An astonishing event occurred last week-end in South Korea, more or less
simultaneously with the meeting of the most important finance ministers and
central bankers of the world also in South Korea. I speak of the Formula 1
Grand Prix -- though not of the race itself.
A developing weakness of mine in the last couple of years of increasing
senility has been to start watching Grand Prix racing -- and, yes, there
were enough spectacular crashes in the last one to have made it
interesting! (No injuries, thankfully, but plenty of wrecked cars!) What
was astounding, however, is that although the race was repeatedly delayed
for two hours because of heavy rain, the crowd took it so patiently. And
there were many thousands who were sitting in unroofed stands and getting
drenched. But not a murmur arose. In fact, they were laughing and joking
and waving at the cameras -- even very young children of six or seven years
of age (mainly boys I noticed) -- right up to the moment of the start of
the race when the cameras turned back to the track.
A Western crowd would never have reacted so stoically -- never mind in such
good spirits (nor would there have been so many families with young
children there either!). At Silverstone or Monaco the onlookers' faces
would certainly have looked grim and there might have been protests during
several short periods when the rain slackened and officials hung on further.
All this highlighted one huge cultural difference between South-East Asians
and Westerners. For thousands of years of civilization in Korea, Japan and
China -- even while many Caucasians in Europe were still mainly
hunter-gatherers and only just taking to agriculture and making clay pots
-- the common people of the Orient had learned to endure hardships and to
do as they were told. Today they still work hard. But they also play hard.
In all three countries, we're still talking of 60- or 70-hour working weeks
in both offices and factories but we're also talking of ad hoc
entertainments in the streets of their cities before and after work --
open-air theatres and choral singing, gymnastics and dancing -- for any
passer-by to attend or take part in.
But Orientals can also revolt big-time when they have a sore grievance. And
they're very disciplined on those occasions -- against authority, not
obeying it. In the West we have never seen industrial workers striking so
fiercely as the lethal street battles with police and army of 50 years ago
in Japan and 20 years ago in Korea. We have never seen student riots --
even in France! -- as confrontational as that which took place in Tiananmen
Square in 1989 even when the tanks were sent in.
Another pronounced trait is that the Japanese, Koreans and Chinese think
that their own country is far superior to any other. They have the same
attitude that the ancient Greek had: "We are civilized; all others are
barbarians." This is only an enhanced version of the "patriotism" that most
governments can so easily elicit in most Westerners (except for the elite
and the intelligent, of course). And it's in our group-think genes anyway.
But orientals believe in their superiority and in "saving face" far more
than we do.
So when Premier Wen of China openly and repeatedly talks -- as he has done
recently -- of the tens of millions of Chinese workers who will be thrown
out of work if America raises tariffs against Chinese goods, he is publicly
losing face, because they have no state unemployment benefits there and
what he is implying is that the Chinese government would collapse as a
result. No Chinese premier would ever have said this before now. And
there's a big rift there, apparently. There are those in China who want to
re-value the renminbi in order to placate growing Republican anger (Tea
Party, etc) in America, and there is China's Commerce department which is
resisting it.
Just as there is a rift in the Chinese government there is almost certainly
a rift in the American government right now. Tim Geithner, the US Financial
Secretary (probably now the most influential individual in America, even
including Obama), for the first time in two years, has actually praised
China's present currency policy. As soon as the recent G20 Preliminary was
over on Sunday in Korea he flew immediately to China. Three weeks ago,
Obama's chief economic advisor and then the most influential person around
Obama, Larry Summers, resigned with no comment (except the usual "family"
excuse) immediately after returning from talks in Beijing.
Both America and China are on knife-edges now. The dollar is at the point
where a double-dip would send it into oblivion -- and world trade also.
Obama is going to get a thrashing in the forthcoming election; he (and
America) must preempt a Republican majority early next year that will be
more belligerent against China. There are other straws in the wind which I
won't go into here.
My forecast is that at the end of the G20 Summit on 13 November, a new
world currency will be announced. It will at the same time have to somehow
neutralize -- or largely neutralize -- the sovereign debts of all the
advanced countries without penalizing China and several other
fast-developing countries.
This time a new Bretton Woods-type currency agreement will not be dominated
by America, as it was in 1944, but by a troika -- American, China and
Germany. Just as with Bretton Woods (when the American dollar only was
backed by gold), the new world currency is also likely to be backed up by
gold. But to save face (America's face this time) it will be dressed up in
SDR (Special Drawing Rights) language which are already -- few people
realize this -- backed up by gold.
That's my forecast anyway. I may be wrong but, otherwise, I can't see how
the world economy can hold together for much longer without a total
currency revision.
Keith
Keith Hudson, Saltford, England
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