South China Sea
Dispute Addressed In Meeting Between U.S. And China
The Obama administration now has a taste of the difficult diplomacy
necessary to sharpen the focus of American power on Asia, seeking investment
opportunities alongside reforms from rights-abusing governments and working
with China while defending U.S. interests.From democratic Mongolia to
once-hostile Vietnam and long-isolated Laos, Secretary of State Hillary Rodham
Clinton this week faced governments eager to embrace the United States as a
strategic counterweight to China's expanding military and economic dominance of
the region, while still lukewarm about American demands for greater democracy
and rule of law.And after meeting face-to-face with China's foreign minister
Thursday as she began to wrap up a weeklong tour of Asia, Clinton lauded
Washington's cooperation with Beijing even as she took up the case of several
Southeast Asian nations threatened by the communist government's expansive
claims over the resource-rich South China Sea.In the discussions across the
world's most populous continent, U.S. officials outlined their belief in
greater democracy and freedom for Asian nations. The vision is part of a larger
Obama administration effort to change the direction of U.S. diplomacy and
commercial policy and redirect it to the place most likely to become the center
of the global economy over the next century.It is also a reaction to the
region's slide toward undemocratic China as its economy has boomed and
America's has struggled."As we've traveled across Asia, I've talked about
the breadth of American engagement in this region, especially our work to strengthen
economic ties and support democracy and human rights," Clinton told
reporters Thursday. "This is all part of advancing our vision of an open,
just and sustainable regional order for the Asia-Pacific."Clinton will
meet Friday with Myanmar's reformist President Thein Sein and introduce him to
American business leaders looking for investment opportunities. The U.S. eased
sanctions on the once reclusive military dictatorship this week, opening up new
opportunities for the administration as it seeks to double American exports.Still,
Clinton said she would urgeThein Sein to do more. "Political prisoners
remain in detention," she said. "Ongoing ethnic and sectarian
violence continues to undermine progress toward national reconciliation,
stability and lasting peace. And fundamental reforms are required to strengthen
the rule of law and increase transparency."The tour started in Japan,
where Clinton assured a long-time ally the U.S. was committed to its security.
From there, she visited four countries in China's backyard, part of a larger
economic area among the world's most dynamic. Up to now, however, China has
taken the most advantage.In each place, Clinton was careful to make the case
for American values alongside American business aspirations. It's unclear,
however, if both messages were received.In Ulan Bator, she credited Mongolia
with liberalizing economically as well as politically, holding it up as a foil
to the Chinese model of growth without freedom. And she offered deeper U.S.
partnerships with communist governments in Vietnam, Laos and Cambodia, which
have looked to Washington for fear of being swallowed up by China's expanding
power.But while two-way trade between Vietnam and the U.S. has soared by 40
percent in the last two years, there has been little improvement in the
Vietnamese government's respect for dissidents. Laos may seek similar business
relations with the U.S., but has yet to show any willingness to rectify its
poor labor rights record.What Washington doesn't want with these countries is
what it has with Beijing, a partnership of unprecedented economic integration
that stops when the discussion turns to human rights, democracy or sharing a
vision for the world. It's a relationship that neither side appears able to
change, both equally reliant on the other's goods and consumers, while
mistrustful of the other's intentions."We are committed to working with
China within a framework that fosters cooperation where interests align, and
manages differences where they don't," Clinton said.In probably her most
difficult work of the week, Clinton pressed Beijing on Thursday to accept a
code of conduct for resolving territorial disputes in the South China Sea, a
U.S. mediation effort that has faced resistance from China..Meeting on the
sidelines of the Association of Southeast Asian Nations' annual gathering,
Clinton stressed the different ways Washington and Beijing are cooperating,
while Chinese Foreign Minister Yang Jiechi spoke of building even closer
U.S.-Chinese ties.Neither side mentioned the South China Sea while reporters
were in the room. Afterward, according to U.S. officials, they got into the
sensitive talk of the South China Sea, an issue that has caused grave concerns
among China's neighbors and the wider world as tensions have threatened to boil
over amid standoffs between Chinese and Philippine ships and competing Chinese
and Vietnamese claims.While China's claim over the entire area has driven
countries closer to Washington, countless hours of talks between U.S. and
Chinese officials haven't led to progress on a lasting solution. The waters
host about a third of the world's cargo traffic, rich fishing grounds and vast
oil and gas reserves – economic opportunities the U.S. would be locked out of
if China were to seize total control.Clinton, however, again framed it as a
question of principles."The United States has no territorial claims there
and we do not take sides in disputes about territorial or maritime
boundaries," she told foreign ministers gathered in Cambodia's capital.
"But we do have an interest in freedom of navigation, the maintenance of
peace and stability, respect for international law and unimpeded lawful
commerce in the South China Sea."She singled out "confrontational
behavior" in the disputed Scarborough Shoal off northwestern Philippines,
including the denial of access to other vessels. The actions she cited were
China's, though she didn't mention the offending country by name."We have
seen worrisome instances of economic coercion and the problematic use of
military and government vessels in connection with disputes among
fishermen," she said. "There have been a variety of national measures
taken that create friction and further complicate efforts to resolve
disputes."Despite publicly exhorting both China and Southeast Asian
nations to diplomatically settle their disputes, a State Department release
made no mention of the issue and instead spoke of Sino-American cooperation on
everything from disaster relief to tiger protection. The issues were clearly
secondary, but reflected an effort to compartmentalize any confrontation with
Beijing and paint a larger picture of collaboration.
Will The European Debt Crisis Affect Me?
With headlines like these, it's easy to get caught up in the frenzy of
what's going on in Europe. But before you do, here's a little background.
Causes of the crisis differ from country to country. Essentially, it is
becoming increasingly difficult for countries such as Greece, Portugal, Spain,
Cyprus and Italy to restructure their debt. These countries owe a lot in relation
to what they are making, and asked countries who were more financially stable,
like Germany, to back up their debts. The hope was that these countries could
get better terms on their loans because the loans would be less risky with a
second backer (like parents cosigning a mortgage). The terms are still being
negotiated. Because no one knows how the debt crisis will play out, there is a
risk that our economy will be affected. In the meantime, however, we may be
affected by something called headline risk. News headlines are constantly
filled with doom and gloom. News stories can have a negative impact on
investments, even if they are unsubstantiated. This is known as headline risk.The
predictions in these headlines might be very real; however, we really can't
predict the outcome of current negotiations. One common example of headline
risk is when a company's shares drop due to negative media coverage of an
executive scandal. These headlines and other media hype can encourage people to
sell their investments and push prices down even further. This sounds very grim
indeed. We might assume that our economy will be adversely affected and that we
shouldn't invest in international bonds. These are distinct possibilities, but
let's look at some facts in order to make an informed decision.
1. Exports: The United States' total exports comprise 14 percent of GDP. Exports to the eurozone
represent only 14 percent of this total.
2. Investments: At the end of 2011,
30 percent of worldwide mutual fund investments were based in Europe.
3. More than 50 percent of the sales of American-owned foreign affiliates are in Europe.
4. Germany is the sixth largest economy in the world with a budget deficit below 3 percent of its GDP. This is
in comparison to the U.S. budget deficit at 12
percent of its GDP. The U.S. is the world's
largest economy though the entire EU economy is larger as a group.
If you have a business catering to
European tourists you may feel the burn. If you have all your money invested in
European bonds, the crisis will have a negative impact on your net worth. The
debt crisis will most likely have an impact on us, but how large will it be? The
effect the European debt crisis will have is a matter of degrees and exposure.
It's hard to discern how these unfortunate events will affect us and what
actions we should take. In other words, what do we have control over and when
are we just being reactive?It is important to have a financial plan in place that
you understand and have confidence in. That way you can stick to it, so it can
meet your needs over time. We also want to differentiate between headline risk
versus a real problem with the investment. The difficulty in this is that there
is no way to predict how investments will perform in the future. Headline risk
generally has short term effects causing prices to dip, but the effects do not
persist in the long run. Could you lose money if part of a mutual fund you own
is invested in these assets? Of course, but that doesn't mean you necessarily
want to make a rash or reactive decision.It is critical to understand the
extent of your exposure and the purpose of your investments. You should also
make note of the reason you chose them and potential circumstances when you
should make adjustments. This can all be documented in the form of an
investment policy statement. There are a lot of moving parts in our global
economy that affect our investments. It's hard to know how to react and what
the ramifications will be for events like the European debt crisis, as well as
subsequent market fluctuations. However, if we put an investment plan in place,
we are better prepared to SaveUp in the long run.
Public Debt in France and Europe
All European countries
find themselves confronted with debt problems that impact sustainable public
finances. The crisis has not spared France, the world's fifth largest
economic power, something that makes private banks quite happy.No European
nation has been spared the problem of public debt, even if the severity of the
crisis varies from one capital to another. On the one hand, there are the
"good students," such as Bulgaria, Romania, the Czech Republic,
Poland, Slovakia, and the Baltic and Scandinavian states, all of which enjoy a
debt lower than 60 percent of their GDP. On the other hand, there are the four
"dunces" whose public debt surpasses 100 percent of their GDP:
Ireland (108 percent), Portugal (108 percent), Italy (120 percent), and Greece (180 percent). Between the two extremes are found the rest of
the European Union countries, such as France (86 percent), whose debt oscillates between 60 percent and 100
percent of GDP. Conservative European governments, exemplified by Angela
Merkel's Germany, believe in the importance of lowering public debt through the
application of austerity measures. Similarly, Pierre Moscovici, despite being
Finance Minister in François Hollande's new socialist government, has set
"deficit reduction" as a priority and is attempting to reduce the
deficit to 3 percent of GNP by, among other means, cutting public spending. Still,
it is common knowledge that the austerity policies promoted by the European
Union, the European Central Bank and the International Monetary Fund that are
currently being applied across the Old World, are economically inefficient. In
fact, they result in the opposite of what was intended. Rather than restarting
growth, reducing expenditures; depressing salaries and retirement benefits;
dismantling public services, including education and health care; destroying
the work code and social benefits -- in addition to the catastrophic social and
human consequences that this causes -- inevitably lead to a reduction in
consumption. Inevitably, companies cut production and wages and lay off
workers. As a logical consequence, the resources that flow from the state are
cut back, while the entities dependent upon the state explode, creating a
vicious cycle, for which Greece is the poster boy. Because of this, several
European countries now find themselves in recession.In 1973, France did not
have a debt problem and the national budget was balanced. Indeed, the state
could borrow directly from the Bank of France to finance the building of
schools, road infrastructure, ports, airlines, hospitals and cultural centers,
something that it was possible to do without being required to pay an
exorbitant interest rate. Thus, the government rarely found itself in debt.
Nonetheless, on January 3, 1973, the government of President George Pompidou --
Pompidou was himself a former general director of the Rothschild Bank --
influenced by the financial sector, adopted Law no.73/7 focusing on the Bank of
France. It was nicknamed the "Rothschild law" because of the intense
lobbying by the banking sector which favored its adoption. Formulated by
Olivier Wormser, Governor of the Bank of France, and Valéry Giscard d'Estaing,
then Minister of the Economy and Finance, it stipulates in Article 25, that
"the State can no longer demand discounted loans from the Bank of
France." As a result, the French state is now prohibited from financing
the public treasury through zero interest loans from the Bank of France. Instead,
it must seek loans on the open financial markets. Therefore, the state is
forced to borrow from and pay interest to private financial institutions, when
until 1973, it could create the money it used to balance its budget through the
Central Bank. With this quasi-monopoly, commercial banks now have been granted
the power to create money through credit, whereas previously this had been the
exclusive prerogative of the Central Bank, that is to say of the state itself. As
a result, commercial banks are getting rich off the backs of taxpayers.Furthermore,
thanks to the fractional reserve banking system, private banks can lend up to
six times more than the amount they actually have in reserve. Thus, for every
euro they possess, they can loan six euros through the system of money creation
through credit. As though this were not enough, they can also borrow as much
money as needed from the Central Bank at a rate of 0 percent to 18 percent, as we
see in the case of Greece. Today, money creation through credit accounts for 90
percent of all money in circulation in the euro zone.This situation has been
denounced by the French economist and Nobel laureate, Maurice Allais, who
wished to see money creation reserved to the state and the Central Bank. "All
money creation must be the prerogative of the state and the state alone: Any
money creation other than that of the basic state-created currency should be
prohibited in a way that eliminates the so-called 'rights' that have arisen
around private bank creation of money. In essence, the ex nihilo money creation
practiced by the private banks is similar -- I do not hesitate to say this
because it is important that people understand what is at stake here -- to the
manufacture of currency by counterfeiters, who are justly punished by law. In
practice both lead to the same result. The only difference is that those who
benefit are not the same." Today, French debt has grown to over 1,700
billion euros. Between 1980 and 2010, the French taxpayer paid more than 1400
billion euros to private banks in interest on the debt alone. Without the 1973
law, the Maastricht Treaty and the Lisbon Treaty, the French debt would be
hardly 300 billion euros. France pays 50 billion euros in interest annually,
making this the largest item in the national budget, coming even before
education. With that kind of money, the government would be able to build
500,000 public housing units or create 1.5 million jobs in the public sector
(education, health, culture, leisure), each with a net monthly salary of 1,500
euros. In this way, French taxpayers are robbed of over 1 billion euros weekly,
money that accrues to the benefit of the private banks. Clearly, the state has
given the richest group of people in the country the fantastic privilege of
enriching themselves at taxpayers' expense. And it has asked for nothing in
return, and has not made the slightest effort to do so.Moreover, this system
allows the financial world to subject the political class to its interests and
dictate economic policy through the rating agencies, which are in turn financed
by private banks. Indeed, if a government adopts a policy contrary to the
interests of the financial market, these agencies lower the rating scores
awarded to states, something that has the immediate effect of increasing
interest rates.Meanwhile, when the state and the European Central Bank bail out
ailing private banks, they do so with interest rates lower than those same
financial institutions charge the state. In reality they are conducting de
facto nationalizations without receiving the slightest benefit, for example,
being granted decision-making authority within the banks administrative
councils.The credit system established in France in 1973, and since ratified by
the treaties of Maastricht and Lisbon, has but a single goal: to enrich private
banks off the backs of taxpayers. It is unfortunate that a debate on the
origins of public debt is not occurring in the media or in Parliament itself,
even though resolving the debt problem would require nothing more than
restoring the exclusive right of money creation to the Central Bank.
