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Merkel beat Obama December 12, 2011

Posted by hslu in Congress, Economics, Global Affair, jobs, Obama, Politics.
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The root causes of 2008 financial crisis and great recession were the greed of Wall Street and corruption by willing participates in the Congress and the White House.

With a financial crisis on hand, the United States chose to flood the market with tax money and Federal Reserve’s printing press which bailed out politicians’ bodies on the Wall Street and covered their own asses. In the process the politicians in the United States and Bernanke ignored the threat of inflation in the future, disregard the enormous financial burden on our kids and grandkids and arguably avoided a short term collapse of the financial system in the world.

In other words, Americans get used to kick the can down the road unlike what Chinese people have been taught for thousands of years: “積穀防饑 未雨綢繆,” “ji1 gu3 fang2 ji1 wei4 yu3 chou2 mou2,” which means “ save some grains for the hard times in the future” and “ fix your houses when it is not raining.”

This is the all too familiar Wall Street and American corporation mentality: our top priority is our next quarter’s results and the performance of our stock prices. We’ll worry about our long term problems when we have to in the future.

Ditto for American people in general when time was good: enjoyed life now with borrowed money, credit cards and home equity loans, so that they could have regular vacations, flat panel TVs, boats, fancy cars and big houses. They did it to show off their fancy life style, pump up their egos and satisfy their short term pleasure in life.

The disastrous results are clearly laid out in front of our eyes when things are not that rosy: near zero savings rates, high credit card debts, lost homes, foreclosed mortgages, soup lines, food stamps and welfare. Even worse, the Americans are not equipped to handle the consequences of globalization bought on by the very free trade policy that politicians are so proud of; American people are ill-prepared to compete with billions of hard working people in foreign countries, be it Chinese, Indians, Mexicans, Salvadorians, Thailand, or Koreans. In general, Americans lack the necessary education to compete in the high tech fields and Americans are lazy when competing with Mexicans and Salvadorians in low wage jobs. If you do not believe me, just look at the sorry state American’s public school system is in. And on the low wages job market, have you seen any white people cutting grass for you or washing dishes in restaurants? They choose to stay at home, watch TV, collect food stamps and use up their 99-week unemployment benefits instead.

This feel-good-now mentality is unfortunately reflected in American’s slow decline orchestrated by none other than Obama who thinks that America shouldn’t always take the lead on the world stage.

This is where Germany’s Mrs. Merkel comes in.

Germans work hard and they have their economy to prove it. They do not believe in short-term satisfaction on the back of future generations. They also believe that the financial market should be given a whack on the side of their collective head with a 2×4 so that they can be taught a lesson that they will remember. They despise countries like Greece, Spain and Italy and do not think they should use Germany people’s tax money to bail out people in these countries.

Because of this deeply rooted value system, Mrs. Merkel chose a vastly different route despite Obama’s calling right before the latest EU summit of all member countries:

“There’s a short-term crisis that has to be resolved,” Obama reminded Merkel, “to make sure that markets have confidence that Europe stands behind the euro.”
Mrs. Merkel, like some Germany officials, believed that the short-term crisis Obama referred to was actually his diminishing chance of re-election in 11 months, which will be damaged further by a prolonged recession without flooding the European economy will tax payers’ money. Mrs. Merkel and many Germans believe, not dissimilar to Chinese’s philosophy; me included, that when time is tough, one has to cut back on one’s spending and not piling on more debt for the sake of avoiding short pain, however unpleasant it may be. However, since Germany is bonded together with these countries by the common currency and a weak EU treaty which gave Mrs. Merkel little leverage to force these feel-good-now countries, including France, to do what is necessary to right the wrong for the sack of long term stability, i.e., cutting back on government spending, reducing public workers’ pension benefits, stopping the lazy life style of their citizens, giving up part of country’s solvency by allowing European commissions to exam their national budgets and adapting German’s style of governance and financial practices.
Mrs. Merkel used the threat of the imminent breakup of the Euro to force everyone in the room, including France’s Sarkozy, to adapt German’s financial practices and fiscal policies and follow Germany’s lead to whip the European countries in shape in the long run.

There is no doubt that there will be short term pain to be paid from a pending recession bought on by reduced government and private sector spending from many European countries. But Mrs. Merkel achieved one thing that no one was able to do in the past: forging the European Union into a more integrated entity which will no doubt out-perform the United States, a declining country saddled with crushing debt and the threat of inflation, in the future.

Mrs. Merkel’s German beat Obama’s America hands down. Europe nations will suffer now but American’s problem will come just about the time when Europe begins to stand up from the ashes.

But Obama is happy because Obama got his wish that America is no longer the lead nation in the world.

A $116 billion hole for Portugal May 4, 2011

Posted by hslu in China, Economics, Global Affair, Politics.
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In the midst of euphoria of Osama’s death “possibly” in the hand of  US navy seals, a story about Portugal $116 billion bailout didn’t get any attention on the main street media.

Countries like Portugal, Greece, Ireland and Italy, they owed so much money that they have no way of paying it back. And the solution to the problem: lend them more money.

Yes, they get more money from many sources with the knowledge that they may never be able to pay the original debt back , let alone the new lending they just got.

They had to borrow money from other EU countries simply because they can’t print Euro themselves.

Well, The United States isn’t doing any better but the United States has something these other countries didn’t have: America has four or five mints with printing presses operating at full speed: every day, every evening and every night.

You know that you know what will hit the fan when US dollar loses its reserve currency status.

Well, that won’t happen for a while but IMF is doing something in the background and one of these days it will happen.

In the mean time, let the good time roll and enjoy.

The hole which America is digging for itself is bigger than all the other holes combine.

The structural change in US economy and the prolonged depressing state of the housing market will make the situation even worse.

Do not believe Bernanke and his public statement because he has let the cat out of the bag and has stubbornly ignored the increasingly worsening inflation problem in the US and all over the world.He has consistently denied that inflation is happening until his first public news conference.

He was trying to set up America people for his mistakes, i.e., the extremely loose monetary policy.

The inflation cycle has just begun and it will not end easily. Bernanke has more than $2 trillion on his balance sheet and more than $2 trillion-dollar in the economy. He is waiting for a chance to sell what he has on his book but it will increase interest rate and hurt the economy that is still trying to find its footing.  When he finally starts to sell them, look for interest rate to pick up which will need more of our tax money to pay for the interests on the national debt.

In the mean time, China, India, Singapore, Australia, South Korea, Vietnam, Thailand, EU, England, Switzerland, and Brazil have raised their key interest rates in order to fight inflation caused by the loose monetary policy of the US Fed, i.e., Bernanke.

Even Nigeria, a country which relies oil export for almost 90% of its GDP, has raised its interest rate because of economic forces beyond its border..

It is no secret that Bill Gross, the $1.2 trillion PIMCO Bond fund had dumped all his US treasury holdings because he is very negative on US dollar. He went one step further and has shorted US treasuries because he sees the US dollar will be less valuable in the near future.

When Bill Gross stops buying US treasuries in the tune of a couple of hundred of billions, investors will demand higher interest rates.

Buckle up, Americans, the road of inflation will be very bumpy. We are going downhill fast!

And the view isn’t going to be pretty at all.

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