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Monthly Archives: January 2009

Renewed concerns in the news today about buy American provision added to the bailout plan. The house has already approved it, and the senate is considering a buy American provision that applies to “all manufactured goods.”

2009_01_30t142628_450x300_us_usa_stimulus_buyamerican

Frightening.

At least someone–the US Camber of Commerce in this case–is speaking up against the protectionist policies.

“Such provisions would cost American jobs, trigger retaliation from our trading partners, slow economic recovery by delaying shovel-ready infrastructure projects and cede our leadership role as a long-standing proponent of free and fair trade and global engagement.”

The questions I struggle with: Are US congressmen really stupid enough to believe protectionism will help the recovery? Or are they simply being pragmatic politicians and bowing to the wishes of their constituents?

Either way, the answer implies that the American brand of democracy is not working very well.

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Chinese Premier Wen Jiabao has defended Chinese money policy against accusations from the new Obama administration that the Yuan’s value is being held artificially low.

He acknowledged that global currencies were facing dramatic fluctuation — comparing the ups and downs to a “rollercoaster” — but sharply rejected charges that China was exercising undue influence over exchange rates.

“The fault is not with China,” he said.

Right he is. In fact, the relatively high value of the dollar is rightfully blamed on doubt over the world’s economy and the continued value of other currencies.

In fact, why not blame the Brits for this–

Dollar skyrockets on UK bank woes

dollarmkw

I am glad the Chinese are standing up for themselves. The US wants some kind of concession from the Chinese, but would not dare ask the same from the UK or Europe.

President Obama branded Wall Street bankers “shameful” on Thursday for giving themselves nearly $20 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out some of the nation’s most prominent financial institutions.

The real problem here seems to be that these bonuses are coming straight from government funds meant as a bailout. Is it really the same money?

This article says no, not exactly the same funds, but it certainly gives the financial institutions more leeway in funding the extravagant bonuses.

Applause to Obama for scolding the bankers, but will it matter? The US can not–will not–put legal limits on compensation by private industry. Why not make it a condition of the bailout to begin with–bonuses stop until the bailout money is repaid.

That would be effective, eh?

Nice to see some sensible opinions being developed in this world of global recession.

Today’s economic downturn has blindsided a generation of young people around the globe brought up to believe that a college degree guaranteed them financial prosperity. Whether in the US, China, or in countries in between, graduates from even marquee-name schools are feeling the crunch, prompting many rightly to rethink the value of their education.

For a few years I have been teasing my students with pleas to quit school as soon as they can get away with it, go work as a street sweeper or dish washer.  I say teasing my students, but part of me is dead serious. Do any of us really have any legitimate evidence that more ambition, wealth, responsibility makes us any happier or healthier?

I ride my bicycle to work each morning, often passing local workers on the street. Their smiles and laughter are almost constant. Maybe they are not too worried about their kid’s university fund.

The thawing Arctic Ocean is again finding its way into the news, as countries are vying for control of oil and gas deposits there. It is said to be tricky and a little frightening as no one–up to now–has had much interest in enforcing conflicting claims of jurisdiction.

Myself, with a sailing boat parked in Norway, I am much more interested in the sea lanes that are opening. What great, convenient, and cheap access–for me and shipping companies everywhere–between thousands of ports in the northern hemisphere. A quick search turned-up this story–

The opening of a new waterway between the Atlantic and Pacific oceans is akin in historic significance to the opening of the Suez Canal, in 1869, or is Panamanian cousin, in 1914. With this sea change will come the rise and fall of international seaports, newfound access to nearly a quarter of the world’s remaining undiscovered oil and gas reserves, and a recalibration of geo-strategic power.

and a cool map.

arctic map
Click the image above to see the full map

As in a post from a couple of weeks ago, something on the proper measure of labor from the Enviromental Economics Blog–

 If people who were previously unemployed choose to work on a project, it must be because the wages paid by the project are greater than the value of their next best alternative. The excess, or the difference between the wage and the value of the next best alternative, is a transfer from the people financing the project to the people it will employ.

I think John makes a mistake when he says that labor is counted as a cost in cost-benefit analysis.

wage = opportunity cost + transfer

Balancing cost and benefits–looks like a zero sum game to me. Of course the transfer will feel like a surplus for most workers, but it is still a cost to the employer.

China’s economic growth slumped to 6.8 percent last quarter, dragging down the pace of expansion for all of 2008 to a seven-year low of 9.0 percent as the full force of the global financial crisis struck home.

Wow. Growth of only 9%. What country would not accept that with open arms? Most amazing–it is the lowest growth rate here in seven years. I have been here in China for about half that time. I can not say that I notice any slow-down, but the construction sites all closed-down about a week ago, even though Chinese New Years is still four days away. Easy time to save on labor costs a bit. Everybody wants to go home.

What a great idea. Instead of bailing out failing businesses, give people spending coupons that companies can redeem for cash.

One of my students–she is from Taiwan–told me about this. Sure enough, a simple search turned-up the story. The coupons are worth just over 100 US dollars, redeemable at restaurants, grocery stores, and retail shops, but must be spent this year.

I wondered about Obama’s 825 billion bailout plan. How many coupons would that pay for? Figure there are 200 million Americans 18 or over, you could give each one a coupon worth just over4 thousand dollars. The coupons expire after a few months. People will spend money, retail sales go up, profits rise, resource demand will rise.

Maybe the Taiwanese are working with a better model. But–I did also read they are bailing out their memory chip industry.

Here is a suggestion that countries’ leaders should be ranked with different standards than are usually used. The focus is on the US–with Obama’s inauguration and all–but I guess it could apply anywhere.

Presidential rankings should be based on different standards: Did the president uphold the Constitution, and have an agenda that contributed to peace, prosperity, and liberty, and was he reasonably adept at getting that agenda implemented?

The author, Ivan Eland, downgrades the rank of very popular presidents who have served during periods of large wars. He argues, basically, that it would have been better to avoid war altogether. Sensible enough.  He also praises the presidency of Jimmy Carter, always a favorite of mine, for reducing government spending, beginning deregulation, and tightening money supplies, allowing for the growth years that followed.

Nothing personal, but I agree with this guy–Jim Rogers–on the relative optimism to be felt regarding China’s economy compared to the US.

Adam Smith and the Wealth of Nations made great contributions to our understanding of how a markets can be efficient without control; and, during the cold war, growth in the more authoritarian economies was unable to keep pace with the less authoritarian, but times have changed and perhaps China’s steady and strong growth over the last dozen years gives the world a new model to emulate.

The sermon of free trade has–finally–been accepted by most of the world. As predicted, it brought us a long period of significant growth. Now we find ourselves unable to climb out of a deep recession, largely due to a lack of control over financial markets, and global wealth disparity is probably worse than ever, maybe one reason that bail-out policies are not adding much to optimism.

The first year I taught in China, I worked with a local guy who described the China model as “the Bird-Cage Model.” The market is free within certain limits, but there are barriers within which we have to work. I need to learn more about what the barriers actually are, but one noticeable thing is that all enterprise comes within a master plan that originates with government.