My Views on The Atlantic - "5 Most Likely Ways the U.S. and China Could Spark Accidental Nuclear War"

This just came out today. It's 1:08 AM, so I don't have the time / faculty for a thought-through response, but here are a few observations.

1. There is no such thing as "accidental nuclear war". Case in point, Cuban missile crisis.

2. China/Philippines island dispute wouldn't be my first choice of serious threat. Taiwan could be. Despite the escalation of tension over the South China Sea over the past couple of years, which could be seen as "testing waters", China's commitment in its "core interest" Taiwan is much more long-term-standing; and neither U.S. or China would backpedal on their commitments there. More on this later.

3. I'm not worried about "intra-Korea war" as much as the possibility of a North Korean implosion/ collapse, which could be a real possibility with the coming succession. The scenario of a DPRK faction struggle leading to a civil war would cause China to step in and march across the Amnok River again; U.S. troops in South Korea would not sit still either. This could be a very likely launching pad for another China-U.S. war on the Peninsula. The worst thing is, there is no U.S.-China military discussion on this matter at all for [China's] fear that, its North Korean allies knowing that China is considering a plan B for the Kim regime.

4. China and India territorial dispute would not escalate to a U.S.-China nuclear confrontation; but India-Pakistan conflicts could. More on this later.

These are just my quick thoughts on Max Fisher's article. Any comments, disagreements?

China's "New Currency" Speaks Housing Woe: 1 Pan = 1000RMB/sq m

 

(1 Pan: front)

(1 Pan back)



Chinese real estate guru Pan Shiyi, Chairman of Soho China, released a new "bank note" (above) yesterday with his own image and a tagline "SOHO China is Awesome" replacing "China People's Bank" in the real one RMB note on the front. On the back, 1 Pan note says "Once the idea of war emerges, it needs to be supressed by more powerful thoughts of peace. (One) should use more intense thoughts of friendship and love to diminish hatred."

(real 1 RMB note)

It started with Pan Shiyi, in his microblog posts to commemorate Steve Jobs, proposed that Apple should produce iPhone and iPad that cost less than 1,000 RMB ($157) so that more people could afford these products. Chinese netizens, long been outrageous towards the ultra high home prices, replied by saying Pan should offer apartments priced at 1,000 RMB/sq. meter and that this should be a new measurement. Pan probably took the joke as a good marketing opportunity; indeed he encouraged such discussions and calls for him to release a new 1 Pan currency that stands for 1,000 RMB/ sq. meter. At 11AM today (Oct. 26th), Pan Shiyi officially released the design of 1 Pan on his microblog and asked for feedbacks.

Jokes aside, Beijing's efforts in trying to cool home prices has so far hardly seen significant result. Apart from being a sign of economic growth, the soaring housing price is a result of structurally low real interest rates

(particularly relative to income growth), high saving (and therefore ample liquidity), and a lack of alternative investment and property tax.

To me, the government's control over the banks is a major problem. On the one side is state-owned enterprises that get loans with extremely advantageous terms; on the other side is regular depositors getting about 3% interests (which is a de facto negative return for their savings). I can't see how this imbalance could be solved without a certain degree of liberalization of the banking sector.

In the meantime, I'll relish the all the jokes about the new Pan currency, while lamenting the fact that I probably could never afford to buy a home in my hometown back in China.

Debate with a Top 1% / Tax Lawyer

I had a conversation with a good friend yesterday about the tax issue and the row between We are the 99% and 53%. My friend is a tax lawyer at an elite law firm in New York, and definitely belongs to the top 1%.

It went something like this:

Me: Warren Buffet is the one who said that he paid a lower percentage than anyone in his office.

My friend: He didn't take into account that the profit from his companies and all kinds of transactions have already been taxed. In any case, the tax increase he's advocating doesn't really affect him that much -- everyone wants someone else' tax be increased.

Me: But the richest 1% control 40 something percent of the nation's wealth, and they pay so little. (and infographs here and here.)

My friend: People are easily misguided by simple comparison between some numbers. The tax system is very complicated; you can't just drag two numbers together and say it's not fair.

Me: So how come big coorporations that made a profit paid negative tax ( GE had $10.3 billion in pretax income and reported a tax benefit of $1.1 billion.) and hugely profitably oil companies like Exxon Mobile can claim nearly $4 million subsidies each year???

My friend: I don't know the details of these companies, but sometimes even when these companies are globally profitable, it doesn't mean that they made a profit in the U.S., or they had a huge loss in the past year and was rolled into the next time period. For instance, BP's huge loss would roll down to several years.

Me: So if you don't support taxing the rich, i.e. yourself, how do you suppose we resolve the revenue problem?

My friend: The current tax system doesn't work. It's much more complex than it has to be, and has resulted in a lot of inefficiencies. We don't have a straightforward tax code, instead, the Congress passed a lot of separate laws to say we'll give something tax credit up until 2016 (e.g. wind turbines), or give certain companies a tax break. Someone needs to keep track of all these miscellaneous changes all the time. Companies need to hire many lawyers and accountants to do taxes. All these costs are passed on to the consumers, causing prices to be higher than they have to be. That is such a waste.

Me: If the tax system is simple and straightforward, you, my friend, wouldn't have a job.



It's probably not smart to have a debate on tax issues with a tax lawyer, but does anyone have any evidence either to support to oppose my friend's argument?

Is U.S. in Decline?

This article appeared recently in a leading Chinese international relations journal and has got a lot of attention. Below is a précis. Most of the arguments should be familiar to many Americans, in fact, many of the arguments are probably found on the cardboards at #OccupyWallStreet. Isn't it refreshing when a scholar from the "competiting power" put it out like this?


Is U.S. in Decline?
Chu Shulong
Beijing: Contemporary International Relations, April 20, 2011, 1-6

Summary: No fundamental changes have occurred in the key American strengths such as the economy, science and technology, military strength, international political influence, cultural softpower, etc., though U.S. currently face localized difficulties and problems.

U.S. is still way ahead of the world in the following fundamental areas:

1. long-term economic growth

2. stability and influence of the political system, ideology and values. (Though greatly suffered as a result of the Iraq War)

3. science and technology, innovation. (Nobel Prizes, IT/ aviation & aerospace/ biotech/ agricultural/ military technology industries) [Ella: cue Steve Jobs]

4. the global competitiveness of U.S. companies

5. softpower/ culture (Hollywood; higher education system that attracts world’s talents)

Facing problems in the following areas:
1. competitive power of manufacturing industry dropped. [Ella: but does a developed economy necessarily need a strong manufacturing industry? What about making the transition to higher value chain? See case “The High Way to High Wages: Denmark's Answer to the U.S. Model".]

2. decline in the health, stability and quality of service industry: due to the lack of regulation of the finance sector (political funding from the big corporations; inability to regulate Wall St.; quality of service sector decline)

3. inequality in wealth distribution; middle-class not doing well; unsustainable: middle class income has grown little after the 1980s despite the growing economy, which affects the long-term economic growth because of the consumption-based economic model

4. fiscal and trade deficits: public expenditure constrained, government unable to make investment in social and economic development; danger of inflation which may cause dollar depreciation and drop in U.S.’ international competitive power

5. military spending and international strategy: “They have spent too many funds and resources on military affairs, foreign wars and foreign interference. The U.S. has not spent more wealth on its own development… To a certain extent, the U.S. is taking the wrong path that other big countries, such as the former Soviet Union, have already taken in history.”

6. population growth not accompanied by improved population quality: “Over the years, the main source for population growth in the U.S. was legal and illegal immigration from Latin America and their quite high birth rate. This group of people is generally recognized as a group with a quite low educational background, quite poor English, quite low income, quite weak consumption power, and few skills in the U.S.”

7. lax social culture and values: expansion of personal desires and power consciousness, and a decline in a sense of duty; will in learning and working hard is not strong; quality of basic education in the U.S. is not high. (Neoconservatives have tried to change but due to some of their extreme policies and actions, their influence in U.S. politics and society has gradually declined.)