Opinion

The Great Debate

from Bernd Debusmann:

Who is the superpower, America or Israel?

On February 18, the United States vetoed a U.N. Security Council resolution on Israeli settlements in occupied Palestinian territories. The vote raises a question: Who dominates in the alliance between America and Israel?

Judging from the extent to which one partner defies the will of the other, decade after decade, the world's only superpower is the weaker partner. When push comes to shove, American presidents tend to bow to Israeli wishes. Barack Obama is no exception, or he would not have instructed his ambassador at the United Nations to vote against a policy he himself stated clearly in the summer of 2009.

"The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop," he said in a much-lauded speech in Cairo.

Compare this with the text of the resolution that drew 14 votes in favor and died with the U.S. veto: "Israeli settlements established in the Palestinian Territory occupied since 1967, including East Jerusalem, are illegal and constitute a major obstacle to the achievement of a just, lasting and comprehensive peace."

Linguists may quibble over the difference between "illegal" and "illegitimate" but the substance of the two statements is pretty much the same. So why the veto? It followed an energetic campaign by the Israeli government and its allies in the United States to keep the issue out of the United Nations, seen by Israel as a reflexively anti-Israeli body.

Nuclear bombs and the Israeli elephant

-The views expressed are the author’s own-

For the past four decades, there has been an elephant in the room whenever experts and government officials met to discuss nuclear weapons. The elephant is Israel’s sizeable nuclear arsenal, undeclared under a U.S.-blessed policy of “nuclear opacity.”

It means neither confirming nor denying the existence of nuclear weapons. “Deterrence by uncertainty,” as Israeli President Shimon Peres has called it. The United States became a silent partner in Israeli opacity with a one-on-one meeting between President Richard Nixon and Israeli Prime Minister Golda Meir on Sept. 26, 1969.

That policy made strategic and political sense 40 years ago but it has outlived its usefulness, conflicts with Israel’s democratic values, is counter-productive and should be abandoned. So argues Avner Cohen, one of the world’s leading experts on Israel’s bomb, in a new book “The Worst-Kept Secret”, which delves deeply into the history and strategic and political implications of the policy.

U.S., China and eating soup with a fork

-The opinions expressed are the author’s own-

Are economists the world over using an outdated tool to measure economic progress?

The question, long debated, is worth pondering again at a time when two economic giants, the United States and China, are sparring over trade, currency exchange rates and their roles in the global economy.

In the run-up to U.S. mid-term elections on November 2, politicians from both parties, for different reasons, blamed trade with China for American job losses. China responded with irritation and hit back by accusing the U.S. of “out of control” printing of dollars tantamount to an attack on China with imported inflation.

Euro zone faces QE2 pain test

QE2 — a second round of quantitative easing — means that soon the U.S., Japan and Britain will all be busily exporting their deflation, raising the question: Just how much pain can the euro zone take?

If by November we have three of the largest economies printing money and buying up their own debt, the outcome — in fact the intention — will be to drive their currencies lower against their trading partners, opening new international markets for their goods and, by raising the price of imported goods, fighting deflation before its debilitating psychology can take hold.

That is the plan, at any rate, and, unless something else happens, it will force the euro up against all major currencies, including, as it is tied to the dollar, the Chinese yuan. The euro has risen about 9.5 percent against the dollar in the past month, a trend that ultimately will murder European exporters and its stock market.

America’s trouble with Islam

Of the many posters held aloft in angry demonstrations about plans for an Islamic cultural centre and mosque in New York, one in particular is worth noting: “All I ever need to know about Islam, I learned on 9/11.”

As an example of wilful ignorance, it’s in a class by itself. It passes judgment, in just 12 words, about a sprawling universe of 1.3 billion adherents of Islam (in 57 countries around the world) who come from different cultures, speak a wide variety of languages, follow different customs, hold different nationalities and believe in different interpretations of their faith, just like Christians or Jews. Suicidal murderers are a destructive but tiny minority.

But for the people waving all-I-ever-need-to-know posters in front of national television cameras two blocks from “ground zero,” site of the biggest mass murder in American history, Islam equals terrorism. No need for nuance, no need for learning, no need for building bridges between the faiths. The mindset epitomized by the slogan mirrors the radical fringe of Islamic thought, equally doubt-free and self-righteous.

For assets, demographics may be destiny

Right about now a massive demographic shift is getting under way which will put substantial downward pressure on house and stock prices, perhaps suppressing global asset prices by one percent a year.

This is going to complicate the response to a series of thorny outstanding problems. Less buoyant asset markets will make it that much harder to work out from under a massive overhang of debt in many advanced economies. It will also put retirement plans in a vise, as more would-be retirees find the assets they had hoped to live off of in old age are not worth enough.

That means longer working lives but also higher savings, which may, you guessed it, hit consumption, company profits and give stock and other asset prices another shove lower.

US intelligence spending – value for money?

America’s spy agencies are spending more money on obtaining intelligence than the rest of the world put together. Considerably more. To what extent they are providing value for money is an open question.

“Sometimes we are getting our money’s worth,” says John Pike, director of GlobalSecurity.org, a Washington think tank. “Sometimes I think it would be better to truck the money we spend to a large parking lot and set fire to it.”

The biggest post-Cold War miss of the sprawling intelligence community was its failure to connect the dots of separate warnings about the impending attack on New York and Washington on September 11, 2001. It also laid bare a persistent flaw in a system swamped by a tsunami of data collected through high-tech electronic means: not enough linguists to analyse information.

China’s export dominance must force U.S. rethink

Managing the rise of China’s vast economy and healing the U.S. trade deficit will require a new willingness and capacity to boost U.S. technology exports at affordable prices. More importantly it requires a new language from policymakers and a new mindset.

In a recent survey of American businesses, the proportion who felt unwelcome operating in China had risen sharply, amid tense stand offs involving Rio Tinto and Google. But with U.S. legislators in full flag-waving cry about China as a currency manipulator, is it really surprising China is looking to become more self-reliant?

At the heart of the trade problem is the difficulty the United States (and other western economies) are experiencing in adjusting to China’s rise to superpower status in the 21st century. It is causing the same problems the rise of Germany, Japan and the United States itself caused for Britain in the 19th and early 20th centuries.

At least U.S. has Japan to fall back on

(James Saft is a Reuters columnist. The opinions expressed are his own)

The bad news for holders of U.S. debt, in case you missed it, is that China has sold so many Treasuries that it is no longer America’s leading lender.

The worse news is that there is a new creditor-in-chief, and it is Japan, an aging country with its own government debt bubble to contend with.

China sold about $34 billion of Treasuries in December, taking its holdings to $755 billion, while Japan increased its purchases and now is in the top spot of the Treasury Department’s scroll of merit, with $768 billion. China’s holdings peaked in April, since when the trend has been gently downward.

Who wins in U.S. vs Europe contest?

In these days of renewed gloom about the future of Europe, a quick test is in order. Who has the world’s biggest economy? A) The United States B) China/Asia C) Europe? Who has the most Fortune 500 companies? A) The United States B) China C) Europe. Who attracts most U.S. investment? A) Europe B) China C) Asia.

The correct answer in each case is Europe, short for the 27-member European Union (EU), a region with 500 million citizens. They produce an economy almost as large as the United States and China combined but have, so far, largely failed to make much of a dent in American perceptions that theirs is a collection of cradle-to-grave nanny states doomed to be left behind in a 21st century that will belong to China.

That China will rise to be a superpower in this century, overtaking the United States in terms of gross domestic product by 2035, is becoming conventional wisdom. But those who subscribe to that theory might do well to remember the fate of similar long-range forecasts in the past. At the turn of the 20th century, for example, eminent strategists predicted that Argentina would be a world power within 20 years. In the late 1980s, Japan was seen as the next global leader.

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