Raising the Red Flag on Red Capitalism

Posted by , 10th January 2011

China Stock MarketRick Carew
1/10/2011

The conventional wisdom, propagated by senior businessmen, pundits, and policy makers, holds that the 21st century is China’s for the taking, says Carew. He reflects on a book by Carl E. Walter and Fraser J.T. Howie who argue that China isn’t immune from normal economic laws as its cheerleaders argue. Scratch the surface and China’s economic model is less impressive than it looks. The authors discuss unacknowledged bad loans piling up within China’s system (implying that leaders have misallocated capital), and put its public debt at 76% of GDP. With an aging population and a weak social safety net, China cannot afford a banking crisis in the next decade. If and when one comes, Beijing could regret not creating a more resilient, genuinely capitalist market.

Carew is a former Asia M&A reporter for The Wall Street Journal.

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Friends with Benefits

Posted by , 5th January 2011

William D. Cohan
1/5/2011

Facebook is now considered to be worth more than Time Warner, DuPont, and Goldman’s rival Morgan Stanley. Cohan says it is worth the $450 investment Goldman Sachs pumped into the company. This is because Goldman’s cost of capital is close to zero since, as a bank holding company, it can borrow from the Federal Reserve at negligible interest rates. Any capital gain Goldman Sachs makes would be sheer profit. In addition it will have locked up the role of lead manager of Facebook’s initial public offering when it happens. Cohan also looks at other business deals Goldman has negotiated on its behalf and says it will come out ahead. The loser will be the average investor who will be left holding the bag when Wall Street realizes its performance doesn’t live up to the hype.

Cohan blogs about Wall Street and Main Street for The New York Times.

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GOP congressional leaders are acting a lot like their predecessors

Posted by , 5th January 2011

Dana Milbank
1/5/2011

Republicans were elected last November on the strength of Tea Party populism, but their behavior as they prepare to assume control of the House of Representatives closely mirrors that of their Democratic predecessors. Republicans have agreed to a significant increase in the deficit and they’ve taken up the closed debate style of legislation that conservative voters railed against. They speak of a strong mandate while the poll numbers show a very even split among the electorate.

Milbank writes about political theater in the nation’s capital.

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The States Versus ObamaCare

Posted by , 5th January 2011

Pam Bondi
1/5/2011

As new state attorneys general take office in the coming weeks, Bondi expects an increase in the number of states challenging ObamaCare in court. No legislation in our history alters the balance of power between Washington and the states so much as ObamaCare does. The lawsuit brought by 19 states to challenge it is based on the notion that an individual’s decision not to purchase health insurance is not an act of “commerce” that can be regulated under Congress’s constitutionally enumerated powers. If the courts deem the federal health-care law to be constitutional, then there are no meaningful constitutional restraints on Congress’s power to regulate virtually every facet of our lives.

Bondi is the attorney general of Florida.

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General Petraeus’s Surge Map

Posted by , 22nd December 2010

General PetraeusMatthew Kaminski
12/22/2010

The surge in Afghanistan is a wager that we can make the country a less violent and more stable base for America. Kaminski notes that America’s forces aren’t leaving anytime soon and probably not in this lifetime. Where the US military has gone in robustly, the Taliban has folded. The Afghan government’s shortcomings feed the insurgency. President Karzai squandered nine years, but the Taliban is hated. Only a tenth of Afghans tell pollsters they prefer them, and their sympathy is often as much practical as ideological. Afghans want the state to protect and serve them. In the many places it fails, the Taliban steps into the gap. Kaminski argues that giving up prematurely on our Afghan surge could make the fantasy of failure real.

Kaminski is a member of the Journal’s editorial board.

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China’s National Insecurity

Posted by , 22nd December 2010

ChinaJohn Lee
12/22/2010

As social unrest rises exponentially each year throughout China, the Communist Party remains as insecure as it has ever been. A regime that is awkward in its own skin and uncomfortable among its own people is always in danger. Beijing sees Liu Xiaobo’s Nobel Peace Prize as part of an international strategy to contain China’s rise. Chinese leaders observe that awarding the prize to past winners like Poland’s Lech Walesa, Burma’s Aung San Suu Kyi, and Iran’s Shirin Ebadi weakened the legitimacy of authoritarian regimes in those countries. Lee notes that Beijing’s official line has always been that reforms will only occur “when the time is right.” It had better democratize soon or domestic discontent will destabilize it.

Lee is a foreign policy fellow at the Centre for Independent Studies in Sydney and at the Hudson Institute in Washington, DC.

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Silvio Berlusconi’s Virtue

Posted by , 21st December 2010

Silvio BerlusconiRachel Marsden
12/21/2010

When Italian Prime Minister Silvio Berlusconi won a confidence vote last week by a mere three votes, it proved that in politics you don’t have to be perfect, you just have to be better than the other guy. And in Italy right now that’s a pretty low bar. The only people in Italian politics who are worse than the prime minister are everyone else. Unless the various opposition parties are able to find an actual issue or reform on which they profoundly disagree with Berlusconi, and so can mount a campaign on substantive issues, then they’re just wasting everyone’s time. Marsden notes that the socialist left hasn’t done much better: the traditional left-wing approach of doling out favors to their constituents is no longer viable.

Marsden is an international political and communications strategist and writer who teaches at the Institut d’Etudes Politiques in Paris.

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The Coming Iraqi Business Boom

Posted by , 21st December 2010

BagdadBartle Bull
12/21/2010

Nine months has been a long time to wait for a new government in Iraq, but the process has happened peacefully and constitutionally, and Bull is encouraged by that. There is evidence that Iraq can avoid much of the “oil curse” and build a more cosmopolitan and modern economy than those of its autocratic neighbors. Iraq’s greatest resource is its famously resourceful, tough, educated, and enterprising people. Whereas the capitals of the Gulf oil monarchies did not have paved streets a generation or two ago, Baghdad and Basra are ancient capitals of commerce, ideas, and global finance. However, Iraq still faces the challenge of overcoming inefficient bureaucracy, rampant corruption, and sporadic violence.

Bull, a former journalist, is a founder of Northern Gulf Partners, an Iraq-focused investment bank.

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In Belarus, a slide toward Eastern aggression

Posted by , 21st December 2010

LukashenkoAnne Applebaum
12/21/2010

In Belarus, Alexander Lukashenko was “elected” to a fourth term as president after a violent crackdown by his regime. The violence, says Applebaum, was evidence of Lukashenko’s weakness. Truly popular leaders do not need to resort to bloodshed and beatings to intimidate their opponents and shut down communication. Lukashenko rejected a deal with the European Union that involved Belarus receiving, among other things, more open borders in exchange for free elections. He did, however, sign an oil deal with Moscow. This represents the decline of the West. The United States and Europe are “out of money and out of ideas” and can not offer any “carrots” as attractive as Russian oil.

Applebaum is a weekly columnist for The Post, writing on foreign affairs.

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