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Post Italy to Join China-Led AIIB
Created by John Eipper on 03/17/15 8:47 AM

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Italy to Join China-Led AIIB (Eugenio Battaglia, Italy, 03/17/15 8:47 am)

A very surprising item from Rome:

It has been reported that Italy, thus far a loyal lackey of the US Empire, will enter the Asian Infrastructure Investment Bank, a sort of Chinese IMF.

Already the UK is part of this bank, and it has also been reported that Germany and France may follow.

Xinhua, the Chinese Press Agency, has reported that Switzerland, Luxembourg and South Korea are also joining.
There are already 26 members of the AIIP.

This is considered a big slap in the face of the Empire.

JE comments: Can anyone walk us through the AIIB? Its present capitalization of $50 billion is not world-shaking, but this could grow to a true rival of the IMF and World Bank.  My thought is that it's the biggest example yet of Chinese "soft power" on the world stage.

It's not surprising the Italy would join, if the UK, Germany and France have already done so.

Conversely, I note that in WAISworld's "International Finance" category, in April '14 we were wondering if the dollar's days as the world reserve currency were numbered. Nearly a year later, and with the euro at near-parity with the dollar, this is anything but the case.

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  • AIIB and Chinese "Soft Power": a New Empire? (Eugenio Battaglia, Italy 03/19/15 10:13 AM)
    A couple of days ago I spoke about the AIIP (Asian Infrastructure Investment Bank). John E, in his excellent comments, mentioned the growing "soft power" of China.

    However, China may be trying to build its own empire, an empire that does not look any better than previous empires. It probably would be much worse. Of course I am against any empire, except perhaps the Roman one, but that was 2000 years ago.

    The Argentinian journalist Patricio Eleisegui has described a not very encouraging situation in Central and South America about Chinese deals there.

    The Chinese are pouring money into Venezuela, Ecuador, Costa Rica, Chile, Argentina, Mexico and Nicaragua. All these nations are selling their lands with agricultural, mineral and oil resources, while Nicaragua let China to have its transoceanic channel. But these nations with the new "unequal treaties" (due to the different conditions of power among the two negotiating parties) are losing their sovereignty.

    As soon as Italy confirmed that it will join the Chinese-sponsored AIIB, the Italian PM has been "invited" to Washington for 17 April.

    On the other side of the Atlantic, in the Middle East and North Africa, the news is all horrible, with Netanyahu's victory in the Israeli elections and the terrorist attack in Tunis. In the attack a number of Italian tourists, who arrived with the ship Costa Fascinosa, are reported dead and injured.

    JE comments:  With its financial incursions and infrastructure projects in Latin America, China may be defying the Monroe Doctrine more than any nation in 100 years.  The US is entirely focused on the Middle East, and is in no position to protest.  Note that 150 years ago, when America was at war with itself, France conquered Mexico.

    The Tunisia attack is especially depressing, given that Tunisia was the only Arab nation to emerge from its "spring" with a reasonably functional democracy.

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    • China's Long Game (John Heelan, -UK 03/20/15 1:24 AM)
      For some years I have been arguing in WAIS that China will play the long game and adopt the Chinese martial arts principle of using the opponent's own strength against him.

      In this case China is using capitalist tools of markets and finance against the West, e.g. "the largest foreign holder of US debt is China, which owns more about $1.2 trillion in bills, notes and bonds, according to the Treasury."

      JE comments: John Heelan first made the "long game" analogy long ago, and referred to the popular board game "go," where contests often last many hours.  The AIIB is a significant move in this game.

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      • China's Long Game (Francisco Wong-Diaz, USA 03/20/15 8:41 AM)
        John Heelan's argument about China (20 March) is quite commonly made since the publication of the book Unrestricted Warfare (URW) by two Chinese colonels--Qiao Liam and Wang Xiangsui--and translated as Unrestricted Warfare: China's Master Plan to Destroy America, 2002. It is based on Sun Tsu's Art of War.

        The most recently and impressive long-war analysis is by former "panda lover" and DOD official Michael Pillsbury--The Hundred Year Marathon. It reflects the fast-changing perceptions and more realistic views of our most experienced military and foreign policy experts.

        JE comments:  The guru of Soft Power, Joseph Nye, recently spoke with Time magazine about China.  Nye believes the "American Century" is far from over.  China, in Nye's view, faces the triple whammy of environmental devastation, an aging population, and inefficient state-run industries.  This article should assuage some fears about an imminent Chinese takeover.


        The biggest danger facing the US, as Pogo taught us long ago, is us--political gridlock and petty factionalism.

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        • China's Long Game; David Shambaugh in WSJ (Paul Levine, Denmark 03/21/15 4:06 AM)
          My thanks to JE for referring to Joseph Nye's interview in Time. (See Francisco Wong-Díaz, 20 March.)

          Another skeptic is a respected China scholar and watcher, David Shambaugh, who recently published this surprising op-ed piece in the Wall Street Journal. It has caused quite a stir:


          JE comments:  Fascinating reading.  Mr Shambaugh cautions against being too confident about predicting the fall of repressive regimes, but he suggests that for China, the Beginning of the End is already upon us.  He cites five reasons:  1)  The ultra-wealthy already have one foot out the door; 2) Xi Jinping has intensified crackdowns on dissent; 3)  Regime loyalists are becoming increasingly demoralized; 4) Corruption, corruption, corruption; and 5) That Chinese trump card--the economy--seems to be running out of gas.

          A question for the Floor:  what would a regime collapse in China look like?  I strongly doubt it would involve a peaceful transition to democratic pluralism.  These would be most interesting times, with scary, world-wide implications.

          Shambaugh mentions a bizarre phenomenon:  "birth tourism," whereby wealthy Chinese women travel to California to deliver babies that automatically receive US citizenship.  Can anyone enlighten us further on this practice?  Who specifically is cashing in?

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          • Birth Tourism, Starting at U$60,000 (Alan Levine, USA 03/22/15 10:44 AM)
            Birth tourism (see Paul Levine, 21 March) is a real thing. The Washington Post recently ran a story covering the arrest of a number of US citizens of Chinese origin for organizing and encouraging it.

            They charged women $60,000 each for advice on how to get through US security and they arranged places to stay, hospitals, and shopping trips while the women waited. My impression, though, is not that it is a government plot, but a precaution taken by the rich to start to find a way to get out of China and come here.

            JE comments:  I'm puzzled:  how exactly is birth tourism a crime, if the people enter the country legally on a tourist visa?  Wikipedia informs us that Australia, France, Germany, and the UK have passed laws to stop the practice, by requiring at least one of the parents to be a citizen or legal resident.

            Besides the Chinese, it's also popular among South Korean parents, as the youngster born in the US can avoid two years of compulsory military service.


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        • More on China's Long Game; Joseph Nye (Francisco Wong-Diaz, USA 03/21/15 4:35 AM)
          Joseph Nye's arguments about China (see JE's comments on my post of 20 March) are similar to those made by the failed "Russian reset" policy. No one of import believes that those three issues are determinative. In a long war strategy, they are minor obstacles.

          For instance, China's aging population argument has been made regarding Japan (a country that has addressed the issue thru robotics) and the US, which has relied on immigration. Europe is a hard case of a declining and aging population, and Russia's male short life expectancy is a tragedy. Yet, except for the US under Obama none of these four (J, USA, EU, Russia) are retreating from global activism. In fact, the most globally aggressive countries today are Russia and China. For a review of China's global go, I refer all Latin Americanists to read the body of work by Robert Evan Ellis. In particular, the Rise of China in the Americas.

          For long now, I have hypothesized that China's strength and future dominance lies on its soft power strategy of allowing or encouraging sub rosa the spread of its population to the entire globe. The overseas Chinese and their descendants will be the instrument "to win without fighting."

          JE comments:  Many would argue that with its military presence throughout the world, the US is still far and away the most "globally aggressive" nation.  But China's soft-power reach is impossible to overlook.  One tiny example:  I've spent the last three Christmases in airports.  Last year, we were in the León-Guanajuato (BJX) airport in Mexico.  Almost every passenger seemed to be Chinese.  In previous years I had seen the same thing in Orlando, Las Vegas, and New Orleans.

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        • China's Long Game (Tor Guimaraes, USA 03/22/15 3:45 AM)
          I have read with amazement and amusement the explanations and forecasts of my distinguished colleagues about what is going on with China. It is an impressive collection of facts and wild imagination ranging from how the Chinese government is playing "the long game" to how it is sending Chinese people to populate the world and/or sending pregnant Chinese women to the US to have their babies here and become good little Communist Chinese agents.

          Give me a break!

          On the other hand, I would love to have been a fly on the wall when the high echelon of the Chinese leadership was debating accepting the invitation from greedy corporate and government Western leaders to join the Capitalist game by becoming the world's manufacturing center. Obviously the greedy Western leaders thought they could make a lot of money with China as a friendly partner, and that has happened. But the Chinese Communists have ideas of their own: they want China to become the greatest power in the world, and they have made giant strides in that direction. However, world dominance will be shared in the next few centuries. Which countries will be the dominant players depend on some basic facts, not on sending Chinese people to populate the world or pregnant women to the US so their babies will become US citizens.

          John Heelan correctly observed (20 March) that "China is ...the largest foreign holder of US debt is China, ... owning ... about $1.2 trillion in bills, notes and bonds." So what? That makes China dependent on US financial success. It is not a tool of war. If the US government squanders the borrowed money to burn fireworks in Iraq and Afghanistan, or some other unproductive project, it is our own fault.

          I posted about this a few times in the past; which nation(s) become the dominant power in the future will be decided by the strength of their economy, which in turn will determine the power of their military. The strength of any economy will have to start with the demand for goods and services, which means a strong middle class. To the extent that US or Chinese elites create substantial income disparity, they are financially oppressing their middle class cutting their own long-term economic throats. I tell my students about the virtuous cycle: science begets technology, technology begets innovation, and that in the presence of consumer demand, creates economic development. While there are many extraneous factors (civil wars, corruption, government tyranny, etc.), basically whichever country performs this virtuous cycle better will eventually dominate the world.

          JE comments:  I was the one who mentioned the "birth tourism" phenomenon, but I didn't suggest the new US citizens would become "good little Chinese agents."  The opposite could also be the case--that these cross-cultural youngsters will be agents of change in China itself.

          Let's face it:  China is an enigma.  But is this because of China, or is it just the West's inability to understand?

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          • China's "Long Game" is Real (Francisco Wong-Diaz, USA 03/23/15 2:11 AM)
            Tor Guimaraes (22 March) should begin by reading what the Chinese are writing and saying about their own intentions, capabilities, and strategy. Some of us in WAIS have already provided a few introductory recommendations.

            Just last week the Chinese admitted having a large "aggressive" cyber capability. The US Cyber Commander Rogers testified that we need to ramp up our aggressive capabilities to meet the Chinese, and change our "passive" cyber strategy to a more aggressive one.

            JE comments: We've just learned of Daesh's "Hacking Division," and now we hear of China's cyber capabilities. Not long ago Sony experienced a cyber attack from North Korea. 

            Should we begin a conversation on cyberwarfare?  It conjures up visions of electricity blackouts and erased bank accounts.  My biggest fear is that if the Internet is made to crash, how will the citizens of WAISworld communicate?  Should we set up a WAIS Pigeon Corps?

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            • China and Hegemony: Response to Francisco Wong-Diaz (Tor Guimaraes, USA 03/24/15 3:46 AM)
              Francisco Wong-Díaz (23 March) believes that I "should begin by reading what the Chinese are writing and saying about their own intentions, capabilities, and strategy." My opinion is that those who listen to the Chinese declarations of their own intentions, capabilities, and strategy will be a day late and a dollar short when dealing with the Chinese.

              Contrary to what has been said, the Chinese government is not an enigma. It is quite predictable if you assume they are very practical and patient, ruthless, nationalistic, militaristic, and that they understand the power of science and technology, and that the concepts of individual rights and privacy are non-existent. In contrast, my experience is that personally Chinese people are strong trustworthy friends, extremely family-oriented, mostly very hard-working and dedicated to learning.

              Personally, I am very concerned about the increasing Cyber warfare going on worldwide. I expected that the US Cyber Commander Rogers would state that "we need to ramp up our aggressive capabilities to meet the Chinese, and change our ‘passive' cyber strategy to a more aggressive one." That is his job, but my concern is that in the long run the US will be on the short end of the stick. First, we have not been passive in cyber wars; we may have invented it and have cyber attacked many "enemy" countries. We just have not engaged in irresponsible cyber-attacks against anybody as many other countries do, including China. Cyber warfare has escalated to scary levels and the destruction can be enormous one of these days.

              I think it is time for the UN and the UN Security Council to consider Cyber warfare as a form of aggression which can cause as much or more harm to a nation as a military attack. Just as with terrorist attacks, governments must be held responsible for attacks originating from their own soil, and legitimate governments must cooperate to reduce this dangerous threat just as they have been doing about terrorism.

              WAISer Robert Whealey made many good points (23 March) about Chinese reality and likely future behavior.  However, regarding the "Beijing's bank declar[ing] the paper dollar null and void" and "the New Yuan becoming the new reserve currency"--pigs will fly before that happens.

              JE comments:  Do we all agree with Tor Guimaraes that China's government is "very practical and patient, ruthless, nationalistic, militaristic, and that they understand the power of science and technology, and that the concepts of
              individual rights and privacy are non-existent"?  I think Tor is right on the money.  Ruthless and militaristic regimes tend to embark on reckless adventures, which inevitably lead to their destruction.  China hasn't gone this impetuous route so far, because of its practical and patient side.  

              Have the Chinese found the successful formula for world hegemony?

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              • Has China Found the Formula for World Hegemony? (Tor Guimaraes, USA 03/25/15 6:40 AM)
                When commenting my post of 24 March, John Eipper put an irresistible question to this Forum: "Have the Chinese found the successful formula for world hegemony?" My answer is yes, with only one huge caveat. The response is complicated enough and ignores the side shows like prospective Chinese mothers coming to the US to bypass US immigration laws.

                Any intelligent answer to this very important question requires balanced strategic thinking. Toward the possibility of Chinese world hegemony, besides its enormous population which has become a mixed asset, I am sure we all agree that China was unimaginably lucky that the Western corporations decided to invite them to the Capitalist party and become the manufacturing center of the world for at least some time. The Communist leadership were smart enough to put their dogma aside and accept the invitation. Instead of behaving like a bunch of corrupt politicians as we learned to expect from Western leaders, they were downright patriotic and strategically brilliant to dangle their potentially large markets to memorize Western corporate leaders into "sharing" their extremely valuable technologies. Strategically this is the single most important factor toward Chinese greatness in the long run: massive absorption of technology (and its uses) in all areas.

                As the money rolled in from their Capitalist partnerships, they did what most countries would have done: beefed up their military, improved their infrastructure, polluted the hell out of everything, and used their need for raw materials and long-term partnerships worldwide to develop the best kind of power: soft and productive, and in a few cases even magnanimous. Not bad for a bunch of ruthless Communists.

                As I wrote numerous times before, world power will be shared in the 21st century, but which nation(s) become the dominant power in the future will be decided by the strength of their economy, which in turn will determine the power of their military. The strength of any economy will have to start with the demand for goods and services, which means a strong middle class.

                The Chinese leadership has shown that they understand the virtuous cycle: science begets technology, technology begets innovation, and that in the presence of consumer demand, creates economic development. But, I believe their discipline is being tested, internal corruption is showing its ugly face in a few places, and while the Chinese middle class is awesome, there are still 600 million people looking at the party from the outside. They must be incorporated or there will be problems.

                All politicians need to take the course Middle Class Management 101. It is about decent living standards, education and job opportunities, fair income distribution, human rights, health care, the rule of law including intellectual property protection, and a little democracy. As America and most Western nations slide down slowly on seemingly every one of these areas, the Chinese nation seems to be quite stuck on its way up. While social/political deterioration is like slowly boiling the frog imperceptibly, the Chinese situation is very uncomfortable to their government: Internally, Chinese already at the party want more, and those left behind desperately want in. Externally, China's economic success and world power is raising eyebrows in the West, to say the least. At minimum the smell of conflict is in the air. Many Western partners are complaining about mistreatment by the Chinese government, and here we are discussing possible future Chinese hegemony over the world.

                Has the Chinese middle class grown enough to support their national economy without major trouble? Absolutely not. Has the Chinese government done everything possible to build their middle class? Can they surmount creeping corruption and growing popular unrest for many reasons? Probably not in both cases. Therefore, we probably do not have to worry about Chinese taking over the world during this century.

                JE comments:  Well stated.  I'd like to expand this discussion to the wider topic of hegemony.  What does national "hegemony" mean in the 21st century?  Do the old metrics (richest, biggest markets, strongest military) still apply?

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                • World Hegemony, and a Lee Kuan Yew Quote (Mike Bonnie, USA 03/25/15 9:05 AM)

                  Heard on public radio this morning; I can't quote the exact source and therefore cannot verify the accuracy of the comments:

                  The guest speaker on the program told a story of having lunch with Singapore's Lee Kuan Yew. During their conversation the guest speaker asked if China would become the world's dominant economic power. Yew replied (again, an unverifiable statement):  "China has 1.3 billion people to rely on as a source of building its economy. The US has 7 billion people to rely on as a source of creativity."

                  A while back I listened to a program where the guest discussed enrollment in US Ivy League colleges (again, an unverified observation). The guest presented his research, that 60% of college students enrolling in Ivy League colleges were pursuing degrees in economics, capitalization and risk management. If so much future talent in the work force is going toward managing a finite commodity (capital), isn't the US (as a culture) sacrificing the one thing that has made the nation great?

                  JE comments:  Perhaps it was Joseph Nye, of "soft power" fame?  Nye cited this Lee quote in the Time interview we visited last week:


                  Remember that Lee passed away just two days ago.

                  It's great to hear from Mike Bonnie, by the way.  Mike:  what's the buzz in Wisconsin about a Scott Walker presidential bid?  Remember:  Truman and Lincoln didn't need no college degree.

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                  • Lee Kuan Yew on China (Paul Levine, Denmark 03/25/15 1:08 PM)
                    Apropos Lee Kuan Yew and his views on China as a world power, Mr. Lee concluded:

                    "China's political system is not attractive and they have no attractiveness as a model. China has little soft power."

                    JE comments: By making his small nation rich, Lee garnered a reputation as the Sage of Southeast Asia. There's something Buffett-like about him.

                    Let's make this Lee Kuan Yew Memorial Week on WAIS. Does anyone in WAISworld have a personal encounter to report?

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                    • Lee Kuan Yew: A Poem by Gary Moore (John Eipper, USA 03/29/15 11:28 AM)
                      Our friend in Memphis, Gary Moore, sends the following:

                      Am I too late for Lee Kuan Yew week, and the irresistible Eipperian analogy of Buffettism?

                      Here are some verses in tribute:

                      Oh, I wish I had a pencil-thin island,

                      That I could always make run nice.

                      I'd Singapore-un-sling it, and never have to wing-it,

                      Cause I'd let laissez-faire suffice.

                      I'd raise a little Cane with the backsides,

                      And all the traffic lights would align;

                      I'd never traffic-jam it, and just supply-demand it--

                      A Strait-laced Isle of Rightness Yew'd find--

                      Oh, the beacon on my pencil-thin, insular beach

                      Would be the Key East of Sun-Shine...

                      (With apologies to the landmark dissertation

                      on Boston Blackie econometrics from the Other Key.)

                      JE comments:  Lee Kuan Yew Week concludes today, so you're just in time, Gary!  Thank you for the excellent poem.  "A Strait-laced Isle of Rightness Yew'd find"--I count three examples of word play in just one line.

                      I get one other reference:  Buffett can be Warren or Jimmy, and Jimmy Buffett is associated with Key West...ergo Singapore as Key East.  But how about Omaha East?  Or conversely, a Singapore Margarita?

                      WAISworld's LKY Week (alas) never really got off the ground, but Gary's poem ends it with a bang.

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                  • A Scott Walker Presidential Run? (Mike Bonnie, USA 03/27/15 2:54 AM)
                    On 25 March, JE asked for the buzz in Wisconsin on Governor Scott Walker's possible presidential bid. Walker won a resounding applause at the CPAC conference (February 26, in National Harbor, Maryland) by characterizing his foreign policy experience as "standing up to 100,000 protesters in 2011, [which] has prepared him to face the threat posed by Islamic State terrorists." This remark won few kudos here in Wisconsin. http://host.madison.com/news/local/govt-and-politics/scott-walker-tells-cpac-that-facing-protesters-prepares-him-for/article_c3560052-ca4a-5283-8df6-367cb61f0510.html

                    In a straw poll following the convention, Walker came from fifth place last year to within four points of the winner this year, Rand Paul. http://www.cnn.com/2015/02/28/politics/cpac-2015-straw-poll-results-rand-paul/index.html

                    Walker, a "rock star" at the 2012 Republican National Convention, is garnering acclaim in Iowa, Colorado and other polling states and building a tremendous war chest. Within his home state, Public Policy Polling reports (March 10), "Overall only 35% of voters in Wisconsin want Walker to run for President, compared to 58% who don't think he should run." http://www.publicpolicypolling.com/main/2015/03/clinton-leads-walker-in-wisconsin.html

                    From the history log: Only two governors have become president since William Howard Taft (Provincial Governor of Cuba, 1906): Ronald Reagan (California, 1967-1975); and, Bill Clinton (Arkansas, 1979-1981 and 1983-1992). Scott Walker is a two-term governor and has to his credit being the first US governor to survive a recall election, by 52-47% of votes, and a photo-op visit to England.

                    The Daily Kos lists in a blog, The Political Environment, "Scott Walker facts little known outside Wisconsin, cannon fodder for the media as the selection of a Republican candidate to run against Hillary Clinton approaches." In my opinion, Hillary needs a serious contender: http://thepoliticalenvironment.blogspot.com/2015/03/scott-walker-facts-little-known-outside.html

                    Regarding the 2016 election, Progressives and others in Wisconsin are looking toward Russ Feingold returning to state or national politics, perhaps to run against Senator Ron Johnson, first-term Tea Party senator and chairman of the Homeland Security Committee. Johnson deposed Feingold of his senate seat in 2010. http://www.state.gov/r/pa/ei/biog/213603.htm and http://www.progressivesunited.org/

                    JE comments:  Walker already has much catching up to do against Texas Senator Ted Cruz, as they would be chasing the same voter demographic.  Cruz is a polished debater, a graduate of Harvard Law, and a Constitutional expert.  Reportedly he has memorized most of the document.  On paper Walker is no match for him, but Walker is fearless--and plucky.

                    The big question:  will the Koch brothers wager on their local boy (Walker)?

                    The history log has overlooked another state governor who became president:  George W. Bush, 2001-'09.  Remember him?

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                    • Governors who Became US Presidents (Randy Black, USA 03/28/15 3:25 AM)
                      Mike Bonnie cited the following in his post of 27 March:

                      "Only two governors have become president since William Howard Taft (Provincial Governor of Cuba, 1906): Ronald Reagan (California, 1967-1975); and, Bill Clinton (Arkansas, 1979-1981 and 1983-1992)."

                      Actually, there have been 18 former governors who have managed to get to the Presidency.

                      On the chance that Mike was referring to governors who were elected President "while" being a or after being a sitting governor, his premise apparently still misses the mark.

                      Governor of Ohio Rutherford B. Hayes became President; Governor of New York Grover Cleveland became president (twice with a gap between terms); Governor of Ohio William McKinley made it to the top as did New York Governor Theodore Roosevelt; New Jersey Governor Woodrow Wilson. Not to be forgotten are Massachusetts Governor Calvin Coolidge; New York Governor Franklin D Roosevelt; Bill Clinton from Arkansas and George W. Bush from Texas.


                      JE comments: I had already included George W Bush on the list. The eagle-eyed David Duggan wrote to add FDR.  It's been nearly a century since an Ohioan reached the White House, but from the Civil War until the 1920s, Ohioans were more or less the norm.  A possible contender for 2016?  Ohio Governor John Kasich.

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                      • Jimmy Carter was a Governor, Too (David Fleischer, Brazil 03/28/15 3:26 PM)
                        Randy Black (28 March) overlooked Jimmy Carter, who had served as governor of Georgia.

                        JE comments: Tim Brown also caught this omission. It took a surprising number of tries to come up with a list of governor-presidents, but now I believe it's complete.

                        Greetings to David Fleischer in Brasília!

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                • China, Hegemony and Birth Tourism; from Ric Mauricio (John Eipper, USA 03/26/15 2:26 PM)
                  JE: Ric Mauricio sends this response to Tor Guimaraes (25 March):

                  It appears that there is thinking that the government of the People's Republic of China is seeking world hegemony. And by sending mothers to the US, it is looking to achieve this. But the PRC is not encouraging this at all. How do I know? First-hand experience in Beijing.

                  In 2012, I traveled to Beijing to give a presentation to American expats on having to file their US tax returns, FBAR (for financial accounts overseas $10,000 or more), and FATCA (for financial assets over $150,000 for married couples). This was held in a very public forum, since I know that the government frowns upon private meetings (they are very paranoid).

                  Unbeknownst to me, word got around the Chinese community about this presentation, so it was also attended by wealthy Chinese individuals. One of the topics discussed was having a child in the US, so that the child now has dual citizenship. I pointed out to them that to do so would subject their child to having to file US tax returns, FBAR, and FATCA, even if the person never set foot in the US. Why, I asked, would you subject your child to this? Anyone, citizen, resident, or visitor, can invest in the US. The only possible benefit to becoming a US citizen is to perhaps collect welfare, which I really doubt many wealthy Chinese have in mind.

                  After the meeting, a gentleman came up to me and introduced himself as a government official. Oh, man, I thought, I am so in trouble. He told me that the official government take on parents going on "birth tourism" trips was discouraged, but if they wanted to subject themselves to dual tax systems (by the way, the PRC borrowed our US tax code and is now redesigning their tax system to tax worldwide income as well), then that's their choice. I think we both agreed that to do so would be "dumb." Yup, we both had a good laugh. Since I was in agreement with the government of the PRC, does that make me a good little Communist? Uh, I don't think so. But when in China ....

                  Back to world hegemony. First of all, I think that the Chinese are becoming more capitalistic than we are. In fact, with the exception of the Mao era, China has always been capitalistic. China has made deals with Latin American, African, and North American (yes, Canada and Mexico) companies and countries. This is capitalistic, much like American multinationals have operated. The centrally managed economy of the PRC is not unlike the business laws we have here in the US. Many countries outside of China have infrastructures owned, managed, and operated by ethnic Chinese, also known as the "Overseas Chinese."  This is not unlike the Jewish influence in the western world in finance and entertainment. The differences between Communist government and democratic governments is a matter of degree of tolerance and freedom.

                  Both are really ruled by oligarchies. But bottom line, other countries resent the fact that the American empire tries to push its way around (again, FBAR and FATCA and its attempt to control financial institutions around the world is an example of this). This is why you have the China pushback. They don't want to be known as second-class world citizens.

                  JE comments:  It's IRS season in America, and tax irregularities have been the downfall of more than one financial scheme.  I hope Ric Mauricio can enlighten us:  how does the US impose the tax code on its ultra-wealthy Chinese baby citizens?  I'm thinking of jurisdiction and enforceability.  Will some tax dodgers find themselves arrested when they come to the US for college?

                  Best of luck to you, Ric, during the tax crunch!  Only three more weeks...

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                  • China, Birth Tourism, and Dual Citizenship (Mike Bonnie, USA 03/28/15 9:37 AM)

                    Ric Maurico wrote on 26 March that Chinese babies born in the US would be granted dual citizenship. Has China's rule changed? To the best of my knowledge China does not permit dual citizenship; citizenship in China is based on jus sanguinis (right of blood). A child of Chinese parentage born in America would have US citizenship, shown through a birth certificate. Parents would need to obtain a Chinese visa for the child before leaving the US, then follow China's rules for residence. The purpose of child birthing in the US is so children are more acceptable to US schools and colleges. Child migration within China, children living with relatives and friends in different cities and provinces, is pervasive to avoid or take advantage in passing the gao kao (college entrance exam) and gaining access to "key" colleges. Minorities are allowed lower college entrance exam scores in some provinces.

                    From personal experience, a person being naturalized as a US citizen must swear allegiance to the US and surrender allegiance to all other countries. It seems that swearing allegiance to the US means surrendering dual citizenship.

                    JE comments:  My understanding is that if a US citizen takes citizenship elsewhere, s/he is stripped of US citizenship.  But the opposite is not necessarily the case.  The lists below suggest that Mike Bonnie is correct:  you cannot hold both Chinese and US citizenship.


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                    • Dual Citizenship in US (Timothy Brown, USA 03/28/15 2:24 PM)
                      In response to Mike Bonnie (28 March), a bit of additional nuanced chaos seems to be in order here:

                      In the case of the United States, you can become a US citizen by being born in one of the fifty states or DC. This is jus solis, the law of the place; or to two US citizen parents regardless of where you are born outside the 50 states or DC.  If only one parent is a US citizen, that parent must have lived in the US for, as I recall, five years between the age of 18 and 28. Contrary to conventional wisdom, US citizens can have more than one citizenship, but can lose their citizenship by committing an expatrative act (renouncing their citizenship, voting in a foreign election, voluntarily serving in a foreign army, holding a policy-making office in a foreign government). It's illegal, but not expatriative, for a US citizen to leave or enter the US using a third country passport.

                      And then it gets complicated! (Here I go again, advertising for my book.) In Chapters 17, 18 and 19 in Diplomarine, I describe a handful of consular cases I handled while Citizenship and Passport Officer in Israel. But there were lots more. In one instance involving an impressively convoluted citizenship, I was able to return to a woman her US passport that had been taken away from her, even though she had four other nationalities and had a passport from each of them (Germany, France, the UK and Israel). In another case, the Spanish Consul in Haifa was from a generations-old Palestinian family that had, for more than a century, been sending its pregnant women to the US to have their children, so that everyone in the family, none of whom had ever lived permanently in the US, was a US citizen. In a later case in Spain a non-US citizen NCO in the US Air Force (a Bolivian), his Peruvian wife and their child born in Spain were all three stateless (Bolivia expatriated him for serving in a foreign army; Peru expatriated his wife for marrying a foreign citizen; a child of two non-Spanish parents "protected" per the US-Spain Status of Forces Agreement did con acquire Spanish citizenship). So I had to convince the Air Force to fly all three to the US where they obtained expedited citizenship, and immediately fly them back to Spain.

                      As for China, I haven't a clue.

                      JE comments: Statelessness has never come up on WAIS, but it's a fascinating topic. I'm sure other WAISers have stories to share.

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                    • China and Dual Citizenship; from Ric Mauricio (John Eipper, USA 03/29/15 3:55 PM)
                      Ric Mauricio sends this comment:

                      In response to Mike Bonnie (28 March), you are correct that China does not recognize dual citizenship. As my PRC government friend told me, they discourage birth tourism.

                      But as Timothy Brown points out, the situation can be nuanced chaos.

                      In most situations, any child that is born in the United States or one of its territories will automatically receive American citizenship. However, children born to diplomats and other recognized government officials from foreign countries will not receive US citizenship if born on American soil. You can learn more about this by looking through Title 8 of the US Code.

                      If you were born in the US, your US citizenship will last your entire life unless you make an affirmative action to give it up, like filing an oath.

                      Section 1 of the Fourteenth Amendment to the United States Constitution provides that "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside."

                      In the case of United States v. Wong Kim Ark, 169 U.S. 649 (1898), the Supreme Court ruled that a person becomes a citizen of the United States at the time of birth, by virtue of the first clause of the 14th Amendment, if that person:

                      Is born in the United States, or has parents that are subjects of a foreign power, but not in any diplomatic or official capacity of that foreign power, or has parents that have permanent domicile and residence in the United States, or has parents that are in the United States for business.

                      Based on the US Department of State regulation on dual citizenship (7 FAM 1162), the Supreme Court of the United States has stated that dual citizenship is a "status long recognized in the law" and that "a person may have and exercise rights of nationality in two countries and be subject to the responsibilities of both. The mere fact he asserts the rights of one citizenship does not without more mean that he renounces the other" (Kawakita v. US, 343 US 717) (1952). In Schneider v. Rusk 377 US 163 (1964), the Supreme Court ruled that a naturalized US citizen has the right to return to his native country and to resume his former citizenship, and also to remain a US citizen even if he never returns to the United States.

                      The Immigration and Nationality Act (INA) neither defines dual citizenship nor takes a position for it or against it. There has been no prohibition against dual citizenship, but some provisions of the INA and earlier US nationality laws were designed to reduce situations in which dual citizenship exists. Although naturalizing citizens are required to undertake an oath renouncing previous allegiances, the oath has never been enforced to require the actual termination of original citizenship.

                      Although the US government does not endorse dual citizenship as a matter of policy, it recognizes the existence of dual citizenship and completely tolerates the maintenance of multiple citizenship by US citizens. In the past, claims of other countries on dual-national US citizens sometimes placed them in situations where their obligations to one country were in conflict with the laws of the other.

                      In other words, although China does not recognize dual citizenship, their tax system will go after their citizens and the IRS will go after the US citizen by birth. "I am not a US citizen," said the PRC citizen born in the US through birth tourism. "Yes, you are," says the IRS. "We have proof right here, your birth certificate." "Now file those tax returns and fill out the FBAR and FATCA, or you will be fined $100,000 and go to jail." Now you know why that government official and I had a good laugh. It is so absolutely stupid to subject your child to this. Poor kid doesn't even have a choice in the matter.

                      As for becoming a US citizen to have better access to our universities, I have seen many times where non-citizens have received special treatment because they pay the full non-resident college tuition (probably funded by the Chinese government or wealthy parents). Sort of like the special treatment for H1b workers who get the jobs in Silicon Valley over their American counterparts.

                      I counsel non-Americans to be very careful when considering whether to enter the Citizen or Resident entrance or the Visitor entrance at the airports. You may open up a can of tax worms.

                      By the way, the Vatican allows dual citizenship.

                      JE comments: So US citizenship costs more if you're rich and Chinese, but the insurance policy is worth it if times get "interesting" in China.

                      We can presume that not many citizens of the Vatican practice birth tourism.

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                • What Does Hegemony Mean in the 21st Century? (Tor Guimaraes, USA 03/26/15 5:31 PM)
                  Commenting on my 25 March post, John Eipper asked: "What does national "hegemony" mean in the 21st century? Do the old metrics (richest, biggest markets, strongest military) still apply?"

                  Clearly, the old metrics will remain important forever, if not for dominance, at least for survival and prosperity. However, the concept of US world hegemony came the closest to its fulfillment right after the fall of the USSR.

                  Right after WWII the US was at its pinnacle of economic, political, and military power. The USSR was the only candidate capable of defiance, but we all probably agree they were far behind in second place. Western Europe's influence slowly grew in cooperation with the US and China played the same role for the USSR. It was still close to a stalemate in world dominance.

                  Temporarily, after the USSR dismemberment, the US was the sole hegemon, but we squandered the opportunity to build a better world with a stronger partnerships with Russia. We chose instead to follow neocon advice to control the Middle East and to politically and militarily encircle Russia more tightly. This was clearly bad advice, since now the results are we are in economic/financial trouble, we must now spend increasing amounts to protect against widespread terrorism, and seem unable to disengage from wars all over the globe. Furthermore, a critical problem from the neocon military and political adventurism is that our physical infrastructure is decaying due to neglect, our standard of living is dropping too quickly for comfort, with no end in sight and no resources to correct the mounting problems. Therefore, by any metrics, we can kiss any chance of US hegemony goodbye for the foreseeable future.

                  JE comments: But most would acknowledge that the US is the hegemon (or the "Empire," in Eugenio Battaglia's book).  Perhaps these things depend on your understanding of hegemon--or on how you define is.

                  The US has two aces in the hole:  the dollar as reserve currency, and English.  The former may eventually change, but the latter?  I cannot envision any scenario in which English would be replaced by Chinese, Russian, or Spanish.  (If English ever goes, which it won't, my vote is for Spanish.)

                  Tor Guimaraes's post launches a new menu topic on our website:  "hegemony."   I invite other WAISers to send their thoughts, definitions, and criticisms.

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          • China's Long Game (Robert Whealey, USA 03/23/15 6:18 AM)
            Tor Guimaraes (22 March) has convinced me of a few things:

            1. China is not now a financial power.

            2. Chinese production of technology and scientific innovation continues to grow.

            3. China is not planning any military action against the US.

            Here are some possible future developments:

            Sometime, in 3, 5, 10 years, Chinese productivity of industrial and electronic equipment will reach parity with the US.

            They spend their present surplus dollars on joint-bilateral trading companies in the Middle East, Africa, and Latin America for raw materials. Real capital accumulation grows in the territory of China. On the future foreclosure date, Beijing's bank declares the paper dollar null and void. The New Yuan becomes the new reserve currency.

            What is the one remaining real asset that the US will still retain? Coal for the inevitable day when oil has been consumed? Surplus grains for export?

            US hardware in the form of aircraft and aircraft carriers can be sold for junk. When USSR collapsed in 1991, the surplus tanks, bombers, missiles, submarines had to be sold for junk. Today the real assets of the Russian Federation are their gas and oil fields, which are still untapped.

            The real solution of the Russian, Chinese enigmas is a new tripartite environmental treaty. A permanent Secretariat in Europe could help save the oxygen and water for the entire planet. When Beijing, Washington, and Moscow stop thinking of possible military action, the EU can later join the proposed agreement as #4.

            JE comments: I can confidently say that China will not foreclose on the US. For starters, China's billionaire elite would never give up the security of US holdings. And would the world ever prefer the Yuan, New or not, over the dollar? Once again, color me doubtful.

            Can anyone sketch out a scenario by which it would be in China's interest to call in its US loans?

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            • Can China "Call In" Its Loans to US? More on the "Long Game" (Cameron Sawyer, USA 03/31/15 5:48 PM)
              When commenting Robert Whealey's post of 23 March, JE asked: "Can anyone sketch out a scenario by which it would be in China's interest to call in its US loans?"

              China cannot exactly "call in its loans" to the US, since the great bulk of our debt to the Chinese is in the form of treasury bonds and other instruments which are long-dated, and negotiable. If China were to start dumping them in large quantities, the price would crash, and China would be the (immediate, at least) loser.

              Holding such a large quantity of US debt instruments actually gives China a pretty large stake in our continued prosperity. This is part of a web of mutual interests which we have with China, which some commentators have even characterized as a kind of symbiotic relationship. China needs our debt instruments, because if all the dollars they earn from consumption were converted to Yuan for domestic consumption (or investment), the Yuan would spike up in value (supply and demand!), destroying China's terms of trade with us--that is, making their export goods unaffordable. China cannot afford that; therefore they balance their trade surplus with us by exporting capital back to us.

              We also have little choice--you have to give something in return for the large flows of goods which the Chinese send to us. If they are not taking our own goods or services in similar quantities, that flow has to be balanced with something. Hence, we need to sell them our debt, and not just to offset our budget deficits. In a sense, our sale of bonds to the Chinese is perhaps driven less by our budget deficits, than it is by this--by factors of the balance of trade. If we did not have this kind of trade with China, we could not run the kinds of deficits we run, and we would live differently. Maybe better--I deeply regret that so much of our deficit spending over the last 13 years has been on utterly pointless and, indeed, counterproductive wars.

              Capitalism, under conditions of reasonably free trade and reasonably free capital flows, tends to create common interests and is generally a force for peace--contrary to Marxist theory. That's not to say that China is not a danger to us--China is a danger to us. Besides that, they play a long, long game, and cannot be manipulated with short-term interests. But it's not nearly so simple as this, and there are many mitigating factors.

              JE comments:  Well said, Cameron.  Historians of WWI often begin by citing Norman Angell's book The Great Illusion, from 1909, which made the argument that war was unthinkable because of the Great Powers' economic interdependence.  I'm not saying that this point applies to China and the US today, but it's worth thinking about.


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