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Blinken’s Soft-on-China Globaloney Speech (Finance Friday)
Singapore plays 3D chess with itself as the Philippines never misses an opportunity to miss an opportunity
Joe Biden’s slightly animated corpse of a Secretary of State, Anthony Blinken, has given a speech today that can best be described as accommodating of the Chinese Communist Party.
Blinken can’t state simply that China wants to harm and subvert the United States and the rest of the free world, dominating it and achieving a moment in the sun that has somehow eluded the Chinese people for all of recorded history. Nor can he state that the simple solution to deter war and prevent this domination is to build up our defenses in the Pacific, delink economically from China, and seek every opportunity in every time and place to backfoot the Chinese Communist Party—especially by elevating Taiwan, which proves that capitalism and democracy work just fine for ethnically Chinese people.
Instead, Blinken’s Harvard Kennedy School pencil necks have put in writing what really has them upset:
China is the only country with both the intent to reshape the international order – and, increasingly, the economic, diplomatic, military, and technological power to do it. Beijing’s vision would move us away from the universal values that have sustained so much of the world’s progress over the past 75 years.
There you have it. What really upsets the soft-on-China crowd is not that China has systematically stolen technology, jobs, and whole industries from America, nor that it threatens to invade its neighbors, but that it proves that their postmodern, globalist kumbaya (“universal values,” “international order”) is really just hippie make-believe.
In reality, what has kept the peace in the Pacific is the U.S. military, which gained supremacy after the 1944 Battle of Leyte Gulf, followed by final victory the next year. The Japanese and Australian militaries also contribute significantly to that peace today. There are no “universal values” in Asia, and certainly no “international order,” just nations and political forces with interests. If you doubt me, put the Taiwanese and Cambodian governments in the same room and see how much they have in common. China sees this reality for what it is, and it wants to put itself at the top of this heap, first regionally then globally.
No globalist speech about China would be complete without some flattery of the Chinese Communist Party. Blinken does not disappoint:
China is also integral to the global economy and to our ability to solve challenges from the climate crisis to COVID-19. Put simply, the United States and China have to deal with each other for the foreseeable future… We don’t seek to block China from its role as a major power, nor to stop China – or any country – from growing their [sic] economy or advancing the interests of their [sic] people…
Even as we invest, align, and compete, we will work together with Beijing where our interests overlap. We can’t let the disagreements that divide us stop us from moving forward on the priorities that demand we work together, for the good of our people and the world.
I guess we shouldn’t expect any calls from Biden officials for China to be held accountable for spreading Covid. Apparently the Chinese government is “integral” to solving the “challenges” it created by killing one million Americans with its virus. The idea of America and the Chinese Communist Party working together for “the good of our people and the world” is sheer hippie nonsense—something polls show the American people with their growing skepticism of China know is outlandish.
And then comes the meaningless prescription:
But we will defend and strengthen the international law, agreements, principles, and institutions that maintain peace and security, protect the rights of individuals and sovereign nations, and make it possible for all countries – including the United States and China – to coexist and cooperate…
Unfortunately this globaloney follows a well-worn model from the time before Donald Trump by which the foreign policy and trade establishment thought a jedi mind trick would work on China. Flatter Beijing, ignore its kleptocratic economic rise, and hope that some word salad can change the aggressive trajectory of China and the obvious intent of its military and technological buildup. Steve Yates, the chairman of the China Policy Initiative at the America First Policy Institute, summed up the mentality:
This speech is re-heated leftovers of establishment bromides from the 70s and every decade since. It reflects no acknowledgment of or adjustment to profound negative manifestations of the CCP’s malign intentions and evil actions (Xinjiang to Hong Kong to Wuhan/WHO). The greater sin, however, is ignoring the decades of evidence that the West showered trillions of dollars into China for economic development for which the CCP takes full credit without changing its behavior, and also ignoring the reality that whether we seek conflict or a Cold War is irrelevant: the CCP pretty clearly does and has done so for decades while we doubled down on a bad bet.
Nothing in this speech deters Beijing from attacking Taiwan, conventionally or otherwise, and nothing in this speech even hints at dissuading much less thwarting any other malign CCP influences or activities—in the U.S., internationally, or within China. This is the diplomatic equivalent of “Can’t we all just get along?
Everyone in Asia will see Blinken’s speech for what it is: a requiem for the time before Trump when the American elite, both Democrats and Republicans, dreamed that China’s rise would be peaceful and that what they falsely called “free trade” would ensure peace and prosperity.
The administration has been talking up a big speech on China policy for over a year, but it was elusive until now. Why rush a lame speech out the door in the media doldrums before Memorial Day? In this case, it was to cover Biden’s statement this week in Japan that America would defend Taiwan in war. Someone needed to tell the Chinese and the rest of Asia-Pacific that Biden’s moment of lucidity was not authorized by the foreign policy establishment. Blinken was just the man for the job.
From Ulithi to Ulaanbaatar, it’s Friday morning in Asia and welcome back to Finance Friday. I’m sure you’ve been waiting with bated breath (joke). As America and Europe likely enter recession and asset bubbles look ready to pop, I’ll be taking a closer look at financial and business factors as they impact investing and national power—with a primary focus on Asia and the USA plus the Middle East. (Europe is for vacations and little else, so I’ll mostly leave that aside.)
Labor Wins Big in Oz
The Labor Party triumphed in Australian elections, defeating the confusingly named Liberals. That now-ousted center-right party governed for nine years, with emphasis on the “center,” not the “right.”
The commentariat assured us that the Labor victory was a vindication of their secular religion of climate change alarmism. Bloomberg dutifully ran an opinion article titled “Climate Won Australia’s Election” by a certain David Fickling if you will. This in a country whose economy is based on mining and exporting iron ore and coal? Mmmkay.
The real problem with the “center-right” party in Oz was the same one that afflicts today’s Tories in Britain: they are just a diet version of the Left. (Britain also happens to be governed by a hypocrite and a buffoon.) The now-former conservative prime minister of Australia caved in on “net zero” commitments that effectively conceded climate and energy issues to the Left. Like congressional Republicans and the Trump administration in the USA, he also failed to defend the rights of his people as local officials and public health tyrants locked up the population in the name of science or whatever.
While just one seat, one election result ought to call into question what the media is trying to spin about climate change. An anti-elite, independent candidate who fled Saigon as a refugee with her parents beat a lefty grandee. The Sidney Morning Herald reports:
The controversy opened an opportunity for Fairfield deputy mayor Dai Le, who won respect from the local community for standing up to the [New South Wales] government during last year’s harsh western Sydney lockdowns. Keneally—a wealthy, white woman from the Northern Beaches—was the embodiment of the other side of Sydney where restrictions were less severe.
The message: if you fight, you are more likely to win. Someone tell sad Mitch McConnell and the Beltway GOP.
Luckily, Australia’s new Labor prime minister doesn’t seem particularly dovish on China. Analysts point out that he is committed to the “AUKUS” agreement by which Australia will procure nuclear-powered submarines with American and British help for the first time in its history. I’m not sure if that sentiment is pro-China or anti-China since the younger members of those boats’ maiden voyage crews are still just twinkles in their parents’ eyes. At least the boats will be ready for whatever threat comes after China.
Singapore outdid itself in annoying, half-clever balancing of the free world and China. It said it would join Joe Biden’s newly announced Indo-Pacific Economic Framework, which I like to call the Seinfeld network, since it is about nothing. Simultaneously, Singapore said it supported China’s bid to join the successor to the Trans-Pacific Partnership (TPP), which wouldn’t have required anyone to do anything except export what is left of their manufacturing to poor parts of Asia.
It will now fall on Japan to prevent China from joining the TPP. Or it could let China in and maybe Tokyo and other capitals in the region can stop fantasizing that the USA will ever join. (They might also ponder that Biden’s joke of a framework will be dead in two years when the White House switches hands.) Meanwhile, Singapore gets to look reasonable in both Washington and Beijing and has to do absolutely nothing. Excellence in diplomacy!
The Recession is Calling from Inside the House
The stock market has bounced back a little because traders are convinced the Federal Reserve will wimp out on its stated plans to raise interest rates and reverse the unprecedented growth in money supply until inflation is tamed. They may be right.
But something just as ominous for stocks is no longer merely on the horizon: recession. The people who play economists on TV and in print were surprised that GDP contracted in the first quarter. Never ones to learn from mistakes, they are predicting nearly 3% annualized growth in the current quarter that ends June 30. If they are wrong and the economy shrinks for a second quarter, that will meet the technical definition of a recession.
Are they wrong? Probably. GDP is calculated by adding Consumption + Investment + Government Expenditures + Net Exports. Have any of these factors improved in the current quarter to warrant the turnaround that all the top men on Wall Street are predicting? Consider:
Consumption: Energy and food inflation is out of control, as is the cost of that summer vacation. There are early signs that people are cutting back as a result, especially disappointing forecasts from Target and Walmart. Consumer sentiment is falling.
Government: Harder to judge on a quarterly basis, at least for me. Uncle Sam will spend a whopping $5.9 trillion this fiscal year, but that is nearly $1 trillion less than last fiscal year, with slightly fewer people being paid to do absolutely nothing.
Net Exports: Always a negative number since the Nixon era, and therefore a drag on GDP. The trade deficit hit a record in Q1, which helped drag GDP into a decline. Economiticians seem to think this was a quirk. However, sky-high oil prices consistently well over $100 per barrel and a strong dollar that is trading at near parity with the euro and able to buy a shocking 127 yen per greenback tell a different story. Imports should remain high unless the shutdowns in China really do crimp exports from that country.
Forget about a recession maybe cropping up in 2023. The better odds are that it is here already. Equities usually drop 25% when the market prices in a recession. And a Fed wimpout means lasting stagflation.
The Philippines Will Always Have a Bright Future
Bongbong Marcos, the son of the former dictator, has won the presidency of the Philippines. His vice president will be the daughter of the current president, the nominally anti-American Rodrigo Duterte.
Singapore’s founding father, Lee Kuan Yew, summed up the predicament of the Philippines in his 2000 autobiography, From Third World to First: The Singapore Story:
There was no reason why the Philippines should not have been one of the more successful of the ASEAN countries… Something had gone seriously wrong. Millions of Filipino men and women had to leave their country for jobs abroad beneath their level of education. Filipino professionals whom we recruited to work in Singapore are as good as our own. Indeed, their architects, artists, and musicians are more artistic and creative than ours. Hundreds of thousands of them have left for Hawaii and for the American mainland. It is a problem the solution to which has not been made easier by the workings of a Philippine version of the American constitution.
With its presidential system and Senate, the Philippines has a government structure that ostensibly most reflects our own among nations around the world, but it never seems to work for them. For those of us rooting for the Philippines to get ahead, to adopt capitalist reforms, raise per capita income, build a military, and ditch residual anti-Americanism in the political class some 76 years after independence and 31 years after the last U.S. military base in the country was closed, is there any silver lining in the return of the Marcos family? Probably not argues Mark Simon, who spent decades working in the Philippines and broader region. He and I discuss the situation there beginning at the 26:20 mark of this video podcast.
See you again next Friday.