Why is U.S. Influence Weakening in Asia? Should We Care?

Daniel Henninger, Deputy Editorial Page Director for the Wall Street Journal, appeared on Fox News this morning to discuss his recent editorial “Time for a Big-League President.”1  In it, he wrote about the world’s political climate and declared that “Only one thing really matters in an unsettled world: the quality of U.S. leadership.”

In today’s television interview, he commented on China’s increased assertiveness against Japan and other countries in the Far East.  Meanwhile, the U.S. seems to have disappeared from Asia.  In response to an unprecedented need, the State Department has tried to reassure our allies that we have not, in fact, abandoned them.

The question is: “Why has the Administration pulled back from opportunities to “keep the peace” in Asia?

Isolationism  and  Presidential  Resources

Mr. Henninger believes it stems from the fact that “polls say Americans are in an isolationist mood.”  He continued with “Mr. Obama won’t spend political capital outside the country—Ukraine, Syria, Asia. He wants to spend what capital he has left consolidating internal federal authority.”1

These observations are accurate.  A majority of the American public, or at least the Baby Boomers and perhaps some of Generation X, have had an extended, subconscious guilt over the Viet Nam years.  For the last four decades, there has been a persistent reluctance to become involved in major disputes outside our borders, reminiscent of our pre-1917 era before we were pulled into World War I.2

Advancing  Socialism  and  Increasing  Federal  Debt

There are two other reasons for our lack of effort in preventing Asia from becoming another hot spot in the world.  The first is the President Obama’s obvious preference for socialism.  Despite laughter from the left and disbelief from the uninformed center of the political spectrum, there is abundant evidence.

Obamacare is just a recent example.  The President’s signature piece of legislation may or may not work.  It seems unimportant to his ultimate goal.  If it succeeds, then it becomes part of a more orderly move toward socialized medicine.  If it fails, then by recognizing the reality that we rarely retrace our steps away from entitlements, it will fast-forward us to socialized medicine.  And as Dr. Benjamin Carson has reminded us, Lenin said that “socialized medicine is the keystone to a socialized state.”

Another tactic on the part of the President is the “Common Core” (or “Obamacore”) standards for education.  It’s a bold move to take control of education from the states and to concentrate it more in the federal government.  It also strives to make students “worker-ready” at the expense of being “informed voter-ready.”

Lastly, but certainly not least, is our federal debt.  It’s not only at a very unhealthy level, but is made even worse by the amount of Treasury securities held by other countries.  At the end of October, 2013, China owned $1.3045 trillion, which was 7.6% of our total debt and up from 7.2% twelve months earlier.3  If this were the stock market, China would be required to make a bid to own the U.S.   As it is, they hold a disturbingly high percentage of our Treasury securities; thus, adding credibility to the idea that the Administration doesn’t want to ruffle their feathers.

Wrap-Up

The abdication of our influence in Asia is just one of several injuries to our ability in being a force for good in the world.  The current Administration is more concerned with the long-term dependency of the citizenry.  We voters must remember that the world is way too small for us to think that if we just keep to ourselves, become preoccupied with “American” problems only, then everything will be fine.

I cannot improve on Mr. Henninger’s concluding statement: “Barack Obama has proven that rookie leaders won’t work in the world we’ve got now. If the U.S. wants to remain a big-league nation, it’s going to have to elect a big-league president.”

1 – 1/1/2014 at www.online.wsj.com

2 – Mr. Henninger also wrote in that article: “It is no surprise that in conversations of late one hears invocations of the 1930s. Or that a popular book to give this season has been Margaret MacMillan’s ‘The War That Ended Peace: The Road to 1914.’ Whether the world in 2014 will tip from containment to chaos or war is not the subject here.”  Nor is it for this posting, either, but it’s certainly worth thinking about as we head toward the mid-term elections ten months away.

3 – While China’s additional investments in Treasury securities slowed from April to October of 2013, their 12-month net purchases showed an increase of $134 billion while all other foreign owned debt decreased slightly.   Data is from www.treasury.gov

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Chemical Warfare: Stop the Newcomer or the #1 Current Perpetrator?

Human combat has existed since pre-historic days.  The basic concept has remained the same, only the technology has become deadlier.

The 20th century saw a significant change in that some “ground rules” were established.  After World War I, countries agreed to ban a method of killing, chemical warfare.1

Although the ban has not been 100% effective, it was a step in the right direction.  Events in the Middle East have now engulfed us in the current debate:  should the U.S. or any other country send military strikes against Syria for using one of these banned substances?

The situation has been made more complicated since it appears that Al-Qaeda and other inhumane groups are now part of the Syrian government’s opposition.  A wimpy slap-on-the-wrist strike would only embolden Assad & Co.  (To add to the dilemma, it has become ”if” they are actually the perpetrators, because doubt has been cast on their guilt.3)  A more appropriately severe strike would be our favoring one barbaric group for another.  And, some of our ideological opponents would likely take issue with this and threaten retaliation possibly leading to the much-feared Final Conflagration.

President Obama has put himself in a no-win situation.

But a different win-win opportunity has been staring us in the face.  We can still thwart those who have been employing chemical warfare against the innocent for years.   All we have to do is take humane, constitutional and legal strikes against…  Planned Parenthood.

1 – “The world’s horror led the League of Nations in 1925 to draft the Geneva Protocol, banning chemical weapons in war and declaring that their use ‘has been justly condemned by the general opinion of the civilized world,’” from “A brief history of chemical warfare,” by Harold Maass, The Week, 9/7/2013

2 – “A top Republican on the House Homeland Security Committee on Sunday cautioned against arming Syrian rebels, saying ‘al Qaeda elements have a lot of control’ within the Middle Eastern nation’s opposition groups… It is in ‘everyone’s interest’ to see the current Syrian leadership leave power, but ‘by arming the rebels, we could be strengthening al Qaeda,’ Mr. King said on CNN,”  from “Rep. King Warns of ‘Al Qaeda Elements’ in Syrian Opposition,” by Ryan Tracy, www.blogs.wsj.com, 5/5/2013

3 – “According to an article published on Sunday in the German newspaper Bild am Sonntag, a German spy ship intercepted repeated communications from forces loyal to Assad asking for permission to use chemical weapons; however, their requests were consistently denied,” article by David Stout entitled “Report Claims Syrian Troops Used Chemical Weapons Without Assad’s Approval,” www.world.time.com, 9/9/2013

“Unemployment Rate” and “Infant Mortality” Are Dangerously Misleading

The Internet Age has made information abundantly available in a way not even imaginable a generation ago.  But like most things in life, an excess brings drawbacks.  The flood of data being thrown at us can cause us to forego rational processing in self-defense.  As a result, it can provide opportunities for us to be bamboozled on critical issues.

“Unemployment  Rate”

The term “unemployment rate” was useful at one time.  Back in the simpler days of a “dog-eat-dog” business mentality, it gave our more benevolent federal government the information it needed to gauge funding for assistance programs and so forth.

Now, with a “dog-eat-employee” climate, many workers are pushed into less than full-time status.  So, Big Brother repeatedly ignores that and tells us cheerfully that the unemployment for June held steady at 7.6% which is below the 10% of four years ago.

This disregards the fact that part-time workers increased by 322,000 to 8.2 million. Consequently, we actually have an unadjusted rate of 14.6% for “labor underutilization.” And, as Gary Burtless, a senior fellow of economic studies at the Brooking Institute adds, “Of course, none of these indicators tells us the number of full-time or part-time workers who hold jobs in occupations that are far below their occupational and educational qualifications levels.”1

We can’t fix the problem when we can’t define it.

“Infant  Mortality”

This statistic is the most deceptive of all of the numbers tossed at us periodically.  A week ago, the Cincinnati Enquirer ran its usual Sunday headline feature on a local issue.  That week’s article, “A Crying Shame,” described some of the regional increases in early childhood deaths and an organization, Every Child Succeeds, which is trying to improve the chances of our little ones.2

A noble cause indeed.  It also mentioned the number of “at-risk pregnant women waiting for services.”  However, the data was presented in the standard format: “deaths before age 1 per 1,000 live births.”  As a parallel to the unemployment segment, “back in the good ol’ days” when unborn babies were properly respected and cared for by most, “deaths per 1,000 live births” was an accurate way to judge pediatric progress. Unfortunately, the 6.1 deaths per 1,000 live births in the U.S. in a recent year2 is but a tip of the iceberg risk facing the most vulnerable humans.

My approximation of a revised “baby mortality”:  Due to the fact that abortions are estimated,3  I will use the Minnesota Citizens Concerned for Life’s approximation of 1,212,400 abortions to be joined with the U.S. Census data showing 3,999,386 live births in the U.S. for 2010.  This gives us a baby mortality of 303 abortion deaths per 1,000 live births.

Our motto should be, “Every Child Born, Then Succeeds.”

 

1 – Jennifer Waters, www.marketwatch.com, The Wall Street Journal, 7/5/2013
2 – Mark Curnutte, “A Crying Shame,” Cincinnati Enquirer, 7/7/2013.  The article included data from many countries (e.g. Canada 4.9, Russia 9.8, Bolivia 39.9, India 47.2 and Nigeria 78)
3 – “…there are no laws requiring abortionists to report to any national agency the numbers of abortions they perform,” Minnesota Citizens Concerned for Life, www.mccl.org

Whence Wall Street’s Recent Optimism? (Or Is That a Bubble on the Horizon?)

If one can have a detached position on the economy, then watching the Dow Jones can be an amusing sport.  As a rule, many on Wall Street have a compulsion to find reasons to be tentative or depressed.1  They seem to view each calendar year as an Olympic cyclist and his strategy.  The plan is to be very cautious, stay very close to the competition then put on a frantic burst of speed just prior to the finish line to pull out a win.  The main difference with the Stocks and Bonds “cyclists” (pun intended) is that their burst to victory for the year doesn’t have to happen in the fourth quarter.  It could be a day when a “triple-witching Friday”2 occurs three days before Company XX announces its earnings for the quarter AND if those earnings are at least 2.5% over projections AND if consumer confidence is above the seasonally adjusted unemployment rate by a factor of at least 4-1/2, AND if…  (I’m making some of this up, but you get the point.)

Indicators  Causing  Optimism

Since those who watch the Dow and its cousins tend to be negative when the real world seems rather positive, you can understand my concern over their budding exuberance when things are still not looking good for average citizens.  Last Friday, it was reported that the Dow Jones and S&P 500 were off to their best starts in 24 and 16 years respectively.  This “January barometer” coupled with the Yale Hirsch expression, “As the S&P goes in January, so goes the year” explains why many view 2013’s outlook with optimism.3

One of January’s market drivers was that “the so-called ‘fiscal cliff” of tax increases and automatic spending cuts was avoided and the debt ceiling debate has put on hold until May.So, we have a whole three months to kick up our heels and enjoy the good times?  Hmm.

Currency  Markets

So, what else is out there which we can use to gauge the financial (mis)fortunes of 2013?  Maybe there are sources of optimism that we’ve overlooked.  The yen continues to be at its 2-1/2 year low against the U.S. dollar  🙂  , but the Euro hit a 14-month high against the dollar  😦  .4    The price of gold remains at $1,650+ per ounce and considering it took until 2006 for the yearly average price to top $500, the dollar has quite a retracing to do if we are to look for strengthening.Oh, well.

Labor  Statistics

The official unemployment rate is steady at 7.9%. Yes!  But, of course, that statistic is aided by the fact that more workers are no longer looking for work, thus aren’t part of the number.  Therefore, the “true” unemployment rate is 11.8% by one estimate.6  Crud.  There are many underemployed workers as well.  37% of college graduates who are working are in jobs not requiring more than a high school diploma. More crud.  And that’s bad for those without college degrees, too.  Forget this category.

Food  Prices

OK, let’s look at other factors, maybe we’ll find a reason for rising optimism.   Ah, food.  The price of wheat is starting to drop toward more normal levels after spiking last July-November thanks to the last year’s severe drought.8

-Grain-

But the overall picture, while not as bad as it appeared in August of last year still is not pretty according to the following: “yields and production of many field crops, particularly corn and soybeans, remain far below levels that would have been expected under more normal growing conditions. What had started out as a promising year for U.S. crop production, with favorable planting conditions supporting over the high planted acreage and expectations of record or near-record production, is seeing some of the driest and most unfavorable growing conditions in decades.”Not only that but, “’Corn is important,’ said Bill Lapp, president of Advanced Economic Solutions, a commodity and economics consultancy in Omaha. ‘In a normal year, corn is more than half of all the corps we produce in the U.S. So when we have a bad corn crops it affects virtually all food products that the average American consumes… next year, the price of vegetable oil will most likely increase. So will the price of wheat, rice, oat and barley.'”10   Rice is a major grain and it’s facing uncertainty because of an unexpectedly big increase in imports by China for which there are conflicting explanations.11,12  Moving right along.

-Beef-

Global beef prices may hit record highs this year due to a “lethargic world economy” and because beef production has been flat for the last six years.  We won’t be immune to rising prices in the U.S. because last year’s drought caused ranchers to reduce their herds which may have helped the supply last year, but means less beef this year.  If a summer drought returns, then we’ll expect more of the same.  However, even if more normal rainfall occurs, we’ll still be looking at up to 9% less beef production. Drought conditions still impact cattle feeding regions and heifers may be held back to help replenish downsized herds.13… Next

-Fish-

The New England Fishery Management Council agreed last week to “decreasing the overall quota of Gulf of Maine cod by 77 percent, and by 61 percent for Georges Bank cod, for fishing years 2013 to 2015…The cuts will take effect May 1.”  The 2012 interim action which reduced catch limits by 22% expires April 30.  The National Marine Fisheries Service denied a request for another.14  This is not to say that the outlook is necessarily bad for fish everywhere.  However, this won’t help.

Energy

Our gasoline price situation might be looking better for a while.  Canada is having trouble with the Keystone project as noted by:  “a 730-mile line called the Northern Gateway that would carry crude from landlocked Alberta to the Pacific port of Kitimat—is mired in political and public opposition, focused in the province of British Columbia.” However, we also have the following:  “The U.S., the destination for over 98% of Canadian crude exports, has been boosting its own output, making America’s future appetite for Canadian oil less certain.”15   So, we should be producing more of our own oil after all, which may help prices.  Of course, before we become elated, let’s remember that Iran continues its misbehaving.  That, plus the on-going Arab Spring (or Summer, Fall…) throws the uncertainty card into the mix which keeps Wall Street awake at night.

Natural gas production continues its increase.  November 2012’s total was 49.8% above that of September 2005, which was the low point over the last 16 years.16  The consensus seems to be that the increase will continue, helping our economic situation some.

Banks  and  Taxes

Banks are supposedly going to be more helpful in the lending markets.  This is essential for a recovery.  They also took some criticism at the World Economic Forum in Davos, Switzerland recently.17  While the focus was on many international banks; the pain has a way of spreading to people worldwide.

Meanwhile, President Obama has nominated Jacob (Jack) Lew to be Secretary of the Treasury.  He had the unfortunate task of taking over Citigroup’s Alternative Investments unit (CAI) in January 2008.  While he didn’t create the mess, many are wondering if he did anything at all to help.  The terrible mortgage bets at CAI and others parts of Citigroup led to a $45 billion bail-out.  “The greatest irony is that given Mr. Lew’s crisis-era resume, he bears a remarkable resemblance to the bankers who President Obama says created the financial crisis and deserve federal investigating.”18 

The new estimate for ten years of Obamacare is now $1,165 billion.  Add to that are the expected $45 billion in payment penalties by uninsured citizens and $130 billion in penalties paid by employers.19  Not included in this is the effect of any significant alien amnesty program.

Conclusion

I’ll start with this rosy outlook: “With Europe sliding into a recession and China’s economy slowing to a 7-8% GDP rate, the U.S. economy may be the strongest engine during the mid-cycle transition due to expanding domestic natural gas resources, manufacturing strength, available workers, easier credit and improving consumer confidence.”20

“Available workers” is a category no one will question.  The issue is how soon will they reap the benefits of this news: “Strong earnings reports…helped push the Dow Jones Industrial average to its eighth gain in nine sessions…DuPont, Verizon and Travelers Cos., three of the 30 stocks that make up the Dow, closed higher after reporting their financial results for the final quarter of 2012… Jack Ablin, chief investment officer at BMO Private Bank in Chicago, said traders have been encouraged… ‘Granted, we have diminished expectations, but companies are doing a decent job beating on the profit side…The U.S. has been pulling this wagon by itself for the last couple years, and now we’re facing some austerity measures.’”21  Tell us about austerity measures!

Improving consumer confidence?  Then where did this come from: “The (Consumer Confidence) Index now stands at 58.6 (1985=100), down from 66.7 in December. The Expectations Index declined to 59.5 from 68.1.22

All of us certainly hope Wall Street’s optimism will be vindicated somehow.  It’s just a little difficult when analyzing these factors.  And we also have the ominous reminder that as more money keeps being printed and if the economy does pick up some day, we have to be cognizant that inflation is waiting in this wings… Did that bubble just get bigger?

1 – Of course, not all qualify for medication.  Sensible companies look at the overall picture and don’t micromanage themselves into a frenzy.  Pioneer Investments issued a guide early in the last decade which examined the previous 73 years and gave one “good” reason per year which suggested investors should be wary and avoid the market.  Yet, its portfolio had outlasted all of the ups and downs occurring in those ensuing decades.
2– “Definition of ‘Triple Witching’
An event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.
This phenomenon is sometimes referred to as “freaky Friday”.
Investopedia explains ‘Triple Witching’
The final trading hour for that Friday is the hour known as triple witching. The markets are quite volatile in this final hour, as traders quickly offset their option/futures orders before the closing bell. If you are a long-term investor, triple witching will have a minimal impact on you.  (www.investopedia.com)
3 – Adam Shell, USA Today, as reported in the Cincinnati Enquirer, 2/1/2013.  The article also gave comments from the CEO of U.S. Global Investors and a strategist at UBS.
4 – Daniel Bases and Wanfeng Zhou, Reuters, 2/1/2013
5http://www.nma.org
6 – Markos Kaminis, Seeking Alpha web site, 2/4/2013
7 – Annalyn Kurtz, www.economy.money.cnn.com, 1/28/2013
8www.futures.tradingcharts.com
9 – “U.S. Drought 2012: Farm and Food Impacts,” from www.ers.usda.gov
10 – Abby Elin, “New USDA Crop Report: Production Estimates Bad for Corn, www.abcnews.go.com, 8/10/2012
11 – This increase in spite of the claim by Concepcion Calpe, senior economist with the Food and Agriculture Organization of the UN in Rome, “The country does not appear to be facing rice shortages, as China’s production has been growing uninterruptedly since 2003, reaching levels above estimated consumption and resulting in bulging stocks.”  She said (lower) prices were the main reason for China’s increased imports. (www.ft.com, 11/27/2012)
12 – “Some analysts believe the buying spree is being driven by soaring demand from Chinese consumers.  They say that even though China has bolstered production for nine years in a row, it isn’t enough to feed its population… this could spark worries about whether there is enough of the staple to go around, keeping prices elevated.” (Carolyn Cui, Wall Street Journal, 1/8/2013)  Note:  According to the WSJ graph, China’s rice in storage is about 40% less than it was in 2002-03.  So, what is it? Lower prices [which will change], not enough for their people, or something up their sleeves?
13 – Annalyn Kurtz, quoting Rabobank which is a Dutch financial firm which focuses on agriculture , www.economy.money.cnn.com, 12/14/2012
14 – Jennifer Keefe, www.fosters.com (a service of the Foster Democrat), 2/3/2013
15 – Paul Vieira, “Canada Pipeline Hits Slippery Patch,” Wall Street Journal, 1/9/2013
16 – www.eia.gov
17 – “There have been plenty of negative headlines and investigations over the last year that show banking in a far harsher light… HSBC has been fined for allowing money-laundering and Standard Chartered has been penalized for dealing with Iran.  Even (CEO) Dimon’s own bank (JPMorgan Chase) has suffered an embarrassing $6 billion trading loss on complex derivatives.” (David McHugh, AP, Cincinnati Enquirer, 1/24/2013)
18Wall Street Journal, “Review and Outlook: Treasury Gets a Citibanker”, 1/28/2013
19 —  Alex Rogers, www.swampland.time.con, 2/5/2012
20 – TCW Funds 2012 Annual Report for TCW Relative Value Large Cap Fund, Management Discussions section.  In its discussion of TCW Value Opportunities Fund,  it said, “”According to economists at UBS, domestic energy production and price developments from sustained shale gas extraction could begin to boost U.S. annual real GDP growth by around 0.5% per annum over the next five years.  By way of comparison, economists have estimated that the information technology boom boosted U.S. annualized real growth by 1.6% per annum in the second half of the 1990’s.”
21 – Daniel Wagner, Associated Press, Cincinnati Enquirer, 1/23/2013
22www.conference-board.org, 1/29/2013

2012 Election: Surprising Impact of Marital Status

For reasons still unclear to me, I decided to look at the demographics of the rubble left behind by the events of last November 6.  The following chart caught my attention:

Electorate (Marital Status): Barack Obama Mitt Romney

Unmarried Women                           67%               31%
Unmarried Men                                 56%               40%
Married Women                                46%               53%
Married Men                                      38%               60%

Of all of the demographic data, this one1 captured an atypical category and it surprised me at first.  Then, I had this sudden mental image of a former Georgetown student, now attorney, who was pushing for the federal government to provide free contraceptives (and abortifacient drugs).  But, I thought, that conclusion was too simplistic.  After all, many married people voted for the President, including an astonishing number of my (supposedly) fellow Catholics according to the statistics.  The reason had to go deeper than that.

Of course!  Obama is an ideological descendant of the Clinton years which believed in a distorted version of “it takes a village to raise a child.”  The original meaning referred to the benefits of close-community societies.  The President is attempting to implement the second generation Clinton version which achieves “marriage equality” by legitimizing same-sex so-called marriage.   With moral relativism in the White House, it’s “Spring Break” year ’round.

But this is a serious matter.  This is not the first time people have tried to rid themselves of hindrances like the Ten Commandments (or “Natural Law” for the non-believers in the reading audience).  No time to recount the number of societies which fell apart because in their “enlightenment” they forgot that the family unit headed by a husband and wife is the basic building block of civilization.  (I had promised myself to limit this article to 500 words max.)  The ignorance of history which has precipitated most human-caused disasters is at work once again.

A ray of hope appeared earlier this week in the Wall Street Journal.  The author pointed out that a liberal columnist wrote in December, “Children who live with their biological parents perform better in school, have lower rates of suicide…”And, a conservative had written in 2010, “Compared to children raised in an intact family, children raised in single-parent homes are more likely to have emotional and behavioral problems; be physically bused;… and drop out of high school.”3

Ms. Schachter exhorted Michelle Obama and her “Let’s Move” campaign, which promotes the well-being of American children, to include a “Let’s Marry” message.  This would be a step in the right direction.

However, the cynic in me sees a potential problem.  Would the First Lady risk alienating many of her husband’s supporters who are thrilled that the White House now stands for the philosophies of the movie “Animal House?”

(P.S.:  With this sentence, this article contains 497 words according to “Word’s” count.)

1 – Jack Watkins, www.addictinginfo.org, 11/8/2012
2 – Abby W. Schachter, Wall Street Journal, 1/15/2013, quoting Clarence Page of the Washington Post
3 – Ibid., quoting Robert Rector of the Heritage Foundation