China says it's up to US to drive global economy … China's finance minister said Wednesday that the country is not planning any new stimulus measures and it is up to the United States to drive the global economy. Lou Jiwei said that leaders are satisfied with the country's economic performance so far this year and that in the first five months China had created up to 6 million jobs, 60 percent of this year's target. Analysts say the ruling party appears willing to accept economic growth below its 7.5 percent target this year so long as the rate of creation of new jobs stays high enough to avoid political tensions. – AP
Dominant Social Theme: China is very different than the West.
Free-Market Analysis: The temptation always is to believe that Russia and China operate systems that are much different than the West's. But perhaps not.
Two recent articles remind us that what seems separate includes significant elements of compatibility. The world's leaders run interconnected economies, and the co-dependencies are significant. This is why the Chinese finance minister can look to the US to perform the heavy lifting for the world economy going forward. It sounds more like a relay race than a confrontation.
Lou said China, which is the world's second-largest economy after the U.S., is emphasizing structural reforms to spur economic growth and is unlikely to repeat the kind of massive economic stimulus it did in the wake of the 2008 global financial crisis.
"Therefore the global economic recovery depends on the situation in the United States," he told reporters at a briefing during an annual U.S.-China strategic and economic dialogue in Beijing attended by U.S. Treasury Secretary Jacob Lew.
Lou pointed out that the U.S. economy shrank at a 2.9 percent annual rate from January to March — largely because of a brutal winter — and said China hopes the U.S. "can take measures to ensure the momentum of growth."
He also said China hopes the U.S. can rebalance its economy by encouraging Americans to save more. The finance minister said that during the talks Wednesday, U.S. officials had asked whether China still had to intervene in the foreign exchange rate — a longstanding issue between the two as the U.S. says Beijing's controls on the yuan give Chinese exporters an unfair price advantage and hurt foreign competitors.
Who would have thought some 50 years ago when China was still suffering the ravages of the Great Leap Forward that the US and China would eventually vie for world economic leadership, and that the two systems would have come to resemble each other as much as they do.
In fact, both Russia and China do have systems similar to the US's. They have central banks, securities marts and various complementary capitalist facilities. They are also cooperating with the US when it comes to such global initiatives as FACTA and GACTA.
FATCA asks that banks act as watchdogs for the IRS in reporting on US citizens' bank accounts and even withholding funds to conform to US tax laws. GATCA is even broader and is intended to be a reciprocal surveillance system that provides data on a given individual's financial status at the request of that citizen's homeland.
There are other ways that China and Russia have adopted Western systems, most notably now from the standpoint of operating parallel World Banks and International Monetary Funds.
These facilities, once the province of the West, are now being operated jointly by Russia and China. A recent Newsweek article informs us of the following:
The long-awaited BRICS development bank is expected to finally be launched next week, Russian finance minister Anton Siluanov confirmed today. The joint project will see the emerging economic powers of Brazil, Russia, India, China and South Africa establish an alternative to the World Bank, in an attempt to ensure economic stability should the U.S. dollar continue to fluctuate.
The 'New Development Bank' project will see each of the founding countries contribute $2 billion to the bank's funds over the next 7 years, with the bank's maximum capital set at $100 billion. Non-BRICS countries will be invited to join as members once the New Development Bank opens for lending in 2016, said Siluanov.
The bank's stated aim is to keep emerging economies stable, serving as a counterweight in the case of disruptive capital outflow. The project presents a new step away from economic dependence on the U.S. by the BRICS countries.
The launch of the New Development Bank comes after growing mistrust by BRICS leaders of the World Bank, which they have accused of being too concerned with the Euro-Atlantic economic agenda. The bank will be launched at a BRICS summit in Fortaleza, Brazil next week, said Siluanov, with all but the decision on the main headquarters' already agreed.
The article states that the new World Bank and IMF were precipitated by "growing mistrust" over the current state of affairs in which Western-centric facilities provided global services. The new World Bank and IMF – run not just by China and Russia but by the panoply of BRICS nations – will presumably be more judicious about loans and less invasive and exploitative when it comes to helping countries pay them back.
This, of course, remains to be seen. We tend to doubt it.
There is nothing especially admirable about Russian or Chinese systems – or about India's, Brazil's or South Africa's for that matter. Just because these countries have second – and third – world antecedents doesn't make them better or more moral capitalist conduits.
In fact, what we see forming is George Orwell's forecast in 1984: two or three separate global regions putatively competing against one another but actually organized around the same systems.
Sooner or later, we're certain, we'll hear complaints raised against the BRICS's World Bank and IMF that will rival those already aimed at the Western versions. These vast, centralized loan facilities invite abuse, no matter who runs them. The systems are standing invitations to the worst kind of financial fiddling.
So it goes … What is presented as different and even confrontational may be nothing more than the organization of the world into competing sectors by international elites that want to give the rest of us the impression that there is regional and global competition when really there is none.
If the BRICS were working with an entirely different economic paradigm, we might believe that there was genuine divisiveness and competitiveness. But what is being presented by the BRICS uses the Western template. Hell, even the nomenclature – BRICS – comes from the West. The term was coined by a Goldman Sachs banker.
When one observes the broad gamut of global facilities and treaties, one must be struck by the homogeneity. It is fashionable to pretend that the West, China and Russia are mortal enemies, but as we know from what we call "directed history," even the Cold War itself was a kind of theatrical set piece. And current intercontinental tensions do not approach that of the Cold War.
Investors will want to keep the above points in mind. Systemic rivalries may still be cooperative ones. And quid pro quos can be exercised at will.
If one wants true diversification around the world in terms of real estate holdings and wealth dispersal, one might wish to stay away from the current, competing blocks. Smaller, apparently neutral regions may provide better opportunities for wealth enhancement and asset protection.
Appearances are not necessarily reality.
You don’t have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.
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