A looming financial disaster for the Federal Givernment.

harpseal | August 17, 2003 | harpseal

[Filibuster_60]

Maybe in 15-20 years it will conclude that it can deal an effective blow to (what's left of) the U.S. economy by seizing assets

We'll have to keep a step or two ahead of them, in terms of R&D and management, to prevent that from happening, because otherwise they'll never attain true independence from our corporations. Increasingly what they lack is not hardware but software and intellectual capital. Fortunately, it's very difficult for them to improve in those areas without at least some increase in openness and transparency. On the other hand, it's alarming that they're producing ever-greater numbers of skilled technical workers, even as the technical proficiency of our own future workforce may be questionable thanks to the high-tech downturn.

[harpseal]

If it so good why don't private companies issue the insurance? I have never yet known an insurance company that did not want to make a profit. Could it be they lie?

[Filibuster_60]

Correction: Instead of "otherwise", "then"

[harpseal]

I note one of the conditions of investing in China is to locate an R&D facility there and if it is just a token R&D facility the company will be taken to the "woodshed" by the government of the PRC as Motrola was. I further note the PRC has the benefit of the R& D funded by the so called American companies.

[NRA2BFree]

ping

[meadsjn]

There was an article a few months ago concerning China buying up large amounts of US government and consumer debt (including blocks of mortgage notes). It might be a good idea to dig up some of this info and factor it in with possible scenarios.

They wouldn't be able to foreclose on the loans unless our military gets crippled to the point they can overrun the continent, and then "we the people" would have to negotiate with them.

If they do nationalize plant, equipment, and patents, then we could threaten to default on all our outstanding debt to them. This, of course, would require a whole new slate of elected officials to replace those in both parties who are already owned and operated by the Chinese.

If the offshore companies start collecting on OPIC money to cover their losses in China, it will lend much stronger credence to the claims that the S&L/FDIC debacle of the 1980's was a well-planned ripoff of the American taxpayers. This one will be much larger though.

[harpseal]

Well the reason it could not be privatized or sold to the insurance companies is the rates for doing that would be prohibitive and it would not be a hand out. To sell a book of business to anothe rinsurance company it must be discounted so that they can make a profit at it. to get rid of OPIC's book of business wouldprobaly mean the government that is we taxpayers would have to pay a company to pick up teh book of business and that company would have to be rock solid for its guatrntees of indemification to be considered a subsitute for teh Full faith and crdit ofthe US government.

Now with theimpending nationalization of some assetts by China that book of business has become even less valuable and will be ever less valuable as the date of nationalization approaches.

Given these conditions and the fact it may need the insured consent to tranfer the policy to a private company can you suggest a solution to the problem? I am actively soliciting solutions.

[harpseal]

There was an article a few months ago concerning China buying up large amounts of US government and consumer debt (including blocks of mortgage notes). It might be a good idea to dig up some of this info and factor it in with possible scenarios.Agreed on the utility of this action. I am already up to my eyeballs in trying to find hard data s o a little more work never hurt anyone.

They wouldn't be able to foreclose on the loans unless our military gets crippled to the point they can overrun the continent, and then "we the people" would have to negotiate with them.

Might I suggest rule .308 as an initial negotiating principle. But I would not look forward to this.

If they do nationalize plant, equipment, and patents, then we could threaten to default on all our outstanding debt to them. This, of course, would require a whole new slate of elected officials to replace those in both parties who are already owned and operated by the Chinese.

I would also suggest sequestration of any assetts we could get to. As to the need of a whole new slate of politicians maybe we would not have to replace everyone is some showed some b*lls.

If the offshore companies start collecting on OPIC money to cover their losses in China, it will lend much stronger credence to the claims that the S&L/FDIC debacle of the 1980's was a well-planned ripoff of the American taxpayers. This one will be much larger though.

True.

[harpseal]

While I support free trade, the Federal government should not be involved in insuring against the risks of political turmoil in foreign countries (especially if it costs the Feds money in the net, which really makes it into a subsidy).

I am glad you got at leats one of my points clearly. What we have in the current trade envirornment is clearly not Free Trade based on teh example in the linked thread alone. I note the comment by LS to that effect in that linked thread. (LS tou are flagged because i mentioned you).

[searchandrecovery]

...otherwise they'll never attain true independence from our corporations.
Interesting - first time I've read this idea.

Increasingly what they lack is not hardware but software and intellectual capital. Fortunately, it's very difficult for them to improve in those areas without at least some increase in openness and transparency.
I was thinking about this. The move from manufacturing goods designed elsewhere to designing and selling stuff on your own (especially for cultures way different from yours) will be difficult, imho. It'll be informative to see the first chinese-made car.

[harpseal]

Now you stated there is no good reason thatOPIC can not be privatized. The Companies that ourchased this coverage got acontrcat that the full faith and credit of the Federal government wa sbehing their possible indemnification. By simply selling the operation to hwhomever demanded the least federal money to take it on the companies who paid their premium ight still have a claimon theFederal government if the private company the insurance policy book was transfered to went out of business. this could well have very negative implictaions for every other full faith and credit guarantee form teh FEderal government.

[harpseal]

the bolded word was upposed to contract.

[LS]

I would pull a Reagan: put any items on the "Do Not Sell" list that are relevant to national security. Reagan did this with computers, and virtually broke the USSR.

I'll say again: we OWN the world computer industry---that part of it which is truly cutting edge and of value (yah, Japan makes processors, but only after we develop the stuff that goes on them!). Computers are our biggest wedge against China. If computer sales are tagged as "national security," then before the Chinese get any, they have to prove themselves "open" to American goods and trade. Even then, I wouldn't be fool enough to sell them advanced target acquisition computers.

[harpseal]

That is definitely a start. Any ideas as to how to deal with teh full faith and credit guarantees that will be a raid on Federal government funds.

By the way you just might get flamed for being an anti Free trade socialist for expressing that idea. :^)

[Filibuster_60]

I'll say again: we OWN the world computer industry---that part of it which is truly cutting edge and of value (yah, Japan makes processors, but only after we develop the stuff that goes on them!). Computers are our biggest wedge against China. If computer sales are tagged as "national security," then before the Chinese get any, they have to prove themselves "open" to American goods and trade. Even then, I wouldn't be fool enough to sell them advanced target acquisition computers.

It's now increasingly difficult to deny the Chinese advanced hardware, specifically chip-making equipment, which they're getting from Japan and Taiwan, even though our own government has tried to stick to the Wassemer Agreement as best as possible. During the Cold War we aimed to keep our major competitors two generations behind in semiconductor technology, but China's already closed the gap to less than a decade.

We dominate commercial software, no doubt. However, there's only a handful of companies - Microsoft, Oracle, Sun, etc. - that command the bulk of the market. All of them want access to China, the world's fastest-growing IT hardware market. Even though 90% of the stuff sold in China is pirated, that doesn't dampen their determination to not get shut out of the market. Microsft is particularly unwilling to offend China - to the point of putting R&D centers there - for fear the Chinese government will throw its weight behind Windows rivals like Linux.

We don't really lead Japan in supercomputers, it's a fairly close race there, but our areas of expertise are vastly different. They use their supercomputers for climate modeling while we use ours for weapons-system design, so while it's true that they can't come up with their own AEGIS system, it's equally true that our meteorologists are increasingly dependent on their Japanese (and European) counterparts.

[LS]

Chip making is not irrelevant, but it is hardly cutting edge. George Gilder argues, rightly I think, that the hardware is increasingly less important and the software, particularly the net, increasingly more important.

It's not just the Microsoft-type companies. That's a straw dog---it's the thousands of small software firms in Boise, Phoenix, Austin, Minneapolis, etc. that are YEARS beyond the Japanese and decades beyond the CHinese.

Supercomputers are obsolete. In the 1970s, there was a test where 100 PCs beat a Cray in a game of chess, and while they still have their place, the message is that PCs linked are more powerful---the net again.

The Chinese/Japanese in no way scare me in this regard.

[LS]

Free trade and free markets say that no business (except clear national security cases) should ever have claim on the Treasury, ESPECIALLY Harley-Davidson!

[Filibuster_60]

The Chinese can already market their own cars - of course they have to follow the foreign blueprints. Actually we shouldn't sneer at their R&D capabilities either, judging from the advances they've made in fields from genetics to artificial intelligence in just a few years. They have plenty of capable people and trail only a few countries in basic science research. Their problem, as it was in the Soviet Union, is how to translate knowledge into profit, and that's something that'll require fundamental changes in the way they do business.

[Filibuster_60]

Our advantage still rests mainly with the large and mid-size companies, not the little guys. You can actually find hundreds of small software firms in cities throughout India and China. The problem for them is they can't develop a sufficient economy of scale, the markets are extremely disorganized and few if any of them can grow into a globe-trotter. In this day and age, with consolidation being pursued by many big players in the IT industry, the reason we maintain a huge lead over other countries is that they don't have their own Microsofts, not because they have a low number of software firms.