Sino Supercomputer, Drones, GPS & Mars Rover

It is not only on the dollar financial front that the U.S. is getting shellacked. The shellacking it is encountering on the supercomputer, drone and GPS fronts, American pioneering cutting-edge frontiers are heartbreaking ─ and un-American. America’s leadership in the supercomputer technology has been hijacked by China with its new fastest supercomputer in the world ─ the Tianhe-1A that can perform a mind numbing 2.57 quadrillion calculations per second.

The supercomputer is a key research tool in such fields as climate change, product design and weapons development. Any wonder the U.S. is concerned? It is an expensive and serious national security issue for both countries. China is rapidly catching up with the U.S. in the supercomputer installation business. So why not work together on joint aspects that are not security threats in the interest of building mutual trust and respect?

China’s ability to build drones and get a satellite to Mars, and launching satellites that can show people how easy it is to get around on earth, without getting lost and not using GPS, ends America’s role as the sole provider of global GPS services. China is challenging America not only on earth but in the skies.

Unmanned aerial vehicles, commonly known as drones, are considered the future of military aviation and could one day replace the fighter jet. China has developed more than 25 different models that is causing anxiety in the Pentagon because “when deployed, will expand the PLA Air Force’s options for long-range reconnaissance and strike.”

By 2012 China will also have more than a dozen satellites capable of covering the Asia-Pacific region and by 2020 it will have complete global coverage with 35 satellites which will give China strategic independence and another commercial gold mine. The GPS was a navigation revolution comparable with the invention of the compass, except that it is controlled by one power. America is no longer the world’s sole traffic cop in the sky at the dawn of the new space age.

Giving America a run for its money on earth and the skies is not enough for China. It is also reaching out to the moon. China’s lunar probe Chang’e-2 that was launched October 1, 2010, sent dramatic photos of the moon’s surface and areas proposed for China’s first unmanned soft-landing around 2013, which will carry a moon rover and a telescope. The telescope has attracted international attention because it will be the only lunar-based telescope and could lead to new astronomical discoveries.

Corporate Republic ─ Income Inequality

America has become a corporate hedge fund republic where the richest one percent possesses more net worth than the bottom 90 percent. The top one percent of Americans owns 34 percent of America’s private net worth, according to figures compiled by the Economic Policy Institute in Washington. The bottom 90 percent owns just 29 percent. That also means that the top 10 percent controls more than 70 percent of Americans’ total net worth. Huge concentrations of wealth corrode the soul of any nation. All one has to do is look at Africa and Latin America. The same is now happening to America.

Emmanuel Saez, an economist at the University of California at Berkeley, who is one of the world’s leading experts on inequality, notes that for most of American history, income distribution was significantly more equal than today. And other capitalist countries do not suffer disparities as great as ours. “There has been an increase in inequality in most industrialized countries, but not as extreme as in the U.S.” Professor Saez said.

Yet, career politicians insist on granting $370,000 tax breaks to the richest Americans as a way to stimulate the economy during a recession? I don’t get it. How is that going to stimulate the economy? Do politicians really think these rich taxpayers are going to stimulate the economy by buying fancy cars and yachts and hire more groundskeepers and chauffeurs? Of course not. But they are the people who fund the politicians re-election campaigns.

The unemployed poor who can stimulate the economy with unemployment benefits are given no breaks because they don’t have money to spare on career politicians re-election campaigns. A study commissioned by the Labor Department during the George W. Bush administration makes clear the job-creation power of unemployment benefits because that money is spent immediately. It is pumped back into the economy rather than a savings account or politicians re-election coffers.

Clash of The Currencies

The “shellacking” Obama and his democratic Congress received was not limited to the midterm elections. They also received a shellacking for their monetary policy at the G20 in Seoul last week..

While America demanded, make that ordered China to revalue the yuan with the threat of sanctions, America decided to print $600 billion to stimulate its economy with the second round of quantitative easing, commonly spun as QE2. The result, a weaker devalued dollar ─ 15-year lows against the yen and an all-time low against the Swiss franc ─ with China taking the biggest hit because of its multi-trillion dollar holdings. The result, instead of China being criticized for its currency policy at the G20 in Seoul last week, it was America that was roundly criticized by world leaders, including China, for its destabilizing currency policy that is causing trade imbalances and disparities not only at home but globally. The U.S criticism of China’s yuan policy and push to revalue the yuan was soundly rejected by world leaders who put the blame for the global clash of currencies squarely on U.S. shoulders.

The biggest force undermining the dollar is the U.S. Federal Reserve’s dollar printing policy, not China. It is time this is acknowledged and that the U.S. reconsider its exchange rate policy in rebalancing the U.S. economy. With the dollar’s interest rates in the U.S. at nearly zero, the country is printing more money and pumping it into the U.S. markets from where it flows to the rest of the world. As a result, the dollar has tumbled; inflation expectations have increased; asset and commodity prices have hit new highs. Even worse, the dollar’s appreciation has negatively impacted other economies and currencies, forcing them to act, either by imposing capital controls or intervening in their exchange rates.

Banks take the U.S. dollars the Fed prints and instead of investing and circulating them in the U.S. economy, look for better returns in emerging countries and create inflation, asset and housing bubbles with their hot dollars that they withdraw when they have maximized their returns, leaving the local economies in shambles as witnessed during the 1997-98 financial crisis. It should therefore not come as a surprise that countries as diverse as Brazil, Indonesia, South Korea, Vietnam and China have imposed restrictions on investment inflows to defuse the danger of hot money.

This is a “beggar-my-neighbor” policy. During the 2008-2009 crisis, the U.S. nationalized a lot of private debt, but in the post-crisis period, it tried to internationalize its public debt. The policy is shortsighted, beneficial to neither U.S. economic growth nor global recovery and stability. Shifting America’s accumulated debt burden across the world by softening the dollar only forces other countries to take action to protect their currencies. That ultimately isolates the dollar and its users. Historical experience shows that policymakers must be cautious about aggressively shifting exchange rates.

In the 1970s, the U.S. pursued a devaluation policy for the same purpose and using the same justifications. It led to chaos around the world and plunged the U.S. economy into a prolonged period of stagflation. Maybe the world can stop the U.S. from repeating the mistake, through currency interventions. This isn’t a currency war, it is good medicine, not only for the countries protecting themselves, but America as well.

The U.S. weak-dollar policy could backfire big time, leading straight to inflation without growth along the way. There is no mileage in politicizing currency management. There are no winners in a clash of currencies.

Dying American Dream

The American Dream has not only turned into a nightmare but is dying. People the world over dream of coming to America the way millions of immigrants, myself included, did to better ourselves. America was a place where if one worked hard one got ahead and created a better world for their children who in turn did the same for theirs. That was a dream all Americans believed in. Today less than half believe so according to a poll released by ABC News/Yahoo News in September 2010.

This point was brought home to me wherever I came in America in 2010. Homeless people shuffling and pushing shopping carts with all their worldly possessions. As a lawyer who represented mobile home and trailer park developers when I practiced law in California in the 70s, I couldn’t help think, my, mobile home living sure has changed in America these days.

The seeds of today’s global economic disaster were sown in the 1980s. From 1980 to 2005, the U.S. economy, adjusted for inflation, more than doubled. But the average income for most American families actually declined. The standard of living for the average family improved not because income grew but because women entered the workplace by the millions. As hard as it may be to believe, the peak income year for the bottom 90 percent of Americans was way back in 1973, when the average income per taxpayer, adjusted for inflation, was $33,000. That was nearly $4,000 higher than in 2005!

The American dream was alive and well and evidently unassailable. Yet somehow, following the oil shocks, the hyper inflation and other traumas of the 1970s that triggered my protest horseback ride to my Beverly Hills office in 1979, We the Apathetic Maids allowed the oil companies and their extremist career politicians in the Military Industrial Congress to smother the dream.

America can and must restore the American Dream. The dream can be revived. It will take time, courage and sacrifice. The American experiment is alive and although dying, can and must be resuscitated and restored by reaching back to the founding principles of this great republic envisioned by the Founding Fathers and enshrined in the Constitution.

Tea Party Revolt

What has fascinated and absolutely captivated me during the 2010 midterm elections is the emergence of the anti-establishment tea party movement and its vocal disgust and active revolt at the political process, system, expanding government, rising taxes and the career politicians and bureaucrats for their lack of adherence to the Constitution, who were enriching themselves and their Wall Street financial backers at the expense of America’s founding principles and taxpayers. Career politicians are not what the Founding Fathers had in mind for America.

The volatile 2010 midterm election brought out the angry voters willing to punish career politicians, Democrats and Republicans alike. The anti-incumbent wave went beyond anger at the Democrats, Republicans, Left, Right, Conservative or Liberal. Voters were angry at every Washington career politician and their Wall Street corporate influence peddlers who have hijacked the system and created a corporate welfare state at the expense of hard working taxpayers.

The Tea Party is the new phenom on the U.S. political landscape. It concluded the primary season with eight “citizen” Senate nominations and 33 candidates running in congressional districts, shocking not only the Democratic and Republican establishments, but the political pundits, who again, got it wrong misreading the anger and revolt brewing in America.

The Silver State senatorial race between Senator Harry Reid and Sharon Angle was a nail biting “man up” showdown, the nastiest and highest-profile Senate race that epitomized two of the strongest political trends of the 2010 election year: anger against incumbents and the vulnerabilities of the Tea Party candidates.

Tea Party Express began as a PAC called Our Country Deserves Better that political operative Sal Russo, a long-time conservative Republican ad man, and former California Assemblyman Howard Kaloogian formed in 2008. They were frustrated that Senator John McCain wasn’t drawing enough contrast with Obama during the 2008 presidential election. They rebranded the PAC after CNBC’s Rick Santelli made his famous “tea party” remarks on the air in February 2009 that spurred the protest movement.

Christine O’Donnell, notwithstanding her refreshing frank wackiness and “checkered background,” is on the Tea Party frontline carrying the banner of big business, like her sister Sarah, who told Karl Rove to “buck up,” to his checkered background comment about O’Donnell. It doesn’t matter to the party movers and shakers if O’Donnell loses, as long as she sweeps some like minded people into office elsewhere in the country on her tea leaves.