Monthly Archives: April 2015

Post Financial Capitalism. Towards Industrial Capitalism and National Capitalism.

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“Post Financial Capitalism.

Towards Industrial and National Capitalism”

Takeo HARADA

CEO and Representative,

Institute for International Strategy and Information Analysis, Inc. (IISIA)

(Key note speech delivered on the occasion of EBF 2015 in Almaty, Kazakhstan)

Ladies and gentlemen,

First of all, I’d like to express my warmest thanks for the invitation to this forum. I am a member of B20. B20 is a sister entity supporting G20, the whole process of G20. Last week, the B20 held a joint task force meetings, which I of course attended.

And today, I’m here in Almaty. What I’m about to explain to you, is extremely important. I will explain the reality of the global market and community. This is exactly what you should and have to know for the prosperous future of Kazakhstan and Eurasia as a whole.

Last year, I was invited as a speaker to this forum. At that time, I touched upon with the on-going total deflation and stagnation the world community is facing. And I said, it’s not the human activities, but the irregularity of solar activity and climate change that matter. To combat this phenomenon, USA, Euro-zone and Japan have being trying hard to accelerate QEs (=quantitative easing). Nevertheless, they obviously fail to stop the total deflation so far. It seems that there is only one option for them left to get rid of this situation: Making use of “war economy”. To stimulate the global economy as a whole, a total war is urgently needed as the decisive cause of massive military consumption. That’s exactly why leading countries intervene in the Middle East, which rather destabilizes the regional situation. Just remember the tragedy in Syria or massacres by the Islamic State.

In this context, the point is we shouldn’t mistake result for cause. The situation in ME is destabilized, because the war economy is needed. And the war economy is needed, because the global economy has to be urgently stimulated by all means to evade further deflation. Now, we’d better precisely focus on why the current trend towards total deflation can’t be stopped.

In this regard, I fully agree with BIS. Last year, “the Bank of central banks” publicly pointed out disinflationary policy in industrialized countries since the latter half of 1990s has been leading to collapse of real economy all over the world. After the double oil crisis in 1970s, leading countries once made effort to inflate the economy with a series of financial measures. This caused quasi hyperinflation in many countries such as Israel. And these countries introduced disinflationary policy to combat the hyperinflation. This was successfully done, however, their policy interest rates has to be kept at the lowest level since then, so that the inflation can be moderated.

This is the very beginning of the current financial capitalism. While policy interest rate is trapped as I described beforehand, smart investors borrow money where the interest rate is very low, and lend it where the rate is only a little bit higher. This type of money transfer is generally called “carried trade” and has been caused bubble economy one after another in the world.

Bubble and its collapse in the global economy accelerate volatilities, which harm sound development of the real economy, of course, including energy sector. And when the real economy is weakened, wealth can’t be distributed to the ordinary people in a satisfying manner. This is exactly what French economist, Thomas Piketty, explained in his famous book entitled “The Capital in the 21st Century.”

Now, I hope you completely understand what’s going on in the global economy, and what’s the reason for that. Based on that, I just try to anticipate our common future. There are three trends we’re about to face:

The conventional financial capitalism will be ended very soon. Successive QEs, which I mentioned, raise risks of national default in many countries. Greece is a very good example. Once a single country will be forced to declare its default, it’ll cause a domino effect in the global economy. Every country holds other countries’ national bonds and bills to secure its own asset. This system of risk sharing will turn out to be the cause of the domino effect and lead to hyperinflation in each countries. Every currency will be devaluated to the bottom.

Such a dramatic change in the financial sector will make us get back to the origin of the modern economy. It’s not money but goods and their added values that will matter in the real economy. Gathering money itself won’t make sense any more. Instead, how to make added values effectively will be a tough question for all of us. The renaissance of industrial capitalism will begin. Because not money but only the human resource is capable of making added values, all the nations try hard to attract innovative and skilled persons. This is why McKinsey predicted “War for Talent” in 1997. While focusing on real values of commodities including oil and gas, getting back to gold standard can be discussed in the international community, such as inclusion of gold in currency basket of SDR (=special drawing right) in the IMF.

Last but not least, national capitalism will declare its come-back. To inflate the economy, globalization has been accelerated so far based of the financial capitalism. However, when the financial capitalism will collapse, the world economy will face hyperinflation foremost and then total deflation. And in the course of deflation, nobody needs to expand his own market and tries to secure its own national market instead. At this stage, globalization and liberalization will be understood just as illusions. The age of bloc economy would come back, where national capitalism would dominate the world. These developments would, of course, affect also the energy sector negatively.

Ladies and gentlemen, this is the reality of the global community we’re facing. To wrap up all the points I raised, I’d like to say this is only the beginning of the long, long common story ahead. We are at a crossroads now.

Please keep in mind the reality I explained to you today. We’re urged to find an alternative way for moving forward. All of us will face the worst, unless we won’t work together. The EXPO 2017 in Astana must be the tipping point for changing these trends. Whether this EXPO will be the symbolic event of prosperous and peaceful future not only for the Kazakhs, but also for all the humankind, totally depends on our own steps from now on.

Thank you very much.

/END OF THE TEXT/

SMEs Change the World!!

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The day before yesterday, I arrived at the Dulles Int’l Airport in D. C. Almost one and a half year has passed, since I paid a short visit to here during my world tour in 2013. This time, I’m entitled as an official member of B20 to actively participate in its meetings. Yesterday, a very intensive discussion of our task force dedicated to SMEs and entrepreneurship was held in the Ronald Reagan Building.

Although almost 80 percent of GDP in every industrialized country is produced by SMEs, the mainstream of political decision makers haven’t paid enough attention to them especially in international arenas. Regarding this lack of attention rather as a good opportunity, Turkey, the chair of this year’s G20, launched our task force, where we focus on what recommendations we should formulate on behalf of G20. This was the third meeting since the kick-off in March in Istanbul, where smart guys from Accenture as the knowledge partner of G20 chaired by Turkey presented their “long list” of potential recommendations to us.

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After having discussed three hours (!), our recommendations are summarized tentatively in eight parts. They are to be further condensed maybe in three or four sentences, while all the task force members are asked to get together online for telephone conference to be held on May 13. On June 6, the joint task force meetings will be held in Paris, at the fringe of the OECD meetings. In July, our recommendations will be finalized together with recommendations proposed by other task forces and passed to G20 fora in autumn.

Although some task force members expressed their dissatisfaction in terms of house keeping matters, I myself find the whole discussion process fair and satisfying. For example, for those who are not verbally capable to express their comments and ideas in a perfect matter, written comments and ideas are always accepted after the meetings. Each additional comments are reflected in documents of the following meetings with explanations on how the secretariat treat them. Just before the last teleconfenrence in the latter half of March, I had sent a written proposal of recommendation to the secretariat, which was then reflected in a PPT sheet during yesterday’s meeting (See the first “additional recommendation” in PPT sheet shown below). At least, the secretariat doesn’t ignore voice of all the task force members and tried to somehow pour it into the discussion stream.

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Obviously, Japan is underrepresented in this B20 process, even though it is the very entity which prepares the first draft of policy recommendations in terms of world economy for G20 process. The secretariat now calls on all the B20 members to advocate their work to their mother country’s government and list potential impediments against the recommendations. This clearly shows not the government but the civil society that controls the whole process, while the former is forced to execute the latter’s recommendations. Well, this is the way how the world community changes itself nowadays.

Turkey, this year’s chair, will soon launch a new initiative called “World SME Forum”. This will work as the first advocacy entity for SMEs’ interests as a whole in the international community. The previous era of global economy, where big corporates have dominated the world, will come to an end. They will be rather obliged to be harmonized with their little but much more innovative partners, SMEs. A new wave is about to be caused by our B20. I fully support the Turkey’s initiative and will actively advocate for SMEs interests in both Japan and the international community.

Last but not least, please watch out the next year’s chair of G20 and B20 is China. Can you understand what I mean by mentioning that, dear Japanese readers??

Warning! Earthquake Is Predictable!!

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As I mentioned beforehand, US Army was fully aware even on March 8, 2011 of the possibility a great earthquake would take place near the coast of northern Japan thanks to its high technology. Even though USG conveyed this surprising result of its analysis to GOJ, the latter just ignored and didn’t prepared for the Great East Japan Earthquake which happened exactly at 14:46 on March 11, 2011.

I myself am not interested in any conspiracy theories in terms of earthquake and natural phenomena. Instead of that, I seek only facts, facts and facts, while my institute works on relevant analysis in cooperation with alliance partners including those who have access to scientific evaluation of USG. And one of them just informed me of the following short warning:

-Be urgently careful of a significant earthquake in Japan, which could take place within a week.

-It is not coast of the Tokai region but any other regions that could matter.

Some Japanese experts in private sector warned of a possible earthquake in the Nagano Prefecture. In addition, a member of the British House of Rothschild is about to pay a short visit to Japan in the midst of April, while she has been quite concerned about not earthquake but eruption of volcanos in Japan specifically such as the Mount ASAMA.

For those who can believe only “data”, I’ll show you the following geomagnetic data of Swedish and Russian institutes.

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Last but not least, we can’t forget only a humankind seems to have lost animal instincts which originally tell us when to evade natural disasters like earthquake. Yesterday, hundreds of dolphins were found on a shore of the Ibaraki Prefecture. A similar phenomenon was seen just before the Great East Japan Earthquake in 2011.

 

“Wachet auf!”, ruft uns die Stimme…

Why Will US-DPRK Alliance Be Emerging?

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Everybody in the global community is talking about ME, especially the so-called “framework agreement” with Iran announced yesterday in Lausanne. However, I’m extremely interested rather in the opposite side of the same coin. I mean, the story on Iran is indirectly but closely related with another on DPRK. Why?

There are some reasons for such an argument. First of all, we should pay attention to limited capability of US military force. It can’t fight against enemies in two separate regions any more. This fact automatically leads to the reality that USG has to seek a peaceful resolution in one region, whenever its military force is forced to battle in another region on the globe. Now, the USG has been trying hard to keep its hegemony in ME militarily, which obviously brings about its peaceful attitude even to DPRK.

Secondly, it’s nuclear capability that matters in both Iran and DPRK. As far as I, former chief desk officer in charge of Japan-DPRK relationship in the Ministry of Foreign Affairs, know, DPRK precisely follows every single movement of negotiations between Iran and US in terms of the former’s nuclear capability. Once the issue will be solved between the two countries, the same scheme might be applied to DPRK vis-à-vis US to tolerate the former’s nuclear capacity (hopefully).

In these senses, nuclear issues of DPRK and Iran are two different sides of the same coin, and we should keep eyes on what’s going on in both countries simultaneously to anticipate the future of the global community.

As I mentioned beforehand, everybody currently focuses only on Lausanne. Nevertheless, I just want strongly urge you, dear readers, to pay attention rather to Pyongyang and the Korean Peninsula.

The point is the establishment of AIIB led by PRC obviously causes endless turbulence in East Asia. It’s not just financial matter, but security policy issue, which is closely related to the historical fact after the WWII that US has dominated in the region. Acquiring a membership of AIIB is regarded as a confession of faith: When you join the AIIB, you automatically lose trust of US. For fear of that, Japan, for example, still hesitates to announce her willingness to get involved in the newly established arena in Shanghai.

Well, how about Pyongyang and Seoul? The former was refused to get the AIIB membership for the lack of official applications with detailed statistics of its economy (sic!). The end of “alliance of the blood” between Beijing and Pyongyang? NOPE. There hasn’t been such an alliance mentioned frequently among experts, since it’s not PRC but Japan and the former Soviet Union which jointly built up DPRK as a buffer state between communism (=USSR) and capitalism (=US). Therefore, not formal but substantial reason hinders Pyongyang from joining the AIIB.

The whole story becomes a little bit complicated at this stage. In accordance with the above mentioned criteria, “being refused to get a membership of AIIB” means an indirect confession of faith to Washington D.C. Pyongyang has been used as a center for money laundering in East Asia, which is almost unknown in the public. Without involving DPRK in the financial regime in the region, it doesn’t work actually. That is, of course, extremely good for US, which fights against the hidden intrigue led by the City of London (Don’t forget the fact it’s UK that officially declared her willingness to join the AIIB foremost in the world community!), but in vain.

In Seoul, there is only one policy option left. ROK didn’t hesitate to become a member of AIIB to save its disastrous economy to be otherwise collapsed soon. Taking this opportunity very strategically, Pyongyang scoffed at such a policy change in Seoul with its statement by saying, “Poor Seoul, where is your self-proclaimed “alliance” with Washington D.C.?”

What a horrible scenario it is for the people in ROK, when US-DPRK alliance will emerge! This just means the end of the puppet state in the Korean Peninsula since 1948. US already implied this policy change by releasing its former classified document in terms of immoral activities done by South Korean military personnel during the Vietnam War. According to the official document of US Army, the South Koreans run houses of Vietnamese “comfort women” for soldiers, while they harshly criticized similar activities of Japanese Imperial Army during the WWII. What a contradictory statement it is! A Japanese proverb says: “One man’s fault is another’s lesson.” Obviously, this wisdom isn’t fully shared among the East Asians.

To wrap up, I’d say the next step for the Obama Administration will be “historical” reconciliation with DPRK. The framework agreement with Iran by US harms the Israelis, while another with DPRK damages the Japanese. My last question to all of you: Who should establish a new alliance then?