Smarting from Tim Geithner’s comments about China manipulating, its currency, the Chinese have retaliated with a condemnation of U.S. economic policy in the harshest of terms. At the World Economic Forum, Chinese Premier Wen went on the attack, accusing the United States of undisciplined profligacy.

As I indicated just yesterday, irrespective of Geithner’s motives in branding China a currency manipulator, his language was unwise. Further comments of these sorts can only increase tensions between China and the U.S.

The Chief Economist of Goldman Sachs sat down with the FT’s David Oakley and had a go on a number of topics from the financial crisis, investments in Emerging Markets, the future of the Bric (Brazil, Russia, India and China) economies, to the global economy.

Below are links to the three-part video series on the FT website. I think the videos are well worth watching.

Enjoy.

The row between Russia and Ukraine over payments for natural gas looks to be de-escalating. Gazprom has committed to letting the gas flow freely again after the EU requested this action be taken. The question now is whether the core issue of payments for natural gas can be solved. The Financial Times takes a stab at this in their latest Lex column, part of which is excerpted below.

The Ukraine-Russia row over natural gas has escalated to a new high. Now, state-owned Gazprom has completely cut off supplies to Europe through the Ukrainian transit route. It still remains unclear what the ultimate aim of the Russians are in bringing the issue to this critical state. Nevertheless, it is generally believed that Russia is making as much a political statement about NATO expansion, the disregard of Russia’s sphere of influence, and the dependency of the European Union on Russia for its energy needs. One should expect a political response from the EU shortly.

The question on everyone’s mind in the emerging markets is who will blow up next. Arnab Das of Dresdner Kleinwort Benson takes a stab at answering that question. He targets the Baltics as the problem children and sees current account surplus nations in Asia as lest vulnerable. He also discusses his views on Russia.

Below is the video with him on CNBC giving forth his view.

As an article in my links yesterday suggested, for many in the west, Russia’s behavior of late has lurched toward the unpredictable, volatile and aggressive. After Russia’s moves against Georgia in South Ossetia, wariness in the west has increased, sometimes bordering on hostility.

I have generally taken a more pro-Russian view of events, seeing the reactions by Russia as predictable responses to a Super Power provoked by repeated slights. That is neither here nor there as the latest controversy heats up, this time over natural gas.

In a world of limited resources where oil prices have plummeted, Russia’s military is ever more stretched. Yesterday, I highlighted the implosion in the Russian economy, suggesting that many in Washington see Russia as a potential problem due to its aggressive foreign policy and its declining economic fortunes.

In response, a friend who I know from my foreign service days sent me an article from the BBC suggesting that this confluence of events has increased a nuclear bias in the Russian military — with obvious negative consequences for U.S.-Russian relations. The country simply cannot afford to have strong technological capabilities and provide for its large infantry that is serving on the front lines of Russia’s increasingly unstable borders. It is choosing the nuclear option.

Russia is one country that we do not want to see fall on hard times. It has great geo-strategic power, but a weak economy, declining oil output and revenues and increasingly autocratic rule? Now it is being roiled by the global financial crisis as hot money is fleeing the country causing its currency to plummet and its stock market to swoon. Russia has used up a quarter of its massive foreign currency reserves to stabilize the situation — to no avail. Is Russia about to become a problem?

At first glance, a flair-up in the Caucasus region seems to have little meaning for Americans. But just as the collapse of the subprime mortgage market ultimately came to symbolize the beginning of the end of an American credit system run amok, so too does the Russo-Georgian conflict illustrate the limits of American military power and its capacity to exert itself anywhere in the world unilaterally. Neither economic, nor military “unipolarity” seems to work any longer. We have, in the words of Boston University professor Andrew J. Bacevich, a “crisis of profligacy”, in which US foreign policy parallels its domestic dysfunction, because of the refusal of Americans to recognize that they have to pay a significant price for economic abundance at home and geopolitical dominance abroad. In this world the Bush administration unveiled “a breathtakingly ambitious project of near global domination,” writes Bacevich. Preserving American abundance was the watchword, “yet that way of life, based for at least two generations on an ethic of self-gratification and excess, drastically reduced the resources available for such an all-encompassing imperial enterprise,” he writes. No wonder things have not gone well.

ShareRecently, I have become very concerned about the deteriorating geopolitical situation and its likely effects on the global economy. The Georgia-Russia situation produced a response from the U.S. to defend Poland with a missile shield, which could be labeled provocative at best.
In further escalation of U.S. -Russian tensions, the response from Moscow was to [...]