The Complete Henry C K Liu

Henry C K Liu was born in Hong Kong and educated at Harvard University, US, in architecture and urban design. His interest in economics and international relations started when he participated in interdisciplinary work on urban and regional development as a professor at the University of California Los Angeles, Harvard and Columbia. He is currently chairman of a New York-based private investment group.

THE SHAPE OF US POPULISM, Part 1
A rich free-market legacy - for some

The sight of businessmen such as E Stanley O'Neal of Merrill Lynch and Citigroup's Chuck Prince pocketing millions of dollars as they quit companies losing billions in value sticks in the throat of those whose money has been lost. Even some congressmen have figured something is wrong with such rewards for failure. Fair game, say others. (Mar 11, '08)

THE SHAPE OF US POPULISM, Part 2
Long-term effects of the Civil War
The present deepening and widening financial crisis is laying naked the wealth-making mechanisms of society's elites while wreaking havoc with the lives of low-paid workers. It is also making imminent a wave of populist reform that may extend for several decades. In this are echoes of the New Deal era and much earlier reactions to economic depressions. (Mar 13, '08)

THE SHAPE OF US POPULISM, Part 3
The progressive era
Ideological ferment at the close of the 19th century left the US with impressive political and economic reforms for future generations to build on. Yet fundamental issues - notably those involving race and economic centralization at the expense of economic democracy - dating back to the nation's birth have even now not been resolved. (Mar 26, '08)

THE SHAPE OF US POPULISM, Part 4
A panic-stricken Federal Reserve
The recent moves by the US Federal Reserve, amid fears of an economic depression, to inject liquidity into the credit market and to bail out banks and brokerage houses are looking more like fixes for drug addicts in advanced stages of abuse. But for neo-liberal market fundamentalists, the fear is not of an economic depression, but the populism that may follow it.  (Apr 1, '08)

HK-Macau planners go for costly option
A proposed 36-km bridge to straddle the Pear River Delta between Hong Kong and Macau is to be developed under the build-operate-transfer system of funding, with a 50-year operating period. It is a remarkable choice given the wealth of the local governments involved. (Mar 4, '08)

THE ROAD TO HYPERINFLATION, Part 1
Fed helpless in its own crisis
The US Federal Reserve, desperate to prevent the home mortgage crisis from infesting the whole economy, is trying to inject funds into financial institutions - a counterproductive response to a credit crisis caused by years of excess liquidity. Hyperinflation lies down the road. (Jan 25, '08)

THE ROAD TO HYPERINFLATION, Part 2
A failure of central banking
Before 1913, there was no US central bank to bail out troubled commercial and financial institutions or to keep inflation in check. The near 2,000% rise in prices since then underlines the dismal failure of the Fed to fulfill its role as the nation's monetary guardian. (Jan 29, '08)

THE ROAD TO HYPERINFLATION, Part 3
Inflation targeting
The market has lost faith that governments will have the courage to adopt the policies and models necessary to keep the economy growing without debt or inflation. The world must stop looking to the flawed institution of central banking to bail it out of a monumental debt crisis with more debt. (Feb 20, '08)

PATHOLOGY OF DEBT
PART 5: Off-balance-sheet debt
Increased willingness of companies and banks to take on off-balance-sheet debt helped to boost spending and support a buoyant economy. But promises that those debts would be paid by the banks when they come due, even if the vehicles that held the debt could not repay it, are coming back to haunt lenders as good times turn to bad. (Nov 30, '07)
This is the conclusion of a five-part analysis.

 PART 1: Banks as vulture investors

 PART 2: Commercial paper and pesky SIVs

 PART 3: The credit guns of August

 PART 4: Lessons unlearned

SUPER CAPITALISM, SUPER IMPERIALISM
PART 2: Deregulation: Global war on labor
It is time for all countries to seek solutions to problems created by the exploitative terms of world trade, by focusing on fundamental issues of domestic development before the prodigal global trading system collapses from its own contradictions and brings forth global depression. Unless and until an equitable international trading system is negotiated, economic nationalism is a proper response to neo-imperialism. (Oct 12, '07)

Either way, it could be an unkind cut
Whether the Fed lowers the Fed Funds rate depends on whether it sees 6% unemployment on the horizon. Yet a cut in short-term rates may do more harm than good by not helping to sustain a liquidity boom, yet fueling accelerated inflation; not to mention leading to a loss of confidence on the part of the market in the Fed's ability to manage a monetary and financial crisis. (Sep 17, '07)

CREDIT BUST BYPASSES BANKS, Part 1
Rise of the non-bank financial system
The financial crisis brought to the world's attention by the subprime time-bomb is no longer one of liquidity, but of deteriorating creditworthiness throughout the global system. The liquidity crunch is a symptom, not the disease. The disease is a decade of permissive tolerance for credit abuse in which banks, regulators and rating agencies were willing accomplices. This is the first article of a two-part analysis.(Sep 5, '07)

CREDIT BUST BYPASSES BANKS, Part 2
Bank deregulation fuels abuse
The Glass-Steagall Act, born of the chaos and misery of the Great Depression, reined in the excesses longed for by the US financial services industry. Finally, in late 1999, the Clinton administration yielded to industry pressure and repealed the act. Today we see the result: a raging forest fire in the non-bank financial system that will present finance capitalism with its greatest test in eight decades. (Sep 6, '07)

Central bank impotence and market liquidity
What the US Federal Reserve is trying to do in the current subprime crisis is not merely to restore market liquidity, but to preserve excess liquidity in the market. In other words, it is trying to avoid a crisis by setting the stage for a bigger future crisis. (Aug 23, '07)

THE INTEREST RATE CONUNDRUM, Part 1
Economics of denial
All of a sudden, in an interruption of the spectacular rise of global stock markets driven by abnormally ample liquidity, all eyes are trained on rising interest rates. But because of the hegemony of the US dollar, a fiat currency that by definition does not behave like other currencies, rising interest rates cannot have the effect against inflation predicted by mainstream economic theory. All in all, exchange rates mask the reality that all currencies are decreasing in value. (Jun 12, '07)

THE INTEREST RATE CONUNDRUM, Part 2
How currency devaluation destroys wealth
As central banks thrash about creating new bubbles to contain older ones, real wealth is sucked into a black hole of imaginary plenty. The downward spiral will continue as long as the masters of the global financial system continue to be guided by fantasies such as the "free market", a dream world (though a nightmare for most) in which wealth can materialize from falling wages. (Jun 13, '07)

A dialogue of the mute
On the face of it, Chinese Vice Premier Wu Yi - the "Iron Lady" of Beijing - enters the second round of the Sino-US Strategic Economic Dialogue this week with a strong hand. But with support for the lame-duck Republican administration at a historically low ebb and beset by a vehemently anti-China Democratic Congress, Wu and her counterpart Henry Paulson are doomed to discuss the wrong issues at the wrong time. (May 22, '07)

Liquidity boom and looming crisis
A debt-driven financial crisis threatens to put an end to the liquidity boom and the accompanying global financial mania that has decoupled equity markets from economic reality. All will melt away in a catastrophic unwinding some Tuesday morning (New York time). And China cannot save the world. It's part of the problem.  (May 8, '07)

CHINA AND APPEASEMENT, Part 1
Beyond Munich: Geostrategy and betrayal
US neo-cons have exploited the term "appeasement", made famous by the Munich Pact that sacrificed Czechoslovakia to Nazi Germany, to disparage any diplomatic move they don't favor. But appeasement, today as much as in the 1930s, is a common foreign-policy tactic that sometimes succeeds, at least in the short term. Henry C K Liu examines appeasement with Chinese characteristics, and why it isn't working. (Apr 27, '07)

CHINA AND APPEASEMENT, Part 2
Not much rise, and even less peace
While the term "peaceful rise" has been replaced in official Chinese rhetoric by "peaceful development", Washington's invitation to China to become a "stakeholder" in the US-dominated international system and the post-Cold War unipolar world order engineered by the US has given the appeasement faction in Chinese political circles new ideological energy. But if it follows this path, China will not rise, and the result will not be peaceful. (Apr 30, '07)

CHINA AND APPEASEMENT, Part 3
China's misguided 'experts' on the US
Beijing's leaders evidently believe that Washington has China's best interests at heart. Yet there is ample evidence not only that the United States cares only about the United States, but that it is, always has been and will continue to be particularly hostile to China. Beijing's leaders are getting bad advice.  (May 1, '07)

Why the subprime bust will spread
Years ago when the US debt bubble spread to the housing sector, warnings from many quarters - including Henry C K Liu - about the systemic danger of subprime mortgages were dismissed by Wall Street cheerleaders as "sky is falling" hysteria. Now, belatedly, financial wizards are slowly realizing that their earlier departure from reason has fueled a phenomenon that is poised to cause severe damage to the global finance system. (Mar 16, '07)

The US as leading currency manipulator
In the wake of Tuesday's announcement of yet another record-smashing US trade deficit, the usual chorus of moans about China's currency is in full voice. China must stop "manipulating" the yuan to keep it undervalued, we hear. Yet, argues Henry C K Liu, no government leaves the exchange rate of its currency to market forces. This is particularly true of the US, which sings free-trade lyrics to protectionist music. The trade distortions have been created by US policies, and the China critics are in effect telling Beijing to pay for US errors. (Feb 14, '07)

Paulson, China and the turmoil beneath
There is much that is dysfunctional and unsustainable in US-China economic relations, but these are not issues that US Treasury Secretary Henry Paulson will be able to resolve in discussions with Chinese officials. The problems are the result of fundamental imbalances brought about by globalization and dollar hegemony, and Paulson need travel no further than his own back yard. (Dec 13, '06)

CUT AND RUN, Part 1
Fleeing self-destruction is common sense
Disastrous policy is disastrous policy, no matter how long and how shrilly neo-conservatives and their true believers in the Bush administration wish to fantasize otherwise. The US public this month voted for a change of course in Iraq, and such a change is already in the works. It's just a question of how, and how long. (Nov 20, '06)

CUT AND RUN, Part 2
Looking to Syria for help
The Iraq Study Group recommends that the Bush administration bring neighboring states, including longtime pariahs Iran and Syria, to the table as it tries to extricate itself from the Iraq quagmire. But there is much history behind US animosity against Syria.

CUT AND RUN, Part 3
Iran and the failed US Iraq policy
The long-cherished neo-conservative dream of taking over oil-rich Iraq, rejected by two US presidents, found a willing agent in George W Bush. Four years after the invasion, the US now faces a Shi'ite-led regime in Baghdad - something neighboring Iran was unable to accomplish in eight years of bloody war against Saddam Hussein. Henry C K Liu examines the benefits and challenges the new Iraq presents to Tehran. (Mar 20, '07)

Regime-change blowback
For at least 50 years, the US has pursued a policy of belligerent regime change in the Middle East that time and again has suffered from unforeseen consequences, or "blowback". The results of the US mid-term elections indicate that the American people have realized that this has happened in Iraq and in Afghanistan. The result: regime change at home. (Nov 10, '06)
 
CHINA AND THE US, Part 1
The lame duck and the greenhorn
While George W Bush struggles to keep his administration, and the fortunes of the Republican Party, from imploding, his counterpart in China is still learning how to cope as the leader of a rising great power. China and the US have always had a tense relationship, but it is one they cannot avoid, whatever their leaders' personal difficulties.  (Jun 22, '06)

CHINA AND THE US, Part 2 
The challenge of unilateralism
US unilateralism did not start with the Bush administration. Its moralistic roots lie in US foreign policy after World War II, especially over policy on China. At its most dangerous, unilateralist policy undermines the regime of nuclear non-proliferation.  (Jun 30, '06)

CHINA AND THE US, Part 3
Dynamics of the Korea crisis
Geopolitical undercurrents flow through the Korea missile crisis as they do in the Middle East. Under way are attempts to forge new international climates so as to restructure existing regional security patterns. In East Asia, the undercurrent relates to the rearmament of Japan as a counterweight to a rising China. (Aug 16, '06)

CHINA AND THE US, Part 4
Proliferation, imperialism and 'China threat'
As in the 1940s, perceived threats, misunderstandings, racism and outright lies are bringing the West, led by the US, into conflict with East Asia, led by China. Even Japan's elevation to "honorary white" status has parallels in World War II.  (Sep 8, '06)

CHINA AND THE US, Part 5
Kim Il-sung and China
Six decades after the end of World War II, the US posture on Korea and Taiwan remains basically the same, to prevent the unification of the two Koreas and the ending of the Chinese civil war with a no-war, no-peace status quo, thus keeping two major Asian nations from normalizing their wartime anomalies. And now there is a new policy of "containment". (Sep 15, '06)

CHINA AND THE US, Part 6
Korea under Park Chung-hee
The continued isolation of North Korea is just fine with some players in the Great Game, as evidenced by the twice-stalled progress toward reunification. The first home-grown reunification effort was hatched in 1972 by Southern president Park Chung-hee, who was assassinated under mysterious circumstances. But the story's not over yet. (Oct 24, '06)

CHINA AND THE US, Part 7 
Clinton's belated path to peace
When Bill Clinton took over the White House, it was a time of opportunistic hostility toward China dictated by US domestic political sentiments. For a number of reasons, not least a near-war with North Korea, China remained on the back burner for most of Clinton's two terms. But at least peace with Pyongyang was maintained, for a while.(Oct 31, '06)

CHINA AND THE US, Part 8
Bush's bellicose policy on North Korea
The latest crisis involving North Korea, which tested a nuclear weapon on October 9, did not begin on that date - it began six years earlier, when George W Bush entered the White House and promptly overturned the progress the Clinton administration had made toward rapprochement with Pyongyang. (Jan 4, '07)

CHINA AND THE US, Part 9
The North Korean perspective
The US has always claimed that it wants a nuclear-weapons-free Northeast Asia, but its actions - especially since the advent of the Bush administration - in the Korean Peninsula belie that. "Axis of evil" member North Korea, on its part, has long provided evidence that it supports non-proliferation and denuclearization, notwithstanding its missile and weapons tests last year. (Jan 10, '07)

CHINA AND THE US, Part 10
The changing South Korean position
South Korean politics has been evolving along two parallel paths since the Cold War. One path moves toward increasing resistance to US domination, and the other toward closer ties with neighboring China. Both paths lead to moderation of Cold War ideological hostility in South Korea toward its estranged Northern fraternal state. (Feb 6, '07)

CHINA AND THE US, Part 11
Japan's strategy to be a 'beautiful nation'
Saddled with a dark history of imperialism and aggression, Japan's efforts to remake itself in the eyes of its Asian neighbors have been an uphill struggle for six decades. While its youngest ever prime minister, Shinzo Abe, has made serious efforts to mend fences, there remain good reasons for skepticism over Japan's true loyalties, motives, and long-term intentions. (Mar 2, '07)

America's untested management team
The US Treasury has not been performing at its best in the past six years. Enter Hank "the Hammer" Paulson, fresh from Goldman Sachs, ready to tackle the challenges facing the world's biggest economy. He will find that the greatest of those challenges lie not in Beijing, Moscow or Caracas, but at home in the US. (Jun 16, '06)

THE WAGES OF NEO-LIBERALISM, Part 1
Core contradictions
Despite all evidence, the US in particular continues to delude itself that fair exchange rates, especially for the Chinese yuan, would solve economic ills. But Western exchange-rate policies have long been part of the problem; what economies worldwide should be floating is wages, not exchange rates. (Mar 21, '06)

THE WAGES OF NEO-LIBERALISM, Part 2
The US-China trade imbalance
A rising US trade deficit with China has generated much heat but little light about unfair Chinese trade practices. The real danger to the US economy is that the US sovereign debt rating is now dependent on the soundness of Chinese sovereign debt - in other words, on China's credit rating. (Mar 31, '06)

THE WAGES OF NEO-LIBERALISM, Part 3
China's internal debt problem
China's fiscal policy has begun a gradual shift from "proactive" to "prudent". Beijing now urgently needs to deal with pressing economic and social problems that have been created by its transition from a socialist planned economy to a "socialist" market economy. One key factor is how to handle the national debt in a system dominated by US dollar hegemony. (May 26, '06)

WAGES OF NEO-LIBERALISM, Part 4
Development financing and urbanization
Similar to other developing countries, the most fundamental problem China faces in its path toward industrialization is urbanization. This is not solely a hallmark of the country's economic growth over the past two decades, or of the policies of the Communist Party. It is reflected in millennia of Chinese history. (Jul 21, '06)

PART 4
Toward living wages
in the modern era
The idea of a global labor cartel is based on the needs of a modern economy for managing consumer demand to overcome structural overcapacity, which globalization has made a worldwide problem. The rules of economic democracy mandate that capital in a modern economy is formed from the savings of labor, which in turn depends on rising wages. (Mar 8, '06)

THE WIZARD OF BUBBLELAND
PART 4: Global money and currency markets
Any notion that money is not available, or that it may not be available at any price, only raises alarm to panic and enhances panic to madness, with a total loss of confidence. Yet the acceptance of loans at abnormally high interest rates is itself a sign of panic. Against such contradictions, no central bank - including the Fed under Alan Greenspan - has found the appropriate wisdom. (Feb 15, '06)

Of debt, deflation and rotten apples
The US and Japanese economies have both been ailing for a long time, with different symptoms of the same disease. While the latter struggles with deflation, in the US the trade apple is kept shining on the outside by sucking nutrients from a slowly depleting, rotting core, eaten away by a growing debt worm, turning a sick economy into a terminal case. (Jan 10, '06)

Superpower vulnerability
It is simplistic to blame America's crusade of moral imperialism on the neo-conservative cabal that currently dictates US foreign policy. The scene was set long before their rise to power, and the harsh (and still unlearned) lessons of the futility of forcing a set of mores on others can be seen throughout history.

The real oil crisis
As all oil money returns to the US anyway because of the unabated appetite for dollar assets, $50 oil will buy the US debt bubble a little more time. The key issue of the coming oil crisis is ballooning equity prices unsupported by earnings. We are heading toward a replay of the '80s, when a widening trade deficit and a precipitous fall of the dollar triggered the 1987 collapse of the equity markets. (May 25, '05) 

Hong Kong appeal court in the dock
The Hong Kong Court of Final Appeal thinks it can rule on constitutional issues of sovereignty and overrule China's parliament, grossly misinterpreting the territory's "high degree of autonomy" bestowed by Beijing to mean independent sovereignty.(May 13, '05)

Nationalists, communists mending fences
For the first time in more than 50 years of estrangement from the Chinese Communist Party, the Taiwan-exile Kuomintang Party has sent a delegation to mainland China. This is an examination of the history of the historical break, and signs of reconciliation. (Apr 4, '05)

The glorious role of Tung Chee-hwa
History will judge that Tung Chee-hwa, who retired because of failing health - not political banishment - was never part of the problem, but part of the solution. The day will come when Hong Kong longs for a leader as kind, gentle and accommodating as Tung, his glorious place assured in Chinese history. (Mar 22, '05)

Looking after the little man
The US has evolved into a superpower in the course of two world wars and will remain one for the foreseeable future. As such it has earned the privileges associated with the instinctive prerogative of a tough big guy. But the complete American character requires the US to champion the defenseless little guys of the world as well.  (Sep 16, '04)

A poisonous geopolitical jungle
An iron rule of terrorism is that what goes around, comes around from geopolitical blowback. One cannot exterminate terrorism any more than mosquitoes, except by reordering the ecosystem. Despite shining examples of this lesson being ignored - with dire results - in the Middle East, the US remains unbending in its geopolitical goals. (Sep 14, '04)

Geopolitical weeds in cradle of civilization
Since the modern Iraqi state was the artificial product of Western geopolitical maneuvers in the cradle of civilization during the age of European imperialism, Iraq's full geopolitical spectrum has always included Pan-Arabism beyond narrow state interests. This was overlooked when the US decided to topple Saddam Hussein. This is the second part of an on-going series. (Sep 2, '04)

Geopolitics in Iraq an old game
The Americans are not the only ones to have had a tough time of it in Iraq. Neither the Persians nor the Ottomans could keep the population effectively in check, and the British occupiers also failed. Iraq's troubled history goes back centuries, and its echoes resound forcefully today. (Aug 17, '04)

Occupation highlights superpower limits
Sunnis in Iraq and the region are torn between their fear of a rise of the Shi'ites in Iraq and their commitment to Arab nationalism stimulated by foreign occupation. Neither option has any room for US superpower dominance. (Apr 19, '04)

MAO AND LINCOLN, Part 1
Demon and deity
While vilifying Mao Zedong, the neo-liberal West has idolized Abraham Lincoln. Unlike Lincoln, Mao is not given credit in the West as a revolutionary of noble principles who fought for equality using all necessary means. Yet Lincoln's assault on due process was more violent than Mao's. (Mar 30, '04) 

MAO AND LINCOLN, Part 2
Great Leap Forward not all bad
Mao Zedong has been vilified over the Great Leap Forward, but 30 million people did not die. The numbers are wildly exaggerated, and Henry C K Liu argues that many deaths were caused by cyclical famine and a US embargo on grain imports. Today, globalization causes greater suffering.  (Mar 31, '04)

REALPOLITIK AND BUSH'S REVOLUTION
Part 1: The Philippines revisited
George W Bush early this month sought to justify his country's bloody and costly occupation of Iraq as part of a proactive "global democratic revolution". Shortly thereafter, Bush visited a country still paying the price for a failed US policy of imposed democracy: the Philippines. (Nov 18, '03)

REALPOLITIK AND BUSH'S REVOLUTION
Part 2: Flawed visions of democracy
George W Bush has built his new policy of world democratic revolution on the assumption that democracy in foreign lands would automatically welcome US imperialism in the name of capitalistic free trade. We see now that not only can democracy not be easily imposed from outside, even if it does take root it may well flower in ways detrimental to US interests. (Nov 19, '03)