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“China has clearly been moving ahead of the rest of the G- 20 in terms of thought leadership and laying the groundwork for what will be discussed, “

                              Glenn Maguire, chief Asia-Pacific economist at
                              Societe Generale SA in Hong Kong.

FX Trading – Does Thought-Leadership Equate to Economic Propaganda?

Referencing the Quotable section above, I wonder what “thought leadership” really means. When I hear such a term used to describe any government body my instincts tell me it can’t mean anything positive, regardless of its intent. Kind of reminds me of those Newspeak terms popularized by George Orwell in 1984 – doublethink, telescreen, ingsoc, etc.

Anyway, the quotable refers to the most recent comments by People’s Bank of China Governor Zhou. Yes, I know I got on him for his comments on Monday, but he wants the attention so I am going to give it to him …

 Contrary to his counterparts in the West, Zhou is taking the glass-half-full approach. Ok, I understand there’s no point in being overly pessimistic about an economy (unless you’re trying to make full use of a crisis). But does misleading optimism make any sense either?

The way we look at it, it does when you are China. Yesterday Jack touched on China’s smoldering social volcano yet to erupt (perhaps he didn’t describe it the same way.) If this is true, and if China is as vulnerable to the ongoing global economic crisis as we think they are, then it’s going to be a tough road to recovery.

But not to worry: China is China; and China is King of the World. Just ask them. Mr. Zhou today said in an article:

“Leading indicators are pointing to recovery of economic growth,”

And …

[Chinese government] “has taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to making vital policy decisions.”


OK, maybe something’s been lost in translation, but I find the above statements to be a premature and overly confident, though not surprising. China, more so than any other major world economy, finds itself in a most sensitive position – catering to a volatile and largely inflexible society reliant on economic stability.

Basically, this “thought leadership” may be nothing more than that – thoughts leading an empty train to recovery while China’s economy is actually stuck on different train heading the opposite direction. Call it propaganda if you’d like; just don’t get blurry-eyed from it if that’s the case.

And now that US GDP numbers disappoint again – down 6.3% in the fourth quarter – China still can’t rely on US consumer demand to help kick-start their economy. They’ll need to rely on, as Mr. Zhou said, there “superior system advantage when it comes to making vital policy decisions.”

The return to savings in the US has arrived; and officials who’d been clamoring for such a shift should be ecstatic (though they appear quiet.) Yes, the US economy is contracting, but isn’t the contraction (in the US and across the world) exhibiting the characteristics that we thought necessary to balance the imbalances only two years ago or so? Why abandon that?

Ultimately, growing savings and declining demand keeps our big picture market themes in play. Obviously the most popular theme among these is a US dollar bull market. The buck has had its rest. Now we’ll see what data and the global leaders can add to the mix over the coming days to solidify or weaken this view.

Keep an eye on the February US Personal Income and Outlays report tomorrow. The chances are we get more evidence that the Mr. US is further tightening up his balance sheet. And don’t forget to tune-in for Treasury Secretary Timothy Geithner’s testimony to the House Financial Services Committee that began at 10 am EDT this morning; or do. Which brings me to …

Cutting off the nose to spite the face.

I’ve never actually used the phrase above in casual conversation – it’s a bit too cliché. But the ongoing drama playing out in Washington has me returning to that line frequently. It appears not to be ‘thought leadership’ exuding from the Capital, but rather thoughtless leadership.

Hopefully I’m not committing a thoughtcrime with these comments, but see what you think after skimming through the following article:

Geithner Seeks Power to Regulate Big U.S. Hedge Funds, Derivative Markets  

And hey, if the markets have trouble swallowing this plan, Geithner could always meet Mr. Zhou for a bite to eat and a pleasant discussion on SDRs as a world reserve currency.