Obama Vs. China: Let’s Get Ready To Rumble

While there may be many promises of “change” happening in America…one thing that is definitely “changing” is the relationship between China and the U.S.

Why is this increasingly important? There are a few reasons but a couple of important ones off the top of my head are:

Just a few short years ago, China was only the 8^th largest economy in the world. Now they are at least 4^th and many argue that they are now the 3^rd largest economy in the world. Not too shabby for a country that wasn’t even invited to G-7 meetings.

Another important reason is that they are THE largest holder of U.S. treasuries as of last September. Until then, they were second only to Japan.

While I’m a “red-blooded” American…I’ll have to say that we picked this fight. We started it even before Tim Geithner officially became our Treasury Secretary when he stated that Obama feels that China is manipulating their currency. So that puts them both in the ring with Chinese Premier Wen Jiabao.

China quickly refuted this claim that same week. However, for the first time ever, the Premier shows up at the World Economic Conference in Davos, Switzerland.

China’s first big Jab comes at Davos!

His speech, while not directly calling out the U.S., really alluded to the fact that the U.S. originator of the world’s economic woes.

My Wen blamed an “excessive expansion of financial institutions in blind pursuit of profit” a “failure of government supervision” and an “unsustainable model of development characterized by prolonged low savings and high consumption”.

I must say what the Premiere said makes a lot of sense.

We are “ticking off” our largest creditor and it’s not the smartest move we’ve ever made as a nation. While Obama will probably do a lot of great things for the economy, this is not one of them.

Not surprisingly, China says it’s “examining its investments”. Sounds like they are trying to say, “Watch it or we will pull the plug on you!”

The Chinese already haven’t been happy about their investments in Morgan Stanley (MS: 32.10 -0.21 -0.65%), Fannie Mae (FNM: 1.02 -0.01 -0.97%), Freddie Mac (FRE: 1.14 -0.02 -1.72%) and others. In fact, when many U.S. companies recently turned to China for funding, China backed away.

So while I don’t believe China will dump all of its U.S. treasuries like some say, I do think that they could still hurt us economically as they continue to climb the rungs on the economic ladder to the top.

China needs to be taken seriously and dealt with wisely. After all, they now have over $2 trillion in foreign exchange reserves…and recently, China has been sharply trimming its holdings of Fannie and Freddie debt. After making net purchases of $46 billion in the first half of 2008, they were net sellers of $26.1 billion in the five months through November and that’s according to U.S. data, not China’s sources.

Also, one Chinese government official recently told the China Daily newspaper (in December) that “Washington shouldn’t expect continuous inflows of more cheap foreign capital to fund its one-after-another massive bailouts”.

You see, for the last number of years, we’ve preached to China about how they need to become more like us here in the U.S. Now that it doesn’t seem to be working as well for us as we’d like (at the moment), this argument becomes a “hard sell” to the Chinese.

Also, China will revalue its currency when it decides to and not when we tell them to do so. Besides, what country is going to jack their currency up higher when they are facing rough economic times? They know that there is no reason put the nail in the coffin of their exporters just to pacify the U.S.

So while I’m an American, I can’t always say what we do is right. It’s sort of like “standing up for family because they are family” rather than “standing up for what is right” instead.

If we are smart, we will take an approach with China much like former Treasury Secretary Paulson took. It’s one of the things he did get right. The Chinese ended up strengthening their currency at least 15% while he was in office. Before then, we didn’t have much luck in our talks with China. So in that regard, it was smart of Bush to pick him as his choice of Treasury Secretary. While both Bush and Paulson have had their screw ups, we are now getting “wrong” the areas they got right.

To sum it all up, I think that this could undermine the U.S. dollar, U.S. treasuries and boost the price of gold.

By Sean Hyman on January 30, 2009 | More Posts By Sean Hyman |

The World's Most Powerful People 2009

The 67 heads of state, criminals, financiers and philanthropists who really run the world.

"I love power. But it is as an artist that I love it. I love it as a musician loves his violin, to draw out its sounds and chords and harmonies." — Napoleon Bonaparte

Power has been called many things. The ultimate aphrodisiac. An absolute corrupter. A mistress. A violin. But its true nature remains elusive. After all, a head of state wields a very different sort of power than a religious figure. Can one really compare the influence of a journalist to that of a terrorist? And is power unexercised power at all?

In compiling our first ranking of the World's Most Powerful People we wrestled with these questions — and many more — before deciding to define power in four dimensions. First, we asked, does the person have influence over lots of other people? Pope Benedict XVI, ranked 11th on our list, is the spiritual leader of more than a billion souls, or about one-sixth of the world's population, while Wal-Mart CEO Mike Duke (No. 8) is the largest private-sector employer in the United States.

Then we assessed the financial resources controlled by these individuals. Are they relatively large compared with their peers'? For heads of state we used GDP, while for CEOs, we looked at a composite ranking of market capitalization, profits, assets and revenues as reflected on our annual ranking of the World's 2000 Largest Companies. In certain instances, like New York Times Executive Editor Bill Keller (No. 51), we judged the resources at his disposal compared with others in the industry. For billionaires, like Bill Gates (No. 10), net worth was also a factor.

Next we determined if they are powerful in multiple spheres. There are only 67 slots on our list — one for every 100 million people on the planet — so being powerful in just one area is not enough to guarantee a spot. Our picks project their influence in myriad ways. Take Italy's colorful prime minister, Silvio Berlusconi (No. 12) who is a politician, a media monopolist and owner of soccer powerhouse A.C. Milan, or Oprah Winfrey (No. 45) who can manufacture a best-seller and an American President.

Lastly, we insisted that our choices actively use their power. Ingvar Kamprad, the 83-year-old entrepreneur behind Ikea and the richest man in Europe, was an early candidate for this list, but was excluded because he doesn't exercise his power. On the other hand, Russian autocrat Vladimir Putin (No. 3) scored points because he likes to throw his weight around by jailing oligarchs, invading neighboring countries and periodically cutting off Western Europe's supply of natural gas.

To calculate the final rankings, five Forbes senior editors ranked all of our candidates in each of these four dimensions of power. Those individual rankings were averaged into a composite score, which determined who placed above (or below) whom.

U.S. President Barack Obama emerged, unanimously, as the world's most powerful person, and by a wide margin. But there were a number of surprises. Former President George W. Bush didn't come close to making the final cut, while his predecessor in the Oval Office, Bill Clinton, ranks 31st, ahead of a number of sitting heads of government. Apple's Steve Jobs easily made the list, while Arnold Schwarzenegger, the movie star governor of California (alone, the world's fifth largest economy) did not.

1. Barack Obama

© AP Photo/Gerald Herbert

How powerful is he? Let's count the ways:

• Presides over world's largest, most innovative, most dynamic economy.
• Commander-in-chief of planet's richest, deadliest military.
• Finger on button of nuclear arsenal containing more than 5,000 warheads.
• Head-of-state of world's sole superpower.
• His Democrats have majorities in both U.S. House and Senate.
• Recently awarded Nobel Peace Prize, apparently for general awesomeness.

2. Hu Jintao

© John Moore/Getty Images

• Paramount political leader of more people than anyone else on the planet; 1.3 billion Chinese, some 70% in their prime working years of ages 15 to 64 powering world's low-cost workshop, transforming nation.
• Biggest buyer of U.S. debt avoided Chinese meltdown during financial crisis with massive stimulus package to encourage domestic spending.
• "Coming-out party" at 2008 Beijing Olympic Games showcased young, modern, harmonious society; reality often quite different — few political, religious, press freedoms; brutal suppression of Tibet; refusal to acknowledge Taiwanese independence.
• Still, credible estimates have China poised to overtake U.S. as world's largest economy in 25 years — although, crucially, not on a per-capita basis.

3. Vladimir Putin

© Alexey Druzhinin/AFP/Getty Images

• Prime Minister might as well be known as Czar, Emperor and Autocrat of All the Russians.
• Vastly more powerful than his handpicked head-of-state, President Dmitry Medvedev.
• Presides over one-ninth of Earth's land area, vast energy and mineral resources.
• Former KGB officer unafraid to wield his power; invading Georgia, cutting off natural gas supplies to Ukraine or Western Europe (again).
• Declared nuclear power has veto on U.N.'s Security Council.
• "I'm deeply convinced that constant change is not for the better."

4. Ben S. Bernanke

© AP Photo/Gerald Herbert

• Former chairman of Princeton's economics department and noted Great Depression scholar now guiding world's largest economy through Great Recession; has overseen massive growth in Fed's balance sheet, from less than $900 billion in liabilities in August 2008 to more than $2.1 trillion today.
• With federal funds rate now effectively 0%, the so-called Bernanke Doctrine calls for using monetary policy to stave off deflation.
• "The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost."

5. Sergey Brin and Larry Page

© AP Photo/Paul Sakuma

• If knowledge is power, maybe information is too. Brainy duo met in Stanford computer science Ph.D. program, now trying to put all the world's information at your fingertips.
• Known for collecting best and brightest young tech talent at Mountain View, Calif., "Googleplex"; employees encouraged to spend one day a week on personal projects; company often named "Best Place To Work" in America.
• Google guys' combined net worth of $30.6 billion would place them third on the Forbes 400.
• Yet despite professed intentions to "do no evil," Google is blamed in some quarters for decimating traditional publishing, journalism. Brin: "Some say Google is God, others say Google is Satan."

The World's Most Powerful People 2009 6-10

6. Carlos Slim Helú

© Chris Hondros/Getty Images

• World's third-richest man is dominant economic force in Mexico, personal fortune equivalent to some 2% of Mexican GDP.
• Telecommunications monopolist: His Telemex owns 90% of Mexico's fixed telephone lines; his TelCel has 90% of wireless market.
• Also head of group dedicated to improving Mexico's roads, energy infrastructure, water supply.
• New focus, media: Last fall snapped up 7% stake in the New York Times Co., largest after Sulzberger owner-family.
• "I think it's perverse to believe there shouldn't be strong companies in poor countries."

7. Rupert Murdoch

© AP Photo/Jacquelyn Martin

• "The man who owns the news" still believes in print, not afraid to use vast media holdings to further personal political views.
• Media empire includes leading British (the Times), Australian (The Australian), American (The Wall Street Journal) newspapers, in addition to tabloids like the New York Post and The Sun (U.K.). Also movies (20th Century Fox), books (HarperCollins), television (Fox, BSkyB), online (MySpace).
• Weak ad-marketing hurting his News Corp.: net loss of $3.4 billion in fiscal 2009, stock off March lows, but still well below 2007 levels, when he made a $5.6 billion gamble on Dow Jones. "Quality journalism isn't cheap."

8. Michael T. Duke

© Vivan Mehra/The India Today Group/Getty Images

• Runs world's largest retailer, more country than company: $401 billion in annual sales, 2 million employees, 8,000 stores.
• Wal-Mart alone is China's eighth-largest trading partner.
• Largest private-sector employer in U.S.; favorite target of unions; blamed and praised for backing Obama health care proposals, shifting economic power from manufacturers to retailers, from mom-and-pop to big box.
• "I am competitive by nature and I want to win."

9. Abdullah bin Abdul Aziz al Saud

© Marwan Naamani/AFP/Getty Images

• Absolute ruler of desert kingdom that contains the world's largest crude oil reserves, two holiest sites in Islam.
• State-owned oil producer Saudi Aramco most profitable company on Earth, earns more than $200 billion a year, has reserves of 260 billion barrels or 25% of planet's known supply.
• Ultimate succession unclear: 85-year-old king's official heir is 81-year-old Crown Prince Sultan bin Abdul Aziz Al Saud.
• In 2006, established committee of senior princes to ensure smooth transition in the event both become incapacitated.

10. William Gates III

© AP Photo/Chuck Burton

• Richest man in the world dominated, transformed software business.
• More than 85% of world's hundreds of millions of computer users stare at, struggle with, Microsoft products on daily basis.
• Second act: Saving the world. Still Microsoft chairman, but now devotes day-to-day to his Bill & Melinda Gates foundation, the largest charity on Earth with $34 billion endowment. Foundation devoted to reducing hunger, improving education and fighting diseases like malaria, tuberculosis and AIDS.

The World's Most Powerful People 2009 11-15

11. Pope Benedict XVI

© AP Photo/Andrew Medichini

• Spiritual leader is highest earthly authority for 1 billion souls, or about one-sixth of planet's population; runs Catholic Church, world's oldest, largest multinational.
• A staunch traditionalist, unbending on reproductive matters, yet conservatism comforting to many.

12. Silvio Berlusconi

© AP Photo/Andrew Medichin

• Prime Minister of Italy also media monopolist: Owns three television networks outright, controls three others through state. Also magazines, newspapers, advertising agencies.
• Beyond politics and publishing, sports: His AC Milan is one of the world's premier soccer teams.
• Colorful private life, bribery allegations, Cabinet member picks have caused him to be depicted as Europe's buffoon. Unfazed: Calls himself "the Jesus Christ of Italian politics."

13. Jeffrey R. Immelt

© AP Photo/Mark Lennihan

• Heads General Electric, world's largest company.
• Financial services account for more than half of revenue, but also has major presence in energy, media, transportation and aviation.
• Company breeding ground for top executive talent; former GE brass have run companies ranging from Boeing to Rubbermaid.
• Company poised to profit from Obama health care plans and clean energy initiatives; one of planet's largest manufacturers of wind turbines. Yes we can: "You can either sit with a hood over your head and pretend things won't change, or you can get ready for it."

14. Warren Buffett

© AP Photo/Matt Sayles

• Greatest value investor of all time shrewdly profiting from global financial crisis; snapped up stakes in Goldman Sachs, General Electric during darkest days of 2008.
• Opponent of inherited wealth has bequeathed vast majority of $40 billion fortune to buddy Bill Gates and his Bill and Melinda Gates Foundation.
• "Be fearful when others are greedy, and be greedy when others are fearful."

15. Angela Merkel

© AP Photo/Markus Schreiber

• Most powerful woman on planet.
• As chancellor of Germany, oversees Europe's largest economy and fifth-largest in the world with $2.9 trillion GDP.
• Renowned free-market champion and favorite of big business, favors Euro over waning greenback.
• Green cred: Leading European charge against greenhouse gases.