Will China have a Revolution in 2009?

The last time we had a huge financial crisis in Asia back in 1997, authoritarian dictators like Suharto whose claim to fame was economic growth got the boot.  China escaped that crisis pretty much unscathed.

But now China is undergoing big economic dislocations with the current recession, and it might be enough to cause some political change. You have declining stock markets, housing markets, higher unemployment, and slower growth.

I would not bet the farm on this, but unless China can keep growth up, there may be some political upheaval - especially if its not just migrating peasants feeling the shock, but white collar types.

any thoughts?

How to spice up trade publications...

Furniture Today is your usual boring trade publication, but because they allow comments on their articles it gets more interesting.

Like the US factory in China that went bankrupt - its the comments where everyone bitterly complains about the CEO and his scamming ways that makes it interesting.

Or today, the story about a lawsuit, which mentioned that the principal from the company being sued slipped out, and re-opened under another name. (They wrote this more tactfully than me, though I was surpised they even did that.)

The comments included calling that guy "a sleaze" and wondering what retailers would buy from him. (I am guessing sleazes - they stick together.) 

The more I do business, the more scumbaggery I see. Maybe that's why some people think businessmen are evil types.  

Financial Mess

Reading a fair bit about this on-line, I keep wondering if the average Democrat and Republican are really so far off on a consensus. (Note I mean citizens here, not politicians.)

Let the banks fail. Let the shareholders and bond holders lose their money. Market capitalism embraces the concept of companies failing and investors losing their money. I don't think John Q. Public has a problem with fat cats losing money. (But maybe not their pension plan?)

FDIC covers the bank account holders. Let healthy companies come in and buy out the bank business. It seems like instead, all the plans involve kilotons of  money being thrown to the people who cause these problems. 

Now, is this not being considered because its a systemic risk to the banking system,  the only argument I could understand for doing TARP 1? But, since TARP 1 did not save the system, why will more do so? 

Plus, if the process was orderly and expected, it would bring some CERTAINTY to the economy. Instead, the bankers, quite rightly,  figure they will get life support and other goodies if they wait long enough. Everyone else is just clenching their financial buttocks.

I think this has little to do with the economics or systemic risk, but all to do with politicians not wanting to rip the band-aid off. I am especially puzzled at the fear of making bond-holders lose money. What is up with that?

Yahoo Headlines

Unidentified caterpillars invade Liberia, spread to Ivory Coast

People who are excited about this story:

a. Entomologists - finally the news organizations understand our importance!

b. Crop Protection Experts - we are no longer waging a brutal, hidden war that the public cares nothing about.

c. Nestle Sales Team - a reason to raise chocolate and coffee prices!

d. West Africans - Hey, we're in the news and its not coup or civil war related!

e. Caterpillar marketing team - someone must think about our bulldozers and backhoes for a split second.

Complete political non-sequitor:

Didn't Obama just put sanctions on Ivory Coast?  Now we have mysterious caterpillars invading.

The Great Game is afoot in Africa! 

Send in the Marines!

Shut down EVERYTHING.

 

Various Issues

1. Costco Swedish Meatballs ready to eat meal is pretty good. I split it into two meals. At NT$ 219 that makes it about as cheap as McDonalds...or even Beef Noodles at some places. 

2. Taiwan steel prices are now lower than China's. YEAH! Glad we kept some molds here.

2a. We also buy diecast parts way cheaper here than in China or Vietnam.

3. My kid is in the hospital again. I think our doctor is extremely conservative or know that our insurance covers hospital rooms.

4. I should be able to get a US$ 8,000 tax credit for buying a house this year. I don't know if that is a "refundable credit" or not, but it would be awesome if it was. Thanks taxpayers! I promise I will gently and pleasurably suck on the teat of the State and not bite or anything.

Yahoo Headlines

Despite Obama's pledge, Justice Dept. defends Bush's secrets

Maybe its just me, but this headline almost could give you the impression that the Justice Department is somehow independently defying Obama. Or that its hoped this is some oversight and will be correct. "Hey Obama, over here! over here! You dropped a pledge!"

Otherwise why not use the more powerful headline?

Obama breaks pledge, defends Bush's secrets

It should be noted that during the election some Obama supporters wrongfully thought that the GOP controlled Congress.* I could therefore imagine some subset of low information voters believe that the Justice Department is either independent (like the Supreme Court, right? no? oh, my bad.) or somehow controlled by the GOP meanies.

Note, I just did the headline here, I did not read the article. I suspect many people do this as well.

*I am sure there were similar numbers of McCain low information voters who thought Obama was a Arab Muslim who worked for the UN flying black helicopters over Montana dropping flouride in the water supply. (That's a lot of low information!)

Judd Gregg

Judd Gregg

Judd Gregg

Judd Gregg

yep...everytime I see that my mind says "Judge Dredd"

Another one bites the dust.

A very large steel tube furniture factory that sells to major chain stores just went bankrupt in Vietnam.

We had one small order with them, but had not paid any deposit yet, so we have not lost any money.

I have a bit of schadenfreude, because this factory would always say how great they were, how many sales offices they had in USA, UK, etc.

Low prices make sales easy. Low prices that end up losing money makes business hard.

Must Read

A great interview on what is happening in the global economy...I will highlight the part about China's currency. I was thinking of selling off some of my RMB, but after reading this, maybe not.

And China?

Now we have the delicate China question. That is a complicated, touchy question.

The reasons for China to hold dollar-denominated assets no longer exist, for the most part. However, the desire to have a weaker currency is everybody's desire in terms of stimulus. China recognizes that the exchange-rate peg is not as important as it was before, because the idea was to make its goods competitive in the world. Ultimately, they are going to have to go to a domestic-based economy. But they own too much in the way of dollar-denominated assets to get out, and it isn't clear exactly where they would go if they did get out. But they don't have to buy more. They are not going to continue to want to double down.

From the U.S. point of view, we want a devaluation. A devaluation gets your pricing in line. When there is a deflationary environment, you want your currency to go down. When you have a lot of foreign debt denominated in your currency, you want to create relief by having your currency go down. All major currency devaluations have triggered stock-market rallies throughout the world; one of the best ways to trigger a stock-market rally is to devalue your currency.

But there is a basic structural problem with China. Its per capita income is less than 10% of ours. We have to get our prices in line, and we are not going to do it by cutting our incomes to a level of Chinese incomes.

And they are not going to do it by having their per capita incomes coming in line with our per capita incomes. But they have to come closer together. The Chinese currency and assets are too cheap in dollar terms, so a devaluation of the dollar in relation to China's currency is likely, and will be an important step to our reflation and will make investments in China attractive.

Depressing Googling, Facebooking

Found an old address book of college friends...did some googling and find a lot of them are serious PhD's and stuff. Professors at UC Irvine. Experts in automated laboratories. PhDs in Biophysics (though that guy is job hunting...)

Meanwhile I am selling chalk, steel furniture, and such, sort of unsuccessfully at this point. On the bright side, I am now at least over 125% of US Poverty guidelines, and thus my family may be allowed to come to America.

and if I want to feel better I could always google my college roommate who was hawking sub-prime mortgages last I heard.

p.s. another friend works at Nortel...but is getting his PhD in Physics on the side....is it like raining PhD's in the USA or am I crazy?

As promised

China Troubles

I found this blog post very interesting indeed.

North Korea

A friend of mine works in the building and launching of military satellites. I was chatting with him about the economic downturn when he casually mentioned they were actually pretty busy because it looked like the Korean peninsula was heating up.

I was a bit puzzled about that, but it was just an offhand statement I figured

Now I read this.

North Korea warns of possible war with South Korea