Saturday, 28 July 2012

Nexen and China - The Education of Senator Schumer


So China, crap manufacturing superpower of the world whose year-over-year oil consumption is up 26%, decides to plunk down $15 billion of its hard-earned Walmart and Apple slave wages to buy Canada's 12th or 13th biggest oil and gas firm: Calgary, Alberta-based Nexen Inc.

Queue the usual paranoid dopes in Canada yelling about human rights and/or communism and/or yellow peril.

These people, mostly old, probably have little to no idea how the world functions.  Even if the board of directors of Nexen found China's official communist ideology or human rights violations odious, nothing talks like a briefcase of cash money. The hell in a China flag-draped handbasket crowd's skepticism of the deal more likely has to do with their perception  that this is somehow related to the "Asians" who have "moved in" to their neighbourhood and are "taking over". 

I wasn't even going to bother addressing their batshit-crazy comment board weigh-ins about Nexen  (which for what its worth has over 100 drilling platforms on four continents, but because it's "Canadian" is implied to be Ma and Pa's Ye Olde General Store).  But it is simple to.  This deal will go through because a price was offered the company was willing to accept and the last thing a Canadian government trying to diversify its export markets is going to do is block the country with the world's largest population from completing a legitimate business transaction.  That's easy.

But here's U.S. Senator Chuck Schumer weighing in with his idiotic and ignorant lambasting of the Nexen deal, saying that the U.S. should block it and that it represents a unique opportunity to punish China for its unfair trade and business practices.

Reflexive Anti-Americanism is on the wane, here in Canada and elsewhere, probably because America's misguided military adventures and economic sins have left most of its citizens feeling a bit humbler.  I've noticed it abroad for sure.  There is also, I sense, a general sentiment that America does not necessarily need to be as taken seriously as it used to now, what with an incredibly moronic stuffed suit Republican presidential nominee that makes G.W. Bush look like a phd holding Nobel laureate, the Kardashians and T Cruise's divorce notwithstanding.  Yet apparently the "Exceptionalism is over" memo never got to Schumer's Capitol Hill Office.  The hypocrisy of his tirade is so stunning that it inspired a Lacking Credentials posting.

Schumer's beef is that China manipulates its currency by pegging it to the dollar and making it artificially low.  His argument might hold water if America was not the principal beneficiary of this phenomenon.  But America is, because all those U.S.-based companies' corporate profits, half of which are realized outside the U.S., are possible because of China's cheap manufacturing. And those cheap goods on sale for American consumers at Walmart, Home Depot, and Gap are also possible because of Chinese cheap manufacturing.  Here's an example:

Apple, Inc. of Cupertino, California, manufactures ipad sold in Romania in China.
Materials=$100
China Wages & Shipping=$5
Romanian bureaucracy=$7
Retail Price=$500
Apple profits=$388

I guess C Schumer wants to see that $5 go down to $2.50.

And if he's concerned about currency manipulation, maybe he should take his chauffeured limo down to the fed and talk to U.S. Federal Reserve Chairman Ben Bernanke, whose job seems to have morphed into currency manipulator in chief.  You can see my comments about that before Monday.

Finally, Nexen is a Canadian company, so I'm pretty sure the decision on whether this takeover is going through happens up here in Ottawa, Canada.  As we established 200 years ago this year, this country is not some afterthought provincial backwater of the United States.  At moments like this we notice that this fact still hasn't sunk in for some people.  Granted, Nexen does trade on the NYSE and it's estimated that 10% of its capital and assets are U.S. based, but this by no means gives the U.S. veto power of the deal.  It's like me saying to him that Walmart and McDonalds shouldn't do business in China (which they both do, obviously) because their enormously profitable "Walmart Canada" and "McDonald's Canada" divisions somehow give me a say in their operation, even though those are just the regional operating names up here for two U.S.-based corporations.

Get your head out of your yin-yang, Schumer.  Not every superpower acquires oil by invading a country with 150,000 soldiers and building an "embassy" the size of the Vatican in its capital.

In other news, Amazon CEO and tech billionaire Jeff Bezos contributed 2.5 million to the legal PR battle to legalize same-sex marriage in Washington State. Former and current Microsoft leaders and 0.001 percenter-extraordinaires Bill Gates and Steve Ballmer also chipped in 100k each to the effort.  Wow, America's elite really has its priorities straight and is taking the lead. That 2.7 mil could have provided a quarter's worth of income to 550 destitute U.S. households.  Or been pitched into an effort to bring down the endless breakneck deficit ratcheting that threatens to break the U.S. treasury and destroy the nation's economy.  Instead, they're investing in a legal battle about something that affects nobody other than the people getting married, and other than that is no one else's f----ing business.  But keep wagging your finger Schumer.  You obviously come from a place uniquely positioned to lecture the rest of the world about its priorities.

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