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Global Crisis Blog

China’s G-String at the G-20

By Shlomo Maital

As the G-20 ministers meet in Toronto and Huntsville, Ont., creating massive havoc in downtown Toronto,  China again shows its skill in sleight-of-hand diplomacy.  China is dressing up its apparent willingness to contribute constructively to the global crisis and restore global balance — but in fact, all China is wearing is one thing G-string, and maybe even not that.

With exquisite timing, China announced prior to the G-20 and G-8 meetings that it will allow its currency, the yuan, to appreciate (rise in value) relative to the euro and to the dollar.  This, in order to help reduce China’s huge trade surpluses with the West and restore balance to the totally unbalanced global trading system, a system in which paradoxically rich countries borrow heavily from poor ones (like China) by running persistent large chronic trade deficits.  Despite the recession and the crisis, America’s trade deficit remains in the order of $500 b. annually, an unsustainable level.

With the announcement, the yuan appreciated by a miniscule 0.4 percent (China’s currency is undervalued by at least 50 per cent — in other words,  if the current exchange rate is about 7 yuan per dollar, it probably should be 3.5, to reflect its purchasing power, a rate that would double the dollar price of all China’s exports.     This tiny appreciation will indicate to the G-20 that China is indeed moving in the right direction and is working to contribute to global stability as a good citizen. But this is an illusion.  China’s undervalued currency will remain undervalued, and once the G-20 meeting is over, watch the yuan-dollar rate freeze again.

Writing in The New Republic, Clyde Prestowitz argues this:

At the G-20 meeting, the administration’s first step should be for the President to ask his colleagues to cooperate in bringing about a 25 percent to 40 percent revaluation of manipulated currencies in relation to the dollar[i.e. yuan] within the next three years. The president should warn that if such an agreement cannot be reached, he will have no choice but to launch a full-scale effort in the IMF, WTO, and elsewhere to halt the mercantilist manipulation of currencies. He should leave no doubt that he will do whatever is necessary, including even taxing certain capital inflows, to achieve substantial currency adjustments.

What are the chances that President Obama will actually take such decisive action?

Less than zero.

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Innovation Blog

See, Think, Wonder: What Innovators Can Learn from Kindergarten

By Shlomo Maital

My grand-daughter Agam is six years old, and is finishing kindergarten; she will begin Grade One in the Fall.

Agam’s kindergarten is first-rate.  One of the things she learned there (in addition to reading!) is an exercise known as See Think Wonder.  A variation of it is Feel Think Wonder.

Here is how it works:

1. See.  REALLY LOOK at something.  Mostly, we look at things, but we do not see them.  REALLY see them.  In every detail.  Practice SEEING!  See things we miss normally, out of haste.  Have you really seen your eyebrows lately?  What did you miss?

2.  Think.  Think about what you see. Reflect on it. Ponder, analyze, compare, contrast, examine.

3.  And most important:  WONDER!   That is, imagine and dream. What if it were different?  What if it were impossibly amazing?   What if I looked at myself in the mirror, and became 6 feet 6 inches tall?  WONDER — leading to action!

Here is Agam’s process, for a bit of a shrub, not worth even looking at (?)

* I see a little bit of gray and brownish.   * I see that this one is like a palm tree.  * I think it is not doing so good.   * I WONDER if when it grows, it’s a plant that you can eat.    And that WONDER leads to a small vegetable garden Agam has in her backyard.     Six-year-olds are terrific at see-think-wonder.  They also are great at feel-think-wonder, which involves our emotions:  Feel an emotion, think about it (why it happens, what caused it), and then, wonder…    As adults,  feel an motion (deep passion about something), think about its origins, and then wonder, what if we spent our lives pursuing that passion, instead of shuffling papers for high salaries in a bureaucratic stifling job within an elephantine organization?

Innovator:  Do you truly see!?   Do you think about what you see, but deeply, analytically?  And, most important, do you WONDER?!   Do you imagine, dream, and then, try to implement what you wondered?

If only we could all become six-year-old’s !  The world would be swamped with super-creativity.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2010
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