Blog Archives - Economic Presence

The Rise and Fall of The Clash

9/25/2012

Creativity seems to have an element that is confrontational, I read similar issues at Apple-Pixar. Jobs (V 2.0 ) and his creative team seemed better at depersonalizing differences or at least at letting them blow over than rock/punk musicians. That magic chemistry that brings them together (and pushes them apart) is not easily sustained nor replicated. When a band like U2 survives it is truly exceptional.
60 Minutes did a piece on Aerosmith and it revolved around Steve Tyler's ego and brilliance and suggested the band put up with the former because of the later even though for a time they broke up because of it

New Research Supports the Idea that Foreign Aid Helps Economic Growth

9/25/2012

Vox presents research that goes against mainstream economic thinking. Aid actually helps economic growth. Chalk one up for Bono and Jeffrey Sachs. I am particularly annoyed with Dambisa Moyo, anti-aid economist, who I also disagree with on the issue of commodities.

The Serletis - Barro text that I am teaching (intermediate macro) takes the perspective that trade is ineffective at raising growth -which is mainstream thinking on the topic. Barro even mentions his face to face conversations with Bono re:Debt Jubilee 2000 and his other initiatives. He views Bono as sincere but misguided.

Bono was calling for help to be accompanied my meaningful reforms which it strikes me is the standard IMF bailout rationale and the rationale used to support transfers to the periphery in the Eurozone.

I would almost bet that most economists in favour of the latter would not be in favour of aid to Africa.

Its an interesting world.

I love the title of Mish's post today

9/20/2012

"Economists Can Neither Think Nor See"

Not only are such economists unable to think, they cannot even see what 20 years of monetary and fiscal stimulus did for Japanese "confidence", which is to say nothing at all. However, lower interest rates and fiscal stimulus did leave Japan a
confidence-eroding mountain of debt in its wake.

Japan is now hooked on low interest rates, a mere rise of one percentage point would consume all revenues. Is that supposed to inspire confidence?

Nonetheless, Bernanke and Draghi have vowed to keep doing what they are doing until it works, and economists are hoping it will. It's pure insanity.

Thoughts close to my heart.

State sponsored corruption in Russia

9/20/2012

Charlie Rose. This is the type of economy China can hope to "improve" towards.
Here is a link to The Economist's (Newspaper) Democracy index.
Notice that China sits in the lowest category, as one of the worst countries in the world, 141 out of 167.

Russia is in the same category as China, only higher at 117. Brazil is 45, South Korea is 22, United States is 19, Japan 21, Malaysia is 71. So who is China more likely to evolve towards in the next century?

Here is a Time article discussing that Malaysia has fallen into a middle income trap. How then is it that China, one of the most oppressive corrupt centrally planned economies in the world, is going to do as well, or better than Malaysia? Malaysian GDP is $8,600- Chinese is $5,200 in 2011 according to IMF.

It seems to me the most reasonable assumption is that China will follow a path of crony capitalism as Russia did when the Soviet Union collapsed.

Meanwhile, the American dream is still alive in Brazil.

China the Biggest Malinvestment Case of All Time?

9/19/2012

From Business Insider The fun is just beginning.

Quantifying the "hollowing out" and growing income inequality

9/18/2012

LA Times summarizes a new survey by the Pew Research Center: 'The Lost Decade of the Middle Class'.
"Median middle-class income dropped 5% in the 2000s, while net worth plummeted 28% — to $93,150 from $129,582 — as housing prices shriveled, the report said.

The middle class has steadily shrunk over the years, falling to 51% of the population in 2011 from 61% in 1971, the report found.

That’s not all bad. The upper class rose to 20% of the population from 14% during that span, meaning more than half of the decline in the middle class is attributable to people advancing to the wealthier category.

But the upper class’s share of national income has risen far more dramatically, climbing to 46% from 29% four decades ago. In other words, the rich have gotten much richer."

Chinese steel pledged as collateral nowhere to be found

9/18/2012

Zerohedge quotes and analyzes a Reuters article:

""From Reuters:
Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place."

This means that in an economy in which the creation of liabilities, and pledging of assets took place at a furious pace in the past 5 years, nobody really knows just what the real state of credit creation truly was. What is 100% certain is that as a result of this revelation, the GDP number of the country, which is and always has been a derivative of credit formation and expansion (and heaven forbid contraction), is massively overrepresenting what it is in reality, and that the Chinese economy has been expanding at a far slower pace if defined not only by the creation of liabilities, but by matched assets. Most importantly, it means that every single Renminbi in circulation is impaired as a country-wide liquidation event would see huge losses by every creditor class. It also would mean, naturally, zero residual value left for the equity."

A little fun to start the week PSY - GANGNAM STYLE

9/17/2012

FT on Contango financing for industrial metals

9/13/2012

FT on aluminum. Once again the large banks are manipulating the market and distorting price signals with derivatives. It will work until it doesn't and then the taxpayer will have to bail out those TBTF. I have quoted FT's stories about copper in China on this isue as well.

Mish believes the US is in recession.

9/7/2012

" Digging under the surface, the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate."