US taxpayer to pay to export GM auto jobs to China

In 2003, when Bush invaded Iraq and the US govt started piling up deficits instead of surpluses, the writing was on the wall for a lot of things, including US auto makers. Some elements of the vietnam-era "Guns & Butter" economic turmoil were almost certain to come into play.

I looked at GM (and US auto makers generally) and thought to myself: "These companies are dead unless they start preparing to make small cars". Oil prices were going to be increasingly unstable. Interest rates were sure to rise. The US dollar was going to be a very unstable thing. That much was obvious to me, standing in my yard, looking at my huge willow tree, in 2003.

The US automakers and all the "experts" couldn't see any of it. Maybe they wanted top run the US operation into the ground so they could ditch the unions and "save" themselves by importing new cars from factories in China....all paid for by the US taxpayer.

We now have some confirmation that this may well be exactly what they have been doing. Because this is in the Wall Street Journal and we can have no confidence it will remain visible, I'll post it here in full:

By WSJ Staff

General Motors plans to start importing Chinese-built vehicles into the U.S. in 2011, according to an outline the auto maker has submitted to members of the U.S. Congress.

GM currently manufacturers vehicles in China for sale in Asia. But the company plans for the first time to ship some of those vehicles to the U.S. to save on manufacturing costs.

A summary of the plan, obtained by Dow Jones Newswires, shows that GM plans to import 17,335 Chinese-built vehicles into the U.S. in 2011. The imports from China would jump to more than 38,000 in 2012 and more than 53,000 in 2013, the document shows. Imports from other countries, including South Korea, Japan and Mexico, would also increase. The plan is part of a broader cost-cutting strategy by GM, which has said it intends to cut 21,000 manufacturing jobs in the U.S. while increasing imports into the country.

Those plans are being devised under the guidance of U.S. President Barack Obama’s auto-industry task force as part of GM’s restructuring.

A GM spokesman declined to comment Wednesday, saying that negotiations between the United Auto Workers union and the company are ongoing.

The plans are being strongly opposed by the UAW, which argues that the company, surviving on more than $15 billion in U.S. loans, shouldn’t be using taxpayer money to subsidize U.S. job losses. – Josh Mitchell

Cheap Chinese stuff

On Sunday, we went to Glenfield Mall to buy a few things and have a coffee and chat. Under the escalators from Lvl4 to Lvl3 is a small kiosk selling mugs and some other bits and pieces for a few dollars each. To be honest, I've never actually seen anyone buy anything there in over a year. We buy our coffee at Michelle's (the Korean place) next door. Great coffee.

For reasons, I can't explain, I was fascinated by a fountain with two stylised human figures with a whirling glass ball between them refracting the coloured light of several LEDs behind. I bought the thing for $56, knowing very well it was worth maybe $15 by any rational measure. Maybe I felt sorry for the person on the kiosk, sitting there month after month and not selling anything. Probably not, but that's as close as I can come to anything resembling an explanation.

Having got the article home, the plastic cup came unglued immediately from the rim of the socket holding it where the glass ball was to go. No problem. I grabbed a tube of UHU glue and secured it forever.

The next hurdle was that the power plug isn't one made for New Zealand. It has two narrow, cylindrical "prongs". No problem, today I went to a shop and bought an adaptor that would let me plug it into a the typical twin slant-pinned Kiwi power socket.

I got it up and running and for just under an hour, it was glorious! Then the LEDs failed and it went dark. Now it's just a wet glass ball spitting on a grey thing.

Let me share with you 40 cell phone video seconds of the glory that was my cheap, nasty piece of expensive Chinese shit bought at Glenfield Mall. It's both a metaphor and a parable for our times.

(Accompanied by my unwitting daughter channeling the Beatles via her iPod).

Look to the East

The financial crises hollowing out many major banks in the West is revealing more signs of China's growing influence and wealth.

In March 2006, China eclipsed Japan as the largest holder of foreign reserves of currencies of all kinds - more than U$8.5 trillion.

In June of 2008 China's reserves of US dollars passed the US$1.8 trillion mark.

Last week, in the wake of the Lehman Brothers investment bank failure, the government-owned Chinese Investment Corporation (CIC) was being touted around as a possible saviour should Wall St top dog, Morgan Stanley, run into trouble. The CIC already owns 8.8% of Morgan Stanley.

Whether they buy Morgan Stanley or any other bank hardly matters. What does matter is that when no US organisation other than the government had the resources to step in, it was to China (and Japan) they turned for cash.

That is as clear an indicator yet that the baton of global power and wealth has already shifted to the Far East. There is no way a United States mortgaged to China (and others) and dependent on its manufacturing can be anything other than polite to the country (China) that now makes its things and funds its lifestyle.

It now remains only for perceptions to catch up with that reality.

Though still the world's largest economy, the United States won't be number one for much longer. It's decline has been rapidly advanced by the very policies that were supposed to see the opposite occur.

Life is like that sometimes.

In no particular order

The news is a bit thicker than usual this week. These stories broke through the mass into my consciousness.....in no particular order.

The iPhone 3G appears to have problems. Dropped calls (3% vs the normal 1%) and choppy Internet (as the devices swap frequently between low and high speed access) are the main issues, it appears. Fingers are pointing at Infineon Technologies' 3G chips. But Infineon says they work just fine in other phones and cites Samsung as an example.

Whatever. I'm glad I didn't go for one.

For the last few days, I've also had Georgia on my mind. Where the heck did THAT come from? I'm trying to make sense of it. I can see some long running threads amid the mess.

Russia (Putin) has grown tired of Bush-lead America following a "me first, screw you" approach to almost every aspect of foreign policy. 'Might makes right' wears thin over time. The EU and NATO are encroaching on Russian borders and Russia is frozen out of closer relations with the rapidly growing 'United States of Europe'. But thanks for all the oil and gas. The US continues to set up its missile shield setting up on Russia's doorstep in Poland, Turkey and elsewhere (supposedly directed at "rogue" states) despite Russia's vehement opposition. Then, the president of Georgia, Mikheil Saakashvili, tried to assert control in break-away South Ossetia immediately after US-funded joint military exercises began last month in Georgia. Those exercises were matched at the time by a Russian anti-terrorist operation on the other side of the border.

Georgia wants to join NATO. Hard to imagine Russia letting that happen.

Who is the US 'saving'? Georgia is nominally a democracy. No need to fight for 'freedum-n-dumocrasee' there. South Ossetia has a large Russian population and doesn't want to be part of Georgia. They've made that fairly clear. Russia compares it to Kosovo in that respect, which the West assisted in seceding from rump-Yugoslavia, though it would not be fair to compare Saakashvili to Serbia's now-dead former leader, Slobodan Milosevic.

Looks to me like some (unnecessary) brinksmanship going on and Russia either took the bait (October Surpise!) or called US President George Bush and Georgian President Saakashvili's bluff.

Either way, the US elections would have to feature in the overall calculations somewhere....especially on the American side. One of the key tools Bush has for helping out Republican nominee, John McCain is the ability to stir up trouble as a background for McCain to posture in front of. Democrat contender, Barack Obama has sensibly spoken of a more moderate and co-operative approach to foreign policy. What better way to make him look soft than to go around the world stirring up trouble making it look like talking isn't an option? Meanwhile.....real people die. Bush couldn't give a rat's arse about that, as his record clearly shows. For its part, Russia will be betting the US and EU don't want their oil and gas supplies disrupted by a wider war and anyway the US is busy with all the other endless wars it has underway.

I'm sure it will get worse before it gets better. Obama is still ahead in the polls. It's a risky strategy. The Republicans are already in trouble with many voters for starting stupid wars and waing Everests of tax money. Intensifying the apparent stupidity heading into an election could backfire. Though many Americans are suckers for some flag-waving war-mongerig and might go with it no matter how stupid it is. After all, they backed the invasion of Iraq on he evidential equivalent of the smell of an oily rag.

The Beijing Olympics are on. There was never any doubt in my mind that China would put on one hell of a show. The intelligence, energy and creativity of China are enormous and a set piece like the Olympics is the perfect platform to display all of the above. Virtually every person I know of Chinese nationality or extraction is bursting with pride - and rightly so. Having said that, I'm either working all day, spending time with the family, walking the dog or reading and thinking or sleeping, so haven't seen more than a couple of minutes worth of coverage here and there, now and again. Much like the last Olympics and the several before that. Not being one to spend endless hours in fromt of the tube watching anything (let alone sport) the O-rings aren't getting much of a look in.

The last time I sat and spent hours watching an Olympics was in 1976 in Montreal, where I had a friend attending as an alternate. He won gold in the heavyweight class in Edmonton in 1978 at the Commonwealth Games. He was to be the primary competitor in 1980, but the Soviets invaded Afghanistan to forestall muslim extremists taking control of the place and almost every Western country boycotted the Moscow Olympics....and my friend was very disappointed. He'd spent most of a decade preparing for that day. He left Canada after winning gold in the heavyweight plus class at the Commonwealth Games in Brisbane in 1982 and still doesn't live there full time even now. Last time I spoke to him, he was spending about half the year in Beijing and half in Vancouver and has done for over 20 years. His experience at the hands of cynical political interests sort of ruined the Olympics for me. It's even worse now we know the US funded those muslim extremists in Afghanistan in the first place and Canada was suckered into supporting a boycott regarding a war the US had played a part in provoking. Another one.

BIS: Risk of global depression

The Telegraph reports the Bank of international Settlements (BIS), "the world's most prestigious financial body", is warning of a global depression caused by the credit bubble of recent years.

Individuals and businesses are borrowing far too much money and taking too much risk. A system already at risk of further major default is thus close to a situation where the last straw, a "tail event", might break the camel's back.

Of particular concern is what has been going on in China. I have to admit that I have not followed financial events there closely. The BIS says:

"The Chinese economy seems to be demonstrating very similar, disquieting symptoms," it said, citing ballooning credit, an asset boom, and "massive investments" in heavy industry.

Some 40pc of China's state-owned enterprises are loss-making, exposing the banking system to likely stress in a downturn.

It said China's growth was "unstable, unbalanced, uncoordinated and unsustainable", borrowing a line from Chinese premier Wen Jiabao

That doesn't sound too good at all. Clearly the situation as described is not sustainable should it remain that way.

The US Federal Reserve, (the US central banker), in particular, gets a whack:

In a thinly-veiled rebuke to the US Federal Reserve, the BIS said central banks were starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be "cleaned up" afterwards - which was more or less the strategy pursued by former Fed chief Alan Greenspan after the dotcom bust.

It said this approach had failed in the US in 1930 and in Japan in 1991 because excess debt and investment built up in the boom years had suffocating effects.

While cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and "sowing the seeds for more serious problems further ahead."

The BIS says the trading position of the United States is also perilous with a huge current account deficit equivalent to 6.5% of GDP

a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unpredented drop in the savings rate. "The dollar clearly remains vulnerable to a sudden loss of private sector confidence," it said.

Is money hard to get? Apparently not. Bankers have found new ways to get around credit risk by passing it off to third parties who may or may not realise the level of risk involved:

The BIS said last year's record issuance of $470bn in collateralized debt obligations (CDO), and a further $524bn in "synthetic" CDOs had effectively opened the lending taps even further. "Mortgage credit has become more available and on easier terms to borrowers almost everywhere. Only in recent months has the downside become more apparent," it said.

That last comment must mean one of the monkeys removed the hands from their eyes long enough to accidentally see some evil.

With that in mind, where is it all heading? The BIS looks at how sustainable many of the private equity transactions / mergers are given they levels of debt taken on assumed credit would remain cheap.

Mergers and takeovers reached $4.1 trillion worldwide last year.

Leveraged buy-outs touched $753bn, with an average debt/cash flow ratio hitting a record 5:4.

"Sooner or later the credit cycle will turn and default rates will begin to rise," said the bank.

"The levels of leverage employed in private equity transactions have raised questions about their longer-term sustainability. The strategy depends on the availability of cheap funding," it said.

That may not last much longer.

That's the bad news......and there is nothing any political party in New Zealand can do about it, whatever way it goes. Increasingly, this looks like a dumb time for tax cuts.

Beijing Olympic Drama

In July 2001, the International Olympic Committee (IOC) 56 countries out of 105 voted in the second round to give the 2008 Olympics to China. The March 2001 IOC report on biddersfor the 2008 games doesn't mention civil rights. The only "rights" mentioned at all are property right relating to Olympic logos and insignia. Several times in the report the "strong governmental control" is cited as a positive advantage with respect to infrastructure, traffic and environmental concerns. One line in the report says there is no concern about terrorism at Beijing.

They knew then what China is and how China operates. There was considerable debate at the time.

Chinese people are clearly very proud of their country and what it has achieved over the past several decades. This is evident from the pro-China demonstrations taking place all over the world as a reaction to the anti-Chinese / pro-Tibet demonstrations that have disrupted the movements of the Olympic torch.

From what I know of Asia, the "insults" directed at China preceding and perhaps during these Olympics by individuals and governments will not soon be forgotten in China if they were widely known about. In some ways, I think we should all be relieved that the Chinese media is filtering these out. Far from creating awareness of human rights issues within China, the more likely reaction from ordinary Chinese to some of the scenes we have seen in our media would be an angry one. They live there. They know what China is better than any of us.

This video is one of a large number to be found on YouTube that puts Tibet and recent Chinese history into a context we in the rest of the world may not be familiar with. In China, this is the context that matters.



Absolutely we should continue to press China on human rights issues. Though there has been some imrpovement, they have a long way to go. But wrecking these games won't advance human rights in China and is more likely to be counter-productive. Attitudes to dissent in China may well harden as a consequence of any violence or disruption to the games. Many Chinese have bought into the Olympic Games as a reason for national pride. The Chinese government may well find itself benefiting from popular support if they reacted harshly to any attempts to wreck these games.

I'd say it would be profoundly hypocritical to fill our stores with inexpensive, Chinese goods we happily buy by the truckload, while sanctimoniously advocating we boycott or denigrate the Olympic Games in Beijing over human rights concerns. The time to boycott with ANY credibility would have been July 14th, 2001 - the day after the vote. Now is FAR too late. Now would just be dumb. The Chinese government must laugh quietly to itself when the Guantanamo-operating United States, lead by a President who recently vetoed a bill that would outlaw torture, pretends to lecture it on human rights.

We exaggerate our own importance if we imagine that we can change China from the outside. That isn't how China has EVER operated, as anyone who follows Chinese history will know. Real change will have to come from within China, by the efforts of Chinese people over time.

Enjoy the Games. If China feels good about all this, we may well see some improvement in human rights in China. If China is humiliated or worse, I can't see how that will do anyone, anywhere, any good at all.

NZ's soul for sale?

Wonders never cease. Today I had the rare treat of reading something (no link to it) in the Weekend Herald by Fran O`Sullivan that was (indirectly) complimentary to Helen Clark and Labour. The subject was a free trade agreement with China and Ms. O`Sullivan is all on board. To say she is enthusiastic would be an understatement. So much so that she fully endorses the agreement....whatever it is. We don`t know yet. She says she has a few hints.

On the flip side, Ms. O`Sullivan was dripping with venom and contempt toward anyone who might have any doubts about the still-secret agreement. Especially people who might wish to put human rights ahead of (unknown, but presumed) benefit to their wallets. Well...someone's wallet if not your own.

I'm always amazed that principles don't seem to be worth anything to people like Fran O'Sullivan when there's money to be made. That's the same sort of thinking that would lead some people to think that whoring the lives of your country's soldiers in - say - an invasion of Iraq would be a worthy thing to do in order to (maybe) win a free trade agreement with the United States....as National's Wayne Mapp and Simon Power briefly did in 2003, before getting their chains yanked by more thoughtful and senior colleagues for being so silly.

Anyway, it's not often one sees a staunch advocate of right-wing policies like Fran O'Sullivan blindly and unquestioningly supporting Helen Clark and Labour!

I'm neither in favour of, nor opposed to, the FTA with China. How can I be? I've got no idea what's in it. I am inclined to be optimistic about it.

I have no problems with a free trade agreement with another democratic country that operates under the rule of law and where we know the justice system is generally reliable. Even an FTA with the United States would make some sense, despite their considerable history of ignoring the terms of the free trade agreements they sign when they are contrary to politically powerful domestic interests, as Canadians well know after 15 years of NAFTA.

China is a whole other thing. They arrest and imprison or kill people who simply want to vote for who governs their country.

I do have real concerns that binding New Zealand's future to an unaccountable and ruthless dictatorship disrespectful of human rights will leave a small country like ours little latitude for action when major human rights issues do arise. How large an outrage would be required to make us draw back? A thousand dead? A hundred thousand? A million? Or are we ready to do anything, pay any price, for the "baubles of office" associated with an FTA with China?

Some people clearly are. Fran O'Sullivan, and people like her, clearly have no problems there. Their own words make that clear. Liberal values like democracy, justice, liberty and the people who uphold them are to be held in contempt if they obstruct making money.

Read her article "Cuddling up to China" (Weekend Herald, Review, B1). You'll see what I mean.

It's important to make clear that I'm not disagreeing with Ms. O'Sullivan about free trade that's conducted fairly. That can be a very good thing for all concerned.

Instead, I'm suggesting we not sell our liberal democratic souls for a few pieces of silver. So whatever is in the agreement to be signed, we would be imprudent to not also consider what else we will be giving up in order to maintain the relationship with a China that is not only not democratic, but a ruthless dictator.

In case anyone thinks otherwise, I'm a huge fan of Chinese people and culture. But I'm able to distinguish between a people and the government they find themselves lumbered with.

MAXX/ARTA, Zimbabwe, Winston Peters, Media Ownership

MAXX / ARTA

The NZ Herald published a story quoting me as being upset that public forums had been removed form the MAXX web site last week. I was. There was a community of MAXX users there who used the forums almost daily to ask questions or get answers to questions. Everyone there was a supporter of public transport. But the folks at ARTA didn't appreciate - and still don't - that when they removed the forums, they effectively destroyed that community. Most interesting to me was that it didn't appear to have any value to them and still doesn't, judging by the public comments of the spokespeople concerned.

I exchanged some e-mail with Sharon Hunter, Communications Manager for ARTA. She seems like a perfectly nice person. We're both passionate about public transport. But her comments made it clear that the forums (and by implication, the community therein) had no value to MAXX. At least not sufficient value to see the forums retained. Instead, the MAXX site will point to forums on someone else's site. OK, that's a good fall-back position as there will still be one place where people who support public transport can go to talk amongst themselves.

Separately, but on the same day the Herald story appeared, I got a call from a person at ARTA who wanted to talk to me about all the issues I had been raising with the MAXX Help Centre that were not being addressed. We went through them, he accepted they were valid (or so he said, anyway) and committed to see them resolved and keep me updated as to progress. Great! That was all I wanted in January when I first called. He made apologies to me blaming issues arising from the opening of the Northern Busway as having clogged their pipes for a while. I'm sure they did.

I'm particularly keen to see what happens about Birkenhead Transport refusing bus services to school students on the normal buses. There is no way that is consistent with MAXX policy with respect to children. I asked the ARTA rep whether he could imagine what might ensue should a child refused access to a bus then suffer serious injury or other major misfortune as a result while hurrying to school on foot after being turned away. It doesn't bear thinking about.

Zimbabwe

Still waiting on the result of the presidential election. That's good in that Mugabe hasn't already been declared the winner with 99% of the vote. That's bad in that no one else has been declared the winner. One broad speculation I could make is that if Mugabe can't hang on, ZANU-PF may use the opportunity to ensure some other person from their ranks is elected and strategising around that outcome may be the source of some of the delay. The least likely outcome is that they say "You won, Morgan!" and hand over the presidency. But who knows? It might happen.

Winston Peters

I've never voted for Winston Peters, but I do confess to a certain amount of admiration for him at times. He says things others are too afraid to say and in a way that the media love to cover.

On the free trade deal with China, he rightly points out that we don't know what's in it, so how can we support it? Perhaps because that is my own position I'm happy to hear a politician say it out loud. To be fair, the Greens have also warned against the deal, but they don't have a Minister in the government, so the media doesn't react in the same way as they do when Peters says it. I'm surprised this isn't the position of EVERY party - including any Labour MPs not privy to the details of the agreement. How can you support a deal you've never seen? I couldn't do it.

Media Ownership

Another reason I felt warmly toward Peters this week was his jibe to journalists (while facing questions about the $158,000 for charity)about reviewing the foreign ownership of New Zealand media. I have to confess I'm with him on that one. The editorial stance of the Fairfax and APN media has been distinctly and consistently pro-National, and generally US right-wing in tenor, for some time now. Having watched the media evolve in this direction over the past 18 years - roughly since Richard Long took over at the Dominion Post within the INL / now-Fairfax world - I know where Peters is coming from. For example, the leader writers of the DomPost would have had us invading Iraq along with Bush, Blair and Howard. If i recall corerectly, prior to the invasion, they had few if any issues with the obviously shonky, reality-free case for invading the place. Only later, when it was clearly a disaster and we were obviously well out of it, did they stop. The conversion over the past 3 years of the Listener into the "ListeNBR" has been duly noted.

Where is the alternative point of view that free speech is supposed to enable? From both foreign-owned media empires there is open hostility to the present government and no admission or recognition of the colossal mistakes they did NOT make that the National party clearly WOULD have. Like invading Iraq.

I'd like to see a law that says no person or corporation can own more than ONE media outlet of ANY kind if that media outlet editorialises and seeks to influence public opinion. I think that is the only way we will ever have something approximating a free press in New Zealand.