GLOBALIZE THIS!

Friday, June 24, 2005

"WHO YOU GONNA TRUST..."

"...the CIA or me, your Preznit?"

I guess, either way, we're f*@#ed.

¶ 6/24/2005 04:05:00 PM

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ALBERT EINSTEIN SPEAKS

May 1949:

Man is, at one and the same time, a solitary being and a social being. As a solitary being, he attempts to protect his own existence and that of those who are closest to him, to satisfy his personal desires, and to develop his innate abilities. As a social being, he seeks to gain the recognition and affection of his fellow human beings, to share in their pleasures, to comfort them in their sorrows, and to improve their conditions of life...It is "society" which provides man with food, clothing, a home, the tools of work, language, the forms of thought, and most of the content of thought; his life is made possible through the labor and the accomplishments of the many millions past and present who are all hidden behind the small word “society.” It is evident, therefore, that the dependence of the individual upon society is a fact of nature which cannot be abolished—just as in the case of ants and bees.

...I have now reached the point where I may indicate briefly what to me constitutes the essence of the crisis of our time. It concerns the relationship of the individual to society. The individual has become more conscious than ever of his dependence upon society. But he does not experience this dependence as a positive asset, as an organic tie, as a protective force, but rather as a threat to his natural rights, or even to his economic existence. Moreover, his position in society is such that the egotistical drives of his make-up are constantly being accentuated, while his social drives, which are by nature weaker, progressively deteriorate. All human beings, whatever their position in society, are suffering from this process of deterioration. Unknowingly prisoners of their own egotism, they feel insecure, lonely, and deprived of the naive, simple, and unsophisticated enjoyment of life.

(Read more)

¶ 6/24/2005 12:02:00 PM

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Wednesday, June 22, 2005

RENMINBI WATCH

All eyes and ears will be tuned to tomorrow's Senate Finance Committee hearing on U.S.-China economic relations.

Get your rattlin' sabers ready!

Here is te docket of witnesses:

1. Maestro G-span
2. Secretary Snow Job
3. Ken Rogoff
4. Soybean Lobby
5. Intel Corporation
6. NAM representative

What to expect them to say:
1. China needs more flexibility, soon, especially cause by buying all our bonds to keep the renminbi undervalued they're keeping me from pushing up long term interest rates.
2. If China doesn't revalue by 10 percent and pretty darn fast or they'll be sorry.
3. China's rigid exchange rate mechanism, though it may have served a purpose in the past, is begging for a financial crisis, and by the way, would it kill them to have a little Central Bank independence.
4. We'd like to sell more soybeans to China, or better yet, establish crush operations (the production of soy bean meal and soy bean oil) there, and if the currency were to appreciate, the Chinese could buy more of our beans. And can you make sure China doesn't block our genetically modified crops or illegaly reproduce seeds in violation of TRIPs?
5. China's booming economy is creating a vast new market for our chips, and some day soon we hope to design and produce chips there, making China a major export platform for vertically integrated information technology production. We'd like an undervalued renminbi so that we can continue to earn overvalued dollars for our exports from China while paying wages (albeit high-skilled wages) in undervalued yuan. So let's not do anything drastic.
6. Stop dicking around, our vitally important manufacturing sector is dangling by a thread while the Business Roundtable fiddles and Bush dances and watches it burn.

UPDATE: I should be more clear. There are two issues at question here. The first is the level of the Dollar-Renminbi exchange rate. The second is China's choice of exchange rate regime.

What is the difference? The exchange rate is the actual price at which one currency exchanges for another (currently $1 exchanges for 8.28 yuan). The exchange rate is an outcome of market forces--the interplay of supply and demand for one currency relative to other currencies and assets. Outcomes in this market are of course affected by the structure of the market and rules, norms, and customs that underpin market exchange. This configuration of legal mechanisms and institutions governing the exchange of currencies is known as the exchange rate regime. The choice of exchange rate regime is inherently a political one, based upon macroeconomic policy goals and conditioned by historical experience (say, if you witnessed every neighboring country experience financial crises and dramatic economic contractions after transitioning from a managed to a floating exchange rate regime).

Witnesses 1 through 3 will be arguing around the question of China's choice of exchange rate regime. Conclusion: China should change regimes. Witnesses 4-6, I expect, will argue around the exchange rate and evidence of China's manipulation of the level. Conclusion: China should change the level, though this may entail a change in regime, the regime is a secondary concern.

More info on the evolution of China's exchange rate regime (and more broadly its capital account regime) can be found here.

¶ 6/22/2005 10:01:00 AM

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Tuesday, June 21, 2005

ARGENTINA WINS AGAIN

After a record default on its sovereign debt in 2002, Argentina's economy recovered robustly without international financing.

Many argued that Argentina's unprecedented default on loans from the IMF and World Bank would render it a pariah state uncapable of tapping international financial markets to borrow for development.

Not so. Argentina's default, yesterday, set another precedent. Not only did default not lead to economic ruin, it did not shut Argentina out of international financial markets.

Developing country technocrats take heed.

¶ 6/21/2005 10:19:00 AM

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WHERE I LIVE

Over the weekend, DC Police Chief Wiggum had his car stolen from the street near his home.

Chief Wiggum: Don't worry, that car thief can't hold his breath forever!
Cop: And if he can, Chief?
Chief Wiggum: Then God help us all!

Just another day in our fair city.

¶ 6/21/2005 08:38:00 AM

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Monday, June 20, 2005

CHINA INEQUALITY WIDENS

The IMF reports in its morning press briefing:

China`s income gap widened in the first quarter of the year, with 10% of the nation`s richest people enjoying 45% of the country`s wealth, state press reports said Saturday, AFP reported from Beijing. China`s poorest 10% had only 1.4% of the nation`s wealth, the Xinhua news agency said, citing a recent survey by the National Bureau of Statistics. "There are two gaps that need to be addressed," Li Xiaoxi, head of the economic and resource management institute of Beijing Normal University, was quoted as saying. "The first is the very wide gap between different social groups. The other is the astonishing economic development gap between regions."

¶ 6/20/2005 10:19:00 AM

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