Potpourri: $ Losing Global Status, $100B AAA Loss

A few hours ago we received word that River Plate, the most storied of Argentinian football clubs which has helped spawn many global footballing legends, was relegated from the first division for the first time in its 110-year history. This resulted in riots in Buenos Aires. How the mighty have fallen! It of course got me thinking about another tarnished has-been in the United States of America. Yes it's falling quite fast in various global league tables, but when will it finally be banished from the commanding heights of the world economy? As you'd expect, the dollar being the leading reserve currency and US Treasuries' AAA status are two indicators under pressure.

I am of the opinion that America deserves to be kicked in the balls as hard as possible as just desserts for its boorish financial behaviour. Plus, there's the added benefit of punishing those continuing processes of subprime globalization by hurting both American debtors and creditors alike. In this vein we have two noteworthy and promising developments. First, UBS recently polled central bankers holding a total of $8 trillion in reserves about the future make-up of these assets. It seems most are getting fed up with America as sentiment towards the currency is diminishing even further as the dollar approaches all-time lows on any number of indices. End result? Most see a movement towards a portfolio of various currencies quite soon:

The US dollar will lose its status as the global reserve currency over the next 25 years, according to a survey of central bank reserve managers who collectively control more than $8,000bn. More than half the managers, who were polled by UBS, predicted that the dollar would be replaced by a portfolio of currencies within the next 25 years.

That marks a departure from previous years, when the central bank reserve managers have said the dollar would retain its status as the sole reserve currency. UBS surveyed more than 80 central bank reserve managers, sovereign wealth funds and multilateral institutions with more than $8,000bn in assets at its annual seminar for sovereign institutions last week. The results were not weighted for assets under management.

Good stuff. However, I am even more anxious to see an even swifter and harder kick delivered to Uncle Sam's (rather minuscule) nuts. For instance, I've covered some dire scenarios of what may happen if the US does not raise its $14.3 trillion debt ceiling and effectively defaults on its obligations. While unlikely--an undisciplined and unprincipled debt addict will never refuse a larger fix, just you wait and see--don't forget that America's creditors would also take a hit. Which, again, is part of the attraction since those who bankroll American debt addiction have it coming too.

And we don't have to wait for an outright credit event; a downgrade will do in financially waterboarding America's foolish creditors who fully deserve such treatment. McGraw-Hill estimates potential losses to US bondholders can amount to some $100 billion:

Investors in the US government bond market could face losses of up to $100bn if the largest economy loses its triple A rating, according to a research arm of McGraw-Hill, the parent of Standard & Poor’s. A ratings downgrade that results in higher bond yields and lower prices could also mean the US Treasury paying $2.3bn-$3.75bn a year more in interest on financing a $1,000bn annual budget deficit.

“If Standard & Poor’s or any of the other major rating agencies downgrade the US, Treasuries would likely drop in value, possibly by as much as $100bn,” said analysts at S&P Valuation and Risk Strategies, a research team separate from the agency.

As an American leader of recent vintage liked to say, bring it on. Time waits for no one; ask River Plate.

US-Pakistan Ties Through the Lens of Pax Britannia

Would you like to see Britannia rule again, my friend?
All you need to do is follow the worms

[NOTE: With ex-Pink Floyd member Roger Waters currently playing the London leg of his globetrotting revival of The Wall, I guess this post is apropos. There are reasons why I've included a clip of Sir Bob Geldof in imperial mode from the film version of The Wall.]

It isn't news that already shaky US-Pakistan ties are under further pressure with the extrajudicial and extraterritorial elimination of Usama bin Laden. While you can certainly debate whether the intrusion was justified, this much is clear: Pakistan greatly resents the United States despite being quite dependent on it for aid, the IMF bailout, security cooperation and the rest. While we can debate American hegemony till the cows come home, there is little doubt that its economic and military heft is being felt by the Pakistanis. And, as many American commentators note, there has not really been all that much gratitude for US "largesse." You have Pakistani forces now shooting at NATO helicopters making excursions from nearby Afghanistan to avoid Usamagate II. Meanwhile, the Pakistani press is getting even more strident about American interference in its affairs.

Call it biting the hand that feeds what other provide. I'd argue, after all, that it's the Chinese ultimately lending to the Americans to lend to and supply the Pakistanis if we are more honest about this messed up world of subprime globalization. Pakistani PM Yousuf Raza Gilani has even called China his country's best friend in a reflection of strained ties with the US. Take that, Yanquis; some fine reward for all your troubles.

If you think US-Pakistan ties are frayed, roll back the years, decades, and centuries to the heyday of Pax Britannia for an even more uncomfortable relationship in the United Kingdom and Pakistan. While Pax Americana has not been formal in name--its tradition is ostensibly small r republican--Pax Britannia in all its majesty held sway over Pakistan at the height of its powers. Just as the visit of Senator John Kerry occasioned a lot of anger in Pakistan, it was only a few weeks ago that a representative of the erstwhile imperialist in Prime Minister Cameron visited Pakistan. Instead of urging further cooperation on anti-terrorism and so forth, I think Cameron actually did something smart by attempting to jettison some of the historical baggage.

You see, Cameron was caught on camera attributing a lot of what's wrong in Pakistan today to British colonial rule. By the measure of how the maps of today's regions look like--particularly in Africa and the Middle East--you can certainly argue that the British Empire has had a more profound effect on the modern world than the Americans ever did. Hence the unfinished business in places alike Afghanistan, Pakistan, and Iraq. Historical reappraisals of British Empiretend to go in cycles. Our own Niall Ferguson is of course of the opinion that yes they were often racist and killed/brutalized/enslaved us coloured peoples, but overall, they had a positive influence on the development of the modern world.

However, what Cameron did was, as far as I can observe, a more politically tactful ploy since he was received better than Kerry was. Indeed, British traditionalists were quickly up in arms against what they saw as the latest apologia for empire:

David Cameron has been criticised for being “simplistic and trendy” and for being “more PC than PM” for trying to apologise for Britain’s imperial past. Historians also said he was being naïve to suggest that many of the world’s ills can be traced back to when they were British colonies.

Seán Lang, a senior lecturer in History at Anglia Ruskin University, where he teaches British Imperial History, accused Mr Cameron of “touting for applause”. He told The Daily Telegraph: “His comment was simplistic and trendy - more PC than PM. I certainly wouldn't accept such a sweeping generalisation from one of my own students. “Perhaps the Prime Minister should spend a bit of time over Easter back at Eton, where the very strong history department could quickly put him right.”

The Prime Minister risked controversy when he appeared to blame Britain for the conflict in Kashmir and many other international disputes during a visit to Pakistan. Asked how Britain could help end the row over Kashmir, he insisted that it was not his place to intervene in the dispute, declaring: “I don’t want to try to insert Britain in some leading role where, as with so many of the world’s problems, we are responsible for the issue in the first place” [my emphasis].

Mr Lang said the Prime Minister’s comments showed why “people in public life need extensive, detailed and accurate historical knowledge, and why the seed of this needs to be sown in the school classroom”. He said that while Britain’s hasty withdrawal from India in 1947 certainly led to the Kashmir dispute, blaming the British overlooked “notably the heightening of inter-communal tensions between Hindus, Sikhs and Muslims”, he said.

Britain’s empire was a “multi-faceted phenomenon”, he said, which “cannot simply be categorised as ‘good’ or ‘bad’”. Mr Lang said that “even historians very critical of British imperial rule recognise that it also left considerable benefits.

In an odd twist, it turns out that Cameron meant this solely for Pakistani consumption, not British (although he probably had little fear of losing his invitation to the royal wedding). In fact, he's said to have directed some f-bombs in the direction of the reporters who made light of this slagging of Pax Britannia in Islamabad:

David Cameron swore angrily on the plane journey back from his trip to Pakistan after he learned of the row caused by his comment that Britain is to blame for many of the world’s problems.

The Prime Minister turned on a journalist who had reported his remark and said, ‘You f*****!’. The outburst came after Mr Cameron’s apparent attempt to distance himself from the UK’s imperial past had received a warm welcome from his audience in Pakistan.

The mixed legacy of British Empire continues to shape our world. However, I do think that despite being received poorly at home by some, Cameron's attempt at humility went down much better than did Kerry trying to lord it over the Pakistanis as if he were the new guv'nor. Having had much time to think what the loss of empire means, the British have a greater appreciation for the subtleties of winning friends and influencing people they did not necessarily have during their salad days.

With America waning, you'd hope it learns these skills, too. Lest we forget, others like the Chinese offer friendship with...fewer demands. At present, the US follows the worms.

Coming Soon to Earth: A Superpowerless World

Hegemony is quite an Anglo-Saxon obsession. You can certainly argue that this debate primarily rages in places that previously were (here in the UK) or have been (the US) ascribed such status. A few posts back, I discussed Barry Buzan's interesting pop culture take on American decline via the example of Star Trek and Battlestar Galactica. Actually, I only heard of this notion by attending his recent lecture "A World Without Superpowers: De-centered Globalism." Sadly as many of you probably know, Professor Buzan will be retiring soon. Yet, prior to that, he's unveiled quite a fascinating work charting the forthcoming plight of international society.

For Barry Buzan (alike many other observers), the hullabaloo over superpower status rests on both material capabilities and social standing. We all know how the Soviet Union fared with those come 1989. We also know how the United States has fared since the global financial crisis of 2008 that effectively saw the end of the Washington Consensus--or at least left it terminally damaged. Certainly, the American Dream so central to US identity has taken a major knock; so much so that most Americans no longer believe in it.

So what does the future hold? He argues that the arguments we commonly encounter are too simplistic. On one hand we have the scenario of America maintaining its status as the sole superpower. On the other hand, we have various scenarios of American decline combined with the rise of the rest resulting in conflictual situations. The problem, he says, is that these scenarios are too Amerocentric. Instead, he believes there is a third scenario in which we end up with a world without any superpower.

According to him, there is a secular trend that supports this notion: at the end of WWII the world arguably had three superpowers; during the Cold War there were two; after 1989 there was one. So, it is a natural progression for us to have no superpowers in the near future. Zip. Zilch. None. Nada.

Of course, I invite you to watch the YouTube clip or listen to the podcast to be clear on his differentiation between a superpower (of which there will be none) and a great power (of which there will be several in various regions) as well as his take on why China in its current form is neither able nor willing to be a superpower. Among other things, he believes that the onset of the industrial revolution coupled with certain technologies provided unique conditions for the emergence of superpowers. We certainly don't know whether the future hold another paradigm shift into a new mode of production that will enable the creation of another superpower. But, for me at least, his story is both positively plausible (it has a good chance of coming true) and normatively desirable (in that we won't have others trying to impose their way of life on us).

As a sneak preview, he comes up with five policy suggestions based on his latest work which point to a more heterogeneous world of de-centered globalism or the restoration of more geographically dispersed world power that is more in keeping with previous historical epochs:

1. There is no need for the US to see off challengers to its superpower status since there are none. Besides, its status as the sole remaining superpower is socially indefensible and its material conditions unsustainable
2. After the collapse of Communism and the fall of the Washington Consensus, countries should be more ideologically open. Humility can be reflected in tinkering with the workings of free-market capitalism and see if they succeed or fail in producing the good life.
3. Great powers--a step below superpowers--should look at their regions in gaining legitimacy and stability in international society. That is, great powers should prioritize relations with each other less than those with their neighbours (this is the decentering).
4. That said, all great powers need to understand the substrate of ideas and institutions they agree on so that different modes of capitalism can peacefully coexist. Moreover, doing so is conducive to handling collective actions problems via an interaction culture.
5. The West, particularly the US, needs to acknowledge that they no longer own the future. While some satisfaction derives from shaping the world's political, economic and social form. Not all of this was all good or well done, therefore rest of the world should be allowed to adjust socioculturally to the Western legacy.

It sounds like music to my ears, clearly. Let us wish Barry Buzan all the best in whatever endeavour he undertakes, but I for one hope that he can more fully develop this notion of de-centered globalism before moving on!

Star Trek Shows Demise of the American Idea

Having shattered foolish notions that the "American Dream" is encapsulated by plausible metrics of US political-economic performance--it is, quite simply, a fraud--let us now turn our attention to how this reality is being reflected in pop culture. With the exception of the most delusional, anti-factual USA#1-style cheerleaders, Americans have become increasingly pessimistic about future generations being better off than they are. In a recent novelty article in Millennium, English school of international relations stalwart and LSE immortal Barry Buzan argues that the TV series Star Trek and Battlestar Galactica increasingly reflect this kind of (warranted) pessimism as a reflection of how America increasingly views its diminished situation.

Star Trek once portrayed a quaint, kumbaya interstellar organization in operation in the United Federation of Planets. For instance, even the warlike Klingons were eventually integrated into interstellar society by the time Star Trek: The Next Generation came around. Witness Worf. Note TNG's time frame, however: it made its debut at the tail end of the feel-good Reagan years and was very much in full flow as the events 1989 saw the demise of the Warsaw Pact. Fukuyama-esque triumphalism pervaded in TV as in real life. Later series, particularly those which came after 9/11, have a much darker tone. In English School terms, it's a regression from international society to a more primordial and conflictual interational system. From Professor Buzan:

For IR types, the obvious appeal of Star Trek was that it pictured a Westphalian international system set in a galaxy and universe filled with life and civilisations. This set it apart from the common Manichean streak in [science fiction] in which, as in H.G. Wells’ landmark War of the Worlds, the plot revolves around a zero-sum war of extermination between species in which there is no place for diplomacy. Star Trek was on board with the view of those such as Robert Zubrin, that there is a high probability of intelligent life in the universe being widespread.

Since this was America in space, the interplanetary relations in Star Trek are not just realist or apocalyptic, but contain a strong streak of liberalism. America has, with a bit of help from the Vulcans, a species with a rather Zen-like culture, fulfilled its liberal dream of remaking the whole world in its own image. Federal America has become Federal Earth, which then becomes the United Federation of Planets. The Federation has many of the qualities of a moderately solidaristic international society in terms of human rights and some (not always honoured) obligations for collective defence. There are to be sure also pluralist elements such as the right to cultural distinctiveness, and in the wider galaxy the Federation lives in a power political international system. This ‘America’ has left behind its isolationism and taken its liberal proselytism into space.

Well that was then. How did this American final frontier look like in a matter of a few years? While certain politically correct elements date these latter episodes, the mood is decidedly darker as prospects for the end of history fade:

Interestingly for an American television show, religion remains somewhat in the
background, associated mainly with more primitive and/or non-human cultures. The Star Trek universe, or at least the parts of it dominated by humans, is a pretty secular place in which religion is kept in the private sphere [cosmic Protestant work ethic?]. All of this could be seen as an expression of America in the 1960s, confident in its right to own the future, blithely imperialist in a cultural way, willing but not eager to use force, having no interest in conquest and occupation, and with a deep commitment to progress, humanism, anti-racism and liberal values. At its best, Star Trek represented an expansive and optimistic view of the human condition and its prospects without being naively utopian.

All of this was clearer in the original series of the late 1960s, though it remained
strong in The Next Generation during the late 1980s and early 1990s. During the 1990s, the Deep Space 9 and Voyager series, and the Next Generation films, turned darker and more apocalyptic with wars of survival against the Dominion and the Borg. During the 21st century, with the Enterprise TV series, and the 2009 Star Trek movie, Paramount ran out of visionary steam with the franchise, failing to take the story of the Federation further, and instead focusing on prequels to the original series. These are also darker and more apocalyptic in mood than the original series.

Think of it: in the real world, modern-day "Klingons" (cling ons? Think North Korea, Myanmar, etc.) refuse to take part in the international system. What's more, they have a strong backer that allows them to continue their existence outside of international norms--China (today's collective "Borg"?) Certainly, you don't expect a rehashing of the wilfully obtuse Star Trek: The Motion Picture in which a Voyager satellite obviously launched by Americans is used as shorthand for a shared human consciousness while encountering alien others. Metaphors of American exceptionalism in cinema have been, well, Guantanamo Ghraibed. But I digress. Here he is once again:

On a deeper level, there is an old theme in science fiction literature, and up to a point in world history, that differentiates between societies that look outward and venture outward, and societies that look inward and close themselves off. The turn inward lobby is always strong, saying ‘why should we spend billions going into space when we have more immediately pressing welfare and security priorities at home (the parochial version) or on the planet (the cosmopolitan version)?’ In today’s America such sentiments can play to the country’s isolationist tradition, seeing itself as the exemplary ‘city on the hill’, but eschewing external political engagements lest they corrupt the purity of its revolution.

Simply put, it's no longer an ambition "to boldly go where no man has gone before" when conditions sustaining such adventurism becoming increasingly unfavourable on the homeworld--I mean homeland. And in so doing, Star Trek mirrors the end of the American idea.

Americans Agree America's Future Stinks (Duh)

Ah, the stench of American decay. Just a few hours ago, I heard Joseph "Soft Power" Nye--a worthy inaugural recipient of this blog's Carl Spackler Award for Cheneynomic analysis--outline his case that America's demise is much exaggerated. As you'll read below, I take issue with his argument that while the US may be in relative decline, it is not in absolute decline. But let's begin though with some decidedly non-rose-tinted analyses of America's prospects by regular folks. While deficits don't matter-style reasoning is nothing new as far as Americans academics are concerned, it's good to hear what Americans who live outside of ivory towers have to say instead of having USA#1 cheerleaders feed us a steady diet of Bush league bromides. Save it for the next Sarah Palin rally, buddy (as the Yanks would say).

Once again demonstrating you don't have to look far for IPE-relevant material, I came across this nugget on the Yahoo! homepage. A few posts back I used "green card" petitions as a gauge of just how much America stinks since skilled migrants are choosing not to go there in droves. No jobs, no future, no go. Well guess what: Americans themselves agree that America stinks. Due to a lack of jobs among other things, today's US youth is resigned to a living standard inferior to that of their parents'. The recent Gallup poll mentioned below is in a long line of polls asking basically same question "Will today's generation be better off than their parents'?" The headline says it all: "In U.S., Optimism About Future for Youth Reaches All-Time Low":

And here's the relevant accompanying text:

Forty-four percent of Americans believe it is likely that today's youth will have a better life than their parents, even fewer than said so amid the 2008-2009 recession, and the lowest on record for a trend dating to 1983.

Confidence in the traditional American dream--that each generation can work its way up in the world and have a better life than the previous generation--appears to be slipping away. Americans are less likely to believe this to be true today than at any time on record, including during the worst of the recent economic crisis.

Fewer than 4 in 10 high-income Americans--who presumably have the greatest access to opportunity and resources to gauge what the markets will do going forward--believe today's youth will be better off than their parents. This level of pessimism may also reflect the massive destruction of wealth that high-income Americans experienced from the economic meltdown.

Young adults, however, are mostly hopeful that today's youth will have a better living standard, better homes, and a better education than their parents. This optimism among youth -- their belief that tomorrow can be better than today -- is an important and hopeful sign, but it is possible that as they age, these young Americans will become more pessimistic, as their elders are today.

I've said this before and I'll say it again: The American dream is a fraud. (Perhaps criminally so in the case of the subprime crisis.) Now, there are three versions of this tall story: owning your own home, the land of opportunity, and a rising standard of living. First you have the idiotic "ownership society" variant which begat the housing bubble. As home prices keep tumbling with no end in sight, it's no surprise that homeownership rates keep falling, too. So much for that. Second you have the observation that intergenerational mobility is worst in Anglo-Saxon countries alike the US and UK [1, 2] where laissez-faire is supposed to promote more opportunity. No such thing, either. Third, Americans have good reason to be pessimistic about the living standard of future generations since median incomes have already been in decline for a decade. I learned about "extrapolation" in the fourth grade, and it's not a very difficult idea to grasp (unless you subscribe to mathlexic Cheneynomics, listen to Brooks and Dunn, or are a Tea Party acolyle, of course).

So there you go, Joe (Nye). The American dream, so central to its aspirations, is not supported by fact. Collapsing home prices, class immobility, and falling median income--if that's not outright decline, then my name's Abe Vigoda. Increasingly, Americans themselves don't believe in the American dream as it sinks further into Cheneynomic oblivion. Tell me this: where is the "soft power" of persuasion when your own people don't believe in this fraud? Few except the most deluded buy it, so you might as well consign it to the dustbin of history. The evidence is indisputable that America is in decline--and Americans are increasingly convinced of it, too.

Singapore Gets on the RMB Trading Bandwagon

In case you missed it, here is more news of the internationalization of the yuan. Singapore and Hong Kong usually duke it out for bragging rights as the financial centre of East Asia. For some time now, the Hong Kong Monetary Authority has experimented with facilitating trade settlement with the Chinese yuan--a first step in making it a more widely used vehicle currency in the region. In the longer time frame which China looks at things unlike shortsighted Americans, first the region then the world. It's a different perspective when you're on the way up instead of the way down.

Being ever so hip to the times, the Singaporeans have gotten on the RMB bandwagon as well. While Hong Kong will still retain advantages dealing in renminbi--it is an erstwhile part of China, after all--it is wary of being left behind. That said, Singapore like Hong Kong possesses the requisite financial know-how, market liquidity, and trading outpost status to make it worthwhile for the (mainland) Chinese to extend RMB trading to. From Reuters:

Beijing's desire to redenominate more of its trade into yuan is giving rise to a new offshore centre in Singapore, but don't expect the same breakneck speed of growth there as in Hong Kong. Many of the commodities that trade in Singapore are the stuff that China needs, though Singapore's trade volumes with China make up only 2 percent of the mainland's total trade, compared with 8 percent in Hong Kong.

Even given Singapore's status as a redistribution center for Southeast Asia and even Western markets, the trade volumes are smaller than Hong Kong. That makes it less likely the city state will see a big spike in renminbi-denominated trade settlement, as Hong Kong saw last year, if China indeed chooses a clearing bank for Singapore's yuan trade.

Then there is the issue of liquidity. Singapore does not disclose official figures on yuan deposits, though the amount is probably a fraction of the roughly 408 billion yuan in Hong Kong's banking system. The market cap of Chinese companies listed in Hong Kong after all is 20 times Singapore's.

All that is not to say Singapore's offshore yuan market would not be successful. Having a clearing bank would accelerate the growth for Singapore's yuan deposits, which on an average earn less than in Hong Kong because of the People's Bank of China backstop line and as the city state's banks have to clear any outstanding yuan deals with Hong Kong, earning lower income in the bargain.

Plus, the city state's big lenders including the likes of DBS [Development Bank of Singapore] and funds like Income Partners and Barclays Capital Fund Solutions already offer renminbi products to customers, forming a launching pad of sorts for an offshore market, albeit a mini version of Hong Kong's.

"As an analogy, if RMB is the product, then China should be regarded as the factory, Hong Kong as the main wholesale market and Singapore something of a retail outlet," Deutsche Bank said in a note [my emphasis].

What is effectively being enabled is access to RMB in Singapore itself for trade settlement without having to course transactions through financial institutions situated either in Hong Kong or the mainland. It is, to be sure, still a more limited system than what Hong Kong has in place since Singapore's availability of RMB is contingent on outside authorities' discretion [read: Chinese capital controls]. Still, it's a significant step in internationalizing the yuan's role as a vehicle currency--especially for Southeast Asia's financial heart.

Here's hoping these experiments work, demonstrating to the PRC that making the yuan more freely traded brings benefits to its issuer. From such experiments flow bigger things desirable in remedying global financial imbalances. The end point, of course, would be making the RMB an openly traded currency on world markets--for all that implies to Chinese capital flows. Full convertibility is not an unrealistic long-term possibility.

Remember, 7% of all trade with China is reportedly now being invoiced in RMB from virtually none two years ago. At such a rate...well, you can extrapolate the endgame. I hope I live to see the day when the Chinese tell the Americans to pay them in RMB after getting fed up with never-ending dollar decimation. That will be the day that the world is freed from dollar hegemony. Maybe we should make it a global holiday ;-)

UPDATE: The FT has a neat story on the Hong Kong v Singapore rivalry.

London Wants to Get on the RMB Trading Bandwagon

To accompany today's other blog feature, may I just point out that it's not only the Asian crowd that wants to get on the RMB bandwagon. It may be confusing to my international readers, but to repeat, the Lord Mayor of London (Michael Bear) is different from the Mayor of London (Boris Johnson). The former represents merely the City of London where the financial services industry is concentrated, while the latter represents the much larger Greater London Authority. Moreover, the latter post was only created in the year 2000--the first directly elected mayor in the UK.

Unsurprisingly, one of the Lord Mayor of London's tasks is to represent the interests of the financial services industry. And what better cause is there than to make trading in the currency of the future available right here in old Europe? There's already a City of London Advisory Council for China to help promote this effort. From Dow Jones:

Mayor of the City of London Alderman Michael Bear said the city wants to be an offshore yuan center to take advantage of the internationalization of the currency, state-run Xinhua News Agency reported Wednesday. 'The yuan will become a meaningful component of international trade and even become an important reserve currency,' Bear said.

'Developing several offshore trading centers can help to enlarge the yuan market, with Hong Kong playing the role of pioneer. Singapore and New York also have opportunities to join the offshore yuan market. We hope and have confidence that London will join the market as soon as possible,' Bear was quoted as saying. Bear was on a business trip in Shanghai seeking to boost cooperation between the two cities in areas including financial services, shipping and education.

If and when London begins offering RMB for trade settlement, three of the four most cosmopolitan financial centres--London, Singapore, and Hong Kong--will be on board the RMB bandwagon. Whether out of pride or shortsightedness--I think it's a combination of both--the Americans aren't yet launching charm offensives aimed at a similar goal of obtaining the 21st century's currency. As if you needed any more reason to short America, short the dollar, and for the purposes of this article--short New York. It's a rapidly diminishing financial centre for a has-been nation that needs to begin sucking up to those who wear the pants in today's world economy.

Ditch typical American human rights BS and get your *ss in Shanghai pronto, Bloomberg!

The UN Should Be Anywhere But New York

Where, after all, do universal human rights begin? In small places, close to home - so close and so small that they cannot be seen on any maps of the world. Yet they are the world of the individual person; the neighborhood he lives in; the school or college he attends; the factory, farm, or office where he works. Such are the places where every man, woman, and child seeks equal justice, equal opportunity, equal dignity without discrimination. Unless these rights have meaning there, they have little meaning anywhere. Without concerted citizen action to uphold them close to home, we shall look in vain for progress in the larger world - Eleanor Roosevelt

There is no such thing as the United Nations. There is only the international community, which can only be led by the only remaining superpower, which is the United States...The Secretariat Building in New York has 38 stories. If you lost ten stories today, it wouldn't make a bit of difference - John Bolton, former US ambassador to the United Nations

Given that his campaigning self promised a more internationalist outlook, it is striking how Barack Obama hews more closely to the John Bolton School of International Relations (now there's a thought for you) than that of Eleanor Roosevelt. In addition to keeping that shining example of American justice Guantanamo Bay alive and strong, the Obama administration has done little in terms of Roosevelt's "concerted citizen action" at home. As Eleanor Roosevelt suggested, a likely reason why we often "look in vain for progress in the larger world" is because of unyielding negativity about the UN from the country it is headquartered in. Home ain't where the heart is.

As I will enumerate, the US routinely flouts conventions people from other parts in the world consider valuable--especially in terms of advancing rights. Given the plenitude of such examples, it is best to consider the US a delinquent parent of the organization. Unfortunately, John Bolton's flippant suggestion that nothing much would be lost if ten floors of the UN were blown off is not far from actual US policy. Indeed, the Obama administration is next to no improvement seen in this light -

"The United States is concerned about children's rights and welfare."

Americans blather on and on about human rights. Call it the white man's harangue. So much so that you'd expect it to have ratified the well-meaning UN Convention on the Rights of the Child (CRC), right? If you read my lengthy post on why the shameless publicity seeker Amy Chua is more American than Chinese, then you would know that it isn't. How embarrassing is this? Well, aside from a failed state (Somalia), the US is the only other country that hasn't ratified it. Alike Guantanamo, it appears Obama has not been more talk than action in behaving in an internationally acceptable manner.

For all its human rights happy talk, the truth, dear readers, is this: the United States is a miserable place to be a kid. But don't take my word for it. The OECD recently compared the well-being of children across developed countries and found that the US ranked second worst next to the UK--and by quite some margin. Perhaps you and I should be concerned about this American failing that is only reinforced by its failure to ratify this convention. Child misery, thy name is America:

"The United States wishes that women have equal rights to men."

While the US does somewhat better on measures of gender equality such as the pay gap, it has yet to achieve several milestones others have alike having a female head of state. Most plausibly, America's chauvinistic tendencies are behind it not inking the UN Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). In another shameful display, the US is noted by commentators to be the only developed nation not to ratify CEDAW. A shining beacon of gender equality for the world to follow? I think not.

"The United States condemns crimes against humanity."

The Bush administration was famously hostile to pursuing the ratification of US membership in the International Criminal Court (ICC) based in the Hague. While the Obama administration has stopped its predecessor's outright hostility to the body, it still remains aloof to the idea of ratifying participation. Then again, given the United States' continuing penchant for extrajudicial imprisonment, I guess membership in the ICC is not on the game plan for the immediate future despite more internationalist voices calling for it.

"The United States cares about the welfare of migrants."

It is well-known that virtually all signatories to the UN Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families are migrant-sending nations. Despite calling itself the land of opportunity, a melting pot, and so forth, the truth is that the US is just as reluctant as other developed nations to sign on to something which concerns guaranteeing the welfare of migrants. In trade terms, it is unsurprising a country that has so far been unwilling to implement WTO provisions concerning temporary migration is also unwilling to extend them substantive international rights.

"The United States does not want to deploy land mines indiscriminately."

Activists have, for a long time, been championing the reduction in the use of land mines for the simple reason that they tend to kill and maim civilians--often long after conflicts that resulted in them being deployed have ended. However, the US has once again not ratified the Anti-Personnel Landmines Convention. For a country that is already malodorous in so many parts of the world due to its militaristic excursions, this shameful omission only reinforces America's negative image.

"The United States cares about the environment."

Kyoto Protocol. Nuff said.

"The United States has a national interest in respecting international maritime law."

Of all the conventions left unsigned by the US at the UN, the Convention on the Law of the Sea (UNCLOS) is perhaps the most interesting one in terms of geopolitical implications. In fact, Hillary Clinton alluded to it last year during the non-controversy over the South China Sea the US fomented at the ASEAN Regional Forum. As I have explained, the utterly hypocritical point is that the US has not ratified UNCLOS but claims that its stipulations should be followed when it comes to resolving others' disputes. Hypocrisy aside, meddling in others' disputes without a discernible legal basis to do so takes a lot of nerve.
-----------------------------

All in all, here is the bottom line when it comes to the US and the UN: If you don't bother with much of anything people of the world devote their valuable time and effort to, then you might as well not host the United Nations. Let's face it: Americans tend to be very parochial in outlook. This negative kind of American exceptionalism poisons international relations through thinking that what goes on in the UN is not in US interests in so many instances. Alike with the IMF which really ought to be in Beijing, the time has come to move the UN elsewhere. The world has moved on. I won't even get into the US offering the sole veto over discouraging continued Israeli settlement of the occupied territories.

There's a saying that you shouldn't stick around where you're not wanted. I guess now is as good as time as any for the UN to move from a country of the past that doesn't care much for it (by brushing off any number of conventions) to a country of the future that at least embraces its core belief in the value of multilateralism. There is no point remaining in a location which undermines it at almost every turn like the United States does. A reason why the UN is often ineffective is because of America's delinquent parenting as its host nation. Think of a child continuously being belittled, insulted and threatened by its parents and modern US treatment of the UN comes to mind. (Not that actual American parenting is much better--see above.) That it even functions at all is a wonder.

When the United States is such an all-around bad example for core UN principles alike human rights, justice, opportunity, and non-discrimination, it's best to skip town. That's something John Bolton and I can probably agree on. Does modern America do Eleanor Roosevelt proud? As I said, the UN should be anywhere but New York.

Fire Sale America, Way to Fix US Budget Woes?

Here's a fun Newsweek article I missed by none other than LSE IDEAS' own Niall Ferguson. Yes, the same Newsweek sold for $1--a once-great American institution fallen under hard times like so many others. While I suspect that I may be writing more about shutting down American government for a prolonged period of time in the next few days--something I want to do, mind you--here's some food for thought in the meantime.

There are a number of things obvious about the modern-day United States. It's mind-bogglingly broke at the federal level. Many states and cities there are no better off, either. At the same time, though, Americans are reluctant to given in to the natural solution of selling off valuable assets. Say, corporations at the sharp end of the innovation league tables due to "security" concerns. If you thought that solution was pretty severe, Professor Ferguson has come up with something that should raise a true patriot's hackles even more. For, he says that the US should get real and sell off its vast holdings to help raise revenue. In America? Getouttahere! Given characteristic US inability to balance the books (what's that?), it's certainly something they should consider, though:

Yet there is another fiscal option that neither party seems to be considering. The U.S. needs to do exactly what it would if it were a severely indebted company: sell off assets to balance its books...The mystery is why freedom-loving Americans are so averse to privatization—a policy that has been a huge success nearly everywhere it’s been tried. From Margaret Thatcher’s Britain, where the word “privatization” was coined, to present-day China, selling off government-owned industries has not only improved the fiscal position of governments; it has usually enhanced the efficiency with which the sold assets are managed...

So let’s get down to business...the U.S. government currently has about $233 billion worth of nondefense “property, plant, and equipment,” according to the Treasury’s Financial Management Service. That is almost certainly an understatement. The government owns somewhere between 600 million and 700 million acres of land, or about 30 percent of the country’s land surface, much of it in the Western states, where as much as half the land is federally owned.

Washington could also sell its stakes in the Southeastern Power Administration and related assets as well as the Tennessee Valley Authority’s electric-power assets. There’s Amtrak (which runs at a loss) and the extensive hydroelectric empire of the U.S. Army Corps of Engineers.

And then there are the assets that have the potential to be among the most lucrative of all: America’s highways. Plenty of other countries—Japan, Turkey, and even China, to name just three—have already privatized substantial parts of their transportation infrastructure, leaving private companies to manage both revenues and maintenance.

American highways sold to foreign investors? It may sound unthinkable, but it’s already happening. Indiana recently leased the operation of the state’s principal 157-mile highway to a consortium led by the Spanish company Cintra and the Australian investment bank Macquarie. For the next 75 years, the consortium will collect the tolls from motorists. Indiana got $3.85 billion upfront. The city of Chicago has done a similar deal, leasing out its Skyway toll bridge for $1.83 billion. A few other state governments have been moving hesitantly down this same path, usually by setting up public-private partnerships to manage stretches of highway.

But there’s so much more that could be done. California’s government has an estimated $103 billion in assets, including state highways with a book value of $59 billion. Are you telling me a sovereign wealth fund from, say, Singapore couldn’t do a better job of running those choked and often potholed roads? Yet one of Gov. Jerry Brown’s first acts since returning to office was to cancel a planned privatization of state-owned office buildings.

From sea to shining sea, American politicians are running scared from the only credible solution to the country’s fiscal crisis. Rather than publishing honest balance sheets with meaningful valuations of both their assets and liabilities, they’d rather maintain the fiction that it’s their job to invest billions in high-speed railroads and the like.

Let’s face it: if you want to see serious investment in America’s infrastructure—and the American Society of Civil Engineers estimates that a full upgrade would cost $1.3 trillion—it isn’t going to come from the likes of Governor Brown, much less President Obama. They’re broke, folks [Amen to that].

There are, remember, two kinds of economies in this world: those with guns and those who dig—those with piles of cash and those with mountains of debt. Sure, the debtors can keep on borrowing until their creditors revolt, or they can try to dig their way out with austerity budgets. But a better idea would be to get smart and start inviting bidders to what could be the sale of the century.

I am thoroughly in agreement with this. Having encouraged the Chinese to run US K-12 schools, I also think broke public American universities (alike the much-vaunted but now struggling for survival UC system) should be sold to foreigners too. To tweak my colleagues at IPE@UNC, their highly reputable but down-at-the-tar-heels institution could probably be sold to LSE IDEAS' partner institution, Peking University! I can see it now: the Tar Heels, property of the PRC.

Fire sale America: it's long overdue. To be fair, however, Niall Ferguson may have overlooked resistance here in the UK against similar plans. Although the UK isn't nearly as broke as the US, Environment Secretary Caroline Spelman recently had to withdraw the idea of selling 258,000 hectares of state-owned woodlands over alleged environmental grounds:

Controversial plans to sell 258,000 hectares of state-owned woodland in England have been abandoned. Environment Secretary Caroline Spelman told MPs the government had "got this one wrong", as she announced the current consultation was being halted. Instead, it is understood a new panel of experts will be set up to look at public access and biodiversity within the publicly owned woodland. Labour said it showed the government was "incompetent" and "out of touch". The plans were intended to give the private sector, community and charitable groups greater involvement in woodlands by encouraging a "mixed model" of ownership.

But critics argued it could threaten public access, biodiversity and result in forests being used for unsuitable purposes. The public outcry over the plans led to half a million people reportedly signing a petition against the sell-off.

In a statement to MPs, Mrs Spelman announced the policy was being removed from the Public Bodies Bill currently going through Parliament. She said: Ms Spelman said: "I would first like to say that I take full responsibility for the situation that brings me before the House today. "Let me make it clear that we have always placed the highest priority on preserving access and protecting our forests...But the forestry clauses in the Public Bodies Bill, published well before we launched the consultation, gave the wrong impression as to the government's intentions."

I doubt whether the Yanks will long be able to afford to make similar excuses. Moreover, $233 billion worth of non-defence plant, property and equipment by Niall Ferguson's calculations is a drop in the bucket compared to trillion-dollar plus deficits the US has run and will continue to run. What happen after the US has fully unloaded the family silver? Then again, desperate times call for desperate measures.

'Tiger Mom' Amy Chua More American Than Chinese

Oh, to be rid of this riff-raff once and for all. Let's face it: there are certain popular authors social science academics find cringeworthy. Reading the output of such writers usually reveals obvious shortcomings. Dambisa Moyo combines regurgitation of others' ideas with simple factual errors. Meanwhile, Amy Chua stretches personal anecdotes to represent wide-ranging phenomena. Views of (prejudiced) Chinese-Filipinos become the basis of setting the World on Fire. Or, in perhaps the most puzzling simplification to date, her wish to continue strict parenting she experienced becomes a 'Chinese' parenting war cry in Battle Hymn of the Tiger Mother. Although she claims this book to be more of a memoir, she does list it among her academic publications, so it's fair game here.

My first major objection is that Chua skips over her nanny's contributions:

...something doesn't add up. That missing piece is her Mandarin-speaking nanny.

That's right, the full-time growling Tiger Mom didn't raise her daughters herself, or even in a simple partnership with her husband. She isn't a stay-at-home mom, she isn't a middle-class working mom, she is a rich woman. And although she insists that her recently published book is not meant to be taken as parenting advice, its message is widely being read as suggesting that the "Chinese" mothering style is superior to the more lenient "Western" way. In any case, the truth is that for mothers who don't have her resources, following her lead would be impossible.

My second major objection is that, for someone teaching law--a trade where one should be precise with the use of words--she uses the term 'Chinese mother' in a very loose sense. In fact, I doubt whether she would even qualify as one. To be exact, she is a Filipino-Chinese migrant to the United States baptised as a Catholic who is not fluent in Mandarin:

She became a law professor and now teaches at Yale. She and her husband, another Yale law professor, hired a Chinese nanny to speak Mandarin, though Ms. Chua doesn’t speak it herself. Ms. Chua grew up as a Roman Catholic, but her daughters were raised as Jews.

My third major objection--one that various talking heads including those who claim to be international relations scholars haven't brought up yet--is that, for a lawyer by profession, Amy Chua does not seem to make much use of international law in discussing international parenting differences. This pattern of simplification is consistent with her previous work as I've mentioned above. Anyway, for the benefit of our dear readers, there is this thing called the UN Convention on the Rights of the Child (UNCRC) under the auspices of the UN Children's Fund or UNICEF:

The Convention on the Rights of the Child is the first legally binding international instrument to incorporate the full range of human rights—-civil, cultural, economic, political and social rights. In 1989, world leaders decided that children needed a special convention just for them because people under 18 years old often need special care and protection that adults do not. The leaders also wanted to make sure that the world recognized that children have human rights too...

By agreeing to undertake the obligations of the Convention (by ratifying or acceding to it), national governments have committed themselves to protecting and ensuring children's rights and they have agreed to hold themselves accountable for this commitment before the international community. States parties to the Convention are obliged to develop and undertake all actions and policies in the light of the best interests of the child.

However, alike with the UN Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), let's say 'world leaders' of a certain North American nation have not signed up to this important international law. Which, in retrospect, is in keeping with environs where folks like Amy Chua can thrive. Contrary to the image Chua wants to portray, China has acceded to the UN Convention on the Rights of the Child unlike the United States. Embarrassingly, the only state other than the US not to ratify it is a failed one (Somalia). President Obama cringes at this fact, but then again, he's done next to nothing about the matter:

The head of a United Nations monitoring committee today called on Somalia and the United States, the only two countries not to have ratified the Convention on the Rights of the Child (CRC), to do so immediately. “With the best interests of all children at heart, I would respectfully like to reiterate our appeal that these States ratify the Convention on the Rights of the Child,” Committee on the Rights of the Child Chairperson Yanghee Lee told the General Assembly today. That pact is the first legally binding international instrument to incorporate the full range of human rights – civil, cultural, economic, political and social – for youngsters under 18...

Asked at an earlier news conference why the United States had not ratified the treaty, she cited a raft of reasons from lack of political will to myths and misunderstandings about the convention. “The lack of political will is the biggest reason,” she said, noting that President Barack Obama in his 2008 election campaign had said that the US would ratify the treaty, “but we have yet to see that come to fruition.”

Ms. Lee noted that “then there is the misunderstanding that once you ratify this convention parents will have to give up their parental rights, and then children would be running around with all kinds of rights, taking the rights away from parents. “But that’s really a myth and a strong misunderstanding because the convention calls for guidance and support of parents, and families with responsibilities is one of the major provisions in the convention.”

Ms. Lee also cited a pushback from religious groups and also concerns from people who advocate home schooling and are concerned that CRC would abolish it. “But that’s not the case,” she stressed. “We have consistently said for States parties to provide for formal and non-formal education that also includes home schooling.” She also noted that some people have said CRC is pro-abortion and pro-adolescent health but “there is nothing in the convention that would suggest anything that the CRC is pro-abortion.”

It's insular America all over again, profoundly unconcerned about the rest of the world while constructing its own warped narratives. And just what would this self-styled 'Chinese tiger mom' be discouraged from doing? Let us count the ways:

Article 13

1. The child shall have the right to freedom of expression; this right shall include freedom to seek, receive and impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any other media of the child's choice.
2. The exercise of this right may be subject to certain restrictions, but these shall only be such as are provided by law and are necessary:
(a) For respect of the rights or reputations of others; or
(b) For the protection of national security or of public order, or of public health or morals.

Contrast this with tiger parenting:

• As an adult, I once did the same thing to Sophia, calling her garbage in English
  
• The fact is that Chinese parents can do things that would seem unimaginable—-even legally actionable—to Westerners. Chinese mothers can say to their daughters, "Hey fatty—-lose some weight."
• Back at the piano, [7-year-old] Lulu made me pay. She punched, thrashed and kicked. She grabbed the music score and tore it to shreds. I taped the score back together and encased it in a plastic shield so that it could never be destroyed again. Then I hauled Lulu's dollhouse to the car and told her I'd donate it to the Salvation Army piece by piece if she didn't have "The Little White Donkey" perfect by the next day.
• [Recall those toothmarks on the piano keys from another anguished child]
  

And speaking of which, consider this article too:

Article 16

1. No child shall be subjected to arbitrary or unlawful interference with his or her privacy, family, or correspondence, nor to unlawful attacks on his or her honour and reputation.
2. The child has the right to the protection of the law against such interference or attacks.

Lastly, what would UNICEF suggest parents sensibly do?

• Respect children. Use positive and non-violent discipline, including respecting the child’s perspective.
• Communicate with children. Children and adults should actively and consistently talk to each other, sharing information and ideas in the home, school and community with mutual respect. Listen to, and take seriously, the views of both boys and girls. Ensure that vulnerable children are able to express their opinions and make decisions

She can say that the Convention is wishy-washy, that Chinese parents don't really abide by it, or that the US is right not to ratify it. However, not engaging with the Convention is a professional boo-boo. She seems to be pretty good at self-promotion, but not particularly at her job of understanding laws that pertain to things she's interested in--like parenting. Remember, she's the 'John M. Duff, Jr. Professor of Law,' not yours truly. Instead of attempting to generalize the experience of Chinese parents, she could have done any number of things like review the substantial literature on culturally-based parenting styles. I understand there are any number of academic journals on education, family studies, and cross-cultural differences. Or, she could have investigated why China has adopted the Convention while the United States not.

So, for (1) being ill-informed about a great many things the rest of us are aware of despite her high-faluting credentials [typical Amerocentrism]; (2) maltreating her kids in apparent contravention of the UN Convention on the Rights of the Child [which only the US and a failed state have failed to ratify]; (3) exploiting her kids for shameless self-promotion [America is the land of Jerry Springer and the reality show]; and (4) hypocritically failing to mention that a nanny does a considerable part of the upbringing in their household [too many examples of US hypocrisy to cite]--I dub Amy Chua an American phenomenon. I won't even mention the dubious genealogical bit.

Why does this sort of wilful kidsploitation gain so much attention Stateside and virtually none to intelligent debate about passing meaningful international laws concerning the protection of children? It shows you just how skewed American priorities are towards rewarding cheap sensationalism. Surely, I know which nation is famous for acting out its behavioural issues in public. While Americans may be preoccupied with obvious US decline, my argument is that Amy Chua presents nothing more than a caricature of being a Chinese parent. Jerry Springer, Ricki Lake, Amy Chua...honestly, what's the difference?

Amy Chua, do us a favour: You're supposedly a lawyer. Do your job and tell us something about laws pertaining to topics you're interested in.

Are Brits Dumb Enough to Hold $511B in Treasuries?

(OK, so that's an obviously loaded question. But hey, this is a blog for crying out loud.)

With apologies to our Chinese colleagues, I generally hold one's Treasury holdings as a yardstick for one's gullibility. If you're dumb enough to own so much stake in a sunset nation like America, then you really have no one but yourself to blame when it inevitably goes down like, well, a Led Zeppelin. And speaking of the homeland of that legendary band, something striking that has not gained much notice is the United Kingdom supposedly having accumulated over half a trillion in these papers by November 2010. In a year's time if we are to believe US government figures, UK Treasury holdings have increased by a scarcely believable $356.3 billion, from $155.5 to $511.8B.

Brad Setser usefully pointed out how monthly Treasury data was subject to annual revisions that usually resulted in the UK tally being marked down significantly while that of China being marked up significantly. The same is probably true here. As before, London's status as a global financial centre is being used to facilitate Treasury purchases by those wary of being identified as avid purchasers of American debt for obvious reasons. In this day and age, announcing that you're an enthusiastic buyer of American debt is rightfully identifying yourself as a target for ridicule. Simply put, why invest in a country whose best years are well behind it instead of one whose fate is most likely the opposite on existing trends? China certainly has a habit of not promptly updating its reserve figures...I wonder why.

CNNMoney has an interesting article on China being the new landlord of the US--a somewhat less bold assertion than mine that the Chinese are the real owners of that dissipated place. Hyperbole (but not much) aside, the point is alluded to that most UK holdings are probably attributable once more to the Chinese attempting to hide the extent of their folly--especially to domestic audiences wary that so much money could be spent in so many far more socially productive ways:

There's also the issue of just how much U.S. debt China really owns. The official number reported by the Treasury is just a hair under $900 billion. But the actual amount could be higher, said Nancy Vanden Houten, an analyst with Stone & McCarthy Research Associates in Princeton, N.J.

That's because it is widely believed that China has used dealers in the United Kingdom to scoop up Treasuries. Those purchases would then show up on the holdings for the U.K., not China. And while the amount of China's debt holdings are roughly the same now as at the start of 2010, the U.K.'s holdings has surged from $208 billion in January to $511 billion in November.

Which brings us to a larger point: China shouldn't complain too much about characteristically self-important, bratty American behaviour insofar as it has indulged so much of it (and tried to hide it out of shame). It's bad parenting pure and simple, but more on this later. Aside from being hard up and currently embarking on a pretty hardcore austerity programme, the UK is certainly in no position to fritter away so much money. Nor is there any massive public outcry here over how the government is ploughing hundreds of billions into Treasuries. The only reasonable conclusion is that the UK is being used by an entity or a group of entities as an intermediary for very large scale purchases of US sovereign debt. If historical precedent is accurate, then the revisions should point to China. You can bet your bottom dollar that China has more than an unfathomable $3 trillion in reserves by now.

But then again, as Yankee impresario PT Barnum said, a fool is born every minute. That pretty much sums up modern US grand strategy--hoodwink others into believing the US is a "safe" investment--though I don't think the UK is culpable despite what the figures indicate at the moment.

OECD on Education: Chinese Bury US Students

About the capitalist states, it doesn't depend on you whether or not we exist. If you don't like us, don't accept our invitations, and don't invite us to come to see you. Whether you like it or not, history is on our side. We will bury you!

One of the signature statements of the Cold War was Nikita Khrushchev saying the above phrase to Western diplomats in 1956. While it was certainly enjoyable bluster alike his alleged shoe-banging incident at the UN General Assembly four years later, let's say that history was not on his side. However, let's now turn to an altogether different sort of command economy of the "market authoritarian" sort.

Call it Michael Fay syndrome. I needn't remind readers about the pitiful performance of the American educational system or "K-12" from kindergarten to the twelfth grade. High school leavers' continuously declining performance is certainly no reason to be optimistic about the decrepitude of American education. In international comparisons, American pupils underwhelm--to put it mildly. Now, the OECD has just released its 2009 edition of the Programme for International Student Assessment (PISA) comparing the performance of 15-year-old students from 65 countries on a standardized test with reading, science, and math portions. While the 2006 edition flagged up the unsurprisingly poor performance of the United States, let's say things haven't gotten much better overall. Despite marginal improvements, the overall picture remains the same. In comparison to its peers, the US lags.

More embarrassingly, this is the first edition of the PISA to include evaluations of students from mainland China. (Note that this is being done for comparison purposes, not because China is an OECD member.) While students from Hong Kong have routinely kicked Yankee student butt for years, we now understand that the youth from the town of Shanghai do a pretty damn good job of doing the same (not that it's so hard given the bedraggled state of modern America). The table above from the Sydney Morning Herland should ram home this point: the sample of Shanghainese students are tops in reading, science, and math. In comparison, their Yankee peers are...near or below OECD average in all three areas. From the Christian Science Monitor:

The latest results from the Programme for International Student Assessment (PISA) released Tuesday by the Organisation for Economic Cooperation and Development (OECD) show Asian students – particularly those from China, who participated in the exam for the first time in 2009 – at the top of the pack, with the United States generally in the middle or, in math, toward the bottom.

“We are in the middle of the pack; that’s not where we want to be,” said Stuart Kerachsky, deputy commissioner of the National Center for Education Statistics, in a call with reporters. “That’s not the goal, but all I see in these numbers is things maybe inching in the right direction.”

The test is given to 15-year-old students in dozens of countries around the world every three years, and aims to assess their reading, math, and science literacy as they prepare to enter college or the workforce. It has long been used in the US to raise alarm bells about American students falling behind in a global world.

And indeed, the most striking result from the 2009 PISA may be the top performance of Chinese students, who participated in the exam for the first time with a pilot program that tested students in several cities. Mr. Kerachsky and others cautioned not to read too much into the comparisons, since they are from cities – those which draw many of China’s top students – and are hardly representative of all of China. But the results from Shanghai, in particular, which came out No. 1 in all three subject areas, were remarkably high.

In math, for instance, Shanghai students scored an average of 600 (on a scale with a 500-point average). Students in Korea, the top OECD country, scored a 546, and in the United States, they scored 487. That score puts them in 25th place among the 34 OECD countries, though the score is statistically lower than just 17 of those countries, and indistinguishable from 11 others.

American students scored below the OECD average of 496. The countries outperforming the US include Finland – perennially a top-shower on PISA, along with Korea – Belgium, Estonia, Iceland, France, and the Slovak Republic, among others. US students scored higher than those in just five OECD countries: Greece, Israel, Turkey, Chile, and Mexico.

Yes, you can complain that Shanghai isn't representative of the educational performance of China as a whole. Then again, why not get American students from the largest US cities of New York or Los Angeles to participate and I'd still wager that the kids from Shanghai will utterly demolish the US kids. The thankful difference between Cold War-era Soviet Union and China is simple: unlike Khrushchev and others full of his sort of bluster, the Chinese don't really brag about their achievements, preferring to be low-key about them. But on a day like this, the world wakes up and realizes that Chinese students seem to be leaving their American brethren far behind in terms of academic performance. With so many near-insolvent US states left with few choices but to cut education budgets, I am not optimistic about future US performance in international education comparisons like PISA.

I do look forward to these OECD reports that tell us what we already suspect but now have hard evidence to back up. Yes, Americans are getting fat as all get-out. And now, yes, American kids aren't exactly the brightest. So actually Nikita, as American students demonstrate, there's no need to bury America. It's doing a pretty damn good job burying itself.

Ex-IMF Chief Economist: IMF HQ Should Be in PRC

Former IMF Chief Economist Simon Johnson should be familiar to readers of the fine Baseline Scenario blog which he writes together with James Kwak. While visiting the Bloomberg website, I came across a rather intriguing op-ed in which he discusses the Ireland crisis. Aside from the usual European political-economic gyrations to consider, he makes a seemingly off-the-wall suggestion that had me thinking: Given that they are the world's new moneybags compared to the hard-pressed Europeans and subprime-addled Americans, he believes the Chinese are well-placed bail out troubled Eurozone economies. What's more, he says doing so should buy the PRC some breathing room from constant EU and US complaints over unfair trade practices:

In fact, the Irish leadership has every incentive to delay until other countries can be dragged into turmoil. The crisis will become euro-zone wide, at which point all eyes will turn to some combination of the European Central Bank, the German taxpayer, and the IMF. But the ECB can’t pay and the German taxpayer won’t pay. Does the IMF have the resources to tackle Spain, let alone a bigger country like, say Italy or even France? The U.S. could add sufficient funding to the mix -- this is what it means to be a reserve currency -- but the mood in Washington has shifted against bailouts.

As an alternative, Europe could place a call to Beijing to find out if China would like to commit some of its $2.6 trillion in reserves to keep European creditors whole. This would be an enormous opportunity for China to vault to a leading global role. Perhaps it was a good idea to place Min Zhu, a top Bank of China official, in a senior position at the IMF.

If China offered to recapitalize the IMF, become the largest shareholder, and move the organization to Beijing (according to the Articles of Agreement, the IMF’s headquarters should be in the capital of the largest shareholder), wouldn’t that make for an interesting chess game?

Whoa, now you're talking. Simon Johnson is of course correct in pointing out that the IMF Articles of Agreement stipulate that the institution should be headquartered in the country of its largest funder. Remembering that the US was the world's largest creditor back in the day--the postwar period, to be exact--it certainly wouldn't have occurred to those present at Bretton Woods that Generalissimo Chiang Kai-Shek's pipsqueak communist rivals would soon become the world's largest creditors a couple of decades down the line. (Or even China's leaders, of course.) Here is the relevant IMF text:

Article XIII - Offices and Depositories

Section 1. Location of offices

The principal office of the Fund shall be located in the territory of the member having the largest quota, and agencies or branch offices may be established in the territories of other members.

Thinking about it more, doesn't it sound far-fetched to us that Beijing will become the host of IMF headquarters as China becoming the world's largest creditor did in 1944 to those at Bretton Woods? Times are a-changing, so I'm not one to rule out this happening in my lifetime. That said, there are formidable obstacles to this happening:

• Won't the Chinese swapping foreign exchange holdings for SDRs detract from "managing" foreign exchange levels?
• Wouldn't the Chinese be wary of bequeathing the opprobrium heaped on the US for being the hosts for this often-unpalatable lender-of-last-resort?
• Similarly, wouldn't China be wary of losing its self-proclaimed status as a champion of Third World causes and become the very embodiment of "economic imperialism"?
• If China's interest is in showing magnanimity towards fallen minor Eurozone countries (as it has already indicated before), why bother with the American-dominated IMF and just lend unilaterally?
• Despite being flat broke and rather pathetic , would the US readily countenance losing the IMF so easily as another signifier of American decline?
• Perhaps conveniently for certain countries, participation in IMF facilities like the General Agreements to Borrow (GAB) and New Agreements to Borrow (NAB) do not necessarily boost voting shares for emerging large contributors.

The geopolitics are certainly interesting: Will a weary nation relinquish one of the remaining levers it holds on the world economy so readily? Is the new contender willing and able to take up this mantle of leadership? All I can say is that the world economy certainly looks different from where I'm sitting 64 years after the halcyon days of John Maynard Keynes and Harry Dexter White. Bring on Beijing, baby!

Dontcha Worry About China; RMB Reval 'Inevitable'

And now for a belated Halloween feature...of sorts. (Boo!) For most Americans, the unmistakeable decline of the American economy--they wouldn't be all in a lather about throwing current lawmakers out en masse if not, eh--is tied to the growing prominence of China. Both find expression in election season advertising portraying political opponents as being in cahoots with the Chinese. Scapegoating others for largely homegrown ills is a regrettable but unsurprising American pastime. Now, every American generation has its set of bogeymen--Reds under the bed, Japan buying America, and now China competing unfairly with the United States via "currency manipulation" and other dastardly practices. Signs of conflict are rife and unmistakeable. Among other things, the last congress passed a bill that envisions hitting China with sanctions should it not change its erring ways.

An obvious advantage for critics in constructing bogeymen is that they never change since they are the product of (often inaccurate) stereotypes and, for lack of a better term, A Lot of Yanquis Scaring Themselves Silly Over Their Steadily Declining Standard of Living. Famously incurious about the rest of the world, there is a bland whitebread sameness you get out here--especially in much of the US-dominated blogosphere. The IPE Zone being a far more cosmopolitan outlet in name and in deed, leave it up to yours truly to bring a distinctly different possibility: What if China is already well on its way to freely floating its currency? Also, what if constant pestering by haughty Americans busy trying to devalue their way to prosperity doesn't go down too well and instead slows down a move towards a freely floating renminbi?

Well, Reuters has just the article for this contrarian line of thinking from an adviser to that bastion of financial chicanery, the People's Bank of China (PBoC):

The yuan needs to be more flexible and appreciation is the long-term trend for the currency, an academic adviser to the People's Bank of China said on Friday. Li Daokui, who sits on the central bank's monetary policy committee, also said that exchange rate adjustment should be based on domestic factors and not just on external pressure.

"In the long run, the renminbi needs to appreciate if market forces determine that," Li, a professor at Tsinghua University, told an academic forum. The renminbi is the official name of the yuan. Li said a 3-5 percent annual pace of appreciation, about the same as before the global financial crisis, would be regarded as "gradual" and would be acceptable to the government.

China had let the yuan gain nearly 3 percent against the dollar since it was depegged on June 19, but it has pushed the exchange rate back down by about 0.6 percent over the past two weeks. Analysts believe that the currency is still on course to rise and that the central bank has been making good on its pledge to introduce more two-way volatility in the exchange rate.

A stronger yuan is seen as a key component of China's reforms to cut its trade surplus and contribute to the rebalancing of the global economy. Critics say that an undervalued yuan gives Chinese exporters an unfair advantage. Li said that China's trade surplus would be greatly reduced over the next three years as the government enacts reforms to restructure the economy.

To bolster this line of argument, consider that the Chinese may not have been so unfailingly hostile to the US proposal to limit G20 countries' external imbalances to ±4% even if doing so targeted chronic surplus countries like the PRC and Germany. Supposedly, there already was legislation underway in China itself to limit the relative size of its external surplus, hence it needed little prodding to begin with. But, as I mentioned above, perhaps the key thing is for the PRC to implement these changes on their own instead of them perceiving that they are being browbeaten into making them:

At G20 finance minister meetings in South Korea earlier this month, the United States proposed that countries set a target of capping either their current account surplus or deficit at 4 percent of gross domestic product.

Although rejection of the proposal was virtually unanimous, it has found a slightly more receptive audience in China. "We have the economic and political foundation to reach an agreement," Li said. But he added that China would not want to accept any imposed standards or external checks and would only set targets of its own volition.

Yi Gang, a central bank vice governor, has said that China is drafting a plan to limit is current account surplus to less than 4 percent of GDP over the next three to five year.

Short of buying adult diapers for a majority of the US population, that should help calm American fears about China, right?