Commentary Magazine


Topic: banker

A Debtor’s Strategy?

Although the results — or more accurately, the lack of results — from Obama’s China visit suggest the opposite, the $800 billion the U.S. owes to Beijing “had no impact on [Obama’s agenda in China] whatsoever,” claimed Deputy National Security Adviser Mike Froman.

“The $800 billion never came up in conversation, and the President dealt with every issue on his agenda in a very direct way and pulled no punches,” Froman said at a news conference yesterday in Beijing.

On Nov. 15, the New York Times described Obama as a “profligate spender coming to pay his respects to his banker” and predicted before the trip’s beginning that “Mr. Obama will be spending less time exhorting Beijing and more time reassuring it.” It was a prediction that Froman’s statement contradicts.

And a savvy prediction, indeed, as it turned out. Obama offered vague statements on human rights—admittedly, an improvement on previous silence. Both sides reaffirmed their cooperation on environmental issues, nuclear nonproliferation and security – agreements likely less solid in reality than in rhetoric. Both promised increasing student exchanges. But all these stated commonalities are mild. If anything, the U.S. lost ground, minimizing India as a first-rate Asian power and making concessions on Taiwan, as Foreign Policy’s Daniel Blumenthal noted.

So the question is one of correlation or causation: whether Obama’s conciliatory approach can be blamed on the debt alone, or whether it is instead indicative of a larger China-policy outlook.

True, as Froman said, there was no documented mention of the $800-billion debt on the White House website. (But, given its status as a quite rotund elephant, perhaps it was a topic that should have been broached at least once.)

But if Obama intends to shift U.S.-China policy altogether, expect bigger foreign policy problems soon, a dilemma articulately described by Robert Kagan and Dan Blumenthal, who wrote for the Washington Post before Obama’s visit.

Previously, the American strategy has been to simultaneously engage and balance China, Kagan and Blumenthal write. But this time, throughout the visit, Obama repeated that “we do not seek to contain China’s rise,” words that must be musical to a country historically accustomed to regional dominance and hegemony.

Blumenthal and Kagan suggest a tension between reality and a policy of strategic reassurance: The U.S. doesn’t want to diminish its Asia presence or power, but China demands parity at bare minimum. “So it will quickly become obvious,” they write, “that no one on either side feels reassured. Unfortunately, the only result will be to make American allies nervous.” As if Obama’s recent treaty forfeitures in the Czech Republic and Poland were not enough.

Either way, the tone of the visit belied a less confident America—but whether that’s by dollar or decision, we have yet to see.

Although the results — or more accurately, the lack of results — from Obama’s China visit suggest the opposite, the $800 billion the U.S. owes to Beijing “had no impact on [Obama’s agenda in China] whatsoever,” claimed Deputy National Security Adviser Mike Froman.

“The $800 billion never came up in conversation, and the President dealt with every issue on his agenda in a very direct way and pulled no punches,” Froman said at a news conference yesterday in Beijing.

On Nov. 15, the New York Times described Obama as a “profligate spender coming to pay his respects to his banker” and predicted before the trip’s beginning that “Mr. Obama will be spending less time exhorting Beijing and more time reassuring it.” It was a prediction that Froman’s statement contradicts.

And a savvy prediction, indeed, as it turned out. Obama offered vague statements on human rights—admittedly, an improvement on previous silence. Both sides reaffirmed their cooperation on environmental issues, nuclear nonproliferation and security – agreements likely less solid in reality than in rhetoric. Both promised increasing student exchanges. But all these stated commonalities are mild. If anything, the U.S. lost ground, minimizing India as a first-rate Asian power and making concessions on Taiwan, as Foreign Policy’s Daniel Blumenthal noted.

So the question is one of correlation or causation: whether Obama’s conciliatory approach can be blamed on the debt alone, or whether it is instead indicative of a larger China-policy outlook.

True, as Froman said, there was no documented mention of the $800-billion debt on the White House website. (But, given its status as a quite rotund elephant, perhaps it was a topic that should have been broached at least once.)

But if Obama intends to shift U.S.-China policy altogether, expect bigger foreign policy problems soon, a dilemma articulately described by Robert Kagan and Dan Blumenthal, who wrote for the Washington Post before Obama’s visit.

Previously, the American strategy has been to simultaneously engage and balance China, Kagan and Blumenthal write. But this time, throughout the visit, Obama repeated that “we do not seek to contain China’s rise,” words that must be musical to a country historically accustomed to regional dominance and hegemony.

Blumenthal and Kagan suggest a tension between reality and a policy of strategic reassurance: The U.S. doesn’t want to diminish its Asia presence or power, but China demands parity at bare minimum. “So it will quickly become obvious,” they write, “that no one on either side feels reassured. Unfortunately, the only result will be to make American allies nervous.” As if Obama’s recent treaty forfeitures in the Czech Republic and Poland were not enough.

Either way, the tone of the visit belied a less confident America—but whether that’s by dollar or decision, we have yet to see.

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“What Is Going To Be Done about China?”

Yesterday I suggested that President Bush use all the leverage we have to convince Beijing to disarm Kim Jong Il. The Chinese supply about 90 percent of North Korea’s oil, 80 percent of its consumer goods, and 45 percent of its food. Pyongyang, as we know, has no more loyal supporter in the councils of diplomacy than Beijing. Without China, Kim “could neither bark nor bite.” There would be no North Korean nuclear program, no North Korean missiles, and no North Korea. Jon S, a frequent contentions reader, has borrowed Lenin’s words and asked the critical question: “What is to be done?”

We must first properly understand the “correlation of forces,” if I may continue with Soviet-era lingo. In “China’s century” the general assumption is that the United States must step out of the way of the rising giant. After all, the argument goes, the central government in Beijing owns about $387 billion in U.S. Treasury obligations and holds the bulk of its $1.5 trillion in foreign exchange reserves in dollar-denominated assets. We cannot afford to irritate the Chinese, especially because they have already threatened to exercise the so-called “nuclear option” and dump their dollars. As Hillary Clinton asks, “How do you get tough on your banker?”

Clinton is wrong because she ignores the reality of the financial markets. If the Chinese sold their dollars, they would have to buy something, as a practical matter, euros and yen. The values of those currencies would then shoot through the ceiling. The Europeans and the Japanese, to bring their currencies back into alignment, would then have to buy dollars. In short, our debt would end up in the hands of our friends.

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Yesterday I suggested that President Bush use all the leverage we have to convince Beijing to disarm Kim Jong Il. The Chinese supply about 90 percent of North Korea’s oil, 80 percent of its consumer goods, and 45 percent of its food. Pyongyang, as we know, has no more loyal supporter in the councils of diplomacy than Beijing. Without China, Kim “could neither bark nor bite.” There would be no North Korean nuclear program, no North Korean missiles, and no North Korea. Jon S, a frequent contentions reader, has borrowed Lenin’s words and asked the critical question: “What is to be done?”

We must first properly understand the “correlation of forces,” if I may continue with Soviet-era lingo. In “China’s century” the general assumption is that the United States must step out of the way of the rising giant. After all, the argument goes, the central government in Beijing owns about $387 billion in U.S. Treasury obligations and holds the bulk of its $1.5 trillion in foreign exchange reserves in dollar-denominated assets. We cannot afford to irritate the Chinese, especially because they have already threatened to exercise the so-called “nuclear option” and dump their dollars. As Hillary Clinton asks, “How do you get tough on your banker?”

Clinton is wrong because she ignores the reality of the financial markets. If the Chinese sold their dollars, they would have to buy something, as a practical matter, euros and yen. The values of those currencies would then shoot through the ceiling. The Europeans and the Japanese, to bring their currencies back into alignment, would then have to buy dollars. In short, our debt would end up in the hands of our friends.

And there’s a couple more things that we need to remember about the balance of power between China and the United States. Beijing’s spectacular rise has occurred in a period of sustained worldwide prosperity, but that era is now coming to an end, as the ongoing plunge in global financial markets indicates. China, the world’s largest exporter, has built its economy on selling goods to the United States. Beijing’s trade surplus with us for last year will exceed a quarter trillion dollars when the figures are announced. In short, the stability of the modern Chinese state largely depends on prosperity and that prosperity largely depends on access to American markets, capital, and technology.

Therefore, Beijing’s leaders are not about to cross Washington if they thought we were serious about proliferation. So far, we have not vigorously enforced the trade promises that Beijing made to join the World Trade Organization in 2001. Should we do so, we could drive the Chinese economy into the tank—and Beijing’s leaders know that. It’s time to have a conversation with them about their support for rogues like Kim Jong Il.

Moreover, the United States has never made China pay any price for proliferant activities. We announce slap-on-the-wrist measures on state-owned enterprises every once in a while, but now it’s time to levy real penalties on the Chinese government, which controls those businesses. Until we do that, Beijing’s leaders will just laugh at us while continuing their support for the Kims of the world.

And there’s one more thing. The United States needs to speak clearly to the Chinese, both in public as well as in private, about behavior that is, by any standard, unacceptable. The world looks to Washington for leadership, and we have not been providing it.

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Discovering Nemirovsky

Until 2005, the French novelist Irène Nemirovsky, author of the much-lauded Suite Française, had been more or less completely forgotten, even by specialists in French literature between the wars. Her name did not feature in critical surveys or in the memoirs of contemporaries. Pure chance has led to the discovery of this gifted woman and her work.

She was born in Kiev in 1903, the child of Léon Nemirovsky, a rich Jewish banker, and Faiga (or Fanny, as she called herself), a self-regarding and unfeeling mother. Fleeing the Bolshevik revolution in 1917, the family settled in Paris, where Léon rebuilt his fortune. Outwardly Irène seems to have been something of a Jazz-age, party-going flapper, but in fact she was observing the human behavior around her with penetrating originality.

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Until 2005, the French novelist Irène Nemirovsky, author of the much-lauded Suite Française, had been more or less completely forgotten, even by specialists in French literature between the wars. Her name did not feature in critical surveys or in the memoirs of contemporaries. Pure chance has led to the discovery of this gifted woman and her work.

She was born in Kiev in 1903, the child of Léon Nemirovsky, a rich Jewish banker, and Faiga (or Fanny, as she called herself), a self-regarding and unfeeling mother. Fleeing the Bolshevik revolution in 1917, the family settled in Paris, where Léon rebuilt his fortune. Outwardly Irène seems to have been something of a Jazz-age, party-going flapper, but in fact she was observing the human behavior around her with penetrating originality.

She was only twenty-three when she married Michel Epstein, whose origins were Russian and Jewish like hers. Three years later, in 1929, she published her first novel, David Golder. No doubt it is painfully autobiographical: Golder, like her father, has risen from poverty by taking huge financial risks. His name “evoked an old, hardened Jew, who all his life had been hated and feared.” Golder’s friend Soifer, a miser, leaves thirty million francs, “thus fulfilling to the end the incomprehensible destiny of every good Jew on this earth.” (Nemirovsky drops summary sentences of the kind with terrible simplicity.)

The superficial shame in her depictions of nouveaux-riches Jews might be considered a type of self-hatred, except that Nemirovsky evidently felt pity for them, along with an underlying pride in the way that they dealt with so much contempt from everyone else. Old and hardened Jews do what they have to: they are not allowed a choice. In another early novella, The Ball, she describes Kampf, “a dry small Jew, whose eyes have fire in them,” and the pretentious Madame Kampf, no doubt modelled closely on her own mother. Their daughter wreaks a frightful revenge on them for the sin of social-climbing. And yet, under the savagery of the fiction is a redeeming quality—these people really do love, but don’t know how to show it. In her understanding of the waywardness of the heart, Irène Nemirovsky is the equal of Katherine Mansfield.

After the collapse of France in June 1940, and the installation of the Vichy regime, Irène and Michel were in mortal danger as foreign-born Jews. They hid their small daughters Denise and Elisabeth, but did not themselves try to escape. Instead, Irène’s artistry rose to the drama of the moment, and she wrote Suite Française, a full-length novel that describes the German occupation and the disintegration of France and its society. The novel is so detailed and vivid that it becomes, more or less, a historical document.

The French police came for her in July 1942, and she was murdered in Auschwitz the following month. That November, her husband Michel was also deported and murdered there. The manuscript remained in a suitcase in the possession of the two daughters who for more than sixty years found it too painful to deal with. Its survival and eventual publication was quite outside the bounds of probability.

The role of the artist ultimately is to bear witness. Irène Nemirovsky is in the select company of those who were able to do so in the face of death, thus bringing some hope to others. And how many of those murdered like her, one cannot help wondering, would also have been in that company if only they had been allowed the chance?

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German Anti-Americanism, Then and Now

Germans are often said to be obsessed by their Nazi past. This week Germany has been reminded of another nightmare it would prefer to forget: the Marxist terrorism of the 1970′s and 80′s. The release on parole of an apparently unrepentant Brigitte Mohnhaupt, one of the most notorious members of the Baader-Meinhof Gang (also known as the Red Army Faction) has polarized German public opinion once again, just as it did during the fall of 1977, when she played a key role in the kidnapping and murder of the banker Juergen Ponto and the industrialist Hanns-Martin Schleyer.

In one respect, Mohnhaupt was a prophetic figure: she foreshadowed the extreme anti-Americanism that would grip Germany in the new century. In 1981, in the most spectacular of many attacks on American troops by Baader-Meinhof terrorists, the car carrying General Frederick Kroesen, the U.S. commander in Europe, and his wife was attacked by Mohnhaupt with a rocket-propelled grenade and small-arms fire near Heidelberg. The Kroesens survived with minor injuries, thanks to their armor-plated Mercedes.

Today’s German anti-Americanism takes a less violent form, but it has succeeded where the terrorists failed: the American military presence in Germany, once the largest outside the United States, has mostly been relocated elsewhere. Gerhard Schröder’s Red-Green coalition, which ruled Germany from 1998 until 2005, included several ministers who had once been sympathetic to the terrorists.

For me, however, Mohnhaupt’s release raised another ghost from the dead: Alfred Herrhausen, chairman of Deutsche Bank, who was one of the last of the Red Army Faction’s victims. I met Herrhausen in Moscow during a state visit with Chancellor Kohl in December 1988, less than a year before Herrhausen’s car was blown up by Mohnhaupt’s comrades. He was in Moscow to negotiate a gigantic loan to Russia with Gorbachev—a deal so important to the Russians that in their eyes Herrhausen even overshadowed Chancellor Kohl.

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Germans are often said to be obsessed by their Nazi past. This week Germany has been reminded of another nightmare it would prefer to forget: the Marxist terrorism of the 1970′s and 80′s. The release on parole of an apparently unrepentant Brigitte Mohnhaupt, one of the most notorious members of the Baader-Meinhof Gang (also known as the Red Army Faction) has polarized German public opinion once again, just as it did during the fall of 1977, when she played a key role in the kidnapping and murder of the banker Juergen Ponto and the industrialist Hanns-Martin Schleyer.

In one respect, Mohnhaupt was a prophetic figure: she foreshadowed the extreme anti-Americanism that would grip Germany in the new century. In 1981, in the most spectacular of many attacks on American troops by Baader-Meinhof terrorists, the car carrying General Frederick Kroesen, the U.S. commander in Europe, and his wife was attacked by Mohnhaupt with a rocket-propelled grenade and small-arms fire near Heidelberg. The Kroesens survived with minor injuries, thanks to their armor-plated Mercedes.

Today’s German anti-Americanism takes a less violent form, but it has succeeded where the terrorists failed: the American military presence in Germany, once the largest outside the United States, has mostly been relocated elsewhere. Gerhard Schröder’s Red-Green coalition, which ruled Germany from 1998 until 2005, included several ministers who had once been sympathetic to the terrorists.

For me, however, Mohnhaupt’s release raised another ghost from the dead: Alfred Herrhausen, chairman of Deutsche Bank, who was one of the last of the Red Army Faction’s victims. I met Herrhausen in Moscow during a state visit with Chancellor Kohl in December 1988, less than a year before Herrhausen’s car was blown up by Mohnhaupt’s comrades. He was in Moscow to negotiate a gigantic loan to Russia with Gorbachev—a deal so important to the Russians that in their eyes Herrhausen even overshadowed Chancellor Kohl.

Herrhausen looked every inch the king of German capitalism, with seats on the supervisory boards of many of the Federal Republic’s major corporations. He had been raised in one of the Nazi Lebensborn colonies, where future members of the SS were groomed to become the master race. This biographical accident helped to account for the pathological loathing of Herrhausen by the Left, which formed the necessary background to his murder.

I could not help thinking of Walther Rathenau, the German Foreign Minister in the Weimar Republic, who shocked the West by signing the Rapallo Treaty with Bolshevik Russia in 1922. Rathenau, too, had been a great capitalist—he was the head of A.E.G., then the largest electrical company in Europe—and he, too, was first demonized and then assassinated.

The difference, of course, was that Rathenau was a Jew, and his murderers were anti-Semites of the extreme Right. Herrhausen’s assassins, the Red Army Faction, pioneered the left-wing form of anti-Semitism—they collaborated with Palestinian terrorists in “anti-Zionist” operations, including the kidnapping and murder of eleven Israeli athletes at the Munich Olympics. Showing, once and for all, that despite the Red Army Faction’s pretense that the Federal Republic was merely the Third Reich in another guise, the terrorists had far more in common with the Nazis than with their victims.

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