Who Holds Whom Hostage?

For decades North Korea has crafted a delicate balance, building a nuclear capability while promoting nationalism to perpetuate the Kim Jong-un regime. American Presidents during those years were willing to accept the status quo which was preferable to a military confrontation.  Even with conventional weapons, , on a first strike North Korea could kill up to a million people in Seoul, only a few dozen miles from the DMZ.  That potential has held the world hostage all these years.

Pressure on North Korea’s trading partners, particularly China, to enact stiff sanctions on North Korea has, until recently, been futile.  Here China holds the U.S. hostage, owning a portion of our debt and more significantly knowing the American public’s insatiable demand for cheap imported goods would prevail over any economic retaliation against China.  China was content to have North Korea as a buffer zone until it, too, has been startled by NK’s nuclear ambitions.

Indeed, a delicate balance, and then Trump’s opening day message at the United Nations, where he threatened to “totally destroy North Korea.”   We all know what that is code for – the use of nuclear weapons.  An American President has said he would use this country’s nuclear force as a first strike.

Unthinkable.  There were so many other ways to signal our resolve, to further pressure North Korea to the negotiating table.  He went on to call Kim Jong-un ‘Rocket Man,’ --in front of the United Nations, schoolyard name-calling.  Then, further undermining the dignity of the Office of the Presidency, he continued those threats and name-calling in Tweets.

Surprise.  Tensions have ratcheted up, Kim Jong-un responding with new threats, including testing a hydrogen bomb over the Pacific.  Unlikely, but to even utter that is giving as good as one gets.

There has been much criticism levied at Trump for worsening an already incendiary environment between the two countries, so what does he do?  -- he turns on the NFL.  He has a reptilian instinct for survival.  In so doing, he wrapped himself in the flag, the one that belongs to us all.  “Fire the sons of bitches” referring to NFL players who went to one knee during the playing of the National Anthem.

I come from a generation which would never do that, but I would defend another person’s right to protest that way over such weighty issues as “Black Lives Matter.”  Of course all lives matter in this country and to be born black should not be an impediment, but look where Trump brought President Obama – to the point of producing his birth certificate to prove his legitimacy as the President.  If Obama was white, no such argument would have been made. 

Now, if anyone is an illegitimate President, it is Trump.  And he knows it -- how he got to be President, by his actions and Russia’s and astonishingly by those of the head of the FBI.  Even his ignorance of American history, and his divisiveness seemed to work in his favor.   He did not win by popular vote and although some of his marginal supporters say they would not vote for him now, he still has a solid 30 -35% base enamored by his strong-arm tactics, convinced he can do no wrong.  And it is HE who is holding the rest of America hostage.

He knows his tenure as President is precarious, with the possibility of impeachment or the invocation of the 25^th amendment, which provides for the removal of the President if “disabled” and unable to perform the duties of the office.  One could argue that we are already there, but it is a high bar to achieve and it has to be set in motion by the Vice President and ultimately have the backing of 2/3 of Congress if the President objects. 

With his pathetic response to the Charlottesville show of power by white supremacist groups and his attack on NFL players, mostly black (although he disavows that as being an issue), he dog whistles to his hard-core followers, many probably NRA diehards, and thereby creates a hostage situation.  I can see clearly, now, the “strategy:” “remove me as your President and suffer the consequences of a new Civil War. “  He has his army, he has the means of communication, he exhibits sociopathic thinking, and his politics of divisiveness have created such an environment.  He would even risk nuclear war.

So, North Korea holds the world hostage, China holds us hostage, and Trump holds the majority of the American people hostage.  Never has there been such a President who disrespects the very ideals which makes the American flag so sacred.  He has done more than take a metaphoric knee to fortify his fragile ego.

Yuan to Wings

Two interesting and related stories in the Wall Street Journal today.

Item #1 The Senate voted Monday to move ahead with a bill that would punish China for keeping the value of its currency low, drawing a harsh response from Beijing, which said the measure would severely hurt trade ties.

Item #2 The biggest chunk of Yum's [owner of restaurant chains including KFC, Taco Bell and Pizza Hut] operating profit now comes from China.

Are we sure we want a trade war with China, a country holding a sizable portion of US debt? Imagine putting a tariff on the Colonel's finger lickin' good wings? Perhaps there should just be a conversion rate of Yuan to wings and bypass the US dollar? Are the Chinese sure they really want to eat that stuff? Maybe a CIA plot?

Seems our major export now is "US Culture" -- our movies, our fast food and soft drinks, our way of life -- while the rest of the world manufactures everything else we need.

















Photo courtesy of Daily Times, Lahore Pakistan

Why Johnny Can't Compete

The horrendous images of the Japanese earthquake and tsunami haunt my consciousness. We have friends there and as I said in an earlier post, our son is presently traveling there (he is safe and has been able to move south more out of harm's way).

Our prior travels in Japan are cherished memories. We developed the greatest respect for the Japanese people, a nation which seemed to reach its economic zenith during our stay as the New Year dawned in 1990. The Nikkei Dow touched 40,000 and Japan was booming. Our domestic press was full of stories about the Japanese having an unfair trade advantage and consequently how America was no longer able to compete with this economic juggernaut. Japan was said to be destroying American industry and would be buying up all our assets. Only a couple of months before the iconic Rockefeller Center complex was purchased by Japan's Mitsubishi Group. "Made in Japan" went from a joke in the 1950s to an economic threat by the end of the 1980s.

The dire forecasts concerning Japan faded over the next two decades as boom turned to bust and it fell into an ongoing deflationary spiral. But today we are saying the exact same things about China's unfair trade advantages, China buying up our assets and holding our debt, almost as if we are victims of outside forces and bear no responsibility for our own economic predicament.

While in Japan in 1990 I was invited to deliver a speech to the Rotary Club of Tokyo Koishikawa on the subject of US - Japan trade relations. When I returned home, I was asked to write an article about our experience, which for one reason or another was not published, probably because its contents did not blame Japan for our own failures.

I think the Japanese economy will recover from this tragedy, although it will take years. Our heartfelt hopes for recovery are with the Japanese people, and for a minimal loss of life and containment of what is appearing to be a serious threat from damage to several of its nuclear facilities. Please consider a donation to the Red Cross for those devastated in Japan.

I recently came across that unpublished article and was not surprised about how little has changed. One now only has to substitute "China" for some of the examples I used for Japan. Our fundamental problem about successfully competing remains: education. The irony is our best graduate schools are attended by some of the finest minds from overseas, but upon their graduation, we give them a diploma without a green card and send them on their way home. But the primary failure here is our public school system, the same failure I decried twenty plus years ago. Nothing has changed and it could be argued that they have worsened.

Given the folly in Wisconsin and the rhetoric of some of our politicians, one would think that our nation is going broke because we overpay our teachers. Of course the converse is true. Why go into teaching when one can become a master of the universe at an investment bank and rake in bonuses? We need great teachers and a better public education system to begin to reverse a continuing decline in our students' performance. "The three-yearly OECD Programme for International Student Assessment (PISA) report, which compares the knowledge and skills of 15-year-olds in 70 countries around the world, ranked the United States 14th out of 34 OECD countries for reading skills, 17th for science and a below-average 25th for mathematics."

The following is what I wrote in January 1990, in many ways as relevant today as it was then:

Why Johnny Can't Compete

In my capacity as president of an academic and professional book publishing company I have had the opportunity to visit Japan from time to time over the past 20 years. Even though our publications are in English, Japan has become our largest market outside of the United States. It has been an interesting sideline of these trips to be able to compare the economic, social, and educational progress of Japan with what I observe at home.

My most recent trip to Japan occurred over the Christmas and New Year holiday season, when many westerners who live in Japan return home, and Tokyo's hotels are given over to craft exhibits and festivals in celebration of the New Year. The Japanese New Year holiday is a major one: people stop working for nearly a week to greet the new year at shrines and temples, and to pay respect to their families. I made the trip this time with my wife and 13-year-old son, and we felt privileged to be there at this special time of year.

By prior arrangement with my Japanese host (the head of the company that distributes our books in Japan), I was to give a speech to the Rotary Club of Tokyo Koishikawa on the subject of U.S.-Japan trade relations as perceived by the American people -- a subject of great concern to the Japanese. I was aware of the symbolism of making such a speech at the end of this past decade. Japan has emerged as a leading economic power, while we, ourselves, perceive our own position to be in decline. While I made an effort to put what America had accomplished in the 1980's in the best possible light and to emphasize how the U.S. and Japan can become equal trading partners with the new opportunities in the 1990's, particularly those created by the decline of communism in Eastern Europe, in retrospect my words seem hollow. I returned with the realization that if we are to truly compete with Japan as the 21st century approaches, our nation will have to undergo radical changes by rediscovering many of the values embraced by Japan.

There is a cultural basis for Japan's success. The resolve to work hard, to be productive, to be well-educated, to respect one another, to be part of the team, and to be patient in attaining goals is the very essence of their culture. It little matters what one does, it only matters how well the work is done. In Japan, the marked contrasts to minimal working standards we have become conditioned to accept are everywhere. Is it no wonder we have difficulty in competing with a society that prides itself in being the best it possibly can be?

In a discussion with my host about such issues he asked, "Why is there a drug problem in the U.S.? Japanese people do not understand why such a problem should exist." "A feeling of-hopelessness," I replied. Thinking about that discussion, I believe that our future success or failure in restoring hope might be at the very core of competing with Japan. This can only be done by completely restructuring our educational system and giving it our highest societal priority.

Quality education is truly available to all in Japan and it is widely perceived to be desirable. Japanese teachers occupy a high status in society and are well paid. Illiteracy is virtually unknown. Even peasants were able to read and write by the nineteenth century. Japan ranked among the most advanced countries of western Europe in educational excellence.

Contrast this to our present situation. Our minimal educational standards have led to wide-spread illiteracy and millions are basically unemployable. The recently released report by the Secretary of Education estimates that 60% of our nation's 11th graders are barely able to read the most rudimentary documents. How and why does our society tolerate this perversion? Only by radically improving our educational system will we be able to ultimately remove the pervasive hopelessness that corrodes our land, drugs our children, and produces the type of wide-spread violent crime that is virtually unknown in Japan.

So, while we are urging Japan to make cosmetic changes to facilitate better U.S.-Japan economic relations, we must make mammoth changes to compete in the long run. What is needed is the equivalent of President Kennedy's pronouncement in the early 1960's that our national objective was to put a man on the moon by the end of that decade. Do we have the moral fortitude to declare that, as a national goal, we can and will create a public education system which is second to none by the end of this decade?

Only until we restore hope, the expectation that one generation can be better off than the previous one and people can find meaningful employment opportunities -- the very ideals which made this country the great melting pot of the 19th and early 20th centuries -- will we be able to successfully compete with Japan in the 21st century.

Things are by no means perfect in Japan. Their dedication to work borders on workaholism; individuals may not have the same degree of freedom to which we have become accustomed. However, for years Japan has been accused of copying the best of western business ways and technology and then improving upon them. In dealing with our economic dilemmas, the time has come for us to adopt some aspects of Japanese culture and, in so doing, rediscover many of the values that once made our country great.

Market Report

The S&P was down 3.1% today as the market reacted to slowing growth in China, continuing high unemployment, and signs that deflation, not inflation, is the problem de jour. The 10-year Treasury Note now yields less than 3% reflecting that belief. New York Times’ Paul Krugman characterizes this as The Third Depression. John Hussman, the economist turned mutual fund manager, more mildly states that this is a resumption of the recession. Pain management stocks were up 2.4% in today’s down market.

The View From Here

Although we are some 140 miles from Cape Canaveral, the view of yesterday’s shuttle launch into the twilight sky was spectacular. The shuttle program is one of our nation’s greatest accomplishments. To the left and below are some photographs of the launch, the view from here but beginning with CNN's.

There were other developments over the weekend impacting another sort of “view from here.” One story that grabbed some headlines, but then quietly went into the night was China’s prime minister’s concern about their holding some $1 trillion investment in American debt. Clearly there is some anxiety about the long-term safety of their investment, a remarkable public admission by such a large holder of US debt, one that is symbiotically attached to our hip -- something akin to yelling fire in a theatre while sitting far from the exits. But in Barack We Trust, President Obama saying that our debt is safe in spite of our record deficits, bailouts, and our national debt about to pass the $11 trillion mark. I mentioned this “Black Swan” before, that is confidence in the ability of the US to meet its financial obligations, without hyperinflating its currency.

The other story that will not go quietly into the night, because of the measure of outrage, is the $165 million in bonuses that are being handed out to the same executives that had a hand in creating the alchemy of credit default swaps. We’ve heard this song before, when Congressional Hearings revealed the extent that bonuses were handed out to the banks.

Then there is also outrage that foreign counterparties profited by receiving some money through AIG’s $170 billion bailout, but the main focus will continue to be the bonuses, although its size is but a pimple on the ass of the bailout vista.

The irony is the performance criterion of the bonuses is probably the very short-term thinking that encouraged leverage creation, AIG superimposing a hedge fund business on top of its, then, AAA rating. So why pay these bonuses? We’re told they are “retention bonuses” to keep the “best and the brightest” in the AIG stable -- as if there are not hundreds of unemployed qualified financial professionals who could immediately replace each of the AIG financial wizards. We are also told that these people will sue if they are not paid. Let them sue. Do they really want their names and reputations to go down in the annals of financial infamy?

But on to the happier news of the successful, although delayed, shuttle launch. Here are a series of photographs, only three minutes apart, from the launch as televised on CNN to the shuttle’s appearance only one minute later over our home, to the vapor tail just three minutes after the launch: beautiful and breathtaking.

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