The end of an unwritten, 15-year-old agreement brings great uncertainty.
The Age - 5th Feb 2009
The end of an unwritten, 15-year-old agreement brings great uncertainty.
IS THE US not just thinking but doing the unthinkable? Is the assumption that has underpinned the world economy since China emerged as the new and great Asian powerhouse and the buyer of US Treasuries over?
Do the actions of the US in repeatedly accusing China of currency manipulation and enacting protectionist policies represent a deliberate move to press the economic nuclear button and bring on "mutual assured destruction" (MAD) of the 15-year arrangement whereby China provided the US with cheap consumer goods and purchased US securities and Treasury bonds to prevent America's financial collapse?
The answer appears to be yes.
In what would be the most catastrophic and world-changing move in recent memory, the US appears to be committed to replace China's purchase of its securities with printed money, thereby moving to end the fundamental underpinnings that have governed relations between the most two important economies of the world.
Steve Keen, from the University of Western Sydney, said yesterday the US treasuries auction market was now a sideshow.
Associate Professor Keen said by way of evidence, the US money supply doubled between 1994 and 2008 and "Bernanke has doubled it again in just the past four months".
"The US has essentially abandoned conventional ways of raising money," he said.
Asked about US Treasury Secretary Tim Geithner's attack on China's currency manipulation, Keen said that the rules of the game had now fundamentally changed and the US was, in expanding its money supply, pursing a policy eerily similar to Fed policies that preceded the Great Depression.
Keen, who last week was interviewed by The Wall Street Journal and is fast becoming a world-recognised economic authority, outlined in his recent Debt Watch Report that Bernanke's famous "helicopter drop doubling of base money will be impotent against the US's credit crunch".
Most economists believe the US and China are bound irrevocably by US debt and China's continued purchase of that debt. They assume the US, with 46 states insolvent or approaching insolvency, will suffer immediate MAD if China ends the long financial arrangement.
But with the US entering a period of deflation, its economic leadership appears to be doing the unthinkable - going it alone and letting the electronic printing presses take care of the huge sums required to keep the nation afloat. The consequences for the world economy are incomprehensible as China's purchases of US treasuries underwrite the US's unquenchable demand for money to service its multitrillion-dollar public debt, which President Obama said recently would reach $US11trillion ($A17trillion) this year.
Faced with the huge sinkhole created by the financial meltdown and the prospect of deflation, US Fed boss Ben Bernanke has been printing money so rapidly that the US is being flooded with liquidity. This is beyond unprecedented.
Many Americans believe printing money can free the country from the suffocating embrace of mutual dependence with China. In his blog earlier this week, Brad Setser from the US Council on Foreign Relations, and one of the world's most respected China commentators, outlined the US position: "Exchange rate policies can also influence the allocation of resources across sectors. China's de facto dollar peg is an obvious example ... it is hard for me to believe that as much would have been invested in China's export sector if China had had a different exchange rate regime ...
"Those who attribute the growth of the past several years solely to the market miss the large role the state played in many of the world's fast growing economies."
Setser and others close to policymakers are realising the boom in China may not be a rerun of the Japanese and German postwar economic miracles but more akin to the creation of a giant sweatshop for the benefit of Western companies and the Chinese Communist Party. But this required US consumers to play their role as the linchpins. Now the linchpin has broken. There is no way the old arrangement can continue and the US is realising the system will end. By reverting to the printing press it can free itself from dependency on China.
The risk is massive inflation but that has never been a matter to concern Bernanke nor, it seems, the team President Obama has assembled. And US debt can be paid with inflated dollars. China is onto the tactic, which explains why it is keen to convert its dollars into iron, coal and, I suspect, vast amounts of mineral wealth as well as property overseas. China must act, however, while the US dollar is strong. Don't be surprised if the Chinalco deal is but the first of many and keep your eyes on our resource stocks. There are many games being played at a geopolitical level and many a twist and turn to come.
Tuesday, February 17, 2009
Wednesday, December 3, 2008
'Olympic Village' sex turns toads into athletes
Above: A poisonous cane toad sits on a log.
Photo: Reuters/David Gray
Article from: Brisbane Times
Shannon Molloy | December 3, 2008 - 5:00AM
Cane toads leading the charge out of Queensland suffer a gene mutation that makes them obsessed with speedy travel, according to an expert on the amphibians, but they're now developing arthritis as a result.
Professor Rick Shine from the University of Sydney studies the pesky creatures and believes the toads are evolving to become faster.
When introduced to Queensland in 1935 in a bid to kill the cane beetle, toads generally travelled at a rate of about 10 kilometres each year, Professor Shine said.
"Now that movement has increased to about 50 or 60 kilometres per year, and those at the front of this invasion have become marathon runners in a sense," he said.
The gene mutation that drives certain toads to venture from their local area has been caused by constant selective breeding between the speediest of each generation.
"Within the first generation, the quickest toads - the athletes - were on the western front and they bred with each other... we call this the Olympic Village effect," he said.
"Then their offspring dispersed and again the fastest kids bred... they constantly selected the fasting moving individuals."
Toads leading the push to Western Australia have developed longer legs than their Queensland counterparts, who seem quite content with staying in their local surrounds, he said.
However their new legs and need for speed end up being their downfall.
"A vet in Darwin noticed spinal arthritis and it looks to be the result of toads having pushed the envelope as far as they possibly can," Professor Shine said.
The professor said he believed about 10 per cent of the fast-moving amphibians now suffer severe joint arthritis, which leaves them with large boney lumps on their spines.
However, while the condition is painful, it does not seem to slow them down.
The researchers also uncovered the presence of a soil bacteria between the spinal joints of affected toads - the same bacteria found in humans suffering an immune system deficiency.
"This suggests that the invading toads are so stressed from pushing their bodies that their immune systems are beginning to fail," Professor Shine said.
"It's not actually killing the toads... but there is a strong hint here of a vulnerability (and) as an ecologist, I believe the first step in controlling cane toads is to better understand them."
For the whole article click here
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