26 January: Venezuela’s Chavez steps further down the road to ruin
Also today: Japanese finance mininister urges central bank to do more about falling prices; China shuts down lobbyists as corruption gets out of control; Kiwis offer first-class comforts in coach for much more than an economy-class ticket; Vietnam plays it by the book over inflation pressures; US wind industry see energy being taken from its sails; GM readies itself to make electric vehicle motors.
Venezuela’s Chavez steps further down the road to ruin
Venezuela is selling dollars from central bank reserves for the first time in six years after President Hugo Chavez said speculators are betting against the nation’s bolivar currency. The bank sold nearly $200 million of foreign reserves in the past two weeks in the first such dollar auctions since trading restrictions imposed on the US currency in 2003 spawned a huge black market. Chavez says he wants to strengthen the “official” bolivar more than 30% to contain inflation having already devalued the official rate as much as 50%. Chavez is on a hiding to nothing, because if he pursues this path, the economy will collapse in years to come. His widespread nationalisation of key industries and rampant land seizures have seen wealthy Venezuelans send nearly $100 billion offshore since 2005, which essentially amounts to the entire value of economy. It’s straight downhill from here.
Japan’s Finance Minister Naoto Kan feels the country’s central bank could do more to help tackle falling prices, after deflation became the biggest spectre of economic woe. But he can’t do much more than say so, and is only saying so to keep pressure on the Bank of Japan, which has little choice but to keep its foot off the pedal of interest rates that are already near zero at 0.1%. The government can and does communicate general policy direction with the bank, and vice-versa, but the last thing that Japan’s economy needs is rapidly falling export prices coupled with higher exchange rates, as that means that the value of exports will go even lower. The pace of falling prices has already slowed with rising crude oil costs, but oil is only the baseline input needed for Japan’s high-tech economy.
China shuts down lobbyists as corruption gets out of control
China’s government is said to have ordered the closure of thousands of its own brand of lobbying firms, which are run by local governments and companies to gain favour with officialdom. In the US, a controversial Supreme Court decision has gone the other way, unleashing the corporate lobbyist onto the public almost without restraint. But in China, the opportunities for corruption through this practice are pretty much completely unfettered. The so-called “regional liaison offices” have seen provincial government officials clocking up bills of nearly $100,000 to entertain high central government cadres. And while Beijing makes a serious example of such activities from time to time, it’s widely accepted that the back-door deal is more common than not. Bribery and embezzlement have seen local government officials, and even those more highly placed, get a bullet in the back of the head of late, but with Beijing alone having some 5,500 local-government provincial offices, and perhaps the same number representing state-run firms and other organisations, the ocean of China may be becoming too rough for the ship of state.
Kiwis offer first-class comforts in coach for much more than an economy-class ticket
The Kiwis are now offering first-class comfort to those who travel coach after Air New Zealand sought to get ahead of the competition by providing economy-class beds. You need them to get to the far southern ocean, as the country is extremely remote by any standards. But there’s a big catch, which makes it clear how much cash actually separates ordinary travelling folk from their upmarket peers. Individual passengers need to buy three seats together to lay out their economy sleeper, and while that presumably is still much cheaper than a first-class ticket, it sure says something about relative space and status aboard modern jet aircraft. The airline says passengers need to be ready to sleep together as small families or couples, so it sounds as if they’ve scrambled the price of their eggs. It also seems that sales of the so-called "Skycouch" were part of an Air New Zealand safety campaign last year, which included curvaceous female cabin attendants wearing nothing but body paint. That’s a cheap shot from the Kiwis, as the airline’s chief executive Rob Fyfe told reporters that reclining economy-class passengers should please keep their clothes on.
Vietnam plays it by the book over inflation pressures
Vietnam will keep its benchmark interest rate at 8% because inflation is under control. Who would have believed 20-years ago that the communist government would have to target inflationary pressures to keep its place in the modern world, but this is the second straight month that Vietnam’s central bank has maintained its key interest rate after quickening signs of inflation. Like every nation on the planet, the Vietnamese are trying to balance economic growth with the fact that their home-grown brand of stimulus package basically ended late last year. Authorities have done well to raise $1 billion in a second international bond sale, causing the nation’s main stock index to record its biggest gain in three weeks. That’s how it works these days, despite the Marxist rhetoric.
US wind industry see energy being taken from its sails
The US wind power industry added 39% more capacity last year, despite the chill of the worst recession in living memory. Some 2% of US electricity is now generated from wind turbines, up from almost zero a few years back. It’s tiny in total, but the 9,900 megawatts of capacity added last year is the largest on record for wind energy, helped by the federal $700 billion stimulus package, which gave the industry a tax credit and provided other investment incentives. But the lag in slowing demand could be the greatest enemy from here on in, as the recession has already weakened new orders for windmills, leading to a slow-down in installations.
GM readies itself to make electric vehicle motors
US President Barack Obama wants to see more American electric cars, so General Motors will now set up a $246 million facility backed by government funding to provide electric motors to future hybrid cars and possibly electric-only vehicles. That’s an exciting move by the bankrupt carmaker, and one it hopes will prevent it being eaten by Asian carmakers in its home market. The company’s first such motors are set to appear in 2013 in rear-wheel-drive hybrids. The US Department of Energy will fund $105-million toward the plant. The government already owns a majority stake in GM after it gave it a $50 billion bailout, and now the biggest US car manufacturer is trying to design and build more fuel-efficient vehicles, to get in line with fears over global warming. One wonders whether it will soon make a version of Volkswagen’s wildly popular “people’s car”, in an era when Americans have busied themselves with moving away from the brash individualism of Wall Street, in favour of a distinctly more nationalised and green economy.