Not to downplay the potential fatalities this swine flu may claim, but according to a new LA Timespiece the typical flu season in the US:
[B]etween 5% and 20% of the population becomes ill and 36,000 people die — a mortality rate of between 0.24% and 0.96%.
To add some more perspective, roughly 38,000 people die each year on US highways.
Or in other words, unless it morphs into something portrayed in 12 Monkeys, this will probably be a lot more hype than is warranted (the LA Times piece also notes that the virus has been decoded and scientists worst fears have been assuaged).
Now get back to investigating congresscritters!
And be sure to check out Walter Block’s new book on private roads.
… direct flights between mainland China and Taiwan went from zero to 270 each week.
That is zero flights for sixty year.
I remember sitting in an expat bar in Kaohsiung at the beginning of last April listening to the Belgian owner fret over the day that peaceful exchanges took place. He, along with most others, feared that the PRC would invade and blow the island up.
The very opposite has occurred.
Not only has trade expanded, but so have visitors from the mainland. From zero a week to more than 3000 a week (and now with even more liberalization, 7000+). In addition, while Taiwanese-based companies could invest on the mainland (billions have been spent erecting factories), mainlanders can now invest in the island; approximately $1.2 billion from the QFII program is predicted to flow that way this year.
As a consequence, my friends still living on the island have said everyone seems to be less frantic than a year ago. (Of course, warm feelings probably were also helped with this big purchase of LCD monitors.)
To mark the peaceful occasion, here is another photo from the March 2008 election:
This is just outside my apartment and is taken like 10 seconds before the other one I’ve shown (I lived off of Fuguo road, between Boai and Mintzu). Other election photos here and the wiki entry on the event.
Obama could really learn from this case-study on how to deal with Cuba!
- Cutting back is hard (The Economist)
- The last, frantic days of Perot family hedge fund (Dallas Morning News)
- Technology Stocks Favorites in S&P 500 on Zero Debt (Bloomberg)
- Fannie Mae Creates Housing Mirage With Bum Loans (Bloomberg)
- IBM to hire for new ‘analytic’ centers (EE Times)
- Casualties Continue in Vietnam (In These Times)
- Woman sends stripper impersonator to highschool reunion as a prank (BoingBoing) <-- thinking outside the box!
- Beyond HDTV: 4K digital cinema might soon come home (ArsTechnica)
In a speech today, Obama said “it is time for America to lead again in the area of research and development.”
Uhh. There is a myth that government sponsored research and development funding fell during the Bush years, according to the AAAS this is incorrect. It actually fell during the Clinton years and rose dramatically in Bush’s first term.
And according to the December 2008 issue of R&D magazine (pdf), the US spent more than Japan, China and Germany combined — each and every year.
To rectify a problem that does not exist, Obama wants to boost R&D spending from 2.6% of GDP to 3% yet he does not realize that the stimulus monies will fund both good and bad research alike and crowd out the former (presumably as they both compete for scarce talents)
It’s been a few weeks since I talked about Chinese treasury holdings, what is up?
- According to Bloomberg, China is selling their long-term maturing US bonds and buying short-term notes instead. This can mean several things, perhaps they were using the cash to “stimulate” the local economy here or more likely, they see the interest rate on long-term assets as way too low (e.g., inflation will outstrip the interest rate gains in a few years).
- China is now allowing several cities in Guangdong (the wealthiest and export-heavy province) to settle international trade contracts in Yuan instead of USD. This comes on top of the joint agreements that China has made with several countries for Yuan currency swaps (like South Korea, Argentina and Belarus). The long-term plan here is to position the yuan as an international currency, although they would still have to detach it from the USD by either floating it entirely or peg it to a commodity.
- China is investing large swaths of their treasury holdings in raw material providers, mining companies, and resource owners. For instance, they just signed a $19.5 billion agreement with Rio Tinto (one of the worlds largest mining companies). Two weeks ago they signed a $5 billion loan-for-oil deal with Kazakhstan; a week earlier China purportedly updated similar financial/petroleum agreements with Venezuela.
- According to Ambrose Evans-Pritchard, China is also buying bulk quantities of copper and other metals at low bottom prices and storing them. This serves two purposes, first it allows them to diversify their portfolio, away from dollars which will probably lose value at some point in the next several years. Second, in the event of geopolitical disorder (wrought by a protracted recession or high inflation) will allow Chinese enterprises to continue building infrastructure and develop cities.
- And as part of this move to diversify out of dollars, China has quietly been purchasing gold — an increase of 76% over the past five years. This is relatively high, however to put it into perspective, the Federal Reserve holds eight times the gold tonnage as their Chinese counterparts.
What does all this mean?
Despite conventional wisdom, returns on 10 and 30 year treasuries actually outperformed several asset classes (although the original plan had been for liquidity, not RoI). So why are they cashing out?
I think it is fairly obvious that Chinese policy makers are hoping for the best but preparing for the worst.
In order to fund the current stimulus packages, the US Treasury department is selling tens of billions of securities each week. Now, this would not normally be a big deal (considering the trillions worth of markable treasuries that float around in the bond market), but the vast majority of the securities being sold by Geithner are 2 and 3 year notes. Less than 10 percent of all the new securities are long-term bonds.
What this means is that in 2-3 years, all of that debt will come due.
Again, that might not normally be a big deal except that the administration will still be operating deep in the red and the overall US economy will still be sluggish (e.g., not growing at 10%). Thus the treasury department will have to sell yet more securities to pay for the debt that is due. This will depress yields. And in the event that the bond market pops, the sole buyer of securities will be the Federal Reserve. And anytime the Fed monetizes the debt, they are in effect, depreciating the currency.
I’m not saying that this is how things will play out.
However, I think that Chinese policy makers are hedging themselves into a win-win position.
The US treasury will sell $2.4 trillion this fiscal year to finance the deficit (mostly in 2-3 year notes). If Team Obama’s investments some how work as advertised, then demand for raw materials would increase. Thus by buying low-priced assets right now, China will see huge dividends in the years to come.
Or in the event of a protracted recession and “quantitative easing,” (e.g., inflation), commodity prices will increase, yet because they have purchased large quantities of the ore right now and signed contracts with ore miners at rock bottom rates, Chinese firms will be hedged against this.
Nirvana no matter what?
Unfortunate for sure, 30 million Chinese workers have been laid off here in the last 18 months, but at least their firms were allowed to go belly up, instead of zombified. And in turn, the productive capital will be reallocated and remixed by new entrepreneurs to create profitable enterprises. And long-term, these firms can train and hire these laid off employees.
And while FDI has substantially decreased from a year earlier, it still is coming in.
So in sum, based on all of the above, I think the current situation here is a far cry from the cries of “hard landing” we heard six months ago. Although this could easily change — or maybe I am being too selective?
- Cure For Honey Bee Colony Collapse? (ScienceDaily). Unsurprisingly the huge hype and nonsensical stammering about “cell phones killing everything” turned out to be a lot of hot air.
- Are running shoes a waste of money? (Daily Mail). Should you also eat like a caveman?
- Unskilled and Unaware of It (PDF). Funny journal article that explains the behavior of the annoying Cornell grad down in accounting. Classic concluding remarks. Via Geordie Rose
I have a new piece running over at LRC regarding the ramifications of monetary and fiscal policy on technological innovation.
A few notes:
- First, for the most part, LRC has a no-footnote policy and it would look tacky to put a million hyperlinks in an article (I learned that mistake from Will the University Survive?). So I’ll use this post to flush out the numbers cited in the piece.
- Second, regarding the very first sentence, I take full responsibility for the confusing date of Indian independence. I am very much aware that India was granted legal independence in 1947. I should have added an extra comma to distinguish when the policies were enacted. Here is a good wiki entry on it.
- Also, this time period of India is discussed in a concise vignette within the Commanding Heightsvideo series (the pertinent segment is called “India’s Way”). And regarding the term “Hindu rate of growth,” the term was coined by Raj Krishna, an Indian economist, and has nothing to do with the Hindu religion. During this time period, the increase in per capita income averaged only 1.3% a year.
- To nerds that read scifi books: not to split hairs over semantics but there is no fundamental difference between a computer program as envisaged by scifi writers like Charles Stross and econometric models currently used by government institutions. In their most basic element they all use mathematical equations to prescribe or describe certain action(s). Here is a detailed review of some problems in Stross’s book Accelerando.
- If you don’t already have the EE Times feed in your RSS reader, get it now. They have the best news regarding what is happening in the semiconductor industry. For example, they noted that it will cost $10 billion to build a 450-mm based fab plant, which is laughably high and as a result probably won’t be built in the next 5 years, if ever. And lest I be accused of being biased, they did publish a little green shoot: “TSMC invests in downturn, tips 22-nm.” They also published a good op-ed whose title says it all: “Entrepreneurs still key to silicon’s progress.”
- A similar performance increase/price deflation took place with GPUs. The ground-breaking Voodoo chipset from 3dfx was released in October 1996; it had a mere 4 MB of RAM and operated at 50 MHz. It cost $199 which adjusted for inflation is now $269. Fast forward to December 2008, Nvidia released the GeForce 260 which includes 896 MB of RAM and operates at 576 MHz. Its MSRP is $199.
- For a detailed look at PC sales growth see: “Total Share: 30 years of personal computer market share figures†by Jeremy Reimer. Gartner is forecasting a sales decline of about 12% this year, which is four times the decline following the dotcom bust. For a specific breakdown on smartphone growth in 2008 see this recent report from Gartner. CNet previously discussed the 2005 numbers. And as far as total PC usage goes, Gartner released a report on growth trends last July.
- Thousands of computer manufactures have consolidated over the past three decades. The top six ranked by largest market share are: HP, Dell, Lenovo, Acer, Apple, Toshiba and make up roughly 75% of all global shipments. If a deflationary spiral was a real phenomenon, none of these companies should be able to profitably operate, let alone grow.
- Common metals used to make PCs also include: aluminum, gold, nickel, iron, silver, and zinc. The cost of all these metals dramatically increased during the most recent boom (2x, 3x and sometimes 4x) yet hedging strategies and efficiencies in manufacturing processes absorbed the additional costs.
- We know from Bernanke’s famous 2002 “helicopter†speech that he is no friend to deflation and will do his best to prevent such a phenomenon from taking place. See also: “Bernankein Economics†by Michael King and “There Will Be (Hyper)Inflation†by Thorstein Polleit.
- An estimated 600,000 to 1.3 million Iraqi civilians have died since the March 2003 invasion. And approximately 10,000 to 30,000 Afghani civilians have died since military operations began in October 2001. This human toll is on top of the $900 billion in monetary costs from the Bush administration.
- Unsurprisingly various tech firms are finding ways to share in the massive public spending under the Obama administration. This comes at a time when influential pundits such as Thomas Friedman are promoting other initiatives whose unintended consequences could kill the golden goose.
- While many futurist pundits extol the virtues of government-promulgated grandiose plans such as large Manhattan Projects with Apollo-sized budgets, they don’t realize that this is exactly what the government has done with the banking, finance, residential home ownership, and energy industries to a detrimental effect.
- If the beneficial Keynesian Multiplier was a real phenomenon, then why allow private investors and venture capitalists invest at all, when governments are so much more efficient with their return on investment? The fact is, it never has germinated: “The Myth of the Magical Multiplier†by Frank Shostak, “On Krugman’s Introduction to Keynes’s General Theory†by D.W. MacKenzie, and chapter 11 in “Man, Economy, & State†by Murray Rothbard. Furthermore, Japan tried to spend itself out of several recessions, achieving little more than large debt loads.
- There is a myth that government sponsored research and development funding fell during the Bush years, according to the AAAS this is incorrect. Furthermore, the stimulus monies will fund both good and bad research alike and crowding out the former (presumably as they both compete for scarce talents). See also: the December 2008 R&D magazine (pdf) regarding all US-based research and development spending.
- Regarding the $11.1 trillion treasury number, this includes both the debt held by the public (such as bonds, notes and TIPS) and intergovernmental holdings (such as government trust funds). It should be noted that while the Social Security Fund was supposed to run a surplus through 2017, over the last few months it has actually run negative and this trend will continue for the foreseeable future.
- In her 20/20interview with John Stossel, Maxine Waters incorrectly states that the US government pays back money it borrows. In reality the government simply issues additional Treasury securities to pay for what is owed, creating more obligations that must be repaid in the future; operating arguably like a Ponzi scheme.
- One thing I wanted to talk about briefly but didn’t get a chance was the huge benefits of containerization on expanding global trade. Be sure to read “The Box” for more on that as well as a review from Warren Meyer.
Tudou is by far the most popular web-based video site here in China, boasting similar traffic numbers as Youtube.
One of the big reasons is you can watch full episodes of TV, movies and songs. For instance, many of my students enjoy “The Secret Life of the American Teenager” and the guys can watch all of the 007 movies… por gratis.
And this is no fly by night operation, as heavy hitters such as VW and Dell actively advertise on the site. In addition, Google is trying to get people to switch from Baidu, here is one ad I just saw:
This is part of Google’s campaign in which they allow China-based users to listen to high-quality songs for free. On the right side the Red tab is for Chinese music, Yellow is Western, Green is Japanese, and Blue is for Korean.
With any luck, Chinese firms (including P2P groups) will be able to withstand lawsuits that their Swedish and American counterparts have succumbed to.
Btw: a quick piece of trivia, “tudou” is Chinese for potato… a word I quickly learned when ordering food. Love the spud.
It’s been a few weeks since I talked about Chinese treasury holdings, what is up?
What does all this mean?
I have a new 