China Has the NSA For Lunch

December 26, 2007:

The U.S. recently revealed that China had done some major damage to the NSA (National Security Agency) via penetration of the NSA facility in Hawaii (which concentrates on monitoring China.) The Chinese effort was two-fold. First, the Chinese set up a Chinese translation service in Hawaii, and managed to make it appear as American owned (and able to pass a security check). Eventually, this translation company got NSA contracts to translate material obtained from China. The operators of the translation of the company were able to pass the NSA material back to China, letting the Chinese know what information the NSA was picking up, which helped the Chinese figure out how the NSA was getting certain information, and with what. This made it easier to prevent the NSA from getting certain information, or setting up a trap, to feed the NSA false information.

But there was more. Many of the NSA employees were Chinese-American. The Chinese set up a recruiting operation, that was so carefully established and run, that it was several years before U.S. counter-intelligence caught on, and shut it down.

Using a translation service? Maybe for open source intelligence like newspapers, but for real intel like intercepts? Yikes. You'd even imagine computer translation would be close enough and far safer than using an outside source.

I don't know what to do about Chinese-Americans in these situations, but I know if I was China, I'd fly a false flag operation and claim to be Taiwanese intelligence and ask the Taiwanese-Americans to help Taiwan (all the while actually passing this stuff back to China.)

For the ethnic Chinese, appeal to nationalism.

For non-Chinese, drop a honey pot or some money. I can see the cables back to Beijing "Will need two agents. Subject likes three-ways. Also, prefers C cup or larger. Must be willing to do girl on girl. Suggest hiring agents out to porn production company on the side to reduce our costs. p.s. don't forget to include two cartons of Pandas this time. We are dying here with only Marb Lights!"

By the way, this is why we only sell dumbed-down versions of stuff to Taiwan. Wayyyyy too many leaks back to China. One father-son team in the Taiwan navy were selling US equipment documentation on CDs to China for NTD 500 each.

Technology vs. China

China has been making low cost solar panels for a few years now. They mainly sell to sun-drenched Germany which has some crazy subsidy scheme for home owners installing solar panels.

This coupled with the rise of Green Technology as the new hot investment area has led to these companies in China absorbing massive amounts of capital. I believe one company raised US$ 2 billion in capital a year before they even produced a single product.

Obviously, China thinks it has some advantage for making solar panels, which I suspect probably involves the low cost of labor and perhaps some other factors. But we keep hearing how the Green economy is going to be GREAT for Western companies. Well, we shall see, because Nanosolar, a San Jose based company shipped their first commercial product. Their factories are in California and Germany.

Oh, and if I appear cynical about the West's chances, keep these figures in mind:

IPod - Where the money goes.

The retail value of the 30-gigabyte video iPod that the authors examined was $299. The most expensive component in it was the hard drive, which was manufactured by Toshiba and costs about $73. The next most costly components were the display module (about $20), the video/multimedia processor chip ($8) and the controller chip ($5). They estimated that the final assembly, done in China, cost only about $4 a unit.

This their analysis of the value added amounts, though:

The researchers estimated that $163 of the iPod’s $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mostly via the Toshiba disk drive), while Korea contributed less than $1.

Apparently China ends up just being the place where electronics are assembled, n0t where much of the value is added. (There are other stats that look at the huge dollar value of electronic components they import in order to achieve their exports of a value that is not too much higher.) What was the other fact I heard? That all of the wafer fabs in China that are so scary to Taiwan actually only handle 3% of China's demand? (This demand including chips needed to export products, not just local demand.)

But still, China was first out of the box with cheap solar panels. Let's see how the horse race shapes up. And let's hope Nanosolar has some good IP attorneys and has seriously vetted their work force.

Solar panel raw materials are from foreign sources.

Side Note: India is a major producer of commercial windmills, another green technology that is supposed to provide the new manufacturing opportunities for rich countries. Probably more like design and engineering jobs, with some forklift positions and installers.

South African Politics

Actually, I know little or nothing about South African politics, but the Economist informs me that there is politician in South Africa who's name is Tokyo Sexwale.

I wonder what happens when plugs his name into one of those "What's your porn name" programs? Does it melt down the machine?

Asymmetrical Warfare

If you can't beat your opponents at Axis & Allies the normal way, just drink them under the table. Or play people who have to get home early.

Karl and I drunkenly reviewed the board and thought we might have been able to win that last game. Looked like Japan could hold Anglo Egypt after its turn - I am thinking the effect of my third factory was finally reaching the front - and then Japanese tanks could have taken Africa, further reducing UK's ability to fund its dump. After I got home I also realized that once the Suez was taken, the Japanese Navy (which was fully combined) could have hunted down the British fleet. (Along with the 10+ aircraft I had on the board.)

Regardless, it was an interesting game.

Karl-Red A House 1:00 a.m. commute: two police check points avoided. wife check-point was not avoided, but she let me off with a verbal warning.

Dutch Housing Market:
The average cost of a house five years ago was EURO 137,000. Now, a single-family dwelling averages between EUR 240,000 and EUR 250,000.

This PDF has a whole lot of data to digest:

The house price-to-income ratio has stabilised in the past few years, although its level is still high from an international perspective. The effects of rising house prices on affordability have been mitigated by favourable financing conditions. While the average housing cost-to-income ratio for homeowners has been quite stable since 1995, there seems to be a dichotomy between movers, who profited from the earlier house price boom and have surplus value, and starters, who have no surplus value and fewer financial buffers.

One thing for sure about Taiwan, low interest rates, like 5% for mortgages, will surely lead to higher prices, as people can afford more.

More thinking later.

Imported Beer Data

As of my last data (2006/06/26) the alcohol tax on beer was NT$ 26 / L of beer.

There was also a 1.6% import duty.

5% VAT.

Plus the Customs guy would always take a few bottles of Honey Apple Cider for "sampling" for some reason. Fine by me. Beer is better than cider.

When I have time, I will re-visit the Miller/Heinie pricing based on this data.

Housing Market in Taiwan

For years now, I have seriously wondered about the housing market in Taiwan. My wife constantly harps on me to buy a house, but I just cannot pull the trigger on a NT$ 10 million apartment the size of a dorm suite. (Actually the apartment might cost less, but you need to buy a parking space, right?) Explaining that the rent vs. own calculator always tells you to rent in Taiwan doesn't assuage my wife's angst either. Oh well.

Now, if that's me, how about for the average Taiwanese with a salary of NT$ 450,000 / year? That apartment is 22 times their annual income! (That salary is just a guess at the median income based on 15 months salary of NT$ 30,000.)

One of my customers has a financial background and he suggested off hand that a reasonable way of calculating a house price budget was 10 times your after tax income. Let's just assume a 13% tax bracket and ignore the personal exemption. That puts the house budget at around NT$ 4 million. Which is about what a tao fang at Feng Jia University runs. Okay, assume both parents work, and then they could probably afford a very low end apartment by this calculation method.

Today, I read an article by an economist that has different numbers.

Determining the Right Price

I believe that the maximum ratio of the house price to income should be six. I calculate that figure as follows.

First, assume that it is reasonable for a household to pay 25 percent of its gross income on rent. So if you have a $48,000 household income, you can afford $12,000 a year in rent, or $1000 a month.

Next, assume that you make a rent vs. buy calculation by figuring that you need an inflation-adjusted return on housing investment of 4 percent per year. The price/rent ratio is 100 divided by the required return. 100/4 = 25, suggesting that the price/rent ratio should be 25.

Historically, price/rent ratios in the housing market have been lower--closer to 15. I am not sure why it has been so low. Perhaps it reflects high transaction costs in the housing market--real estate commissions and all of the "junk fees" that afflict home buyers.

If my figure for the price/rent ratio of 25 is correct, then a household that would spend $12,000 a year on rent should buy a house for 25 times that amount, or $300,000. If the price/rent ratio should be 15, then that household should spend no more than $180,000 on a house. Those are the sorts of house prices that make sense for a household with an income of $48,000.

So by these numbers, Taiwan's housing prices seem out of whack. The aging townhouse I rent has a market value of around NT$ 12 - 15 million. It rents for NT$ 25,000 / month. At the 25 price/rent ratio it should only sell for NT$ 7,500,000. At the 15 price/rent ratio, it should cost 4,500,000.

And for the person earning NT$ 450,000 annually, they should be buying a house in the range of NT$ 3 million or so. Which would mean an apartment (as they should be much cheaper than a townhouse.) If both parents worked or had higher salaries, then the townhouse would become pretty viable at the calculated values.

Instead, at the current prices, renting is almost always cheaper than buying, and you basically need to have bought a house a long time ago or have some land in the family to move up in better housing now.

Final proof, with the exception that proves the rule: Karl's apartment.

Questions & Caveats

Also, if anyone has better numbers for median income or knows more about the price of older apartments, let me know. Also, is there any reason land / housing cost more in Taiwan than in the USA? You might say land is more available in the USA, but labor is cheaper here to build the actual house. And were talking NT$ 10 million apartments, not houses, and they are far, far smaller and without any yard. Maybe concrete is more expensive? I do know that if you are willing to live out in the countryside you can get save maybe 30% or more. I also did not include the monthly management fees that apartment buyers have to pay, which would reduce your budget as well.

My New Seminar Gig

Seminar working title: Insane China Profits & Hot KTV Hostess Action

Topic 1:
Mold Deposits: Getting your customer's money to pay for your new tooling

Topic2:
Thick Face: How to react when your business cards are thrown in the garbage before your very eyes

Tip3:
How to make your hangover work for you.

Tip4:
Don't bring your wife to China. If you do, stay in the Shenzhen Hyatt, the only hotel in southern China that does not have an interesting 2nd 3rd and 4th floor.

Yahoo Headlines

Chavez suffers defeat in presidential power vote

Uhhhh, Yahoo, shouldn't that read:

Bush enemy defeated in Venezuela vote

Just to be consistent. Plus I used an alliteration.

On the beer post, I got a nasty head cold so I haven't done shit on it.

Exchange Rates & Beer Prices in Taiwan

Karl and I were bullshitting about various currency stuff while drinking a bunch of beer (always the best way to get meaningful insights) and we were thinking about how the soaring Euro should be making imported European beers more expensive in Taiwan relative to American beers.

I'm going to try to put some numbers to this and see what we find out. This post is a work in progress, and suggestions in the comments would be welcome.

Beer: Heineken
Country of Origin: Holland (in the EU)
Description: A nasty skunk beer that makes my tummy hurt.
Version: 330 ml bottle?

Current 7-11 Retail Price: NT$ 48?
Historical 7-11 Retail Price: NT$ 45?

Taiwan taxes on beer: NT$ ?? / L
(I can find that out at home...I have the info there.)

Wholesale price was close to NT$ 800/ case a few years ago...NT$ 33.33 / bottle.

This is depressing

Edward Wolff, a professor of economics at NYUy, thinks that the middle class in a major city includes people in households with incomes from $40,000 to $100,000. From there, up to $200,000, people are "upper middle class." ... People making $200,000 to $350,000, he says, could be considered rich, but they still have to slog to work every day. To be really rich, in Wolff's scholarly judgment, you need not only an income upwards of $350,000 a year -- which happens to be right about the point where today's top marginal income tax rate of 35% kicks in -- you also need at least $10 million in accumulated wealth.

I thought having a million bucks makes someone rich. Now its 10 million. Plus an income of 350,000 a year.

At least Obama is polite enough to consider US$ 97,000 a year as "upper class."

So I'll take Obama's definition as my goal, thank you.

Yahoo Headline

Minorities hit hardest by U.S. mortgage crisis, studies find

Someone needs to tell the headline writer that "minorities hardest hit" is now as cliche as Bus Plunge. I almost laughed at that headline!

Worried about the Dollar, Debt, Defict, etc.?

This blog post / article might make you feel better.

Of course, the fear of Japan taking over the world economically did lead to the movie Rising Sun which had that awesome shot of a guy eating sushi off a hooker's ass.

Yahoo Headlines

Bush ally defeated in Australia election

John Howard was Australia's prime minister since 1996.

Australia has been a US ally since WW II.

It almost seems a bit rude to not use the man's own name in the headline.

Not to mention if you are Rudd, aren't you a bit bummed to be the passive actor in the headline. He won the election after all. Wouldn't "Rudd defeats Bush ally in Australia election" keep the same anti-Bush flavor while letting the actual winner and new PM of Australia get in the headline?

In any case, I will be interested to see how a former diplomat who speaks Mandarin changes the world. Should we expect Chinese pressure on Sudan now over Darfur?

Rudd probably doesn't smoke, so I'd say he will have little clout in Beijing.

The China Price goes up.

I've been seeing big, big increases in our pricing from factories in the Shenzhen area and some price increases from other parts of China. I've heard two different companies claim they are considering sourcing some items from Taiwan again as the China prices are getting higher.

There are still ridiculous prices to be find in some other parts of China, particularly northern China where you can supposedly buy stainless steel at 1/2 the price of southern China and other such nonsense.* But I have to imagine the raw material cost increases, the increase in wages and benefits, the elimination of tax rebates, and the steady drip drip of the currency will eventually catch up to them as well.

I sincerely hope the era of the crazy pricing is over, because it was really annoying to find people who could sell finished products below your raw material costs, etc.

*Of course, there is also now fake stainless steel made in China. Seriously, after I heard they could make fake eggs in China, nothing surprises me anymore.

Yahoo Headline

Huckabee rides evangelical wave in Iowa

SURF'S UP DUDE!

Living Abroad as Foreign Policy Experience

Barrack Obama is claiming that spending 4 years growing up in Indonesia gives him some foreign policy experience that Hillary Clinton doesn't have. (Hillary shot back that she had gone to Beijing and kicked some commie ass at a UN convention on women.)

I think living abroad as a child could have provided some advantage to Obama in the foreign policy realm. I'd be interested if he still can speak Bahasa Indonesia or not.

In his political autobiography, "He describes making friends easily, becoming fluent in Indonesian in just six months and melding quite easily into the very foreign fabric of Jakarta." but of course some reporter has to track down an opposing opinion "Teachers, former playmates and friends recall a boy who never fully grasped their language."

Six months to pretty good fluency is not impossible with Indonesian, and the teachers are probably remembering the early months because those would be the most memorable. His former playmates seem to be your typical junior high school assholes from the reporting.

At the very least, he was exposed to some third world poverty, different culture, religions, etc. Since he had to take religious classes at school in Indonesia, he also probably knows the difference between a Sunni as a Shia, and in a world where Silvester Reyes as the House Intelligence Committee Chairman guesses Al Qaeda is predominantly Shiite, you take what you can get....except....

Silvester Reyes speaks Spanish and fought in Vietnam, so he too was exposed to foreign cultures and has seen 3rd world poverty up close and personal, too. (If being in a Huey can be consider up close and/or personal.)

So while I want to say Obama's experiences have helped him, I have to worry that when he's dealing with the Nepali crisis of 2010, he's going to offend the Maoist leader by starting the meeting with a prayer or something. That's damned cynical, but he is a politician after all. I'd still count his school years in Jakarta as a small plus on his experience side, and its actually probably worth more simply as PR with Indonesia.

Meanwhile, Barrack Obama is a smoker. Now, that could be very useful in foreign affairs. When he's meeting with the Chinese on trade, he can offer a Marlboro to Hu JinTao at a critical juncture. That's usually good for at least one minor concession. Though if Obama's switched to Merit Ultra Lights, it would be war for sure.

I have to include this quote from the interview with Reyes,:.

And Hezbollah? I asked him. What are they?
“Hezbollah. Uh, Hezbollah...”
He laughed again, shifting in his seat.
“Why do you ask me these questions at five o’clock? Can I answer in Spanish? Do you speak Spanish?”
“Poquito,” I said—a little.
“Poquito?! “ He laughed again.
“Go ahead,” I said, talk to me about Sunnis and Shia in Spanish.
Reyes: “Well, I, uh....”

You know, Reyes, that might have worked with Larry King.

(BTW, I am aware that Republican members of the same committee did worse and that FBI counter-terrorism officials failed as well. Luckily they were your typical dumb Southern monoglots who nobody expects much from anyways.)

Taiwan's Economy

On Taiwan's economy, i.e. is it good or bad and is it all the DPP's fault?

How is Taiwan's economy doing?

Subjectively of course, many Taiwanese will probably compare it to the glory days in the 70's and 80's just as American's sometimes look at the 50's that way. In which case, the answer will be that the economy is doing very bad indeed, and you will cluck you tongue in despair as you drive your Lexus SUV through massive traffic jams of other people in expensive vehicles all trying to get into Costco to buy European chocolates and American beef.

Objectively I guess we could to compare it to Korea or some other rising middle-income country. (Comparisons to China would not be smart as growth from a low base is easier to achieve and China is a bit of a special case where quantity has a quality all of its own.)

2007 GDP Growth
Taiwan: +4.3%
Korea +5.0%

2008 GDP Growth (forecast)
Taiwan: +4.4%
Korea +4.7%

Industrial Production (Sep.)
Taiwan: +8.0%
Korea: +0.3%

2007 Prices (forecast):
Taiwan: +1.1% (But a year ago Taiwan was -1.2%)
Korea: +2.5% (a year ago Korea was +2.2%

Unemployment:
Taiwan: 3.9%
South Korea: 3.2%

(all numbers from this week's Economist.)

I am pretty much underwhelmed by the differences in these numbers, but I guess Taiwan could buck up and try to add about 0.5% to some of these figures, but there might be some factors that affect Taiwan's numbers that we should be aware of:

Due to language and cultural ties, Taiwanese businesses have more opportunities to invest in China than Korean companies. This might lead to some investment that otherwise would be done in Taiwan to be done in China. An example would be a Taipei-based upscale coffee shop that chooses to expand in Shanghai and other Chinese cities rather than in southern Taiwan.

Taiwanese companies may tend to operate in more labor-intensive fields than Korea's large more capital intensive conglomerates, thus forcing them to go abroad at a faster rate.

Taiwanese individuals also have more opportunities to work in China, even at foreign firms that have nothing to do with Taiwan, thus affecting Taiwan's GDP numbers, which only counts Taiwan's domestic production. 300,000 Taiwanese professionals now work in China according to this article. That's 1.3% of Taiwan's population and an even bigger chunk of its labor force!

Is it the DPP's fault?

Politicians have much less control over the economy than people think. It is true that Taiwan's stock market (not to be confused with Taiwan's economy) is overly sensitive to political events, but people like my wife who blame Abian for the fall of the stock market in 2001 without noticing the coincidental bursting of the US dot.com bubble are fooling themselves as to the power of the president.

In fact, the DPP being a political worry to many people, might actually have kept the NT$ lower in value, thus giving Taiwan's export industries a decent boost.

Current Account Balance as a % of GDP (2007)
Taiwan: +6.4%
Korea: +0.4%

Of course, the DPP has been spending some money, too.

Budget Balance as a % of GDP (2007)
Taiwan -2.0%
Korea +0.4%

What could the government realistically do to help Taiwan's economy?

Direct links with China: This policy might have slowed down investment in China a few years ago, but the result now is a net loss to Taiwan. Taiwanese who live and work in China come back to Taiwan less and less as it is too much of a hassle. They end up living in China full time and spending their money there.

Taiwan should not only allow direct links with China, but drastically deregulate the airline industry to make a flight from Xiamen to Taichung cost about the same as flying Southwest from San Francisco to San Diego. That would give Taiwanese investors in China an incentive to fly home more, spending their money in Taiwan. You could literally work at the factory during the week and come home for the week-end to Taiwan. Quick and cheap direct flights would allow some Taiwanese based businesses to gain China business. And it would spur more Chinese tourism and investment in Taiwan, too.

Free up imports: I am not sure how closed Taiwan is to Chinese products, but I would suggest removing any barriers to Chinese goods, providing health and safety issues are met. It does no good to protect portions of the economy from foreign competition and in fact can hurt the overall economy. I personally know that some production of camera tripods ended up being switched from Taiwan to China simply because you could not easily import cheap camera bags from China to include with the tripod. So Taiwan protected its domestic bag industry but destroyed its camera tripod export industry.

Tax Reform: Tax localized businesses and reduce taxes on "movable" business by re-weighting the tax system towards a consumption based tax. The noodle vendor currently pays no taxes beyond the 5% VAT while the factory and its owners pays that as well as corporate tax and income tax. If the factory moves to China and uses an offshore shell company, they can pay far less in taxes than if they stay in Taiwan. The noodle vendor cannot move to China. With the move to a consumption based tax, you will increase tax revenues from the grey market while keeping some of the industrial base in Taiwan for as long as possible. Yes, it's not very progressive, but seeing as how my local breakfast truck owner drives a BMW, I have to wonder how progressive it is to let a large portion of Taiwan's economy pay less than their fair share in taxes. (Wait, maybe he scrupulously reports his income to the tax authorities?) Actually, the DPP have a plan to reduce taxes. I wonder if it actually got passed? Taiwan is also making moves to tax their citizens' global incomes and watch out for the use of offshore companies. Great. Maybe they could enforce the income tax on noodle vendors, too? Get their ID card. Check the tax records and see if they pay any. I am going to hazard a guess that they will under-report their income. I could be wrong. Let's find out.

Alternative choice would be to go to a flat income tax, like many Eastern European countries have adopted to good effect. These can be made more progressive than a consumption tax, but I have worries about enforcement.

Okay, that's enough for a blog post. My portion on the taxes is probably the least well-thought out portion, so go easy there tiger.

I did find an interesting report on Taiwan that might point to areas Taiwan could improve.

Errata for Karl

After reviewing just my initial google search "Maryland median income" and the wikipedia entry on household income....

Washington Post median income for Maryland: $52,868
Sure it says Election 2006, but its from 2000 Census in tiny print at the very bottom. My bad.

Three-Year-Average Median Household Income by State: 2003-2005
Maryland $58,347

In another chart on the same wikipedia page, Maryland has a median income of US$ 63,082, based on 2006 dollars.

Clearly the economy has been doing well in Maryland.

So now, I don't know if $45,000-$50,000 would put you in the middle quintile in Maryland.

There was also the point of cost of living:

Median household income comparison of two states based on PPP.

California US$ 55,000
West Virgina US$ 33,000

That means, even after cost of living is factored out, Californians still make way more than West Virginians. I will see if I can find more on that, especially in regards to Maryland, but supposedly California is a very high cost state.

p.s. There is also a figure for median income for a family of six in Maryland that is $94,017 but I think that just means those who choose to have that many children are already making more money. Because normally having more kids doesn't help increase your income.

Another census information says the median income for self-employed no-incorporated workers is only 37,000...that's way below the median income. I guess working for a big faceless corporation is much better paying.

More Kiddie Insurance

The Democrats have found another family to show off in the SCHIP kerfuffle.

This week, Democrats have brought forth the Wilkerson family, whose two-year old daughter Bethany is covered by SCHIP and had life-saving heart surgery when she was an infant. On Monday the Wilkerson family held a conference call, sponsored by USAction, a liberal grassroots advocacy group lobbying in favor of the $35 billion SCHIP expansion.

For the record, the Bo and Dara Wilkerson say they make $34,000 in combined income from restaurant jobs in St. Petersburg, Fla. They rent their house and the couple owns one car, which Bo calls "a junker."

A much better choice of families from a strictly political consideration. (Perhaps not so good for an interesting discussion of subsidies.) Like I said before, when I think of these programs I envision people like the Wilkerson's or perhaps those stoner kids in high school all grown up. Personally I am much more willing to subsidize a short order cook and his wife than a college educated couple who chose to open a marginal woodworking business. It's one thing to give a helping hand to people who are working hard and don't have a lot of prospects. It's another to fund someone's hobby job.*

But, I'm not sure there's any way around this - I can watch someone like Bread who worked the minimum amount of hours a week to maximize his free time and travel, while still getting all of the benefits of someone who makes the same amount by working 40 hours a week sorting garbage. The inner state planner in me wants to force Bread to work all the jobs he can if we're going to be handing out bennies left and right, and tax his ass to pay for the poor garbage sorter. But how about families where the mother stays home, even though she could be out earning? Or the entrepreneur who truly just started up? I guess you have to do it straight by the numbers, which means people can game the system in some respects. Such is life.

Another aspect of an expanded SCHIP is that it could damage the various mandatory insurance schemes. Most of the health care reform plans out there involve making health insurance mandatory as a way of forcing young people into the pool of the insured and thus lowering everyone's costs. However, in some states SCHIP is allowing "children" up to age 25 to be covered - which means a lot of young people won't be in the insurance pool. That could screw up the math. I still support mandatory insurance because people should be considering that as a basic cost in their life, not as optional.

By the way, both the Wilkersons and the Frosts were both already covered by this program. The veto would not affect their coverage at all, since it was about a proposed expansion of the program. Shouldn't the Democrats show us a family that isn't currently covered but would be under the proposed expansion?

The current cut-off for most states is 200% of poverty or about US$ 41,300. This seems about right to me. At 300% x poverty rate of US$ 20,650 were talking US$ 61,950 in income. Is there not some level of income where people can pay their own way? Otherwise just nationalize health care and be done with it. And tax the smokers to pay for it.

*He's making $20,000 / year with his woodworking after 15 years in business. Either he's working his ass off for no money or he's not very busy. If he's working 40 hours a week, he's making around US$ 10.00 per hour. Last time I was in California, they were hiring at Quizno's for US$ 8.25 / hour. This guy is a college grad. Do the math.

He also owns the building he works in, which means he doesn't pay rent. From an economics perspective, he should factor in that opportunity cost, i.e. if he quit the business he could make money renting his space. So he's even more of a sucker to keep that business going. (This is coming from a guy who started a beer importing business just to drink good beer. Physician heal thyself! Well, I did close that sucker down.)

Hmmmm, I wonder if the large number of illegal immigrants working in the carpentry field have depressed his wages? This could be a mitigating factor.

Yahoo News Headlines

Russia divulges Putin assassination plot

I love the use of the word "divulge" in this headline. It's like Russians are letting me in on some juicy gossip.

I imagine a suave diplomat leaning over and speaking softly in my ear at an embassy dinner party. "I'll have you know they planned to poison his soup. Luckily President Putin doesn't like lobster bisque."

Damned Chechens. Get of my lawn.

Gore wins Nobel Peace Prize

What's next?

Reincarnation as the Dalai Lama?

The Return of the Mahdi?

The Second Coming of Christ?

Revealing he is actually Elvis?

Seriously, a bit over the top I think.

Kiddie Insurance

There's been a big explosion about S-Chip expansion in the USA. I'm not sure where I stand on that, but the family the Democrats chose to showcase this program (which apparently was a GOP idea in the first place, LOL) brought up a lot of interesting questions about means testing.

The family of four has two working parents that earn somewhere between 45,000 - 50,000 per year. Hell if I know what that means nowadays though US$ 48,000 is now the median income, so technically they are middle class.

The family owns a small woodworking business. If the wife earns say 20,000 then this business only makes 30,000 per year. That's pretty low, maybe to the point where you should close shop, especially if you can't afford to buy your family insurance. When I think of these programs, I always imagine some poor high school schmuck who's forced to work at a feed plant or a warehouse. I don't usually imagine some college educated guy who owns his own woodworking business. (Also, if he's making so little, which to me implies slow business, why not get a full time job and do the woodworking at nights and on week-ends?)

The family owns commercial property and are landlords. Now, I don't expect anyone to sell their own home to get insurance, but what about other property? What if they had the equivalent amount of stocks, bonds, or simply cash in CDs rather than land?

If we did not means test the program at all, would it still be a useful program? I'm thinking in terms of encouraging entrepreneurs with children or freeing those with families to switch jobs? It might even spur the birth rate. Obviously its the childless who will get unfairly squeezed, but now that I have kids, that doesn't bother me. Funny, huh? One thing for sure is that I need to pay very close attention to all of these new programs before I move back to the states. I might be able to skip buying insurance for my kids.

p.s. Supposedly a lot of those on S-CHIP are actually adults, in some states its like 50%. Doesn't that pose a problem with a lot of the health care reform plans that assume mandatory insurance will force the young healthy folks to lower the costs for everyone else? If the young healthy folks are on S-CHIP, then it won't work.

I am cautiously for health care reform and know that I probably won't get my "ideal" plan implemented, but I do think the reform plans are getting better and better*, with a lot of state programs acting as laboratories. I almost wonder if we should wait longer to let the various ideas percolate some more before making any decision on a national scale.

*By this I mean the Democrat reform plans have moved drastically away from a nationalized system and are coming to look like some of the moderate schemes being tried out in CA and MA.

Made in the USA and Taxation

A long time ago, I read that a Value Added Tax (VAT) is a very export friendly tax system. Let's take an example of a company that makes imports beer, and exports beer. We will assume a VAT rate of 20%.

Beer Export: Every supplier up the chain pays the VAT, but the exporter is reimbursed for the tax since its not for local consumption. So, a normal wholesale price of $ 1.00 including VAT can be quoted lower to foreign customers at becomes $ 0.80 as the VAT will be rebated.

Beer Import: The importer has to pay a VAT on the imported product and so on up the chain. So, if the import beer has the same export cost of $ 0.80, it will jump to $ 1.00 once its imported.

Now, so far, as long as every country has the same VAT system in place, it really doesn't matter. But some countries don't have a VAT, like the United States of America. If the tax structure in the USA isn't set up to rebate to exporters, they end up having export pricing that includes 20% of taxes in the cost whereas the any imports from VAT countries come in cheaper.

Supposedly that rate in the United States is 22%. (say supporters of the Fair Tax.) I'd like to see more information on that, but I do know that in theory a VAT is supposedly better for exports.

A case in point:

China used to rebate a lot of taxes for exports. This summer they reduced that for many items leading to price increase. (and a huge traffic jam of containers trying to get on board vessels to beat the cut off date.)

We take requests

Karl, my one reader, said I should blog more on business stuff.

Rising prices in China

We recently had to re-quote some wooden items we make in China. There was about a 40% increase in costs from all vendors across the board. Supposedly this is due to rising oil prices affecting the cost of finishing materials and the RMB appreciating.

Pure speculation, but this increase in the cost of paints and finishes coincidentally occurred at about the same time as the lead paint furore. Could it be that there were a lot of folks using lead paints, that now have to switch to non-lead paints which sent the price up?

Then again, oil is up US$ 10/ barrel, and the RMB has kept up its steady appreciation. On the other hand, the US housing market has tanked, and the demand for furniture should be much, much lower going forward. (Maybe Europe and China's domestic markets are still good, though.)

Regardless of my personal irritation with price hikes, I also wonder if they will affect global inflation. I have tried to find out about the possibility that inflation is being exported from China. Apparently, price hikes from actual supply and demand changes aren't as inflationary as monetary inflation (more money chasing less goods) so this shouldn't affect inflation in the US. However, wasn't it argued that those low, low China prices helped keep inflation in check for the past decade or so? (Despite rising commodity prices.) How can that be true, but big upswings in product prices wouldn't work the other way around?

A few disclaimers:

1. I am not an economist.

2. I thought the number of people using lead paint would be low, but I could be terribly wrong.

3. It could be that these price hikes are only happening in the Dongguan area and that the more remote areas of China can still offer those crazy below-material cost quotations we've all come to know and love. Anecdotally, Ikea is supposedly buying from interior provinces now. We will have quotations from Vietnam coming in soon, so that will be an interesting comparison, especially since their currency is not appreciating.

By the way, Ikea is known to be a very skinflint buyer and their philosophy is that their factories will not make a lot of money, but will survive. Gee Thanks! That's why people invest in multi-million dollar plants in China or Vietnam - to survive and eek out an existence. Anyway, be forewarned!

North Korea

I am a bit of a North Korea fiend, so I was quite happy that Discovery had two shows back to back about North Korea.

The first show was about Kim Jong-Il - nothing much that was new there. A South Korean official claimed Kim Jong Il repeatedly said he did want nukes and that a guarantee by the USA would put him at ease. Then again, the defecting bodyguards, cooks, and others said K.I.J.'s only concern was his own security and power. Not mutually exclusive actually. Except that if I were an evil dictator (and yes, I think I'd enjoy that job) I'd want nukes, period. You'd have to have tons of serious pressure on me before I changed my mind. Now, I don't know K.I.J. and we don't know what kind of pressure he is under, so it is quite possible he would be willing to get rid of his nukes. We'll see. Thank God that's not my job!

The second show was about the Mass Games and followed several girls through their lives. This was actually more interesting in that you could see the normal part of North Korean lives. Yes, Moms worry about what you eat and if your backpack is packed correctly no matter what political system is used. But the video shot of the radio mounted on the wall of the kitchen that could not be turned off was AWESOME. There it was. A grey box with a single dial - volume can be turned down but never off.

It was telling that these families had a lot of food. And in one scene one Mom scolds her daughter for eating too little. I bet she was thinking "Your dad works his ass off keeping us politically connected to put rice on the table, and you eat three bites and are off to Mass Games practice!" They did have a power outage though.

Mass Games are supposed to make you a better "communist person" which make sense to me - not that it would succeed, but more as a theory tossed around during late night plenary meetings. The first documentary of course discussed the special "dance" teams that entertain K.I.J. - (Only he can touch them.) Membership has its privileges.

Other Notes:

I hope they can preserve the Mass Games and some of the environment after the regime falls. Maybe as a UNESCO park?

I did see a Mickey Mouse clock in the girl's room. Even the Hermit Kingdom has to deal with the Magic Kingdom.

They had a Chinese dub over the North Korean girl's words...they managed to get a really cheesy teenager, half-bored, half-excited feeling to it. It seemed like she had a crush on the Dear Leader. Nicely done.

Political Suggestion for Dems

Once the Democratic primaries are over, I have a suggestion for how the Democratic candidate could burnish their national security credibility and possibly help our diplomacy with Iran. The candidate should announce that he/she would implement a "Kill List" deterrence policy regarding any terrorist nuclear attack.

The idea behind a kill list is that normal deterrence might not work if a country like Iran developed a nuclear bomb and then "handed it off" to one of their proxies for use, or used it in such a way as to be less likely to be traced back to them as a state actor. For example, instead of a normal missile launch they would have Hezbollah smuggle the bomb in a shipping container to Long Beach and blow it up there. Iran could deny responsibility for the attack. Now we could probably trace the material signature, etc., back to them, and then strike back, but the Kill List makes it more automatic.

The Kill List also encourages those on the list to stop any proliferation they might be considering. North Korea might think long and hard before helping Syria or Iran out with a nuke program if they thought they would be held collectively responsible.

Another attraction of the Kill List is that you can offer to remove countries from the list as part of your bag of carrots during negotiations or make noises about adding countries as well. I remember how the Taiwanese hated being on the Super 301 List and incessantly bitched about it, but the have far better intellectual protection now in Taiwan as a result. (Sadly this killed off the MTV .)

Why should the Democratic candidate think about supporting such a Kill List policy? (And they would not have to be too explicit about naming names, etc.)

1. It's probably a good idea by itself. Even just discussing it serves as a warning to proliferating regimes.

2. It would assist their diplomatic position if elected.

3. It would burnish their national security credibility.

4. It's a pretty cheap program.

Yahoo News Headlines

Western expats in Dubai urged to act modestly during Ramadan

New Orleans should urge Muslim visitors to "loosen up and skip the veil during Mardi Gras?" "Those who refrain from drinking spirits and showing off your woman's breasts are being culturally insensitive."

When I lived in Indonesia, I had one really funny Ramadan experience when my less-than-devout Muslim friend went drinking with me. We came home about 4:00 a.m. which was coincidentally about the time that the mosque loudspeakers announce "Sayur" telling people to get in their last food before they must begin fasting again. So we helped out driving on our motorcycle through the rice fields yelling "Sayur! Sayur!"

Just as Muslims make excellent designated drivers, we drinkers can in turn assist the devout during Ramadan.

Though, I don't get why we can't eat food in front of them while they fast...its supposed to be a test of their faith, so why shouldn't they welcome the added difficulty level? "Hey, I can fast even if you are eating fresh baked cookies in front of me."

p.s. Another weird thing about Ramadan in Indonesia was going into a restaurant at lunch and realizing that the owner and all of the customers were probably Christian. You felt like you were part of some special club.

Gen. Abizaid on Iran

Abizaid: World could abide nuclear Iran

"Iran is not a suicide nation," he said. "I mean, they may have some people in charge that don't appear to be rational, but I doubt that the Iranians intend to attack us with a nuclear weapon."

"I believe that we have the power to deter Iran, should it become nuclear,"

"There are ways to live with a nuclear Iran,"

"Let's face it, we lived with a nuclear Soviet Union, we've lived with a nuclear China, and we're living with (other) nuclear powers as well."

Abizaid stressed the dangers of allowing more and more nations to build a nuclear arsenal. And while he said it is likely that Iran will make a technological breakthrough to obtain a nuclear bomb, "it's not inevitable."

"War, in the state-to-state sense, in that part of the region would be devastating for everybody, and we should avoid it — in my mind — to every extent that we can," he said. "On the other hand, we can't allow the Iranians to continue to push in ways that are injurious to our vital interests."

"I believe the United States, with our great military power, can contain Iran — that the United States can deliver clear messages to the Iranians that makes it clear to them that while they may develop one or two nuclear weapons they'll never be able to compete with us in our true military might and power," he said.

He described Iran's government as reckless, with ambitions to dominate the Middle East.

"We need to press the international community as hard as we possibly can, and the Iranians, to cease and desist on the development of a nuclear weapon and we should not preclude any option that we may have to deal with it," he said. He then added his remark about finding ways to live with a nuclear-armed Iran.

My first little point...was the headline chosen well from the variety of quotes they had?

After reading all of his quotes, I almost wonder what the General is saying here - I mean how many qualifiers (both ways!) can we get about Iran? Bottom line is we should be able to deal with a nuclear armed Iran. I agree with him there.

Then again, this is the guy who was part of the brilliant counter-insurgency plan of holing up our forces in huge bases instead of small outposts in the community, because our troops were "anti-bodies" and thus let things get really out of control. I want to read more about him, before placing blame though - 20/20 hindsight and all. I do wonder if people were blinded by his Arabic skills - a case of "he speaks the language, so he must know what he's doing."

I do like this little blurb at the bottom, too.

The U.S. cut diplomatic relations with Iran shortly after the 1979 storming of the U.S. Embassy in Tehran. Although both nations have made public and private attempts to improve relations, the Bush administration labeled Iran part of an "axis of evil," and Iranian leaders still refer to the United States as the Great Satan.

Mandatory Health Care

Hillary's new health care plan is similar to a lot of the other Donk candidates and also Arnold Schwarzenegger's for California.

Basically the idea is that you make health care mandatory and then figure out how to pay for coverage for poor folks.

What I like about these plans:

1. They are mandatory. Which helps lower some costs by including healthy young 24 year olds who otherwise wouldn't be in the insurance pool. (Now that I am middle-aged, I have no problem making them pay for insurance they may not need.)

Political Bonus: No more stories about the "millions of uninsured." I'm sure it will be replaced by "just above the cut-off for aid, yet still struggling" but hey.

2. The poor are covered, and via a direct subsidy that is transparent. We can set how generous we want to be. I would also include a plan for a non-profit organization that liberals could donate to that would fund this health care plan before we had to have taxes kick in. I wonder why those don't already exist?

Political Bonus: How many times poverty level will be considered needy? Maybe we can have some media stories showing how some family can't afford health-care but has a 47" Plasma on installment from Best Buy?

3. Most importantly, as long as any of these proposals just makes it mandatory to have insurance, with a state subsidy, it's not government-run health care and the free market is still completely involved. I guess it does impinge on the individual's liberty, and this is why libertarians will hate these ideas. I would suggest having an opt-out clause but that sort of ruins the effect of point 1.

What I don't like about these plans:

1. They keep making companies pay for their employee's insurance. There is nothing wrong with that, it's just factored as part of your wages and benefits, but it does make worker's worry about changing jobs. If companies did not provide insurance and it was paid for by workers, it would be "portable" and they would worry a little bit less about trying to switch companies or careers. Also, since health benefits are not taxed while wages are, there may have been an incentive to favor these over wages by both employer and employee.

2. These plans sometimes try to lower the cost of health care by fiat, or pay for it via taxes on doctors, etc. I am not sure that is a good idea. Let the market offer different plans and people choose them. Yes, insurance is complicated, so maybe you can have one simple government plan as a default, but I would guess once health insurance was decoupled from your employer, they would have to work harder to please the actual consumer. I could be wrong there, but you could always choose GovCare so why not?

Medecins Sans Frontier Founder on Iran

World should 'prepare for the worst' over Iran: France

The world should "prepare for the worst ... (which) is war" over the Iranian nuclear crisis, but seeking a solution through talks should take priority, French Foreign Minister Bernard Kouchner said on Sunday.

"We have to prepare for the worst, and the worst is war," he said in an interview broadcast on television and radio.

"We must negotiate right to the end," with Iran, he said, but underlined that if Tehran possessed an atomic weapon, it would represent "a real danger for the whole world."

It looks like the French FM is more hawkish than I would expect. Personally, I think we should prepare for Iran having a nuclear bomb, since I don't think it will be possible to even bomb them. Well, possible, yes, but extremely unlikely. Maybe if it was the French Air Force doing the bombing unilaterally? Cuz America ain't gonna do anything about Iran until 2009 if at all. Now that I made a prediction, the bombing begins tomorrow.

Speculaton on Hsu

Beyond the "scandal" of Hillary Clinton and everyone else taking bundled contributions from Hsu without too many questions, there are worries about whether there is a PRC connection here, mainly because we don't know where Hsu got his money exactly.

The Wall Street Journal has an article that helps explain the source of his money:

Mr. Rosenman described the deal in a pitch letter he provided to prospective investors for Source Financing Investors, which he launched in 2005. The investment pool would "lend to U.S. private label designers that needed interim financing to fill orders for a select group of well-known, high-end U.S. apparel retailers." Since 2001, he writes, "the return of these short-term (typically 4½ months) loans has been no less than 40%."

In a "step-by-step" outline of a typical transaction prepared for investors, Source Financing describes the way a deal worked with Mr. Hsu. Source Financing would agree to provide bridge loans for seasonal high-ticket, high-quality retail goods made in China for exclusive brand names, according to investors. Mr. Hsu told the company that he would obtain from Chinese manufacturers a price quote for apparel production. He would then add a mark-up and give the quote to a high-end buyer in the U.S.

If the U.S. buyer accepted, according to the outline, Source Financing would transfer by wire what Mr. Hsu said was 80% of the necessary loan, with Mr. Hsu saying he would provide the other 20% himself. Mr. Hsu told the investors he would then receive a letter of credit from a Chinese bank and that the manufacturer would ship the apparel to the U.S., where Mr. Hsu would deliver it to the merchant.

Mr. Hsu would give the investment firm a check, post-dated for 135 days beyond the wire transfer, for the amount of the loan plus profit. When the check matured, Source Financing would deposit it and allocate the money to investors. The company that would carry out these transactions, Mr. Hsu told investors, was Components Ltd., set up in 1997.

So basically, the investors are factoring orders from stores to provide financing to factories in China. It makes sense if the stores demand very long payment terms and the factories are cash-strapped. You can often get a 5% discount for simply paying cash after shipment in Taiwan, though in China the factories often demand 20% down and 80% upon shipment anyways. The article has one error in that Hsu should be opening the letters of credit (backed by the investor's cash) rather than receiving them.

Now, the problem is that the investors are now receiving bounced checks. So he somehow went bankrupt recently or is once again running a Ponzi scheme. If it was a Ponzi scheme, there should be some more news coming since we don't know how he funded the initial "profits" back to the investors to start the scheme . Some possibilities,in order of probability:

1. The orders were fake. The investors were sure to ask to see each order before factoring it, but if the orders were fake, he could simply open the LC to a factory and ship an empty container to collect payment of 100%.
2. The orders were real, but he did not pay the factories and just kept switching suppliers. Actually, I have heard of this happening before with office chairs. This might be easier to do because the customers in the USA could be contacted by the investors to see if everything was legit, but if he used shell companies in China, that side would be very opaque.
   
3. The orders were real, but he had multiple investor's factoring them, and ditched some of those. I doubt this since he'd get sued earlier on. Remember the deals are only for 135 day financing.
4. He had a source of funds from the PRC government to pay the investors and then used the investor's "clean" money to funnel donations to candidates. Occam's Razor to me suggests that some guy who ran a Ponzi scheme based on importing gloves from China in the 90's probably is simply doing the same thing in 2002, and not on the PLA payroll.
   
5. The US investors knew this was a scheme to fund donations to the Democrats. (Rosenman's family is already maxed out to Clinton.) I doubt this since the investors are trying to get their money back. Hillary is trying to refund the donations and then have the donors immediately send them back to her, but Rosenman's lawyers don't want her to do that.
   

Scenarios 1,2 & 3 make the most sense since its simply a con-man running his con. Hsu's interest in Democratic politics could be just a way to meet investors, a hobby, or his attempt to get pardoned later on.

Scenarios 4 & 5 are out there, and far scarier, so hopefully will not be borne out in any way. The only reason I consider them possible is that in 1996, a PLA colonel did fund Bill Clinton and we also see situations like Edwards getting paid $500,000 for a "part time job" at a hedge-fund, so I am not putting it past people to find very creative ways to fund politicians.

UPDATE: my scenarios 1 & 2 have a problem maybe. Damn work getting in the way!

Culture of Corruption

California Attorney General spokesman Gareth Lacy said Hsu's lawyers told prosecutors Hsu arrived by charter jet at the Oakland airport about 5:30 a.m. Wednesday local time and then wasn't heard from again.

Obvious question: Who paid for the chartered jet?

At the end of the article

Afghan authorities often make claims they have killed Taliban commanders that turn out to be false. Taliban spokesmen have also downplayed or lied about the extent of their battlefield losses.

That just struck me as a strange but useful way to end the article.

Lead Paint in China

More in depth story about the Mattel recall.

Key information:

But that does not explain why Mr. Zhang — who had lead-detecting equipment on his premises, according to Ms. Andres — did not detect the contaminated toys.

“People at Lee Der were never fully able to give an explanation,” she said. “They had testing equipment on site. And they tested before. We don’t know why they didn’t use it” in this case.

Sometimes you buy the machine just to show the foreign buyer and never actually use it.

The article is also not clear how many sub-contractors there are in the process. It seemed like the painting process might have been out-sourced. As it would be labor intensive and nasty work, I would not doubt it.

UPDATE 2007/09/05:

Mattel said in a statement that the Barbie products affected by the recall were produced by Holder Plastic Company, a Mattel contract vendor, which subcontracted the painting of miniature toy pets and small furniture pieces to Dong Lian Fa and Yip Sing. Both companies used uncertified paint and are no longer producing toys for Mattel, the company said.

So the vendors do sub-contract the painting.

The two GeoTrax toys were made by Apex Manufacturing Company Ltd., one of Mattel's contract vendors, which outsourced paint work to a subcontractor, Boyi Plastic Products Factory. Apex supplied Boyi with certified paint; however, the toys were made with uncertified paint. Boyi is no longer in business, Mattel said.

This is what causes gray hairs. They freaking give them the correct paint to use, but still its substituted somehow.

Fisher-Price's Big Big World toy was manufactured by Shun On Factory, one of Mattel's contract vendors, which outsourced the molding and painting of one plastic piece. A subcontractor, Jingying Tampo Printing Processing Factory, used uncertified paint on the recalled piece.

Okay, this looks to be very, very widespread if so many sub-contractors are violating the requirement.

Mattel vowed as recently as last month it would tighten its controls at factories in China. About 65 percent of the company's toys are made in China, and about 50 percent of Mattel's production there is produced in company-owned plants.

I am amazed they make even 50% at their own plants.

Google Ads on Stoners

This is what Google thinks are ads that Stoners would be interested in:

Marijuana Test
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Panic Attacks?
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They are from some sort of Marijuana wiki with Google ad-sense ads enabled.

Interesting

Recently we have been hearing that the US special forces in Afghanistan have been relying too much on airpower. Since everything in the press is all "NATO" this and that, its hard to figure out if that is true and if its just a disaffected Brit or two bitching (probably with reason, but an anecdote don't make a statistic to mangle Stalin.)

Today we have three British soldiers killed by friendly fire from US airplanes. Seems like its not just US forces calling in the air-strikes after all. And the "yeah but" folks need to tell me how many Brit/French/German/Dutch planes are on-station versus US planes. (What I am saying is that I am guessing that when the USA represents the vast majority of air power, we will also make the most friendly fire kills...could be wrong though.) Or let me know that the Euros fielded 500 lb and concrete bombs before our forces did in their ongoing efforts to use the minimum necessary force.

BTW, we almost killed Karzai by friendly fire....the Air Force controller on the ground with his group of anti-Taliban Pashtuns re-set his instrument which made his location the beacon for our bombs. I'd say that might explain Karzai's continual criticism of the over use of airpower - he's seen its limits way too first hand.

Christiane Amanpour

She says CNN was intimidated by Bush and FOX news.

"My station was intimidated by the administration and its foot soldiers at FOX News."

Eason Jordan admitted that CNN self-censored itself about Iraq due to Iraqi intimidation as well.

So, technically it would all balance out I guess. LOL.

I'd like to ask her if she was intimidated by Clinton, too, into running those stories about mass graves in Kosovo that turned out to be, ehhhh, not so massive. (yes, that's a link to Common Dreams and I do feel dirty.)

p.s. Seriously, who is intimidated by Bush and FOX News???? I thought Bush is an idiot and Fox News is a tabloid TV news station. Christiane should have quit if she had any principles.

Cartoon Cannibals

If I was stranded on a desert island with Mickey Mouse and his gang, without any food, here is the order in which I eat them:

Donald Duck - first to go, if only to stop his annoying voice.
Daisy Duck - Mmmmmmm, duck tastes good.
Pluto - the dog that doesn't talk and thus is less anthropomorphic.
Goofy - black-skinned dogs taste the best according to Taiwanese folk.
Mickey Mouse - not much meat. If he were cane-fed, he would be a delicacy.
Minnie Mouse - the final snack.

Maybe I should keep Pluto around as my companion?

Note to expectant fathers: This is the sort of stuff your brain is forced to come up with to entertain yourself when your toddler demands you play with her toys.

First time I've seen this

The verb "google" used in an ominous sense:

"Two reporters told me that they’d had their names googled at a checkpoint leading into the so-called security square in the middle of the dahiyeh, where the senior Hezbollah members lived."

The poor man's background check.

A cheap man

Mattel advertises on front page of Yahoo

Here's the link. I have one of the toys recalled - in fact it was a freebie at Ding Ding for several months and I even gave one to Ivo. Note that according to Mattel, it wouldn't be affected by the recall since I received them months before May 2007. I 'll probably still junk it.

Here's what they are doing to fix their testing regime:

Regarding our manufacturing processes, we immediately strengthened them with a three-point check system. First, we're requiring that only paint from certified suppliers be used, and we're requiring that every single batch of paint at every single vendor be tested. If it doesn't pass, it doesn't get used.

Second, we are tightening controls throughout the production process at vendor facilities and increasing unannounced random inspections.

Third, we're testing every production run of finished toys to ensure compliance before they reach our customer. We've met with vendors to ensure they understand our tightened procedures and our absolute requirement of strict adherence to them.

That's probably overkill, but it's what I would do in the same situation. It's going to be hard to make shipments on time while testing is being done, so I wonder if there will be delays for Christmas shipments, though I'd guess a lot of those have already been shipped.

It's interesting that they say they are increasing unannounced random inspections - I wonder how many of those they were doing before. The third point is the most crucial, though.

China Toy Association

Companies must not accept orders which are "low priced and with unclear quality demands" nor those which "demand delivery of a large amount of goods in a short space of time and obviously exceed the production capacity of companies," it said.

Or, in other words, don't accept any orders from North America for the Christmas season. Good luck with that idea.

UPDATE on Fisher-Price Toys

Less than two weeks after Mattel Inc. recalled 1.5 million Chinese-made toys because of lead paint, the toy industry is bracing for another blow that could give parents more reason to rethink their purchases just before the critical holiday shopping season.

Mattel is set to announce the recall of another toy involving a different Chinese supplier as early as Tuesday, according to three people close to the matter who spoke on condition of anonymity because of the sensitivity of the situation.

As I suspected, the second paragraph confirms that the problems were not in a Fisher Price owned factory, but at a contract factory.

Days after the Fisher-Price recall, Chinese officials temporarily banned the toys' manufacturer, Lee Der Industrial Co., from exporting products. A Lee Der co-owner, Cheung Shu-hung, committed suicide at a warehouse over the weekend, apparently by hanging himself, a state-run newspaper reported Monday.

Lee Der was under pressure in the global controversy over the safety of Chinese-made products, and it is common for disgraced officials to commit suicide in China.

Wow. SPECULATION ALERT: I wonder though, if he might have killed himself out of financial anguish (going bankrupt) than some sense of guilt. If you're willing to use lead paint on toys to make a buck, are you really going to feel more shame over being caught or more shame about losing your factory (and thus "face" in Chinese culture?) Chinese factories have massive amounts of "ho lien pi" = thick facial skin. Though, I think this does mean this guy probably made the decision to substitute the paint rather than just being duped by the paint supplier. Either way, this story is getting big.

Before this month, Fisher-Price and parent company Mattel had never before recalled toys because of lead paint.

Bingo. Like I said before, the whole toy industry is very aware of lead-based paint being a no-no. They have been making toys in China for a long time and probably do a lot of testing. I am going to speculate some more that through bribery the contractor avoided testing, got fake test reports, or bribed the inspector to take hand-made samples for testing.

From BBC:

An internal investigation found the toys had been made using a non-approved paint pigment which contained excessive amounts of lead, violating safety standards.

A manager at Lee Der blamed its paint supplier for the incident, according to the Southern Metropolitan Daily.

From CNN:

Cheung was a co-owner of Lee Der, according to a registry of Hong Kong companies. The other owner, Chiu Kwei-tsun, did not return telephone messages left for him.

In its report, the Southern Metropolis Daily said Cheung, a Hong Kong resident in his 50s, treated his 5,000-odd employees well and always paid them on time. The morning of his suicide, he greeted workers and chatted with some of them, the report said.

After the recall, Lee Der maintained that its paint supplier, Cheung's best friend, supplied "fake paint" used in the toys, the Southern Metropolis Daily said.

"The boss and the company were harmed by the paint supplier, the closest friend of our boss," Liu, the manager, was quoted as saying.

...
In announcing the temporary export ban against Lee Der, a government quality inspection agency also slapped a similar prohibition on Hansheng Wood Products Factory and said police were investigating both companies' use of "fake plastic pigment." Such pigments are a type of industrial latex used to make surfaces smoother and shinier.

Okay, so perhaps it is the paint supplier after all, and the guy killed himself out of remorse. But this WP quote seems to say my thesis was correct:

"I think the company is about to go bankrupt," said an executive of a Lee Der subsidiary who would not give his full name because of the sensitive nature of the subject matter. "Otherwise, he wouldn't have committed suicide."

This story also says who the paint supplier was:

The paint was sold to Lee Der by Dongxing New Energy, which is headed by Liang Jiacheng, one of Zhang's best friends, colleagues said. It was not known whether Dongxing also was the supplier for Hansheng.

Afghanistan Worries

1. Drug Trade: I really have no idea how to approach that, but I think poppy eradication right now is not a good idea. Some people want to legalize it and tax it to pay for the war, but I think this guy makes a lot of sense on why that can't happen. I also approve of his solution: do nothing.

By the way, the same reasons he lays out for why taxation in Afghanistan is so difficult surely apply to the planning and disbursement of aid. I have no idea what level of aid Afghanistan can absorb, but America's aid of US$ 10 billion in 2007 is about US$ 300 a head or about 30% of GDP per capita. It's going down now to lower levels, but when combined with other countries' aid its still going to be a large percentage of GDP.

2. Civilian Bombings: Supposedly US special forces are using airpower too much. Some of the criticism is for the special forces that operate out of Bagram under a separate HQ - which is bound to cause problems. It might have made sense in 2001-2002, but now we have forces in each province, shouldn't all forces be under unified command? Or maybe I am just thinking of all those cop movies where the FBI comes in and the local police don't cooperate.

Edwards on Trade

Edwards: Freeze harmful imports

Edwards said the nation needed trade rules that protected American consumers and said he would enforce mandatory labeling of foods and other products detailing their country of origin and give the federal Food and Drug Administration the resources needed to keep tainted food products out of the country.

News alert: country of manufacture is already a requirement for imports to the USA. I am guessing he wants to break it down by component or something. Great, more paperwork.

"We'll enforce zero tolerance and immediately freeze the specific import of any food, toys, medicines or other goods that threaten the health of our families and our children," Edwards added. "We will not let them in until we, in fact, know they're safe." In recent weeks, the Tribune has reported on the importation of lead-tainted toys and other products from China. Last week, more than 1 million Fisher-Price children's toys were recalled and before that, pet food manufactured with a tainted China-produced product was discovered.

Just like you will inspect every shipping container arriving in the US for nuclear bombs? He also needs to understand that Fisher-Price probably does have a product testing regime, that requires vendors to test products and pass US safety regulations.

The way vendors who wish to cheat defeat such programs are as follows:

1. Test company is based in China and can be bribed.
2. Samples sent to the test company are hand-made to pass, but production won't pass.

The way to stop that would be to test an actual production run and have it pass the test in the US before shipment would be allowed. That's a major pain, but doable. Of course, if Fisher-Price sends in Chinese employees to sample the production run for testing, they too could be bribed.* (Sorry it's a fact in China.)

Actually, I don't know what happened in the Fisher-Price case - it might have been an honest mistake, though I doubt that as everyone knows that you cannot use lead paint for children's products. Its probably hard to even buy such paint from reputable vendors - it would have to come from a local producer most likely.

"Regular families, their safety and their best interests, should come before the interests of multinational corporations," Edwards said. "This is what smart and safe trade is all about."

Smart & Safe Trade - that's the new slogan, eh? Look, the multinational corporation of Fisher Price is NOT interested in selling toxic toys for additional profit. They are aware that if their brand name is destroyed by selling poisonous toys it will be BAD for profits. They can also be SUED and lose lots of money. Not to mention that some of the owners and managers probably have kids that use Fisher Price toys themselves. It is not in their interest.

*There is also a chance that they made it one of their own factories in China. If that were the case, I would wonder why they do not test their production runs randomly already.

Oh, and John, how about the interest of regular families to get quality health care unburdened by massive malpractice awards based on bunk science coming before the interests of trial lawyers?

Now this is rich, too:

The Democratic candidate also said that as he tries to seek change in Washington, insiders "do not want voices like mine and yours to be heard. They want us to be silenced."

Later, Edwards told reporters that in addition to corporate interests representing the insurance, pharmaceutical and energy industry wanting him silenced, he also was referring to "people like Rupert Murdoch," the head of News Corp. and other media interests because of the candidate's opposition to media consolidation.

Asked if he believed media owners were actively working to prevent his call for change from being heard by the public, Edwards said, "I think they will actively work to keep us from being heard on those issues, yes."

The story ran in the Chicago Tribune, but he's being silenced.

Once Bush is gone, the world will love us again

Right?

Mashed Headline: Faithful pray for Shiite militia attacks

Well they would wouldn't they?

Actual headline:

Faithful pray for Minneapolis victims

And the unfaithful are providing an unsavory kind of comfort for the widows left behind? (This is not so crazy - see Mike and the coma patient's bereaved girlfriend.)

The faithless, meanwhile, just got up and need some coffee before they start doing any real work.

Stayed up late

watching the wife pack for her trip to Canuckistan. Let's say I am not worried if they crash on a mountain and have to trek out - she has everything she needs and can survive by eating her make-up.

So anyways, my eyes are kind of spotty this morning and when opening my browser, I caught the Yahoo news headlines:

U.S. Supreme Court signs arms deal with French firms

Huh? Oh, on second glance, Libya is buying the arms, and the USSC has lowest approval rating in 2 years. My mind mashed them together. Maybe I can make this a new feature.

Pre-Emptive Excuses

Yeah, I lost at Axis & Allies tonight, but it was because Karl drank too much beer, Turton screwed up his Russia moves, Malv touched the dice, and last but not least:

It was AJ's Fault.

UPDATE: I did lose, but it was for none of the above reasons. My skills are lacking. I am getting dumber every day. I need to become a knife-fighter!

Unfortunate Scientific Terms

"Idiopathic" is probably not how you want your malady to be described if you are the Chief Justice of the Supreme Court.

In a sort of reverse situation, I always suspected that the Janjaweed militia would get some initial sympathy from the hippies. They ought to license their name as a brand of hemp clothing. "Tough enough for ethnic cleansing." as the tag?

Second Life

So the Jesuits are going to do missionary work in Second Life. Great. Any resources they use there will keep them from bothering me in real life.

Spadaro warns the uninitiated that "the erotic dimension is very present" in Second Life, that people can buy genitalia for their avatars in a world that is "open to any form of erotic stimulation from prostitution to pedophilia."

(Yeah, like Catholic priests are uninitiated in the ways of pedophilia.)

Still, if the pederasts play in Second Life then they're too busy at the keyboard to be hanging out at the playground.

Other groups that I would like to see spend their time in Second Life? The list would be long.

Rudy 2008

Apparently, one of Rudy Giuliani's favorite slogans is "Better to be feared than loved."

I think on that alone I have to support this guy over Fred Thompson (my alternate choice.)

Terror Cheese

• San Diego, July 7. A U.S. person — either a citizen or a foreigner legally here — checked baggage containing two ice packs covered in duct tape. The ice packs had clay inside them rather than the normal blue gel.

• Milwaukee, June 4. A U.S. person's carryon baggage contained wire coil wrapped around a possible initiator, an electrical switch, batteries, three tubes and two blocks of cheese. The bulletin said block cheese has a consistency similar to some explosives.

• Houston, Nov. 8, 2006. A U.S. person's checked baggage contained a plastic bag with a 9-volt battery, wires, a block of brown clay-like minerals and pipes.

• Baltimore, Sept. 16, 2006. A couple's checked baggage contained a plastic bag with a block of processed cheese taped to another plastic bag holding a cellular phone charger.

I'd like to make fun of this somehow, but some of these seem pretty serious- and would cheese last on a long flight? I always dreamed of bringing Taco Bell food back on the plane, but thought it would go bad.

p.s. If foreigners with residence in the USA are US persons, does that make foreigners in Taiwan with residence Taiwan Persons? I think I'm turning Taiwanese, I think I'm turning Taiwanese, I think I'm turning Taiwanese, I really think so!