The growing Sino–Russian partnership is evidence that the Western policy of isolating Russia has failed. The policy has only served to push Russia deeper into Chinese arms. Russia and China are planning to increase their engagement in Central Asia and they will coordinate their policies in the former Soviet territories in Eurasia.
After a late flurry of additions to the founding membership of the Asian Infrastructure Investment Bank (AIIB), attention now turns to setting the China-led AIIB’s rules and regulations. Important questions remain — most importantly, whether the AIIB is a potential rival or a welcome complement to existing multilateral financial institutions like the World Bank.
The last time a horse won the Triple Crown was at the start of the first dollar rally after Bretton Woods collapsed. It has been 37 years and we think that dollar has begun its third rally since Nixon took the final step in breaking the link between gold and the dollar.
The strong US jobs data before the weekend has strengthened views that the Federal Reserve will get the opportunity it seeks to hike rates later this year. The dollar finished last week with strong momentum. There has been little follow through today.
The recent 2015 Shangri-La Dialogue focused on China, the United States and maritime security. However, those expecting fireworks in the wake of China’s new Defence White Paper and recent sharply worded speeches by US defence officials were left disappointed.
Despite obstacles, the White House continues to push preferential trade deals in Asia and Europe. However, neither can reverse the erosion of U.S. innovation and in Asia Pacific, the proposed pact is more likely to divide than unify the region.
The U.S. Federal Government is getting more revenue, which is helping it cut the budget deficit by over 15%.
The Federal deficit fell by $68 billion to $368 billion according to the Congressional Budget Office’s May report. That decline was helped mostly by a rise in revenues, which grew by 9% on a year-over-year basis, which outpaced growth in spending, which rose only 4% on a year-over-year basis. In total, the U.S. government received $2.1 trillion in the first eight months of the fiscal year 2015.
Income Taxes Strengthen
The most important driver of the dollar remains the de-synchronization of the monetary policy cycle. The early and more aggressive action by the US, and the institutional flexibility, leaves the Federal Reserve in a position to begin normalizing monetary policy several quarters at least ahead of the Eurozone, the UK and Japan. Other countries, including China, Australia, New Zealand, Sweden, and Norway are also in the process or are anticipated to be, of easing policy as well.
So far, 2015 is an eventful year for major-power politics. The European Union (EU) and China just held their fifth round of strategic dialogue talks. Chinese President Xi Jinping visited Moscow to mark the 70th anniversary of the end of World War II. German Chancellor Angela Merkel just visited visit Moscow in early May. In addition, the US–China Summit will be held in September in Washington. While the major powers’ diplomatic exchanges roll on, finding common ground for collaboration remains as important as ever.
Chinese investment in Sri Lanka is causing major problems for Sri Lanka’s President Mathripala Sirisena and has become a point of tension in Sri Lanka–China relations.
In the age of derivatives, swaps, and electronic money transfers, a new form of warfare has emerged, financial warfare. Recently, the US has passed sanctions on countries such as Syria, Venezuela, and North Korea, but the majority of energy related sanctions passed have been targeted at Iran and Russia.
An estimated 68 percent of Russia’s government revenue is derived from oil and gas exports, while 80 percent of Iran’s revenue comes from oil exports. That presents a very large target for the use of financial weapons.
