Does China Own Africa?

By: Scott Nelson
Staff Writer

The Gulf News reported this morning that South Africa has barred the Dalai Lama from attending a peace conference there later in the week.

The reason? Officials cited their relationship with China.

For years here at the Global Affairs Council, we’ve noted that China has quietly but systematically enacted a policy of engagement with Africa. From Chinese emigration and small business ownership all the way to long range state-sponsored natural resource contracting; China is moving into Africa in a major way.

Today’s announcement by South African officials shows exactly how much influence China now exerts over the region.

Why should we care?

The future will depend more and more on Natural Resources, there’s simply no question about it. As the country that burns through natural resources faster than any other country, Americans should care where their next “fix” is going to come from.

And while we twiddle our thumbs, China has quietly sewn up large sections of the world that contain the very Natural Resources we’ll need in the future.

It may not be malicious, exactly. With over a billion citizens, China desperately needs natural resources in a major way. It’s not like they’re tying up those resources just so the United States can’t get them.

But the fact remains, malicious or not, the resources we need may not be available in the future.

For years the United States has systematically ignored all things African. It’s time we woke up, before it’s too late.

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When Will The Bank Nationalization Madness End?

By: Scott Nelson
Staff Writer

The Obama Administration is said to be in talks to Nationalize several large
U.S. Banks, or at least increase their stake in some of them (such as Citi).

We here at the Global Affairs Council have wondered with growing unease for some time at the Government’s intentions in this area.

Hopefully I don’t need to go into a discussion of why the Nationalization of banks is a terrible thing. We’ve commented in the past that the Government is not equipped to run a bank and would only make matters worse. Many government officials probably couldn’t even get an interview for an entry level job at a large bank, let alone run one.

Why, we wonder, doesn’t the Government simply create several new banks and loan all that money to them?

The old banks have failed, we should let them die.

The only reason we can’t do that is because of the risk of contagion and the further tightening of the credit markets due to fear of other banks collapsing.

But! If the government created several new banks (and by “created” I mean grant charters to independent private individuals not affiliated with the government in any way) and then loaned all those billions to them, there would be complete transparency. We, as investors, would KNOW that those new banks don’t have any toxic assets that could potentially wipe them out.

That would completely remove the fear that would have lead to contagion.

Investors would feel comfortable investing in these safe new banks, businesses would feel safe conducting business with these safe new banks, and the public would feel comfortable keeping their savings in these safe new banks.

The major banks have failed. Criminally failed. Banking is an incredibly easy business. You take in deposits, you save a percentage of those deposits and loan the remaining amount out, and your profits are the difference between the interest rate that you pay the depositors and the interest rate you charge the people whom you make loans to. Easy.

The fact that these major banks have screwed up something that is so fundamentally easy is all the proof we need that they should be allowed to fail. Remember the old view of the stodgy banker closing shop at three in the afternoon and playing lots of golf? There’s a reason that stereotype used to exist…because banking is a sleepy, easy profession.

Let’s stop trying to rescue banks that can’t be rescued, and SHOULDN’T be rescued. Lets let some new blood into the system and put this madness behind us.

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Adam Smith Told You So…

By: Linda Beso
Staff Writer

There was a great article today in the Financial Times by P.J. O’Rourke titled “Adam Smith’s Last Laugh”

I urge everyone to read it. It discusses the fact that nothing in this current recession is new. Adam Smith expected and described this exact course of events hundreds of years ago, and explained the exact way to deal with it.

What was Adam Smith’s prescription for saving the day?

Do nothing.

In a capitalist system, when things become overpriced (think BUBBLE), the market reacts to drive prices back down.

We are seeing this today. House prices got too high, now they’re dropping faster than you can say the words “misconceived stimulus package”.

This drop in home prices is painful for homeowners. Tough luck. You shouldn’t have bought a house you can’t afford. It’s not the government’s job, according to Adam Smith, to help you out of that mess.

“But”…you say…”people will lose their homes, and we just can’t let that happen!!”

Of course we can. The people that lose their homes will just have to…*gasp*….rent.

Throughout history we’ve seen crises upon crisis just as bad or worse than this one. Think Tulip Mania. In each case, the only thing to be done was to let it work itself out and NOT let the government muck it up. Or as O’Rourke quotes Adam Smith as saying “I have never known much good done by those who affect to trade for the public good. “.

We couldn’t have said it better ourselves…

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President Obama, Recession, And The Horror of Government Stimulus

By: Scott Nelson
Staff Writer

Recessions are a good thing.

I’ll say that again; Recessions are a good thing.

President Obama wants to end the recession quickly. But American President’s don’t get to make that decision, that’s the whole point to a recession. And you wouldn’t want them to if they could.

You see, a recession tells you what you’re doing well, and it tells you what you’re doing poorly. It shakes out corruption and inefficiency, gets rid of poor segments of the economy and strengthens good segments.

It forces you to change your behavior when you don’t want to, and even when you kick and scream against it (as President Obama is doing right now).

It’s why America is Great, and it’s why Communism historically fails. The Communists didn’t have the benefit of recessions to tell them what they were doing well and what they were doing poorly, so poor segments of the economy continued to grow until the weight of their mismanagement and inefficiency caused the entire system to collapse. Did you think Communism failed because Reagan told Gorbachev to “Tear down that Wall?”; no.

That’s the fundamental difference between a Capitalist system like ours and a Command system like Communism. Recessions, and Government intervention (like the kind proposed by President Obama).

Believe me, you don’t want President Obama to meddle with the economy. It will sort itself out on its own, far better than he could ever hope to do himself. Think Post Office, think DMV, think any other government program you’ve ever run across. They’re simply not equipped to act rationally or competently in the economic sphere.

That’s the secret. Ask an economist. They’ll tell you that Government intervention will kick us out of a recession quicker than if you did nothing and let it sort itself out on its own. BUT, the problem is that in the long run, Government intervention leaves us less well off in terms of FUTURE growth than if you had left it alone and let it sort itself out.

Even a Keynesian will agree with that statement.

Think of a scale from one to ten, with one being bad and ten being good. If you leave the recession alone, our economy will be at an 8 five to ten years from now. If you intervene (aka President Obama’s stimulus plan), you’ll kick start the economy today, but five to ten years from now we’ll be at a 4.

That’s why Government leaders like President Obama want to intervene. It looks good TODAY, and they don’t care what happens 5-10 years from now because they’ll be out of office then.

American’s need to wake up. If you think your problems will all be magically solved by any one person, even if that one person is as charismatic and talented as President Obama; then you seriously misunderstand the world in which you live.

Work hard and save, pay down your credit cards, go back to school if necessary. You may have to become a 3-car family instead of a 5-car family. But believe me, recessions are nothing new, they’re nothing to get scared about, and they won’t stop occurring.

But then, we wouldn’t want them to…

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Democratic Convention Madness…

By: Scott Nelson
Staff Writer

The eyes of the world turn today to the Democratic Convention in Denver to watch Barack Obama’s next step in his bid for the United States Presidency.

There’s a burning questions on the minds of all of us here at the Global Affairs Council; will the Clintons hijack the convention?

Senator Obama was forced to grant many concessions to Hillary Clinton, giving both her and husband, former President Bill Clinton, key prime time speaking slots on Monday and Wednesday as well as allowing the Clintons to show a video on the life of Hillary. Further, on Thursday Clinton delegates will be allowed to make a “symbolic” role call vote for Senator Clinton’s nomination.

We see several possible outcomes.

Outcome One: the Clintons will successfully hijack the convention. Senator Obama hasn’t won anything yet, and with his recent slide in the polls against Senator McCain, delegates that had previously agreed to support Senator Obama could realistically switch their support to Mrs. Clinton; giving her the nomination.

Outcome Two: The Clintons will disrupt the convention enough to cast further doubts on Senator Obama’s leadership and weaken him enough to give Senator McCain the strength to win the general election. Under this strategy a refortified Senator Clinton will sweep in four years from now to run again against aging incumbent McCain.

Outcome Three: Everyone will play nice and Senator Obama will waltz out of the convention with a clear mandate and solid party nomination.

Of the three outcomes, we here at the Global Affairs Council tend to lean towards outcome number two. But one thing is for sure; if history tells us anything it is that nothing is impossible at a party convention.

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The Russian / Georgian War

By John Alexander
Executive Director

Russia’s attack on Georgia signals a shift in the balance of power within the region and perhaps throughout the world that will have significant implications on all of Europe as well as the United States and China.

BACKGROUND:

On August 7th, 2008 troops from the Republic of Georgia invaded territory held by South Ossetia, a breakaway region of Georgia that had declared its independence back in the early 1990’s. That independence had not been diplomatically acknowledged by the United Nations, who still saw South Ossetia as a part of Georgia.

On August 8th, Russian troops entered South Ossetia, citing a kind of informal alliance between the two “countries”. By August 10th, Russia had secured their position in South Ossetia and begin to eyeball Georgia proper, which they then invaded the next day.

ANALYSIS:

This raises several obvious questions to us here at the Global Affairs Council. Why did Georgia invade South Ossetia in the first place? How was Russia able to react so quickly and effectively? Did Russia lure Georgia in so that the could use the “invasion” as a pretext to invade themselves? Why did this happen now, when the eyes of the world are turned to the Olympics in Beijing? Will the United States react, or will they be unable to stop Russia?

Bogged down with the wars in Afghanistan and Iraq, contemplating another action in Iran, and facing a Presidential election that will soon sweep the current administration out of office, the United States is seemingly overdrawn and unable to answer the situation in Georgia.

This action seems to re-establish Russia’s military might after its crushing defeat during the fall of the former Soviet Union and is seen as an attempt to re-establish Russia’s sphere of influence and signal to the world a comeback of Russian power under the rule of Vladimir Putin.

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China Leader Hua Guofeng Dies Today At Age 87

By: John Alexander
Executive Director

Hua Guofeng, the communist leader who ruled China shortly as the Communist Party Chairman after Mao Zedong’s death in 1976, died today at the age of 87 in Beijing.

Hua Guofeng was famous for his “Two Whatever’s” campaign, which directed the Party to:

   1. Uphold whatever policy decision Mao had previously made.
   2. Adhere to whatever instructions Mao had given.

The “Two Whatever’s” campaign was widely criticized by Deng Xiaoping at the 3rd Plenum of the 11th Central Committee in 1978 and ultimately used to push Hua out of power, giving rise to the reign of reformers led by Deng.

Before Mao died, he was notoriously quoted as saying of Hua; “With you in charge, I am at ease”. In an attempt to create his own cult of personality, Hua attempted to mimic Mao, affecting his same hair style, mode of dress, and mannerisms.

Before being ousted from power, Hua Guofeng famously arrested the “Gang of Four”, the group that led China through the Cultural Revolution and included Mao’s wife Jiang Qing.

Hua was notable for being one of the first Chinese leaders not to be purged, killed, or banished to a distant province upon his fall from power. He remained a member of the Communist Party’s Central Committee until 2002. China’s state-run News Agency hailed him as a “loyal communist warrior”.

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Musharraf Resigns

By: Linda Beso
Staff Writer

Pervez Musharraf

Pakistan’s President Pervez Musharraf resigned on August 18th amidst rising  impeachment pressure. Musharraf ruled Pakistan since 1999 when he took over in a military coup. He was forced to resign his military post last November in what many saw as a first step out of power.

In his absense the country will be ruled by a coalition of two rulling parties, though the details and specifics are not yet settled. How this change will affect the United State’s war on terrorism, which saw Musharraf as a key ally, is anyone’s guess.

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Welcome To The Global Affairs Council

Welcome to the Global Affairs Council.  The Council strives to be your source for in depth global affairs analysis and discussion.  In the weeks to come we will expand our new web site to bring you articles by some of the leading voices in International Relations and Global Analysis.  Check back soon!

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