If you looked at those old TIME articles (circa 1933) I posted earlier, the one on Japan says this at the very end:
Undoubtedly Japan’s “inflation boom” distracted her leaders last week from hard and ominous facts which they must sooner or later face. Government expenditures are running 70% ahead of current revenue, a catastrophic spread. Like all booms the current, superficial Japanese prosperity is basically unsound. With Manchuria still full of Chinese bandit-soldiers who are still full of fight, the Empire stands committed to further stupendous military expenditures, consequent further inflation of the yen and the most strenuous testing in 1933 of Japan’s whole fabric, economic, fiscal, political.
No other policy makers have followed the same, misbegotten steps since then, right?
- Brazil’s Atlantic Playground (NY Times in 1989)
- Spy Fired Shot That Changed West Germany (NY Times)
- Let Me Hear My Brother! (World Policy Journal in 2003) — about Turkey/Greece
- Internet Statistics: China logging on (Shanghaiist)
- Investment accord to seal FTA between ASEAN and Korea (Straits Times)
- Taiwan aims to build air hub (Straits Times)
- Taiwan, China to schedule regular flights (Straits Times)
- New Japanese satellite to detect missile (Straits Times)
- Inland free trade area starts construction in SW China (Xinhua)
- Chinese mainland organizes industry purchasing tours of Taiwan (Xinhua)
- Socotra Island’s beautiful and bizarre landscape (LA Times)
- Taiwan To Lift Limits On Investment In Mainland High-end Semiconductor Industry (China Tech News)
- Iraq halts clearing landmines even as huge toll keeps rising (McClatchy)
- A softer approach to North Korea (NY Times in 2005)
- Border calm as tensions rise on Korean peninsula (AP)
- Kim Jong Il’s provocations to the West may hide a rational purpose (Times Online)
- China, Japan on collision course over rare-earth metals (The Australian) :: it is an update to a previous story
- New Vietnam port heralds US service (AFP)
- Potential of US Copyright Agenda to Endanger Freedom of Expression in China (IP Osgoode)
- New Law In Korea Means Google Bans The Uploading Of Music On Any Blog (Techdirt) — I noted this quagmire two years ago in this footnote
And here are two somewhat conflicting articles on the economy in North Korea. The first is from Newsweek which says, “the North doesn’t have to rely on the black market to support itself.”
Yet a new piece from AFP discusses just how much regular/common/normal folk depend on black and grey markets to obtain consumer goods. Thus, the tie breaker goes to the interview with Andrei Lankov whose statements seem to affirm the AFP report.
- Flood Across the Border: China and a North Korean refugee crisis (Nixon Center – PDF)
- The Dear Leader, On a Platter (Washington Post)
- Forgetting Pyongyang (National Interest)
- To Protect an Ancient City, China Moves to Raze It (New York Times)
- China’s Anger at North Korea Test Signals Shift (WSJ)
- China’s Software Outsourcing Export Growth Slowed In First Four Months Of 2009 (China Tech News)
- A note on Japanese household debt (Bank of International Settlements – PDF)
- Interview of the week: multilingual professor Andrei Lankov talks about North Korea with The Browser. A must read.
Two excellent blogs about East Asia: on the ground in China is Evan Osnos of The New Yorker; and the very informative North Korea Economy Watch (Site)
Here are some other things happening on the mainland:
- Top political advisor meets KMT chairman (Xinhua)
- 2 or 3 more overseas banks to go local (Xinhua)
- China to ease controls on investment approval, top planner says (Xinhua)
- Vice Premier: China hopes for more investment from multinationals (Xinhua)
- China debates its bond with North Korea (LA Times)
- How The New “Yuan Carry Trade” Will Add To China’s Global Muscle (Daily Markets)
- Tenants of China’s ‘Optics Valley’ eye broader terrain (EE Times)
And in other areas of East Asia:
- ‘Peace clock’ gets set back to one (Japan Times)
- “150-day battle’: N. Korea succession drama? (MSNBC)
- Is North Korea About to Blow Up the World? (AWC)
Author Charlie Stross recently posted a speech he made regarding the near-future and gaming.
I can’t say much about gaming (because I’m too cool to play anymore), but he does have some interesting things to say about wireless technology and semiconductor fab limits.
I think he is spot on regarding where the wireless stack is heading (driven by “smart” on-the-fly software drivers).
However, I am perplexed as to his position on the limits of semiconductor processes. I too recognize what the designers at big firm like Intel have been saying: there are limits that will eventually be run into. However, Stross believes that there is only another couple magnitudes in performance that can be squeezed from the next several generations of CPUs and GPUs.
To be fair he does suggest that someone could get the multicore approach to eventually pay off in applications outside specific niches (e.g. graphics, finance). But what about graphene? What about optics? What about improvements in bus interfaces, RAM speeds, SSDs, etc.?
And on the software side, what about OS virtualization and shard-based redundancies? Even if it becomes nigh impossible to scale and squeeze performance from XXX amounts of cores, most applications will probably become thread tolerant and OS/application crashes may simply become a thing of the past (for what it is worth, Vista has only crashed on me once in the past 6 months). Stability is a performance gains that will manifest itself more as hard drive throughput speeds increase.
Rose-tinted glasses?
Also, I’m still not sold on his heads-up display/glasses scenario. He has high hopes for it in his book Accelerando, but the whole near-term prospects remind me of what author William Gibson said: the future is already here — it’s just not very evenly distributed. Has Stross ever been to the rural parts of developing countries?
Perhaps some members of the digerati may adopt this technology on the margins in the coming decade, but they would only be able to in dense, developed cities. And don’t count on Japanese and Korean customers to be always leading the way.
Why?
Their populations are declining and the kids being born now will be saddled with huge amounts of debt they will have to pay for. Japans debt-to-GDP is more than 200% now and while Korea is not that high (yet), is saddled with the same institutional problems that will make it hard to pay for and deploy the gee-whiz “smart” infrastructure that Stross envisions and what is needed to make glasses-based HUDs usable. Similar doom and gloom for the US is spelled out here.
Be sure to also check out this sneak peak of Larrabee and an interesting discussion on building a single-server MMORPG.
As part of the new omnibus spending bill, Obama wants to increase the capital gains tax from 15% to 20%. Squeeze those capitalists!
Guess which country has a 0% tax rate for capital gains?
Here in evil communist red China.
It’s true. It has been debated several times including in 2005 and in 2007. But no such tax has been levied on investors.
And not that I’m a fan of Newt Gingrich, but during his recent speech at CPAC he references China’s zero-tax policy as something the new administration should also implement.
This is perhaps the dorkiest post I’ve ever made. I came across a Big Bird special filmed about 30 years ago in China. It is unsurprisingly called Big Bird in China.
Yea, and I watched it. So you can take away my adult card now.
Anyways, what was funny to me is seeing how the producers basically just rolled film and didn’t seal off the locations. As a consequence, you can visibly see the reactions elicited by ordinary Chinese people. And how would you react if you saw a catoony yellow bird walking downtown?
While much has changed in terms of urban development and standard of living, many Chinese people in smaller cities still have never seen a foreigner and react similarly when they see individuals like me (with different color eyes and hair). Note: I think it was filmed in 1979 but it could be as late as 1983 (so just after Deng opened up China).
I guarantee you’ll learn something from it, at least language wise. And while the segment filmed in the Master of the Nets Garden looks similar to court scenery I took of Nanjing last month, it is actually “down the road” in Suzhou.
One last note. As child-friendly as it may be, I really think stuff like Sesame Street probably is the easiest way to learn a language. I’ve had to use a slew of different materials to teach from at the various schools and language centers I have worked at. Bar none the best resources to teach beginners in my opinion are simple, caricatures that convey ideas in the fewest possible words. But that’s a subject for another time.
Oh and apparently Big Bird also went to Japan. I haven’t watched them, but here are the parts: ABCDEF
If I ever do a press conference, do not attempt to drink and speak in Japanese:
That was the finance minister who just resigned due to his apparent inebriation. He says it was medicine. Note to self: do not take medicine that makes you act drunk before going on international TV.
To be fair, if I were a member of the establishment and knew that politically unpopular immigration liberalization was probably one of the only quick-fixes to the dismal GDP numbers… I might drink a bit of sake too. Or maybe he is getting his groove on, for baby making.
My new piece is up over at Mises.org that discusses Asian savings and its purported role in the housing bubble. Bob Murphy has also written a good piece about the topic.
I’ve received some interesting feedback regarding the role currency exchanges played in this. One long-time contributor to Mises.org wrote me (it’s 3 paragraphs for those using an RSS reader):
the argument that is being made by the mainstream comes from people who believe in the paradox of thrift or some variety of underconsumption theories and other such nonsense, and who do not adopt austrian capital theory
we know that any amount of savings can be used to expand the capital structure, and that there can never be any such thing as a savings glut. the asian individuals and business firms that saved may at worst have wasted a lot of their savings but cannot be blamed for the crisis
however, I think that, if within the category of “Asians”, you include government in Asia that adopted mercantilist policies of fixing their currencies at below market levels, this put them in the position of running a permanent capital account deficit, which they chose to “invest” in the debt instruments of the US govt. without the mercantilist program, the US government (by which I include the GSEs) would not have found a buyer for its paper at such low rates of interest, interest rates would have gone much higher, much sooner, and the artificial boom would have been over maybe before it even started.
A number of other people commented about this as well in the blog section (Terry, DS, and Houseward).
While I agree with the bulk of the content stated in the email, I will quibble over the role Asian currencies played in the most recent bubble.
Floating
Following the Asian financial crisis, Korea was forced to float the Won (it fluctuated between 900 and 1400 when I lived there). The Japanese Yen was officially floated after Bretton Woods was abandoned in 1971 and the BoJ has attempted to defend certain price points. While it was initially pegged to bullion, the New Taiwanese Dollar has floated for years (it hovered around 32 when I lived there last year).
Soft-pegs
The Hong Kong Dollar used to float but is now “allowed” to fluctuate between 7.75-7.85 to the USD. The Singapore dollar used to be pegged to both the pound and USD and currently fluctuates based upon an undisclosed basket set of currencies. The Chinese Renminbi (Yuan) has maintained various pegs to the USD. For nearly ten years it was pegged at around 8.27 and since the summer of 2005, has appreciated to roughly 6.85 today.
Government action
In a libertarian world, no government would intervene in currencies. Money would simply be another industry managed by market forces. And despite government monopolies on money creation, market forces still determine exchange rates. See Rothbard and Selgin for more.
True enough, as suggested by the above email, the PRC has practiced some form of partial mercantilism that many mainstream economists note leads to an “imbalance.” This includes Paulson, Setser, Pettis and now evenThe Economist (none of whom condemned the “imbalance” five years ago…).
To their credit, both Hank Paulson and Tim Geithner have tried to get countries like China to float their currencies. And ironically, if China ever did so, it would be the dollar that gets hammered. This is because China artificially props up the USD. In fact, any country that maintains a dollar peg is basically propping up the USD.
And true enough, over the years Korea and Japan have both artificially “manipulated” their currencies by buying or selling dollars on the open market. In fact, in the last quarter of 2008, Korean monetary authorities spent billions of USD to defend the Won — to prevent it from hitting 1500 (it has sat around 1350 this week).
Unexpected Forex changes
At the opposite side of the aisle, one of the reasons Japan has been getting creamed at the macro level in exports is because the Yen has strengthened quite a bit in the past year. Car firms such as Honda and Toyota built margins based upon exchange rates that were way too high and as a consequence, have had huge loses. Even Nintendo’s profits were hit big time during the holiday sales season because of a strong yen.
But this all ignores the role the Fed has played since 1944 (or really, since its creation). Any currency pegged to it has to essentially mimic the monetary policy of the Fed — and not vice-versa. The Yuan is pegged to the dollar and if the Fed inflates or lower rates, so too does the PBoC. And it would be one thing if the Fed maintained a steady rate over the past 20 years, but as shown by this table, the rates have been anywhere and everywhere.
Or in other words, the Fed is peerless as a “manipulator.”
So yes, some central bankers (not just in Asia) probably have tried to “manipulate” their currencies to gain temporary competitive advantages in the export market. Some of them then have invested the “gains” or “profits” to purchase US treasuries. And because of the relatively high demand for US treasuries, interest rates across the board stayed low for many years.
It’s not me, it’s you
Yet, policy makers in both the Clinton and Bush administrations are trying to shirk the blame entirely as if they acted as responsible custodians of the foreign funds. None of OPECs members (collectively the 5th largest holder of US treasuries) forced the GSEs to hand out houses or forced Bush to throw money at wars — the poitical class had access to some artificially cheap money and blew it on really dumb things. That is something the establishment has yet to accept. And again, instead of paying back the trillions in debt, the Treasury department instead issued even more debt.
This cycle was entirely unsustainable in part because nothing productive was being built with the cheap interest rates — government housing in the exurbs, Harrier Jumpjets, Ford Excursions and silicon DD breasts aren’t really good at manufacturing goods to repay the debt. And thus Chinese Premier Wen Jiabao is (partially) correct in blaming the quagmire back where the dollar is printed and to the people (Americans) who benefited from the cheap money and who did jack squat with it.
Seen and unseen
The last sentence in the email is partially true as well. The Fed induced bubble(s) probably wouldn’t have lasted long if central banks in general had kept a steady, higher rate. And if Chinese central bankers had floated its currency 20 years ago (or pegged it to a metal), the middle class in China would be much larger and wealthier, because their purchasing power would have allowed them to buy the goods they make — and allowed them to import products from the US.
However, as a consequence, Americans probably would not have been able to buy as many electronic gadgets from Korea or China because they would have cost more. Oh and perhaps Americans would be living in roach motels and driving crappy cars made in the Rust Belt…
Who knows what the unseen alternatives are. If foreigners didn’t buy Treasury securities, the Fed might have bought the mortgage paper and Treasury bonds to surpress interest rates — something it is doing right now. So again, it’s hard for me to see how foreigners are largely to blame when the Fed has created bubbles independent of the actions of foreign savers.
Thus in a nutshell, by participating in the pegging system, Asians transfered their own gains in standard of living (purchasing power) to the US. Yet again, instead of thanking Mr. Miyagi and the Wang family for working so hard, the Jones’s and Bush’s blew the loaned money on exuberance — and are now bitching at Miyagi for helping them party. It is the same exuberance which the Fed and Team Obama are more than happy to try to reflate. Bupkis.
QED?
I think the above shows that while “adverse” currency rates contributed to and perhaps helped extend one particular bubble, they were not the root cause or the creator of it.
Author Charlie Stross recently 
My new 
Government action
It’s not me, it’s you
Seen and unseen