northern lights

If Kim Jong Il is just trying to grab some attention and headlines, he is doing a good job. Not sure what else motivates him and North Korea in their continued test of missiles and nuclear weapons. Six missiles have been tested in the past week, and one nuclear test. The North Koreans–and the rest of us too–are learning that they are capable of a significant attack on South Korea and much of Japan. Even China may be leary of their tiny neighbors.

North Korea said it conducted the test in self defense. It has asserted that the United States is planning a pre-emptive strike to oust the regime of leader Kim Jong Il and warned it would not accept sanctions or other punitive measures being discussed by the Security Council.

Kim has also said–for some reason–that they will no longer honor the 1953 ceasefire that ended the Korean War. The guy comes off looking more crazy that beligerant. The sad thing is that his craziness may well result in innocent deaths.

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china fuel economy standards

I like this–

Worried about heavy reliance on imported oil, Chinese officials have drafted automotive fuel economy standards that are even more stringent than those outlined by President Obama last week, Chinese experts with a detailed knowledge of the plans said on Wednesday.

Cars with small fuel-sipping engines are now subject to a 1 percent sales tax, while sports cars and sport utility vehicles with the largest engines are subject to a 40 percent sales tax. Stricter fuel economy standards have won support from four interest groups within the Chinese government.

I often hear from friends in the states how awful China is for becomming the biggest polluter in the world. Then I remind them that China has five times the population of the U.S., making Americans easily the dirtiest folks around. I tell them about the cool little electric scooters people ride here, and the restrictions on driving at certain times in certain areas.

Yeah, still the air here can get bad, but it has gotten much better over my four years here.

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petro china

Wow, a Chinese company–Petro China–has just become the world’s largest company. And now China has four of the 10 largest companies in the world, tied with the US. The article also notes that China’s economy is currently ranked third largest in the world and will soon pass Japan into seecond spot. $336,000,000–that is the new value of Petro China after a rise in China’s stock market of 43% this year.

No big deal having the largest company in the world, but I would bet some of my Chinese friends are proud.

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cheap milk

Milk prices have dropped recently because of a big supply shift. About ten months ago there were milk shortages and very high milk prices.

Interesting that prices for milk are so volitile. Of course all agricultural goods have the potential  to experience big price changes, but suppliers are able to control prices for much of it by stockpiling when there are surpluses. Can not do that with milk cause it spoils too quickly.

At the heart of the problem is the nature of milk. Unlike grain farmers who can hold out for better prices by storing crops in a silo, dairymen must sell raw milk to processors or else it spoils. And cows keep producing whether the economy’s expanding or in recession.

Easy enough to understand the problem, but I am surprised that a solution can not be agreed on. Would not farmers be better off by simply agreeing on a quota? Perhaps it is too competitive a market. Regionally, quotas might be possible, but market prices might be set globally.

And where did we get the idea to drink cows’ milk anyway?

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i gotta change my course outline?

Greg Mankiw has published a new article about the slightly changed curriculum in his introductory economics courses. Here is the list–

• the role of financial institutions
• the effects of leverage
• the limits of monetary policy
• the challenge of forecasting

As mentioned, the role of financial institutions and monetary policy are already included in most introductory macro courses, but he argues here that they need more emphasis now because of the important role of financial institutions in bringing the current crisis.

I have always thought that most introductory courses suffered from a lack of  economic history and thought, including Marx, one of the most influencial economists of all. It is embarassing that a student might study economics with me for two years and–sometimes–never hear Marx mentioned. Contrary to many, I think Marx is becoming more and more relelvant as incomes and wealth continue to become more and more concentrated into the hands of a small percentage of the world’s population.

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luxury prices dropping–good or bad?

Two articles in the Times today about luxury goods that have fallen in value with the economic crisis. One is about the upscale wine market, and emphasizes the opportunities available to potential investors. The other is about the boat and yacht market, but the emphasis is on the difficulty of selling in a market where there is a big surplus.

Of course both markets represent good opportunities for buyers and low prices for sellers, and you would expect the same to be true for upscale restaurants, holiday hotels and travel, designer clothes, luxury goods of all kinds. Does this also mean that inferior goods have a higher demand now? I think I did hear that Walmart is doing OK.

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bringing back anti-trust

I was just thinking how the US does not seem to be applying anti-trust regulations, when this article–New Mood in Antitrust May Target Google–suddenly appears on my homepage.

Last week, the Obama administration declared a sharp break with the Bush years, vowing to toughen antitrust enforcement, especially for dominant companies. The approach is closer to that of the European Union, where regulators last week fined Intel $1.45 billion for abusing its power in the chip market.

In this new climate, the stakes appear to be highest for Google, the rising power of the Internet economy.

Easy enough to find cases of non competitive behaviour in tech companies, but I was wondering about the music industries as well. Copyrights were extended back in 1969 and since then music companies have merged and the industry seems far from competitive now. I don’t know how it turned out, but not long ago the EU was investigating recording companies for price fixing in several European markets.

norwegian socialism looking good

New story in the New York Times about Norway and how well they are doing economically. Of course they are extremely lucky because of the oil they have been pumping and exporting out of  the North Sea, but they also deserve some credit for investing the oil revenue rather than spending it all.

Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, state money that is used to make investments around the world. Now its sovereign wealth fund is close to being the largest in the world, despite losing 23 percent last year because of investments that declined.

I feel lucky to have permanent residency in Norway, but when I am there I am overwhelmed by the really high prices, especially for alcohol, tobaco, and gasoline. Of course I appreciate taxes on demerit goods, but tough to  live in a place where you can’t afford to go out for a meal.

By the way, the photo is from Bergen, where I used to live and about 50 kms from where I keep my boat.

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china and green coal technology

Surprised to see this headline–China Emerges as a Leader in Cleaner Coal Technology–but it explains something I have noticed here in Suzhou. My first year here, three years ago, it was rare to see a blue sky. I think it was only two or three days during the entire school year. Last year the air began to clear and it was more common to see blue skies and even an occasional star in the night sky. This year the air has been unusally clear, and perhaps a majority of days we can see a blue sky.

My friends have said it is because the rate of construction has died down a bit. Maybe it is a factor but I am happy to give China credit for developing the clean technology.

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