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The Complete
Henry C K Liu
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MONEY
AND COMMODITY MARKETS
Henry C K Liu was born in Hong Kong and educated at Harvard
University, US,in architecture and urban design. His interest in economics and
international relations started when he participated in interdisciplinary work
on urban and regional development as a professor at the University of
California Los Angeles, Harvard and Columbia. He is currently chairman of a New
York-based private investment group. |
Repo time-bomb
redux
The US House Financial Services Committee proposes that
creditors caught in the failure of a large bank should lose up to one-fifth of
the value of the debt. Such a measure threatens directly the working and value
of the repo, or repurchase, market. The Lehman Brothers collapse and subsequent
global financial crisis should demonstrate only too vividly the risks of messing
with that. - Henry CK Liu (Dec 4, '09)
DERIVATIVE REFORM, Part 2
The courageous Brooksley Born
Brooksley Born's efforts to bring over-the-counter financial derivatives under
the regulatory control of the US Commodity Futures Trading Commission, which
she chaired, won her the prestigious John F Kennedy Profile in Courage Award -
11 years after those efforts failed. Had she succeeded, the present financial
crisis would likely have been radically different. - Henry CK Liu
(Dec 3, '09)
This article concludes a two-part series.
Part 1:
The folly of deregulation
DERIVATIVE MARKET REFORM, Part 1
The folly of deregulation
A United States congressional hearing on reform of the over-the-counter
derivative market would do well to recall that derivatives are not in
themselves weapons of mass destruction, even though their presence is found
suspiciously close to the wrecked heart of most recent financial meltdowns.
(Dec 2, '09)
This is the first article in a two-part series.
US should curb cross-border cash
flows
Criticism of Malaysia's imposition of currency controls early in the 1997 Asian
financial crisis eventually turned to recognition that it was the correct
action to take. The United States should take similar action to regulate the
cross-border flow of speculative funds - it is the only way a low Fed funds
rate will help the US economy. - Henry CK Liu
(Nov 23, '09)
CHINA'S REVOLUTION, Part 5
Surplus and capital formation
China's post-revolution challenge was to transform a feudal economy whose
surpluses were mostly unproductive into a system that would increase capital
formation and hence national income. Land reform, a significant contributor in
the pursuit of this goal, remains a key issue in the country's progress and
potential. (Nov 18, '09)
This is the fifth article in a multi-part series.
Part 1:
In the beginning was Tiananmen
Part 2:
Revolutionary lessons
Part 3:
Lessons of the Soviet experience
Part 4:
Mao's legacy lives on
Failure written into 'too big'
policy
Even as Washington tries to ensure limited damage from any future collapse of
"too big to fail" financial institutions, its own policies are helping the top
US banks tighten their market dominance. Nor is Washington addressing the
inherent risk from small entities failing in large numbers. - Henry C K Liu
(Nov 9, '09)
Lesson unlearned
Eighty years after the market crash in the United States that led to the Great
Depression, the "lessons" learned from that grim period have since been
accepted by central bankers, in particular the role of monetary policy. They
have also given birth to an economics of instability. The real lesson is that
weak national economies must seek redress through economic nationalism. - Henry
CK Liu (Oct 29, '09)
POWER WITHOUT CREDIBILITY
Politics of the financial crisis
United States Federal Reserve chairman Ben Bernanke, already criticized for the
close relationship between the Fed and big lenders, now has to withdraw cash
from the financial system. The trick, giving banks even more cash so they can
buy back toxic debt, will leave the economy to rot with rising unemployment and
a damaged dollar. - Henry CK Liu (Sep 16,
'09)
This article concludes a three-part report.
Part 1: Bogged
down at the Fed
Part 2: A lost
decade ahead
POWER WITHOUT CREDIBILITY
A lost decade ahead
The US Federal Reserve faces an intractable unemployment problem. Households,
their wealth savaged by the financial crisis and their job security threatened,
are now paying off debts and cutting back on purchases. Until consumer spending
picks up, no recovery can come. - Henry CK Liu
(Sep 14, '09)
This is the second article in a three-part report.
Part 1:
Bogged down at the Fed
POWER WITHOUT CREDIBILITY
Bogged down at the Fed
President Barack Obama's announcement of Ben Bernanke's reappointment as US
Federal Reserve chairman overlooked the economist's close involvement with
policies that landed the global economy in its current sorry state. It also
diverted attention from unwelcome new budget data. - Henry CK Liu
(Sep 10, '09)
This is the first article in a three-part report.
MONEY AND COMMODITY MARKETS
Integrity deficit has its price
The role of a reserve currency in international trade is to keep all trading
nations monetarily honest. A reserve currency issuer, such as the United
States, can violate the laws of monetary integrity to finance fiscal and trade
deficits - but not for ever, and not with impunity. - Henry CK Liu
(Aug 19, '09)
This is the first article in a series.
Dollar's future in US hands
China's moves to have its exports paid for in yuan should not
be interpreted as a push to make the yuan a reserve currency for international
trade. The US dollar will continue to play this role - if the United States
puts its own financial house in order. - Henry C K Liu
(Jul 1,'09)
False profits and prophecies
AIG Financial Products, whose disastrous credit default swaps brought the
company to its knees, was taking advantage of regulatory arbitrage, a practice
Alan Greenspan, the former US Federal Reserve chairman, called "desirable".
Another ominous cause of the credit crisis was regulatory risks being defined
by credit ratings, which led to the two feeding off each other. - Henry C K Liu
(Jun 23,'09)
OBAMA, CHANGE AND CHINA
Group of Two the wrong number
Advocates in the United States of a Group of Two power pairing that would link
Beijing and Washington in leading a new world order acknowledge China's desire
for recognition as a global power. But they overlook China's preference for
multilateralism and the energy it is devoting to deepening ties around its
northern and western borders. - Henry C K Liu (Jun
18,'09)
This report is the fifth in a series
Part 1:
The song stays the same
Part 2:
A dangerous balance
Part 3:
The New Deal dollar and the Obama dollar
Part 4:
Brzezinski's G-2 grand strategy
Obama tip-toes on regulatory
reform
Republicans are preparing to fight several of President Barack Obama's
proposals for reform of financial market regulations. There is plenty to
criticize, yet much of it has been inherited from the previous Republican
administration. - Henry C K Liu (Jun 17,'09)
Liquidity drowns meaning of
'inflation'
The standard terms of "inflation" and "deflation" no longer
hold sense as US government intervention perpetuates a broken financial system
where financial profits rise as demand and prices fall. Only reform toward full
employment with rising wages will save this economy.
(May 26,'09)
MONETARISM ENTERS BANKRUPTCY
Credulity
caught in stress test
Regulators are beginning to grasp that "too-big-to-fail" in the debt-driven
financial democracy that is the US now encompasses individual mortgage or
credit-card holders. The government has already got the picture, evident in its
negotiation of the "must pass" stress test for banks.
(May 12,'09)
MONETARISM ENTERS BANKRUPTCY, Part
2
Central banks and the burden of
elitism
Banks are indispensable for a working economy; badly-run banks ignoring sound
banking principles are not. What is needed in a depression is not more central
bank money for distressed banks but government deficit money to sustain full
employment with living wages. (May 5,'09)
This report is the second in a series.
Part 1: Monetarism
enters bankruptcy
World leaders miss the target
The world leaders who met in London this month proved adept at posturing for
the TV cameras while missing the important opportunity to redefine the
predatory terms of international trade created by dollar hegemony.
(Apr 14,'09)
OBAMA, CHANGE AND CHINA, Part 1
The song stays the same
President Barack Obama's promise of a new approach to politics is yet to be
reflected in the US position regarding China, while financial bailouts led by
the US are following the tired formula of cutting jobs and driving down wages.
China appears to be the only exception of this trend. A redefinition of US
national interests is critical if Obama is to succeed with his agenda of
change. (Mar 5,'09)
This report is the first in a series.
OBAMA, CHANGE AND CHINA, Part
2
A dangerous
balance
Trade and currency values have long been a contentious issue at the heart of
the relationship between China and the West. Yet the appreciation required to
close China's balance of payment surplus would cause instability for the whole
global economy - including collapse of the US retail trade.
(Mar 12,'09)
This report is the second in a series
Part 1:
The song stays the same
OBAMA, CHANGE AND CHINA, Part 3
The New Deal dollar and the
Obama dollar
The US, encouraged by the likes of President Barack Obama's advisor Larry
Summers, has for decades mismanaged its finances by exploiting the hegemonic
character of the dollar in international trade. Beijing, for one, needs to
forge an economic strategy independent of Washington's.
(Mar 31,'09)
This report is the third in a series
Part 1:
The song stays the same
Part 2:
A dangerous balance
OBAMA, CHANGE AND CHINA, Part 4
Brzezinski's G-2 grand strategy
Former US national security adviser Zbigniew Brzezinski, in seeking a United
States and China "Group of Two" to jointly address global challenges, rightly
recognizes that the days of a unipolar world order are numbered. His mistake is
in believing China wants to partner a weakening US, or would gain from such
ties. (Apr 21,'09)
This report is the fourth in a series
Part 1: The
song stays the same
Part 2: A
dangerous balance
Part 3: The
New Deal dollar and the Obama dollar
THE FOLLY OF INTERVENTION, Part 1
The zero interest rate trap
Two traps - those of liquidity and zero interest - demonstrate the futility of
central bank macroeconomic attempts to use both quantitative and credit easing
to stimulate an economy contracting from excessive debt and leverage. They
merely sow the seeds for significant future inflation.
(Jan 21,'09)
This is the first article in a two-part report.
THE FOLLY OF INTERVENTION,
Part 2
No easy exit
for nationalization
The notion that nationalization is only an emergency measure that can be undone
promptly when the economy recovers is wishful thinking. We should realize that
nations too can go bankrupt, even nations which were once superpowers.
(Jan 22,'09)
This article concludes a two-part report
Part 1:
The zero interest rate trap
MONETARISM ENTERS BANKRUPTCY, Part
1
Monetarism enters bankruptcy
The US Federal Reserve era under Alan Greenspan and Ben Bernanke, with their
belief that central bank monetarist measures can indefinitely perpetuate the
business-cycle boom phase, proved only that mainstream monetary economists read
the same books. As the world is discovering, Milton Friedman's mantra that
"only money matters" turned out to be a very dangerous slogan.
(Jan 5,'09)
China's inflation-free route
from crisis
China must move away from export dependence to a high-wage,
full-employment economy. Credit creation outside of the government's fiscal
budget, with the use of work-creation certificates, poses no threat of
inflation and offers a route to early achievement of this goal. (Dec
23,'08)
Restoring China's national
destiny
Different nations profess different destinies at different stages of their
history, be it the Ottoman dominion's to maintain peace or that of the US to
expand into Central America and the Pacific. Until China realizes that export
based on low wages is a self-diminishing strategy, the country's destiny to be
restored to its rightful position in the world will be held back. (Dec
15,'08)
This is the fifth part of a continuing series
Part 1:
Breaking free from dollar hegemony
Part 2:
Developing China with sovereign credit
Part 3:
History of monetary imperialism
Part 4:
Gold, manipulation and domination
CHINA AND THE GLOBAL CRISIS, Part
2
Beijing holds key to prosperity
China's best contribution to stabilizing the world economy is to develop the
country's domestic market, raise earnings and pursue full employment - a
strategy opposite to that being pursued in the United States. It should also
cease importing dysfunctional economic systems such as predatory, neo-liberal,
cowboy market capitalism. (Dec 5,'08)
CHINA AND THE GLOBAL CRISIS, Part
1
Denial amid the storm
It took more than a year for President George W Bush to belatedly acknowledge
that the financial crisis resulting from decades of US irresponsibility is not
merely a passing shower. Even then, the terms of his ideological surrender,
bloated by self-deception, sought merely to perpetuate the causes of collapse.(Dec
4,'08)
Black hole gapes for pensions
Assets of public pension funds are crumbling - Calpers by 20% in its most
recent quarter. Public employees now face having to contribute more towards
their retirement schemes as the bankers responsible for the crisis that led to
such losses are rewarded obscenely. (Oct
30,'08)
Killer touch for market
capitalism
The US government has predictably failed to jump-start credit and capital
markets, failing to recognize that assets will stay illiquid until price
adjustments bring about market transactions. Government monetization of
illiquid assets will only prolong their illiquid life span. This approach risks
the total destruction of market capitalism. (Oct
29,'08)
This concludes a two-part series.
Part I: US
government throws oil on fire
US government throws oil
on fire
The US government, by continuing to misdiagnose the credit crisis, perhaps even
purposely, has become part of the problem thanks to flawed responses backed by
the people's money. On top of a trickle down of prosperity during the boom
phase of the bubble in which wealth stayed mostly at the top, there will be a
pouring down of the hot oil of loss on taxpayers. (Oct
22,'08)
This is the first of a two-part series.
Too big to fail versus moral
hazard
Alan Greenspan, when Federal Reserve chairman, noted that the US economy, "with
its wide financial safety net, fiat money, and highly leveraged financial
institutions, has been a conscious choice of the American people since the
1930s". The costs of that choice are coming headlong like a runaway freight
train. (Sep 22, '08)
COMMENT
Friedman's misplaced monument
The University of Chicago's plans to establish a research institute
commemorating economist Milton Friedman, whose now increasingly discredited
influence shaped the world, are inappropriate. Opposition can help expose
Friedmanite market fundamentalism as a device that rationalizes the
exploitation of the many by a few the world over. More than money matters.
(Sep 4, '08)
CHINA'S DOLLAR MILLSTONE, Part 1
Breaking free from dollar
hegemony
China, by seeking growth through exports for US dollars, has trapped itself in
a crisis-prone mismatch between domestic policies to assure sustainable growth
and monetary policy dictated by dollar hegemony. Only sovereign credit can
redress the numerous resulting problems, including a shortage of capital needed
to develop its economy. (Jul 29, '08)
This is the first part in a two-part analysis.
CHINA'S DOLLAR
MILLSTONE, Part 2
Developing China with sovereign
credit
The privatization of China's public sector and opening of its financial sector
to predatory global capital continues even as neo-liberals in the crisis-hit
West clamor for government intervention. This is a con game China should not
seek to emulate. (Sep 3, '08)
This is the second part of a four-part analysis
Part I: Breaking free from dollar hegemony
CHINA'S DOLLAR MILLSTONE, Part 3
History of
monetary imperialism
Given US dollar hegenomy, China and Japan have little choice but to invest
their export earnings in US Treasuries or other dollar-denominated assets. In
consequence, China now lends to the US more than double the vast sums
Washington lent to war-torn Europe in 1947 under the Marshall Plan. And the US
is anything but war-torn. (Sep 25, '08)
This series will be continued
Part 1: Breaking
free from dollar hegemony
Part 2:
Developing China with sovereign credit
CHINA'S DOLLAR MILLSTONE, Part 4
Gold,
manipulation and domination
For China, the world's biggest creditor nation, to allow successful national
development it must cease having its currency a derivative of the US dollar and
stop relying on a US-dollar denominated trade surplus to finance domestic
development. The historic role of gold and its manipulation tells it as much.
(Oct 1, '08)
This is the fourth part of a continuing series.
Part 1: Breaking
free from dollar hegemony
Part 2: Developing
China with sovereign credit
Part 3: History
of monetary imperialism
Debt
capitalism self-destructs
With free-market capitalism turned into a gigantic Ponzi scheme, witness
troubled mortgage guarantors Fannie Mae and Freddie Mac, the world is
witnessing the collapse of the central banking regime that came into being in
the US in 1913. At the same time, amid all talk of how to deal with the crisis,
not one official voice is heard about the need to increase worker income.
(Jul 21, '08)
Flat-earther blind to oil facts
Columnist Thomas L Friedman's demand that the United States set an oil-price
floor of US$100 a barrel to trigger renewable-energy investments and end the
country's oil "addiction" is worse than simplistic. The realities were clear
three years ago when oil was at $50. Little has changed.
(Jun 27, '08)
Fed and the strong dollar policy
US Federal Reserve chairman Ben Bernanke's need for lower interest rates to
stimulate the US economy conflict with the Treasury's need for a strong dollar
to deal with runaway oil prices. The Fed should recognize that its actions are
misguided. The potential harm of a sustained weak dollar can make the credit
crisis look like a minor storm. (Jun 17, '08)
THE SHAPE OF US POPULISM, Part
1
A rich free-market legacy - for some
The sight of businessmen such as E Stanley O'Neal of Merrill Lynch and
Citigroup's Chuck Prince pocketing millions of dollars as they quit companies
losing billions in value sticks in the throat of those whose money has been
lost. Even some congressmen have figured something is wrong with such rewards
for failure. Fair game, say others. (Mar 11, '08)
THE SHAPE OF US POPULISM,
Part 2
Long-term
effects of the Civil War
The present deepening and widening financial
crisis is laying naked the wealth-making mechanisms of society's elites while
wreaking havoc with the lives of low-paid workers. It is also making imminent a
wave of populist reform that may extend for several decades. In this are echoes
of the New Deal era and much earlier reactions to economic depressions.
(Mar
13, '08)
THE SHAPE OF US POPULISM, Part 3
The progressive era
Ideological ferment at the close of the 19th century left the US with
impressive political and economic reforms for future generations to build on.
Yet fundamental issues - notably those involving race and economic
centralization at the expense of economic democracy - dating back to the
nation's birth have even now not been resolved. (Mar
26, '08)
THE SHAPE OF US POPULISM, Part 4
A panic-stricken Federal Reserve
The recent moves by the US Federal Reserve, amid
fears of an economic depression, to inject liquidity into the credit market and
to bail out banks and brokerage houses are looking more like fixes for drug
addicts in advanced stages of abuse. But for neo-liberal market
fundamentalists, the fear is not of an economic depression, but the populism
that may follow it. (Apr
1, '08)
THE SHAPE OF US POPULISM, Part 5
Rubin's
poisoned chalice
The Roaring Twenties and their aftermath demonstrated the need for regulation
to rein in the suicidal excesses of financial free markets, a lesson US
Treasury secretary Robert Rubin ignored in his promotion of deregulation. But
whereas the 1932 presidential election was held amid a severe depression, the
full impact of the bursting of bubbles created by Rubinomics will be felt only
after President George W Bush leaves office. (May
19, '08)
THE SHAPE OF US POPULISM, Part 6
The birth of
the New Deal
Jimmy Carter in 1979 warned of a "crisis of the soul and
confidence". With gas and gold prices more than treble those confronting Carter
and a trade surplus with China turned to an annual US$200 billion deficit, the
US needs its next president to match Franklin D Roosevelt's Great Depression
battle cry that "the only thing we have to fear is fear itself".
(May 21, '08)
HK-Macau
planners go for costly option
A proposed 36-km bridge to straddle the Pear River Delta between
Hong Kong and Macau is to be developed under the build-operate-transfer system
of funding, with a 50-year operating period. It is a remarkable choice given
the wealth of the local governments involved.
(Mar 4, '08)
THE ROAD TO HYPERINFLATION, Part 1
Fed helpless in
its own crisis
The US Federal Reserve, desperate to prevent the home mortgage crisis from
infesting the whole economy, is trying to inject funds into financial
institutions - a counterproductive response to a credit crisis caused by years
of excess liquidity. Hyperinflation lies down the road.
(Jan 25, '08)
THE ROAD TO HYPERINFLATION, Part 2
A failure of central banking
Before 1913, there was no US central bank to bail out
troubled commercial and financial institutions or to keep inflation in check.
The near 2,000% rise in prices since then underlines the dismal failure of the
Fed to fulfill its role as the nation's monetary guardian.
(Jan 29, '08)
THE ROAD TO HYPERINFLATION, Part 3
Inflation targeting
The market has lost faith that governments will have the
courage to adopt the policies and models necessary to keep the economy growing
without debt or inflation. The world must stop looking to the flawed
institution of central banking to bail it out of a monumental debt crisis with
more debt. (Feb 20, '08)
PATHOLOGY OF DEBT
PART 5: Off-balance-sheet debt
Increased willingness of companies and banks to take on
off-balance-sheet debt helped to boost spending and support a buoyant economy.
But promises that those debts would be paid by the banks when they come due,
even if the vehicles that held the debt could not repay it, are coming back to
haunt lenders as good times turn to bad. (Nov 30,
'07)
This is the conclusion of a five-part analysis.
 PART
1: Banks as vulture investors
PART
2: Commercial paper and pesky SIVs
PART
3: The credit guns of August
PART
4: Lessons unlearned
SUPER CAPITALISM, SUPER IMPERIALISM
PART 2: Deregulation: Global
war on labor
It is time for all countries to seek solutions to problems created by the
exploitative terms of world trade, by focusing on fundamental issues of
domestic development before the prodigal global trading system collapses from
its own contradictions and brings forth global depression. Unless and until an
equitable international trading system is negotiated, economic nationalism is a
proper response to neo-imperialism. (Oct 12, '07)
Either way, it could be
an unkind cut
Whether the Fed lowers the Fed Funds rate depends on whether it sees 6%
unemployment on the horizon. Yet a cut in short-term rates may do more harm
than good by not helping to sustain a liquidity boom, yet fueling accelerated
inflation; not to mention leading to a loss of confidence on the part of the
market in the Fed's ability to manage a monetary and financial crisis.
(Sep 17, '07)
CREDIT BUST BYPASSES BANKS, Part 1
Rise of the non-bank financial
system
The financial crisis brought to the world's attention by the subprime time-bomb
is no longer one of liquidity, but of deteriorating creditworthiness throughout
the global system. The liquidity crunch is a symptom, not the disease. The
disease is a decade of permissive tolerance for credit abuse in which banks,
regulators and rating agencies were willing accomplices. This is the first
article of a two-part analysis.(Sep 5, '07)
CREDIT BUST BYPASSES BANKS, Part 2
Bank deregulation fuels abuse
The Glass-Steagall Act, born of the chaos and misery of the Great Depression,
reined in the excesses longed for by the US financial services industry.
Finally, in late 1999, the Clinton administration yielded to industry pressure
and repealed the act. Today we see the result: a raging forest fire in the
non-bank financial system that will present finance capitalism with its
greatest test in eight decades. (Sep 6, '07)
Central bank impotence
and market liquidity
What the US Federal Reserve is trying to do in the current
subprime crisis is not merely to restore market liquidity, but to preserve
excess liquidity in the market. In other words, it is trying to avoid a crisis
by setting the stage for a bigger future crisis. (Aug
23, '07)
THE INTEREST RATE CONUNDRUM, Part 1
Economics of denial
All of a sudden, in an interruption of the spectacular rise of global stock
markets driven by abnormally ample liquidity, all eyes are trained on rising
interest rates. But because of the hegemony of the US dollar, a fiat currency
that by definition does not behave like other currencies, rising interest rates
cannot have the effect against inflation predicted by mainstream economic
theory. All in all, exchange rates mask the reality that all currencies are
decreasing in value. (Jun 12, '07)
THE INTEREST RATE CONUNDRUM, Part
2
How currency devaluation destroys wealth
As central banks thrash about creating new bubbles
to contain older ones, real wealth is sucked into a black hole of imaginary
plenty. The downward spiral will continue as long as the masters of the global
financial system continue to be guided by fantasies such as the "free market",
a dream world (though a nightmare for most) in which wealth can materialize
from falling wages. (Jun 13, '07)
A dialogue of the mute
On the face of it, Chinese Vice
Premier Wu Yi - the "Iron Lady" of Beijing - enters the second round of the
Sino-US Strategic Economic Dialogue this week with a strong hand. But with
support for the lame-duck Republican administration at a historically low ebb
and beset by a vehemently anti-China Democratic Congress, Wu and her
counterpart Henry Paulson are doomed to discuss the wrong issues at the wrong
time. (May 22, '07)
Liquidity boom and looming crisis
A debt-driven financial crisis threatens to put an end to the
liquidity boom and the accompanying global financial mania that has decoupled
equity markets from economic reality. All will melt away in a catastrophic
unwinding some Tuesday morning (New York time). And China cannot save the
world. It's part of the problem. (May 8, '07)
CHINA AND APPEASEMENT, Part 1
Beyond Munich:
Geostrategy and betrayal
US neo-cons have exploited the term "appeasement", made famous
by the Munich Pact that sacrificed Czechoslovakia to Nazi Germany, to disparage
any diplomatic move they don't favor. But appeasement, today as much as in the
1930s, is a common foreign-policy tactic that sometimes succeeds, at least in
the short term. Henry C K Liu examines appeasement with Chinese
characteristics, and why it isn't working. (Apr 27,
'07)
CHINA AND APPEASEMENT, Part 2
Not much rise, and even less peace
While the term "peaceful rise" has been replaced in
official Chinese rhetoric by "peaceful development", Washington's invitation to
China to become a "stakeholder" in the US-dominated international system and
the post-Cold War unipolar world order engineered by the US has given the
appeasement faction in Chinese political circles new ideological energy. But if
it follows this path, China will not rise, and the result will not be peaceful.
(Apr 30, '07)
CHINA AND APPEASEMENT, Part 3
China's misguided
'experts' on the US
Beijing's leaders evidently believe that Washington has
China's best interests at heart. Yet there is ample evidence not only that the
United States cares only about the United States, but that it is, always has
been and will continue to be particularly hostile to China. Beijing's leaders
are getting bad advice. (May 1, '07)
Why the subprime bust
will spread
Years ago when the US debt bubble spread to the housing sector, warnings from
many quarters - including Henry C K Liu - about the systemic danger of
subprime mortgages were dismissed by Wall Street cheerleaders as "sky is
falling" hysteria. Now, belatedly, financial wizards are slowly realizing that
their earlier departure from reason has fueled a phenomenon that is poised to
cause severe damage to the global finance system. (Mar
16, '07)
The
US as leading currency manipulator
In the wake of Tuesday's announcement of yet another
record-smashing US trade deficit, the usual chorus of moans about China's
currency is in full voice. China must stop "manipulating" the yuan to keep it
undervalued, we hear. Yet, argues Henry C K Liu, no government leaves
the exchange rate of its currency to market forces. This is particularly true
of the US, which sings free-trade lyrics to protectionist music. The trade
distortions have been created by US policies, and the China critics are in
effect telling Beijing to pay for US errors. (Feb
14, '07)
Paulson, China and the turmoil beneath
There is much that is dysfunctional and unsustainable in
US-China economic relations, but these are not issues that US Treasury
Secretary Henry Paulson will be able to resolve in discussions with Chinese
officials. The problems are the result of fundamental imbalances brought about
by globalization and dollar hegemony, and Paulson need travel no further than
his own back yard. (Dec 13, '06)
CUT AND RUN, Part 1
Fleeing self-destruction is
common sense
Disastrous policy is disastrous policy, no matter how long and how shrilly
neo-conservatives and their true believers in the Bush administration wish to
fantasize otherwise. The US public this month voted for a change of course in
Iraq, and such a change is already in the works. It's just a question of how,
and how long. (Nov 20, '06)
CUT AND RUN, Part 2
Looking to Syria for help
The Iraq Study Group recommends that the Bush administration bring neighboring
states, including longtime pariahs Iran and Syria, to the table as it tries to
extricate itself from the Iraq quagmire. But there is much history behind US
animosity against Syria.
CUT AND RUN, Part 3
Iran and the
failed US Iraq policy
The long-cherished neo-conservative dream of taking over
oil-rich Iraq, rejected by two US presidents, found a willing agent in George W
Bush. Four years after the invasion, the US now faces a Shi'ite-led regime in
Baghdad - something neighboring Iran was unable to accomplish in eight years of
bloody war against Saddam Hussein. Henry C K Liu examines the benefits
and challenges the new Iraq presents to Tehran. (Mar
20, '07)
Regime-change blowback
For at least 50 years, the US has pursued a policy of belligerent regime
change in the Middle East that time and again has suffered from unforeseen
consequences, or "blowback". The results of the US mid-term elections indicate
that the American people have realized that this has happened in Iraq and in
Afghanistan. The result: regime change at home. (Nov
10, '06)
CHINA AND THE US, Part 1
The
lame duck and the greenhorn
While George W Bush struggles to keep his administration, and the fortunes of
the Republican Party, from imploding, his counterpart in China is still
learning how to cope as the leader of a rising great power. China and the US
have always had a tense relationship, but it is one they cannot avoid, whatever
their leaders' personal difficulties. (Jun 22,
'06)
CHINA AND THE US, Part 2
The
challenge of unilateralism
US unilateralism did not start with the Bush administration. Its moralistic
roots lie in US foreign policy after World War II, especially over policy on
China. At its most dangerous, unilateralist policy undermines the regime of
nuclear non-proliferation. (Jun 30, '06)
CHINA AND THE US, Part 3
Dynamics
of the Korea crisis
Geopolitical undercurrents flow through the Korea missile crisis as they do in
the Middle East. Under way are attempts to forge new international climates so
as to restructure existing regional security patterns. In East Asia, the
undercurrent relates to the rearmament of Japan as a counterweight to a rising
China. (Aug 16, '06)
CHINA AND THE US, Part 4
Proliferation,
imperialism and 'China threat'
As in the 1940s, perceived threats,
misunderstandings, racism and outright lies are bringing the West, led by the
US, into conflict with East Asia, led by China. Even Japan's elevation to
"honorary white" status has parallels in World War II.
(Sep 8, '06)
CHINA AND THE US, Part 5
Kim
Il-sung and China
Six decades after the end of World War II, the US posture on Korea and
Taiwan remains basically the same, to prevent the unification of the two Koreas
and the ending of the Chinese civil war with a no-war, no-peace status quo,
thus keeping two major Asian nations from normalizing their wartime anomalies.
And now there is a new policy of "containment". (Sep
15, '06)
CHINA AND THE US, Part 6
Korea under Park Chung-hee
The
continued isolation of North Korea is just fine with some players in the Great
Game, as evidenced by the twice-stalled progress toward reunification. The
first home-grown reunification effort was hatched in 1972 by Southern president
Park Chung-hee, who was assassinated under mysterious circumstances. But the
story's not over yet. (Oct 24, '06)
CHINA AND THE US, Part
7
Clinton's
belated path to peace
When Bill Clinton took over the White House, it was a time of opportunistic
hostility toward China dictated by US domestic political sentiments. For a
number of reasons, not least a near-war with North Korea, China remained on the
back burner for most of Clinton's two terms. But at least peace with Pyongyang
was maintained, for a while.(Oct 31, '06)
CHINA AND THE US, Part 8
Bush's bellicose policy on North Korea
The latest crisis involving North Korea, which tested a nuclear weapon on
October 9, did not begin on that date - it began six years earlier, when George
W Bush entered the White House and promptly overturned the progress the Clinton
administration had made toward rapprochement with Pyongyang.
(Jan 4, '07)
CHINA AND THE US, Part 9
The North Korean
perspective
The US has always claimed that it wants a nuclear-weapons-free Northeast Asia,
but its actions - especially since the advent of the Bush administration - in
the Korean Peninsula belie that. "Axis of evil" member North Korea, on its
part, has long provided evidence that it supports non-proliferation and
denuclearization, notwithstanding its missile and weapons tests last year.
(Jan 10, '07)
CHINA AND THE US, Part 10
The changing South
Korean position
South Korean politics has been evolving along two parallel
paths since the Cold War. One path moves toward increasing resistance to US
domination, and the other toward closer ties with neighboring China. Both paths
lead to moderation of Cold War ideological hostility in South Korea toward its
estranged Northern fraternal state. (Feb 6, '07)
CHINA AND THE US, Part 11
Japan's strategy to
be a 'beautiful nation'
Saddled with a dark history of imperialism and aggression,
Japan's efforts to remake itself in the eyes of its Asian neighbors have been
an uphill struggle for six decades. While its youngest ever prime minister,
Shinzo Abe, has made serious efforts to mend fences, there remain good reasons
for skepticism over Japan's true loyalties, motives, and long-term intentions.
(Mar 2, '07)
America's untested
management team
The US Treasury has not been performing at its best in the past six years.
Enter Hank "the Hammer" Paulson, fresh from Goldman Sachs, ready to tackle the
challenges facing the world's biggest economy. He will find that the greatest
of those challenges lie not in Beijing, Moscow or Caracas, but at home in the
US. (Jun 16, '06)
THE WAGES OF NEO-LIBERALISM, Part 1
Core contradictions
Despite all evidence, the US in particular continues to delude itself that fair
exchange rates, especially for the Chinese yuan, would solve economic ills. But
Western exchange-rate policies have long been part of the problem; what
economies worldwide should be floating is wages, not exchange rates. (Mar
21, '06)
THE WAGES OF NEO-LIBERALISM, Part
2
The US-China trade imbalance
A rising US trade deficit with China has
generated much heat but little light about unfair Chinese trade practices. The
real danger to the US economy is that the US sovereign debt rating is now
dependent on the soundness of Chinese sovereign debt - in other words, on
China's credit rating.
(Mar 31, '06)
THE WAGES OF NEO-LIBERALISM, Part
3
China's internal debt problem
China's fiscal
policy has begun a gradual shift from "proactive" to "prudent". Beijing now
urgently needs to deal with pressing economic and social problems that have
been created by its transition from a socialist planned economy to a
"socialist" market economy. One key factor is how to handle the national debt
in a system dominated by US dollar hegemony.
(May 26, '06)
WAGES OF NEO-LIBERALISM, Part 4
Development financing and urbanization
Similar
to other developing countries, the most fundamental problem China faces in its
path toward industrialization is urbanization. This is not solely a hallmark of
the country's economic growth over the past two decades, or of the policies of
the Communist Party. It is reflected in millennia of Chinese history.
(Jul 21, '06)
PART 4
Toward living wages
in the modern era
The idea of a global labor cartel is based
on the needs of a modern economy for managing consumer demand to overcome
structural overcapacity, which globalization has made a worldwide problem. The
rules of economic democracy mandate that capital in a modern economy is formed
from the savings of labor, which in turn depends on rising wages.
(Mar 8, '06)
THE
WIZARD OF BUBBLELAND
PART 4: Global money and
currency markets
Any notion that money is not available, or that it may not be
available at any price, only raises alarm to panic and enhances panic to
madness, with a total loss of confidence. Yet the acceptance of loans at
abnormally high interest rates is itself a sign of panic. Against such
contradictions, no central bank - including the Fed under Alan Greenspan - has
found the appropriate wisdom. (Feb 15,
'06)
Of debt, deflation and rotten apples
The US and Japanese economies have both
been ailing for a long time, with different symptoms of the same disease. While
the latter struggles with deflation, in the US the trade apple is kept shining
on the outside by sucking nutrients from a slowly depleting, rotting core,
eaten away by a growing debt worm, turning a sick economy into a terminal case.
(Jan 10, '06)
Superpower vulnerability
It is simplistic to blame America's crusade of moral imperialism on the
neo-conservative cabal that currently dictates US foreign policy. The scene was
set long before their rise to power, and the harsh (and still unlearned)
lessons of the futility of forcing a set of mores on others can be seen
throughout history.
The real oil
crisis
As all oil money returns to the US anyway because of the unabated
appetite for dollar assets, $50 oil will buy the US debt bubble a little more
time. The key issue of the coming oil crisis is ballooning equity prices
unsupported by earnings. We are heading toward a replay of the '80s, when a
widening trade deficit and a precipitous fall of the dollar triggered the 1987
collapse of the equity markets. (May 25, '05)
Hong Kong
appeal court in the dock
The Hong Kong Court of Final Appeal
thinks it can rule on constitutional issues of sovereignty and overrule China's
parliament, grossly misinterpreting the territory's "high degree of autonomy"
bestowed by Beijing to mean independent sovereignty.(May
13, '05)
Nationalists, communists
mending fences
For the first time in more than 50 years of estrangement from the
Chinese Communist Party, the Taiwan-exile Kuomintang Party has sent a
delegation to mainland China. This is an examination of the history
of the historical break, and signs of reconciliation.
(Apr 4, '05)
The glorious role of Tung
Chee-hwa
History will judge that Tung Chee-hwa, who retired
because of failing health - not political banishment - was never part of the
problem, but part of the solution. The day will come when Hong Kong longs for a
leader as kind, gentle and accommodating as Tung, his glorious place assured in
Chinese history. (Mar 22, '05)
Looking after the little
man
The US has evolved into a superpower in the course of two world wars and will
remain one for the foreseeable future. As such it has earned the privileges
associated with the instinctive prerogative of a tough big guy. But the
complete American character requires the US to champion the defenseless little
guys of the world as well. (Sep 16, '04)
A poisonous geopolitical jungle
An iron rule of terrorism is that what goes around, comes
around from geopolitical blowback. One cannot exterminate terrorism any more
than mosquitoes, except by reordering the ecosystem. Despite shining examples
of this lesson being ignored - with dire results - in the Middle East, the US
remains unbending in its geopolitical goals. (Sep
14, '04)
Geopolitical weeds in cradle
of civilization
Since the modern Iraqi state was the artificial product of
Western geopolitical maneuvers in the cradle of civilization during the age of
European imperialism, Iraq's full geopolitical spectrum has always included
Pan-Arabism beyond narrow state interests. This was overlooked when the US
decided to topple Saddam Hussein. This is the second part of an on-going
series. (Sep 2, '04)
Geopolitics in Iraq an old game
The Americans are not the only ones to have had a
tough time of it in Iraq. Neither the Persians nor the Ottomans could keep the
population effectively in check, and the British occupiers also failed. Iraq's
troubled history goes back centuries, and its echoes resound forcefully today.
(Aug 17, '04)
Occupation
highlights superpower limits
Sunnis in Iraq and the region are torn between their fear of a rise of the
Shi'ites in Iraq and their commitment to Arab nationalism stimulated by foreign
occupation. Neither option has any room for US superpower dominance.
(Apr 19, '04)
MAO AND LINCOLN,
Part 1
Demon
and deity
While vilifying Mao Zedong, the neo-liberal West has idolized Abraham Lincoln.
Unlike Lincoln, Mao is not given credit in the West as a revolutionary of noble
principles who fought for equality using all necessary means. Yet Lincoln's
assault on due process was more violent than Mao's. (Mar
30, '04)
MAO AND LINCOLN, Part 2
Great Leap Forward not all
bad
Mao Zedong has been vilified over the Great Leap Forward, but 30
million people did not die. The numbers are wildly exaggerated, and Henry C
K Liu argues that many deaths were caused
by cyclical famine and a US embargo on grain imports.
Today, globalization causes greater suffering.
(Mar 31, '04)
REALPOLITIK AND BUSH'S REVOLUTION
Part 1: The Philippines revisited
George W Bush early this month sought to justify his
country's bloody and costly occupation of Iraq as part of a proactive "global
democratic revolution". Shortly thereafter, Bush visited a country still paying
the price for a failed US policy of imposed democracy: the Philippines.
(Nov 18, '03)
REALPOLITIK AND BUSH'S REVOLUTION
Part
2: Flawed visions of democracy
George W Bush has built his new policy
of world democratic revolution on the assumption that democracy in foreign
lands would automatically welcome US imperialism in the name of capitalistic
free trade. We see now that not only can democracy not be easily imposed from
outside, even if it does take root it may well flower in ways detrimental to US
interests. (Nov 19, '03)
The
Election Cycle Theory and the Fed
US stock
market moves, some suggest, follow the four-year US presidential election
cycle, with stocks declining or rising depending on how the Federal Reserve
reacts to political expediency and perceived, or imposed, economic necessity. A
look at the history of this theory and how it might affect the 2004 campaign.
(Feb 23, '04)
Fed's
pugnacious policies hurt economies
United States Federal Reserve chief Alan Greenspan denies that Washington's
policies caused the crash of 1987 and helped create the later "irrational
exuberance" and economic bubble that burst, damaging US, Asian and other
national economies. Meanwhile, there's the issue of the vaunted stock market
"recovery" of last year that was - and is - fiction.
(Jan 9, '04)
The war that could destroy both
armies
In April, a letter to the editor of Asia Times Online
critical of a Henry C K Liu article predicting that the Iraq war could "end the
age of superpower" suggested: "Reread his article six months from now as a test
of his ability to prognosticate." Six months have passed, and Liu takes another
look at the challenges facing the US military.
(Oct 22, '03)
How Turkey's goose was
cooked
While in Turkey recently for the seventh International Conference on Economics,
Henry C K Liu had occasion to see the effects of that country's
adherence to neo-liberal market fundamentalism under the rules imposed by
foreign agencies. (Sep 15, '03)
America's selective
strong dollar policy
Since the start of 2002, the US dollar
has fallen as much as 30 percent from its peak against the euro, and has also
declined against other key currencies, but the current US administration still
officially maintains a long-term strong-dollar policy. Henry C K Liu examines
the sustainability of this policy in the light of neo-imperialist dollar
hegemony. (Aug 13, '03)
Realism finds new champions
In the wake of protests in Hong Kong against a proposed anti-subversion law, US
observers are suddenly exhibiting neutral respect for historical facts about
the territory, and are at the same time adopting a pragmatic view of Taiwan's
relations with the mainland. Henry C K Liu doubts Hong Kong
Democrats, or pro-independence Taiwanese politicians, will follow suit.
(Jul 30, '03)
Why Hong Kong is in crisis
This week, on the sixth anniversary of
Hong Kong's establishment as a special administrative region of China, half a
million of its people took to the streets in a clear illustration of the
serious disconnect between the territory's government and the governed. While
the protest was billed as being against Hong Kong's proposed security law, the
most heartfelt discontent is rooted elsewhere. (Jul
3, '03)
War that may end the age of superpower
The Iraq war will end from its own inevitable evolution. And it will
not be a happy end. There is yet no discernible exit strategy for the US. After
this war, the world will have no superpower, albeit the US will remain strong
both economically and militarily. But the US will be forced to learn to be much
more cautious, and more realistic, about its ability to impose its will on
other nations through overwhelming force.
(Apr 4, '03)
Power and the new world order
Thomas Friedman, the Pulitzer-winning voice of US neo-liberalism, has rapped
China for not getting on board with US foreign policy. But why should it?
Indeed, why should any nation-state be a cheerleader for a World of Order that
exists primarily for the economic benefit of a single entity - the United
States of America? (Feb 24, '03)
Building
on the lessons of history
As New York City prepares to memorialize the
September 11 tragedy on the site of the destroyed World Trade Center, other
great - and not so great - architectural projects may serve as lessons. In the
conclusion of a two-part analysis of the WTC project, Henry C K Liu offers an
historic guide. (Feb 12, '03)
The
towering challenge of the WTC project
The vitality and resourcefulness that allowed New Yorkers to move on
from the tragedy of September 11 are being tested as the city plans how to
replace the twin towers of the World Trade Center. Henry C K Liu examines the
project's enormous challenges in a two-part series. (Feb
11, '03)
War
and the military-industrial complex
After World War II, the role of defense spending in the US
shifted from domestic economic stimulant to global geopolitical weapon. But
while Ronald Reagan successfully used Star Wars to bankrupt the USSR, the
nature of armaments has fundamentally changed with the arrival of biological
and chemical weapons. Terrorism can only be fought with the removal of
injustice, not by developing anti-missile defense shields and smart
bombs. (Jan 30, '03)
The
Bush plan: Global-scale disappointment
The world is at a very dangerous moment caused by violent
political fallouts from the destructive economic impacts of neo-liberal trade
globalization. All wait for the president of the United States to command the
awesome power of his office to "think big" and lead the world to economic
recovery. Instead, we are given the Bush "growth and jobs" proposal, which
merely reinvokes dated supply-side theories and further enriches the rich.
(Jan 9, '03)
US
on Hong Kong: Calling the kettle black
A leading US newspaper has deplored "Hong
Kong's current drive to enact insidious security legislation that threatens its
people's freedoms", and George W Bush has reportedly phoned Jiang Zemin to
express concern over Hong Kong's proposed national security law. That would be
the same George Bush who signed into law the draconian USA Patriot Act. (Jan
2, '03)
Reaganite
moralists and Hong Kong security
The Project for the New American Century has released an open letter
to George W Bush calling for official US opposition to proposed new national
security laws in Hong Kong. Henry C K Liu examines PNAC - a who's who of the US
political right - and whether its anti-China stance needs to be taken
seriously. (Dec 6, '02)
Hong
Kong pegged to a failed policy
Since its establishment at the start of the Asian financial
crisis, the Hong Kong Special Administrative Region has operated on a
single-note monetary policy: that of defending its currency's peg to the US
dollar. While the SAR's economy plummets, the peg paralyzes all new policy
initiatives. (Oct 15, '02)
Crippling
debt and bankrupt solutions
A movement to tackle distressed sovereign dollar debts through an international
bankruptcy regime has gained momentum in neo-liberal circles. But the proposals
favored by creditors focus on the wrong models in bankruptcy law, and would
serve to enslave debtor nations further while leaving the global economic
system at risk. What is needed is a debtors' revolt. (Sep
27, '02)
The
economics of a global empire
To find the true source of an empire in today's world, take a page from
Watergate lore and simply "follow the money". The trail leads to the world's
low-wage exporting nations - notably China - which unwittingly spent the past
20 years funding the US hegemony that they now deplore.
(Aug 13, '02)
China vs the almighty dollar
Global capitalism is the tool by which
world economies are kept subservient to the United States economy through
dollar hegemony. Asia, in order to service its dollar-denominated debts, is
thus forced to keep wages low and provide Americans with cheap imports. But
China is now in a position to change this state of affairs.
(Jul 22, '02)
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Series
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A
proposal
by
Henry C K Liu
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The Coming
Trade War
(Jul, '05)
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A 10-part series
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Money, Power
and
Modern Art
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On China's currency
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China-US:
The Quest
for Peace
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Religion, enlightenment, and imperialism
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A critique of the role of the world's
central banks
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