Best comments 2013 (part 2)

1. China's cash crunch threatens Shadow Banking shock - Telegraph 24 Dec 2013

The repo has descended to 5.4% today after central bank injected liquidity into the system. The liquidity in the market is abundant, especially for larger banks, but the lending is dismal. A slowing economy results in slower credit growth that banks play fast and loose, circumscribed by prudent lending.

Larger banks usually chime with larger customers basically are state enterprises, are not doing well as it is now, whereas small medium enterprises(SMEs) are duds, fraught with vestige of lending money due to poor credit quality that large banks are reluctant to make lending which restricting credit growth.

The ramification is those need cash the most (SMEs) are running short of cash, A cash crunch came thick and fast is just a replay of past episode few months ago. it also means that there is no effective solution to resolve the hitch despite the Chinese government loosen the grip to allow smaller private banks beginning lending business afoot  to SMEs.

            In the end, credit quality is an overarching factor, whatever the size of the bank, It is               primal that banks are in for a profitable business. Chinese businesses must learn to                    weather good times and bad. There should be chapter 11 like bankruptcy law for                      insolvent companies in no time to reorganize and restructuring trouble businesses out              of the pickle to protect not only debtors but stakeholders. The problem lies in the                       execution.

2. China sends warplanes into air defense zone - Chicago Sun-Times 29 Nov 2013

The tension is now heightening. the idea of air defence zone was folly that China now can't withdraw, neither can it back away from execution due to lose face and is mortified by domestic opprobrium for no action to uphold their claim  which  results in they can only harden their stance.

I t was also folly in the sense that the Adiz(Air defence identification zone) helped their foe to push the US to the frontline, in direct Sino-US confrontation, and the chances to flare up warfare due to miscalculation is all time high.

It benefits only to the rightist Japanese they anticipate anxiously the US to protect their Diaoyu / Senkaku Island’s sovereignty, and now China has escalated the tension by giving itself lesser leeway to maneuver diplomatically. Both the US and China are in a dire strait at the altar to fight for few rocks at a no win situation and the balance go the other way only benefit the rightist Japanese.

            The Adiz also serves as writing on the war to China’s neighboring countries and the                  world that a rising China will not always be peaceful.

3. China creates 'air-defence zone'

China always claims its rising as peaceful, but others smell rat. The Chinese president Xi Jinping reassured the world that the country would not pursue hegemony. But watch what they do is a much reliable evidence than he said.

Immediately after China’s self-proclaimed "air-defence zone", It truly put the America in a fix, the tension between the two super powers escalated. Despite the protests by the US, Japan and South Korea, China is bizarre in testing their brinkmanship perceptibly to check what the reaction by the concerned parties. It simply can ignore a litany of protests, because this is rather a weak challenge to their legitimacy. As year go by, the territorial disputes becomes fait accompli--a legitimate claim.

The shrewd Chinese wields its economic clouts to tame dissidents. South Korea is the weakest in the link due to its close economic tie and its proximity with China. Though an ally of the US, it probably will not adopt a confrontation stance toward China. It also depends much on China to influence the wayward North Korea.

The Japanese Prime Minister Shinzo Abe is a tough nut to crack. There is no denial about the Chinese territorial ambition. To my mind, the Chinese does not want to escalate the Diaoyu / Senkaku-shotō Island, so long as the Japanese admits the island is in dispute and does nothing about it; the Chinese would probably leave it as it is until they are growing into strength in time to come. Shinzo Abe is eager to show in no uncertain terms about Japanese’s sovereignty about the island, if such is the situation that leaves China with no choice if they want to pursue the same claim.

The “air defence zone” probably put the US in the worst possible choice, as conflicts easily flare up if China adopt a harden stance. The US will be in direct confrontation with China, which China also try to eschew going war with the US, but when the nationalism overshadows cool mind in China will force the government to make a hard choice the more, anything can happen. And to the US, if the US dares not to confront China, it would probably lose its leadership in Asia Pacific region when its claim of AP is pivotal is a fantastic talk, so, the probability to go for war is still good.

Amidst quarrel and squabble, the only solution for direct clash is back to negotiation table. Each party must concede a well grooved pattern that there is a grey area in strife-torn East China sea where no party should assert sovereignty. Suffice it to say that leave it as status quo for the time being is the optimal choice.

4.China hard landing is likely: Andy Xie Caixin Online Finance plus 22 Nov 2013

It is probably hyperbole that on the verge of hard landing is impending.

Le Keqiang is probably not in the least fear of adopting bold steps to forge ahead financial reforms, and is willing to experiment new ideas, such as that of Shanghai economic special zone.

In the midst of any reforms, not only in China, reformer encounters exogenous and endogenous impediments, such as that mentioned in the article:  carried trade, if it happens in relatively advanced financial market like that of Japan, it goes without saying that there bounds to be hordes of speculators looking for higher yield opportunities in a quasi-capital control country, like China.

Non-performing loans and shadow banking are unpalatable wild cards, usually prevailing under depressed or undeveloped economy and housing market. This phenomenon also happens in Europe. The Chinese government is cognizant of the housing sluts in derelict in some cities. They are testing water to find a right balance in between healthy property market growth and the suppression of speculative housing activities.

 To my mind, the crux to nip in the bud, eradicating housing bubble risk is to control land sales and cater for more subsidized public housing to allay lower rung’s crying need of housing demand, The odd thing is, land sales, to say the least , are the source of the housing bubble and the major source of local government income. The Chinese government must bear the mantle to learn from past lessons.

5.Chinese business investors flock to UK - FT.com | UK Business 18 November 2013

It can be good news and bad news for the UK. This stupendous progress  at the back of high public and private debts, tenaciously attracting foreign investments will bring sustainable growth to the country by using foreign funds. Over and above, foreign direct investments also help to lower unemployment.

The flip side is Chinese entrepreneurs (except those receiving higher education abroad) are blindsided by having little knowledge about the razzle-dazzle Western business and regulatory environment.

They will encounter rifts in terms of unconscionable culture shock, and intensive and cacophonous conflicts if they resort to deeply grooved habits and using boilerplate business skills acquired at home to run their foreign businesses, will cast a pall to their foreign ambition. It behooves that both sides need to, especially the Chinese side, in no small part,  to gradually adapt to variegated changes by learning the rope.

All that said, a quicker way, come hell or high way,  will be giving foreign managers carte-blanche and for them taking a back seat, it is an inopportune time to be on their own until they are through the gamut of the whole operation then consider weaning off.

6. The ECB’s Asset Quality Review: Are Banks Doing Their Homework? 7 November 2013

It is evident that the current prostrate large banks in Eurozone are undercapitalized. Why local governments take a respite acted supinely? It is because big banks assets usually larger than those of the governments, and there is no clear demarcation to garner the needed funding in between government and banking sector.

And now, most Eurozone countries are heavily in debt, let alone have the ability to rake up funds to recapitalize their banks in any endeavors. According to the economist, even France and Germany's large banks can’t elude the fact of undercapitalization. There is no qualm that many of the big banks will fail the review, but the question is not the review, but where (ECB, Germany, IMF or public tender?) to marshal the needed funds? Without recapitalization, Eurozone’s  recovery is hanging in the balance! 

7.Senate Passes Bill to End Fiscal Impasse  17 Oct 2013

The outcome is now a prosaic stagnation; all are back to the bargaining table, a circuitous round back to the original point. The merit is it eluded a deleterious head-on default in the nick of time. According to Financial Times, the treasury’s computer system cannot prioritize payments to international creditors, so presumably, heading to a default was inevitable, and now budget talk deadline defers to another showdown four months ahead, and no one knows whether it continues to boondoggle repeating the same episode, the out of whack political system consuming enormous energy but yielding no results and only kicking the can down the road.

I mentioned in my previous comment, a two party system (bipartisan) unwilling to compromise only leading to a big crash than a political solution. The strategy to elicit constructive checks and balances between parties diminishes. I read many comments from LinkedIn’s group subscribers; it appears that many Americans still value checks and balances. The crux of the problem of the current system now is it hampers political progress. You may blame the Republican Party for all the havocs, but deep in the skin it is the ideologically divided Americans is the center of the issues.

How to break through the current political stalemate, I think a new centrist political party may be a way forward to progress the political agendas. They are neither red nor blue, say purple. The purple party will pursue a center approach. Their targeted competing political territories will be at swing states where neither red nor blue is predominant. Ideally they capture all the seats of swing states, which resulting neither one party can command the majority vote in the house, In order to pass the bills, red or blue must coalesce the center party and move their stance toward the center than to the extreme, making it easier to break the political gridlock that is the primary purpose of the existence of the center party.

But now, who is willing to come to the fore playing this role? 

8. US government shutdown: lessons in leadership Executive suite 11 October 2013

The recent development is the Republican offered to lift the debt ceiling temporarily for six weeks to facilitate the budget talk, but the Whitehouse rejected the offer, insisting to open the government and lift the debt ceiling first before talk can begin.

It would be hard for the Republican to accept a frizzled out and stop the farce if open the government ostensibly means approving the budget without any haggling, the talk after approval carries very weak negotiating power, and it is hard for them to accept this deal, and may be the standoff continues and everything is back to square. One solution to the stalemate is partial approval to let talk continue and temporary open the government to give further negotiation a chance.

There are mooted wild guess about there will be no default on payment obligation among some observers and Republicans, because tax revenues continue to pour in and the government can prioritize what to pay first. There are some truths in them, but no one knows the veracity of actual cashflow position more than Jack Lew. There are several determinants unknown to us:

1.      The quantity of tax revenues flow in and conserve for the next big payouts, and the consistency and predictability of tax revenues flow. This part usually is uncertain and unpredictable.

2.      The quantity of essential payments: this part usually is certain and fixed. Non-essential payments either deferred or whittled away.

Even the government will not default on bond payment due; we can imagine the treasury will be operating in a constricted manner tantamount to an austerity.

To break the gridlock, both sides must disabuse to manifest flexibility and readily to see from the other party perspectives. The purpose of Republican’s offer is not to yield to Mr. Obama’s demand, but switch their firepower to budget negotiation, lifting debt ceiling is a minnow (I have explained in the previous comment); we can foresee there will be a harrowing hard bargain. The Whitehouse‘s rejection also means now turning the table around, the Republican is emboldened to vociferously use this for a haranguer that the president turned down the offer, it is he culpable not them pugnacious. So, it is imperative to find middle ground to resolve the conflict stymies the progress rather than balked at the status quo resulting unruly calamity causing disarray.

9. Markets are betting that the U.S. Debt ceiling will be finally raised before the 17th of October. But imagine the opposite! CFO 8 October 2013

It is a political brinkmanship that each side refuses to budge, stuck in the cul-de-sac that expecting the other side to chicken out of the political stalemate. In the latest edition, a joke in the economist wrote” To a wondering world, the recriminations missed the point. When you are brawling on the edge of a cliff, the big question is not “Who is right?”, but “What the hell are you doing on the edge of a cliff?”

It is not facetious, in my previous comment; I said the pressure was on the Republican side. Majority of the Americans cannot condone the republican rancorous politics using Obama care to hold their President hostage, Even though they don’t fully endorse with the healthcare policy.

it is a lose/lose situation, Mr Obama cannot sit tight to wait for the Republican yield to his request. It is the Administration that runs the country, not the Congress. If the Republican stick to their gun let all fail together. The outcome can be irreparable. It is the Administration to clean up the leftover, so, it is a lose/lose situation. The American people do not want to see the country in a dicey state, expecting the administration to lead and in control of the whole situation; implementing damage control to minimize the risk of worst possible outcome.

Since both sides are stonewalling, it is imperative to have mitigator schmoozing seeking breakthrough to the gridlock, and it is achievable as many Republican congressmen do not endorse the idea of tying the budget or debt ceiling to Obama care. Now it is only face savings on both sides that is the issue, a bearable concession would be able to break the ice and ensure the matter not scuppered. The Vice President Mr Joe Biden is an ideal candidate as mitigator, a wise and canny politician with abundant political capital in his bag. There is no qualm he can achieve the task.

In fact there is no need to set a debt ceiling, because it is repeating the task of formulating the budget. Debt ceiling is a level doesn't say anything good or bad. It is the gradual decline of debt level is the primary concern, and budget cut already performing the task of debt reduction. The whole idea of budget is to ensure you are prudent enough not to spend more than what you earn. Beside quantitative target, there should be qualitative goal if you want to be constructive to ensure that certain level of spending must gear toward generating future revenues. Not just haggling of what to cut what to spend that frequently mire into political wrangling. (Republican wants to increase Defence budget whereas Democrats want to increase social welfare.)It is the consensus of strategic intent that is crucial to build into budget formulation. Since the debate of budget has already done the job, why debt ceiling must be there? 

10.This shutdown may push the parties to come up with an agreement on the debt, and that would be a good thing. bit.ly/1hfpNda  Chief Financial Officer 2 October 2013

It is a sad episode that bipartisan interminable rancor in a morass finding innocent civil servants victimized (taking no pay leave). If shutdown may push both parties to reach agreement, it won’t evolve by keeping feisty to the current bane. What is causing the gridlock is neither side has the attitude of compromising, and the refusal of either party to see each other stance.

Of course now the pressure is on the Republican side, on the part of bad publicity. Forget about the tea party put muck out of thin air, the feckless younger Republican congressmen may be of the view that the harder they push to topple Obama care, the greater they get the ground support from their own territory. But for neither blue nor red territories, bad publicity will gravitate more seats toward the Democrats, if they are unyielding. According to later survey, majority of Americans do not want Republican congressmen use budget approval as weapon to postpone Obama care. Which only to prove it is wrong strategy that it does not play out constructively as expected for each party to counter check the others if neither side wish to compromise. 

Republican should see Mr. Obama will take his healthcare reform as a signature piece during his presidency. Any move to eradicate this achievement will encounter strong resistance. Mr. Obama also must not over ebullient, there are shortfalls in the newly born healthcare policy rickety that need to refine.

According to Wall Street Journal, temporary employment business is booming, because companies are skittish about bringing on permanent hires to keep employees to below 50 level to get round Obama care’s magic number. If Mr. Obama is open his health care system for refinement and offers continue dialogue, in exchange for the Republican’s support.

If worse comes to worst, Republican has nothing to win for prolonged shutdown, overdone pre-election bluster only see them losing more seats next year; this will be a stepping stone to come to term with Mr. Obama for those non-extremist Republicans to compromise, support the budget and lift debt ceiling (why it should be there at all to consume so much energy year in year out, after all.).

11  Give Jobs a Chance nytimes.com by Paul Krugman CFO 17 September 2013

My line of thought does not go along with Mr. Paul Krugman.

First, it is felicitous to taper if Fed found open market operation was no longer as effective. There is no reason to continue the futile effort to flux the market with excess monies that no longer stimulate derisory demand; Bernanke’s experiments can only speak of one truth that monetary policy can only do so much. And highlight an important lesson that monetary policy can only be effective if there is resurgence of corporeal demands. A surfeit of monies can be counterproductive in driving economic growth.

Second, the easing policy keeps the interest rate low has already revived the housing market, there is no need to keep interest rate low for prolong period of time to induce an effervescent housing market, tapering is to correct the market to its fundamental.

Third, there is no concrete evidence to adduce that there is strong correlation

between easy monies and job growth. 

I am discomfited by Mr. Krugman recent article that he lamented it was the quantities of the monies not swingeing enough that obstructs job growth. If there is strong corporeal demand, it would be sensitive to money supply growth. It is elusive by increasing further money supply that can’t make any wonder. He should consider other factors are at play which weakens the demand, such as rickety global economic recovery, government budget sequestration and austerity measures in Eurozone, and nascent private sector growth.  All these are projecting a low growth, low consumption environment; the buck, as it were, stop there; there is nothing easy money can do about.

12. US, Russian Naval Deployment Near Syria - Update 10 September 2013

A sigh of relief, there is an optimal option now that proposed by Russian foreign minister that for Syria to surrender the chemical weapons. According to news, Mr. Obama is keen to pursue diplomatic solution. In my last comment, I suggested not rushing into war; the reason was the process of gathering evidence was incomplete.

Though the president has the authority to wage war but could fell into the trap of Mr. George W. Bush’s footstep. With hindsight, many US allies carefully drafted using the words of “strong response against the regime” few stop short of explicitly supported military option (Most probably concerned about the prohibitions of UN charters).

To my surprise, Mr. Obama opted for congress’s authorization. This move is risky indeed, because the perspectives of viewing the incident amongst the white house, the senates, and the lower house, the differences can be widely apart, especially the lower house, their votes are driven by ground sentiments, and about 60 % of American against intervention, That will ensnare Mr. Obama in an awkward position, because the president can’t on the one hand seeks authorization, and on the other ignore the Americans’ wish not to be heady for war. This was why David Cameron opted out.

The dilemma is now solved by the new option for Syria to surrender Chemical weapons, why I see this as an optimal solution for the president;

First, it gives the president a stepping stone to go with the view of the majority Americans.

Second, the objective is to stop the proliferation of chemical use, and the West was trying hard the UN security option but to no avail, because the Security Council was “held hostage” by some members. In fact, the Security Council is badly needed to reform to facilitate decision making rather than being obstructed by unanimous agreement. Mr. Ban ki-moon fails to restructure the council to facilitate majority-voting.

Third, some say military strike fizzles out, the president’s cachet and US leadership in the Middle East are at stake. That is wrong mindset, We should measure against outcome not means. Military action is only the last option, there was a war strategy in ancient China by Sun-zi “不战而屈人之兵” It literally means “winning the battle without going for war is top choice.” the ultimate objective was to stop chemical weapon use not just flexing muscle. In fact, it was the president shows his mettle by garnering international support that puts Russia and Syria in hot soup to seek viable option.

Fourth, as to where and how many weapons that Syria possesses is a matter of intelligence, the US can up the stake by asking Syria and the rebels to sign treaty not to proliferate chemical weapons, this is to stop any future use. According to some magazine, the purpose of Syria chemical weapons accumulation was to counter the threat of Israel. Involving in the Middle East ethnic conflicts is meaningless; using military option to solve these conflicts is pointless. Not one to mince words, the only solution to Middle East issues is soft power that boils down to two words, “trust” and “tolerance”. This also applies to the relationship between Israel and Arab countries.

13.Syria intervention plan fueled by oil interests, not chemical weapon... theguardian.com 5 September 2013

The statement sounds familiar, there was a time during the Iraq war, the Chinese media clamored about the ultimate motive of US’s Iraq war intervention was germane to devouring the abundant oil supplies in Iraq. With hindsight, who benefits now the most from the supply of oil from Iraq? It is China. It is absurd to speculate Syria military intervention plan was fuelled by oil and gas interests. Without proffering ground troops in Syria and securing domination in the politics of the rebel parties, there is very little influence in exploiting energy advantage. Judging from the portend of current mayhems in the Middle East's geo-political conflicts, the speculation is crassly unfounded.

14.The Triumph of Parliament – Telegraph Blogs 31 August 2013

It is too early to celebrate the triumph of the thirty vote’s majority. I think it was a wrong precedent in the past that clouds the right decision now. It was the ex-US president George W Bush and   ex-British Prime Minister Tony Blair without concrete evidence of "chemical weapon of massive destruction" that impugn the credibility of the subsequent just war against a crime that was pernicious; the vile effect is to sway the public confidence that it is "a lie of wolf come again"

However, all is not gone. The UN inspectors can play a crucial role now as independent party to testify whether it is a fact or lie. There is no hurry to rush to wallop Assad by missile attack in fear of letting him scot-free, think of something more effective to cripple the regime, and first and foremost, for any troop going to war, there must be a overwhelming purpose that people will convince it is just a holy war. a vivid video image will have explosive impact to say everything than a thousand words of any persuasion.

15.60% Of Americans Oppose US Involvement In Syria, Only 9% Support... 26 August 2013

It is not a simple black and white issue. I believe the Whitehouse has taken into account the pros and cons of direct intervention, of course, also the view of the Americans. 

The Whitehouse weighs against ethical belief against non-intervention, the strong opposition stance of Russia, the chances of quick win, the connection of the rebels with Al-Qaeda, the solidarity among the rebels, the credibility of rebels to lead the country and the nature of conflicts in the civil war are also the concerns, and ultimately, how the world look upon the America as a credible world leader to manage peace,

16.Radioactive Leaks in Japan Prompt Call for Overseas Help  bloomberg.com  21 August 2013

Woefully, the Japanese at Fukushima suffered another onslaught in a rash. 

First, it is the underestimation of the risks of deploying nuclear energy untoward into disarray, and also the lacking of readiness undermine to meaningful response to any kind of unruly nuclear crisis.

Probably there was too little successful precedence to follow, to say the least. The consequences are baleful to human lives and damage to the environment.

It is now clear that the price to pay for technical incompetence is egregiously large. There is also an element of staid Japanese politics into play as to how to manage a crisis to allay public worries leaving the mayhem.