth. Indonesia posted its first trade deficit in nearly two years, and South Korea’s exports, considered a bellwether for Asia, unexpectedly fell for a third straight month.
"The green shoots of recovery that we were seeing a month or so back are wilting away," said Rob Subbaraman, chief Asia economist at Nomura Securities. "The crisis in Europe is one reason; the other one is the China slowdown. But I think less appreciated is that the height of uncertainty about the outlook has caused Asian firms and multinationals in Asia to pause in their investments, and I think that’s the bigger factor right now."
China’s official PMI, based on government data, showed manufacturing continuing to grow but by the barest of margins, falling to 50.4 in May from 53.3 in April. A figure above 50 indicates expansion. An index produced by HSBC and Markit showed Chinese manufacturing was worse, falling to 48.4 in May from 49.3 a month earlier.
"We feel that in China a very powerful stimulus"—combining fiscal outlays and cuts to banks’ reserve requirement ratio—"is required to arrest the slowdown in growth," said Frederic Neumann, co-head of Asian economic research for HSBC. "These numbers today suggest this is coming sooner rather than later. If that stimulus is not delivered, then China is indeed looking at a hard landing."
Both the US’s non-recovery recovery and the Eurozone crisis are being blamed for this slowdown.
The economies of Asia, both the emerging markets and the more developed countries, are being hit by a double whammy of slowing domestic growth and the impact of the European debt crisis on Asian exports and finance.
Signs of distress are proliferating.
In India, the government reported Thursday growth in the first three months of the year at the slowest pace in the past nine years—up 5.3% from the year-earlier quarter, well below the 8% pace of recent years. "A gasping elephant," said Leif Lybecker Eskesen, HSBC’s chief India economist, in a note to investors.
In China Friday, an official gauge of manufacturing activity fell to a lower than expected level, which is likely to add to market concerns about China’s slowdown. China’s official Purchasing Managers Index fell to 50.4 in May, compared with 53.3 in April and lower than the median forecast of 51.5. A reading below 50 indicates contraction. The Ministry of Commerce, meanwhile, is blaming "worse-than-expected" economic performance in Europe for disappointing export data.
Early Friday, South Korea said its exports unexpectedly contracted for a third consecutive month in May compared with a year earlier. South Korea is the first country in Asia to release trade data for the month and is often a harbinger of regional trends.
Meanwhile in Europe, the UK’s manufacturing is reported as slumping with activity dropping to its lowest level in three years. The Eurozone jobless rate stands at 11%. Additionally the Eurozone crisis is now beginning to effect countries with close proximity and ties which are not a part of the Euro:
The euro zone’s deepening fiscal crisis continued to take its toll on some of the neighboring economies of central and eastern Europe in May, as surveys released Friday indicated manufacturing activity contracted again in May.
The countries in Europe’s center and east have close trade and financial ties with the euro zone, and some have seen demand for their exports weaken as the currency area’s economy has stalled, while western Europe banks have cut their lending to the region.
A double whammy. And, finally, within the Eurozone itself, companies are trying to prepare for the Greek withdrawal from the zone (and possibly Spain’s as well):
As European officials race to quell fears that Greece may exit the euro, many companies doing business in the troubled country are preparing for the worst.
Most executives, analysts and others agree on one thing: the impact of a Greek withdrawal from the euro zone is impossible to predict. That’s why multinational companies are rehearsing for any number of contingencies. They range from a paralysis in cross-border payments to a civil breakdown in Greece to a broader breakup of Europe’s common currency.
Retrieving their cash is among the companies’ gravest concerns. If Greece were to revert to its former currency, many companies fear that any euros left there would be converted into less-valuable drachmas. Should that happen, Greece is widely expected to impose capital controls to keep the remaining cash in the country.
Can you say “completely mess?”
Meanwhile, here, the business climate remains unsettled, hiring still isn’t showing any real turnaround and the economy continues to bang along the bottom (one assumes, it could drop again if the Euro crisis explodes) with no real trend upward.
Not so hot. Europe:
Activity at European businesses hit a near three-year low in May, according to a survey by Markit.
Its index, based on a survey of purchasing managers in the manufacturing and service sector, fell to 45.9 in May, a 35-month low.
In response, the euro fell to $1.2515 against the dollar, a 22-month low.
"The flash PMI figures for May look horrible and provide a clear warning that eurozone GDP will almost certainly show a contraction in the second quarter after stagnating in the first quarter," said Martin Van Vliet, from the bank ING.
"It’s not good," said Peter Dixon from Commerzbank.
"The German ones were particularly disappointing, as we had been expecting some more buoyancy.
"It clearly indicates that the evaporating sentiment that we have seen in recent weeks, as the Greece crisis has intensified, is having a big impact on the economy."
A separate report from Germany’s Ifo showed that business confidence fell sharply in Germany in May.
China’s manufacturing activity contracted at a faster pace in May as conditions for exporters worsened during the month, the preliminary findings of a survey by HSBC showed Thursday. The "flash" reading of the manufacturing Purchasing Managers’ Index dropped to 48.7 in May from a final print of 49.3 in April, HSBC said. A measure below 50 in the survey indicates deterioration, whereas one above that figure shows an improvement. The flash reading is typically based on 85% to 90% of the total responses in the monthly survey.
The big red kangaroo is almost to the car.
Meanwhile, in the US, we’re focused on … politics. Silly politics.
This week, Bruce Michael, and Dale record talk about China, illegal immigration, and Egypt.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.
While all the drama of the debt ceiling negotiations and downgrade were happening, China quietly launched their first aircraft carrier.
So what does that mean in the big scheme of things? Well IBD lays out the big point as clearly as anyone can:
It is not yet a full-fledged fighting ship. Its mission is to gain experience in carrier operations, particularly for pilots unaccustomed to taking off from and landing on a carrier’s moving deck.
Yet it represents a sea change in potential capability and something that Congress’ bipartisan fiscal supercommittee should ponder as draconian defense cuts remain on the table.
The first is no mean trick. Learning carrier operations and training carrier pilots takes a while. But the second point – about the supercommittee and defense cuts – should be lost on no one. One of the critical points about cuts to spending is the differentiation between good cuts, that is cuts that trim away fat and waste, and bad cuts, cuts that remove muscle and bone.
But back to the carrier and China’s intentions. First a few facts:
A few weeks ago Chinese Su-27 fighters intercepted a U-2 reconnaissance aircraft that had taken off from Kadena Air Base in Okinawa as part of a routine surveillance program of China. And Beijing issued a warning that such surveillance near its shores will not long be tolerated.
China’s capabilities have taken a quantum leap since a Chinese J-8 jet collided with a U.S. EP-3 surveillance jet in April 2001 off Hainan, the island that now has a base for Chinese ballistic missile and attack submarines.
China in recent years has laid claims to Japan’s Senkaku Islands, the Spratly Islands in the South China Sea, and has conducted at least nine incursions into Philippines-claimed territory.
China is flexing. No question in anyone’s mind that it is feeling its oats and will be challenging the status quo in the South China Sea. It consider that to be China’s “blue soil”. Add to the facts above that China has been reported to have developed an aircraft carrier killer missile and is in the beginning phases of developing a 5th generation fighter, and you have to begin to wonder if all of that points to benign intent.
Beijing’s goal is to secure the waters from Japan’s home islands, along the Ryukyu chain, through Taiwan and to the Strait of Malacca, encompassing the South China Sea.
Chinese government writings refer to the waters surrounding China as blue soil. Where governments used to draw a line in the sand, Beijing is preparing to draw a line in what other governments view as international waters.
Last week, the state newspaper People’s Daily warned of "dire consequences" if Beijing is challenged in the South China Sea.
The People’s Daily is, of course, an organ of the ruling Communist Party in China and nothing hits its pages unless approved at the highest level.
Aircraft carriers are offensive weapons, not defensive weapons. Their purpose for existence is to project power. The carrier China just launched will not be their last or only carrier. The question is, what does China intend to do with it?
IBD concludes with the current situation and the future worry:
We will be hard-pressed to meet the emerging Chinese threat when our Navy has only 286 ships (down 45% from 1991, when it had 529) and continues to shrink.
We’ve closed the F-22 Raptor production lines, and even some in the Tea Party are insisting on defense cuts to make up for our spending follies.
Defense is a constitutional imperative, not an optional budget item. We’d better pay attention to that Chinese carrier.
First among the reactions globally was that of China:
China bluntly criticized the United States after the S&P ratings cut to AA-plus, saying Washington had only itself to blame and calling for a new stable global reserve currency.
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China’s official Xinhua news agency said in a commentary.
Xinhua scorned the United States for a "debt addiction" and "short sighted" political wrangling. China, it said, "has every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets."
"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.
If you think it is bad now, consider our predicament if the dollar was to be replaced as the new global reserve currency. However it is ironic to be lectured by the Chinese on economic matters given their ideological bent. Communists telling Capitalists (pseudo anyway) how they should conduct their business.
France, on the other hand is expressing faith in the US’s ability to get its house in order, as is Poland’s Prime Minister:
France’s Baroin said France had faith in the United States to get out of this "difficult period." Friday’s U.S. unemployment numbers were better than expected and so things were heading in the right direction, he said.
"One should not dramatis, one needs to remain cool-headed, one should look at the fundamentals," he told France’s iTele.
"There is no need for panic," Polish Prime Minister Donald Tusk said. "We will see in August, and maybe more intensively in September what the effects for the world economy will be."
Of course, with the huge problems in Europe, both France and Poland are inclined to play down the significance of a US downgrade. And more interesting than what will happen later this month or next may be what happens on Monday, the first day global markets will mark their reaction to the US credit downgrade:
Because the S&P move was expected, the impact on markets may be modest when they reopen on Monday. But the ratings cut may have a long-term impact for U.S. standing in the world, the dollar’s status and the global financial system.
"The consequence will be far reaching," said Ciaran O’Hagan, fixed income strategist at Societe Generale in Paris.
"It will weigh on secure assets. The bigger reaction will be on risky assets, including equities and on agencies (Freddie Mac, Fannie Mae) and states backed directly by the federal government."
But he added: "U.S. Treasuries will remain a benchmark. This is a ship which takes a long time to turn around."
Norbert Barthle, a budget expert for German Chancellor Angela Merkel’s conservatives, said the downgrade would certainly provoke further turbulence in markets.
Everything mentioned is very important to the future of the US economy and its financial health. Unfortunately most of it is negative. In the next few months we’ll see how this shakes out, but at this point, even the optimists are pessimistic.
Every now and then I’ve been given the opportunity to talk with some of our movers and shakers from the past. First it was former SecDef Donald Rumsfeld as he launched his book "Known and Unknown". And through the Rumsfeld office, I’ve been afforded the opportunity to now sit down with former NSA and Sec State Henry Kissinger today as he launches his new book, "On China".
Unfortunately I received the book yesterday and haven’t been able to read it, but as the title suggests, it is all about China – history, politics, foreign relations, etc. Kissinger has apparently been fascinated by the country ever since Richard Nixon sent him to Beijing to help open and better relations between the US and China.
If you have any serious questions about China – since that’s obviously going to be the theme of the coffee klatch arranged for today, I’d welcome them. I think it will be a fascinating hour or two. China has always been an enigma to the West, and it is no less so today. Drop any ideas for q’s in comments and if they’re good, I’ll try to ask them.
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Obviously I have mixed feelings about the country of Saudi Arabia. On the one hand they’re a tyrannical 12th century monarchy that controls a good portion of the world’s oil and exports a brand of radical Islamism. On the other hand they’re a bulwark against Iranian aggression and expansionism and a titular ally of the US.
So, the question then, given the situation in the Middle East, is it in the best interest of the US to do things that have them seeking solace and partners (allies they feel they can depend on?) elsewhere?
Yeah, probably not. But that’s exactly what is going on. Interestingly it is Tom Brokaw who brought the situation to our attention:
After remarking on the difficulty of establishing democracy in the Middle East, Brokaw said that Defense Secretary Robert Gates “will face some tough questions in this region about the American intentions going on now with all this new turmoil, especially in an area where the United States has such big stakes politically and economically.”
“And a lot of those questions presumably will come from King Abdullah of Saudi Arabia,” reported Brokaw on the Nightly News. “I was told on the way in here that the Saudis are so unhappy with the Obama administration for the way it pushed out President Mubarak of Egypt that it sent high level emissaries to China and Russia to tell those two countries that Saudi Arabia now is prepared to do more business with them.”
All of this stems from how the Obama administration handled Egypt. And it has caused Saudi Arabia to doubt the sincerity of the relationship between the US and the kingdom.
However, Saudi Arabia’s concerns emanate from the manner in which Egyptian dictator Hosni Mubarak was removed from power. Mubarak had been an American ally for decades and yet the Obama administration, in the eyes of Saudi criticism, turned its back on the Egyptian government when reformist protests spilled into the streets.
High sounding rhetoric talks, but actions walk, and SA is not at all happy about the actions the administration took in Egypt nor, apparently, satisfied with their assurances since. And despite the supposed buy-in of the Arab League on the latest attack on an Arab country- Libya- I’d guess they’re not particularly happy with that either. Another indicator they file away and continues to feed their fear of the sincerity of the US as an ally.
The good news, if there is any, is the administration has apparently figured out that it has badly messed up its relationship with SA. Whether or not they can salvage the relationship remains to be seen. It may take another trip by Obama and a lot more bowing and scraping to do that:
Mr. Gates met with the Saudi king on Wednesday, and the Associated Press reported that the purpose of the meeting was to smooth relations with the uneasy and oil-rich ally, noting that "this was Gates’ third trip to the area in the past month."
Thus far the Obama administration has been a foreign policy disaster. Interestingly, some of the highest polling results for Obama deal with his handling of foreign affairs. If anything, that should clue you into how badly it is going for him on the domestic front.
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You are all familiar with the killer earthquake that occurred in New Zealand recently. During that disaster, 70 international students at the King’s English Language School, along with 10 staff, lost their lives. Among the dead were 7 Chinese students.
You’ll never guess why China is now demanding increased compensation for its dead students:
Chinese officials have requested extra compensation for the families of Chinese students killed by the Christchurch earthquake. They say China’s one-child policy means the families will face long-term economic hardship.
In a Radio New Zealand interview this morning, Cheng Lee, head of the Chinese Embassy’s disaster relief efforts, explained that China’s situation was very unusual due to the fact that, under Chinese law, families could only have one child per couple.
Mr Cheng believes the Chinese families deserve special consideration and should be given economic assistance above what’s available under New Zealand’s Accident Compensation Corporation (ACC) payments. Mr Cheng said: "There is a very notable difference in terms of the family situation between the Chinese family members and other foreign family members. You can expect how lonely, how desperate they are, not only from losing loved ones, but losing almost entirely their source of economic assistance after retirement."
So here’s a summary of the thinking as presented by Mr. Cheng – Since China unilaterally and by force restricted its population to one child per family and subsequently since in the case of the disaster in NZ, some of those children were killed, creating a hardship for the families, it is the responsibility of the government of New Zealand to up its compensation to the Chinese families (over and above what it pays others) because of the consequences of the Chinese law.
A pretty absurd claim wouldn’t you say? And the claim also implies that the Chinese student’s lives were more valuable than those of the others that were killed – again, the supposed value based in a law which restricted parents to one child.
Mr Joyce said that with all the investigations currently underway it was too soon to say if special compensation might be available for any of the victims’ families.
Really? The fact that NZ is even entertaining the idea for the reasons given are astounding. If China believes what it is claiming – i.e. that because of the policy of one child per family, the families effected have a particularly tough road ahead of them financially – then it should be compensating the parents for the consequences of its policy, not New Zealand.
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