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Global Crisis Blog

America’s Economic Policy:  Load of Dung

By Shlomo Maital

  Author Clyde Prestowitz, who has just published The Betrayal of American Prosperity, recounted that he originally wanted to title his book Load of Dung, referring to the fact that just before Rome collapsed, loads of carts came in to Rome carrying a wide variety of goods, and left Rome carrying…dung.  Check the containers entering and leaving America, and the picture is not much different. 

    An article in the latest edition of Fortune magazine reveals that for the first eight months of 2010, fully 700,000 more containers entered the Ports of New York and New Jersey than left.  I wonder where they put them all ???   The same article reports that 45 per cent of the containers exported from America are empty – sent back to China, to be refilled and shipped to the U.S.

    In August, latest figures available, America’s trade deficit grew to $46 b., an increase.  For the past 12 months ending in August, The Economist reports that the trade deficit remains a staggeringly high $621 b.  Imports totaled $200 b., up $4 b. from July.  More than half the total trade deficit came from America’s trade with China, or a total of $28 b.

    Intel CEOPaul Otellini recently noted that “Intel is the ‘last one standing’”, because “no one else has built a new [semiconductor] factory  [in America] in five or 10 years.  Everyone is building it either offshore or through joint ventures somewhere else.  If [semiconductors] is the most important technology of the 21st C., and the first derivative is negative relative to building new factories here, it ain’t good.” 

     The only way the containers will leave America full, and not full of dung (or paper for recycling, as if often the case now), is if America makes a strategic decision to renew and reinvent its manufacturing, and to take the necessary steps to make this happen.  Exports from the US must rise, if the world is to achieve ‘rebalancing’,  and the only way to export, as far as I know, is when you actually make things and sell them abroad.  If you do not make things, you cannot export, no matter what the exchange rate for yuan-dollar is.   


Global Crisis Blog

Bernanke Denies Creating the Last Bubble –

And Claims Credit for Creating the Next One

By Shlomo Maital.  

   Fed Open Market Committee Chair Ben Bernanke faces a storm of criticism worldwide for his QE2 policy – the second round of quantitative easing, which sees the Fed purchase 10-year government bonds in massive amounts, totaling (by some accounts) some $1.5 trillion before the program ends.   The policy is not about buying bonds, it is about paying for them and thus creating huge new mountains of dollars.  The policy of spilling such vast amounts of dollars into the world is, to say the least, highly irresponsible, when the American dollar is still the world’s key currency and its stability is crucial to the wellbeing of every country that participates in world trading and global capital markets. 

   Prof. Bernanke, formerly an economics professor at Princeton University, now has a new justification for his policy. He says it will help boost the price of common stocks.   This is a remarkable statement.  Bernanke, who became Fed chair in 2006 when Alan Greenspan retired after 19 years of service, has joined Greenspan in denying that the Fed helped create the housing bubble, despite drastic interest rate cuts in 2001-3 and rapid credit expansion.  Yet he is now apparently trying to create a new one, possibly this time in Asia, to which much of the money he is printing is fleeing. 

   Here are the facts.  The Dow-Jones 30 Stock Industrial Average DJIA peaked at 14164.53 points in the summer of 2008, and then fell rapidly to 6,547.05 at bottom within a year, a drop of 54 per cent.  Since then the DJIA has recovered, to about  11,200 points, a rise of 71 per cent.  So stocks have already made up a large part of their losses.  Do they really need short-term short-sighted help, by massive printing of money?  Is this really what the American economy and American businesses truly need?  

   The QE2 policy is hugely irresponsible and should be stopped before it gets rolling. 


Innovation Blog

The Little Country That Can…and Will:  How Singapore Excels

By Shlomo Maital

   At Singapore’s Changi Airport last night, I learned a small lesson in why Singapore is one of the world’s wealthiest countries, despite having no natural resources.  It is because Singapore has built a culture of no excuses, seeking excellence in all that it does, because anything less will endanger its citizens’ wellbeing.  This culture was built right from the start, from the day Singapore achieved independence from Britain in 1965, and was shaped by its chief architect and first Prime Minister, Lee Kwan Yew, whose son now serves as Singapore’s PM. 

   Changi Airport is among the world’s best and most modern. Yet despite this, it is being massively refurbished and rebuilt.  Why?  Singapore insists on having the world’s best airport.  This is part of Singapore’s formula for attracting people and investors and multinationals.  And to have the best airport means constantly upgrading and improving, because the rest of the world is rapidly improving, too.  But it is not just about infrastructure, about getting your bag 12 minutes after the wheels of your plane touch down.  It is about service.

    I wanted to buy a present, but in the huge airport, did not know where to look. I spotted a young lady dressed in a bright red vest.  She was a tourism intern, studying at one of Singapore’s Polytechnic Schools. As part of her studies, she was required to do an extensive internship at the airport, working six hours every evening, with only a 30-minute break, and being on her feet the whole time, assisting travellers.

    I asked her where I could find a lady’s digital watch.  She told me (she knew where everything in the airport was, I know this, because I rudely gave her a small informal exam, out of curiosity).  Then she asked me politely if she could escort me to the store.  And she did. 

   Singapore’s port is among the world’s most efficient;  its system for charging for road use during peak hours, using transponders,   is now widely copied (including by London); and despite being a high-wage country, it remains a key manufacturing center for Asia.  It is corruption-free, because its civil servants are highly paid, hence do not need to take bribes – and most severely punished if they take bribes.  Singapore Airlines is among the world’s best, and it too insists on being #1, in aircraft, service and amenities.  Avis may have invented the slogan: We’re #2. We try harder.  Singapore’s mantra?  We’re #1. And we STILL try harder.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
November 2010
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