From Volume 7, Issue 38 of EIR Online, Published Sept. 9, 2008
Asia News Digest

Fannie-Freddie Bailout Worsens Chinese Dilemma

Sept. 9 (EIRNS)—While the People's Bank of China, like so many other institutions, endorsed the allegedly "stabilizing" effect of the U.S. government bailout of Fannie Mae and Freddie Mac, some Chinese economists were less impressed. The bailout will actually make China's current position in relation to the U.S. dollar—already between a rock and hard place—even more of a dilemma. Chinese investors stand to lose a lot if Fannie and Freddie go bankrupt.

Chinese Academy of Social Sciences (CASS) economist Dong Yuping told China Daily that the bailout does not solve anything. It will not improve the fundamental reality of the U.S. housing market, and the risks remain, he said. The bailout measures "will only work temporarily to stabilize market sentiment." More funds will have to be poured in, but the big problem is how the U.S. government will get the money. "It may pool the money through issuing new treasury bonds," Dong said. The question then will be, should China buy to support the T-bonds? Already, China's holding of U.S. Treasury bonds are depreciating in value as the dollar falls. China and Japan, the largest holders of U.S. Treasury bonds, "have a hard decision to make," Dong said. "If they increase their holdings, no one knows where the market will head. If they don't, their asset value may continue to fall." China holds an estimated $500 billion worth of U.S. Treasury bonds.

Xinhua news also quoted CASS economist Zhang Ming, saying that the "U.S. sub-prime mortgage crisis has not ended. The rescue just indicates the seriousness of the problem, while we have to wait to see its effect."

As of the end of June, Chinese commercial banks held $24 billion in Fannie and Freddie debt. The Bank of China has cut its holdings by some 25%, and said in August that it holds $7.5 billion in these bonds, and $5.2 billion in mortgage-backed securities, according to AP. The Industrial and Commercial Bank of China, the biggest commercial lender, said late last month that it owns U.S.$465 million in Fannie and Freddie debt, plus $2.2 billion in mortgage-backed securities.

The 'Pad Thai' Coup in Thailand

Sept. 9 (EIRNS)—Prime Minister Samak Sundaravej was thrown out of office today—not by George Soros's fascist mob occupying the Government House and demanding his resignation, not by yet another military coup, and not by the Parliament or his party, but by the Constitutional Court, which ruled that two televised cooking shows, done for free, constituted "outside work" by Samak, forbidden by the Constitution. This will be known as the "Pad Thai" precedent in international jurisprudence, after the famous Thai shrimp and noodle dish. It is appropriate that the mob on the street calls itself the People's Alliance for Democracy (PAD).

Samak, who had a TV cooking program for seven years, has accepted the ruling; there is no appeal in Thailand's monarchical system with its "Star Chamber" special courts, which have absolute power.

Parliament must now choose a new prime minister, expected to take place on Sept. 17. Samak's party, the People's Power Party (PPP), at first announced that it would run Samak again as its candidate, but the PPP's coalition partners protested, and PPP agreed to name a new candidate.

In the meantime, First Deputy Prime Minister Somchai Wongsawat is serving as acting prime minister. Essentially the only accusation against Samak by his opponents is that he's a proxy for the deposed Prime Minister Thaksin Shinawatra, who was driven out of office by the military in 2006, following mass demonstrations by the same Soros-linked mob now demanding Samak's ouster. Ironically, acting Prime Minister Somchai is Thaksin's brother-in-law.

Mahathir To Rejoin Malaysia's Ruling Party

Sept. 11 (EIRNS)—Dr. Mahathir bin Mohamad, the former prime minister of Malaysia, is reported to have requested to rejoin the government party, UMNO, which he headed for many years. Mahathir dropped out of UMNO three months ago, pledging not to return until the current Prime Minister, Abdullah Badawi, resigned. Mahathir has been on a rampage to remove Badawi (whom he had chosen as his successor), accusing Badawi of undermining Malaysia's economy, and blaming him for the loss of support enjoyed by the party under Mahathir's leadership. Mahathir blames Badawi for the threat posed by Anglo-American agent Anwar Ibrahim, who has gained support and is plotting to grab power.

It is not known if Mahathir has agreed to tone down his polemics against Badawi, but he was embraced by several leading members of Badawi's Cabinet—Trade Minister and UMNO Vice President Tan Sri Muhyiddin Yassin and Foreign Minister Datuk Seri Rais Yatim, indicating some accommodation with the current prime minister. Nonetheless, Mahathir has support for his call for Badawi to step down before Badawi had indicated he would, in 2010. There are party elections in December, and Mahathir is backing Tengku Razaleigh Hamzah (a former adversary who almost upset him in the 1987 election), to replace Badawi as UMNO president, and thus as prime minister.

However this plays out, there is a need to re-unite the UMNO forces immediately, both to prevent Anwar's "Soros" coup, and to meet the economic crisis being thrust upon Malaysia and the world by Anwar's British controllers.

Japan's LDP Taro Aso Pledges Friendship with China and South Korea

Sept. 12 (EIRNS)—The campaign for leadership of Japan's ruling Liberal Democratic Party (LDP) went into full swing yesterday, with five candidates stating their positions and soliciting votes among the party officials. The race was triggered when Prime Minister Yasuo Fukuda resigned at the beginning of the month because of declining popularity, even after he reorganized his Cabinet and proposed an economic stimulus package. He said that the party needed new leadership to prepare for new general elections.

The selection of LDP party leader will be held on Sept. 22 within a restricted constituency of party members in the Diet and in important local offices. The winner of the party vote will almost certainly become prime minister when the Diet convenes on Sept. 24, because of the size of the LDP majority in the lower house of parliament.

The leading candidate for the post is Taro Aso, secretary general of the LDP. Aso had previously been a member of radical free-trade "reformer" and globalizer Junichiro Koizumi's Cabinet, but he was the main proponent of the economic stimulus package proposed by Fukuda before his resignation, which is still on the table for passage when the Diet meets. Aso, a Roman Catholic, is the grandson of the post-war Prime Minister Shigeru Yoshida.

Koizumi has given his endorsement to Yuriko Koike, a former TV announcer and defense minister, who has staked out a claim as the candidate most likely to revive Koizumi's "market-friendly reforms."

Aso, who has run for the chairmanship previously, is considered a hawk on foreign affairs, but he made a point in his opening campaign remarks to emphasize friendship with China and South Korea. "There is concern I may antagonize China and South Korea," Aso acknowledged. But South Korea is a country that Japan has to team with, and Japan has to aim for "common benefit" with China, Aso said in a debate with the four other candidates.

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