Sweden’s finance minister on US expansionist monetary policy

Foreign Policy asks:

“In previous meetings it has seemed like there was a tension between the U.S. pushing a more expansionist monetary policy and European governments favoring austerity measures. Is that tension still there?”

Sweden’s finance minister, Anders Borg:

“For us to say that we would ever be over-expansionary, would be very difficult. The U.S. can be very expansionary. You have 10 percent deficit and interest rates are still hovering around 1,2,3, percent. It’s basically only the U.S. that could behave that way. For everybody else it would mean huge bond spreads. To my mind, the U.S. is saying to the rest of us that we should be more expansionary, but we’re also on top of a huge U.S. debt. The markets will not punish the U.S., they will punish everybody else standing on top of that debt. I would be very cautious about running a huge debt like the U.S. because we are a small vulnerable country. That is true of many of these European countries.”

Wouldn’t it make more sense that the “confidence fairy” punishes both the US bonds as well as currencies that is backed by large sum of US debt, namely, China, Japan, Taiwan etc?

Inside Job on Academics and the 2008 Financial Crisis

The causes of the 2008 Financial crisis wasn’t new to me, i understood them. The Wall Street personalities behind the crisis wasn’t particularly disgusting to me, was kind of expecting it, given their incentives structures. But i was surprised and disgusted to hear scholars like John Y. Campbell (Chairman of the Economics department at Harvard) and Glenn Hubbard (Dean of the Graduate School of Business at Columbia) say that their profession dont need to disclose their financial interest in the institution they write about. What?!?

Inside Job (2010) ★★★★

Sex, Sloppy Thinking and Male Achievement

From Mark Regnerus’s Slate article Sex is Cheap:

“[M]en want sex more than women do. Call it sexist, call it whatever you want—the evidence shows it’s true. In one frequently cited study, attractive young researchers separately approached opposite-sex strangers on Florida State University’s campus and proposed casual sex. Three-quarters of the men were game, but not one woman said yes. I know: Women love sex too. But research like this consistently demonstrates that men have a greater and far less discriminating appetite for it.”

The conclusion drawn fromt the cited research is at best sloppy at worst wrong. Continue reading

China at the End of History


The end of history
Francis Fukuyama’s The End of History thesis famously argued that liberal democracy is the final form of government. Its key premise: successful industrialization will inevitably create an large educated middle class that demands democracy. An indicator of how far along industrialization will liberal democracy emerges, as noted by Francis Fukuyama, is when the country have around USD6,000 purchasing power (in 1992 PPP USD). This premise has largely been correct since its pronouncement, with the exception of Singapore and a handful of resources-rich states where purchasing power could raise without creating a large educated middle class.

China democratizing?
Since China enter WTO in 2001, China’s purchasing power has ballooned to USD4,700, after adjusting inflation and purchasing power parity, closing in on the USD6,000 milestone. However the size of its educated middle class is far from the average of countries considered free fry Freedom House.

Average population tritiary enrollment rate (1)

While China is not a free country by any standard, there is some low-level movement towards democracy. Freedom house gave China the exactly the same score in 2002 and 2010: political rights 7 and civil liberty 6 (7 being least free, 1 most free). Some have suggested (as have Fukuyama) instead of democracy, Chinese communist party (CCP) might push towards a soft-authoritarian political system akin to Singapore, the only industrialized exception to the stated premise. Continue reading

Ending China’s trade surplus will be great for the world

From Martin Feldstein’s The End of China’s Surplus:

The policies that China will adopt as part of its new five-year plan will shrink its trade and current-account surpluses. It is possible that, before the end of the decade, China’s current-account surplus will move into deficit, as the country imports more than it exports and spends its foreign-investment income on imports rather than on foreign securities. If that happens, China will no longer be a net buyer of US and other foreign bonds, putting upward pressure on interest rates in those countries.

Although this scenario might now seem implausible, it is actually quite likely to occur. After all, the policies that China will implement in the next few years target the country’s enormous saving rate – the cause of its large current-account surplus.

The plan calls for a shift to higher real wages so that household income will rise as a share of GDP. Moreover, state-owned enterprises will be required to pay out a larger portion of their earnings as dividends. And the government will increase its spending on consumption services like health care, education, and housing.

These policies are motivated by domestic considerations, as the Chinese government seeks to raise living standards more rapidly than the moderating growth rate of GDP. Their net effect will be to raise consumption as a share of GDP and to reduce the national saving rate. And with that lower saving rate will come a smaller current-account surplus.

This is the right policy direction for China (i suggested it in the past here and here) and the world economy will benefit from it.

Another report from a China based economist: China’s shrinking surplus.

The Calculous of Abrahamic Religions

Followers of Abrahamic religion (christianity, islam or judaism) believes, by following the correct religious doctrine you will enter heaven in the afterlife, if not you will be consign to hell. This mechanism raise the ultimate cost and benefit of good and bad to infinity. Without it there is in the long run (death) no cost nor benefit to acting morally. This is perhaps what fear the Abrahamist about atheists the most. Not only do the atheist deny the existence of heaven and hell, they consider the very concept of afterlife to be complete nonsensical.

I suspect that there are closet-atheist-elitist (CAE) who denounce atheism and promote religion because while they are comfortable with themselves living without heaven or hell, they are uncomfortable with others doing the same. These CAE fear the freedom of knowing the ultimate cost and benefit is zero may lead to nihilist social unrest. They imagine nightmare of nihilists going around raping and pillaging, doing whatever they want with completely disregard for other people, and if thing turn for the worse, either because they got caught committing crime or whatever they can just kill themselves to set all balance to zero.

I as an atheist obviously do not subscribe to CAE’s fear. I am convinced that human internal moral compass develop via evolution and the incentive mechanism of modern legal institutes are very effective. To the contrary of CAE’s logic, if ultimately the cost/benefit is zero after death, than the only cost/benefit is that will affect you when you are a life. It does not make leading a life of crime more attractive, it make it less so.

While its extremely difficult to have a watertight demonstration of correlation between believe/non-believer and morality/criminality, because we dont have the technology (yet) to read peoples minds to know if they really believe in god or they are just paying lip service. There is at least some evident to suggest that atheism dont necessarily lead to more, but less crime.

More than half of Japanese consider themselves to be irreligious, they also have one of the lowest homicide rate in the world – 0.5 case per 100,000 people. While in the United States, where only 15% consider them self to be irreligious, their homicide rate is 10 times higher than japan at 5 cases per 100.100 people.

Ricky Gervais sums up the benefit of teaching your kids Christianity (he is now an atheist).

China, India and their culture of Hope

Vodpod videos no longer available.

Giridharadas’ point about the culture of hope among Chinese and Indian is an important observation. The two countries prop up by their swelling labor pool and sound government management are lifting millions out of poverty, consistent economic growth, accumulating wealth, raising eye brawl and garnering national prestige. They are rightly bath in a culture of hope.

This culture of hope means China and India are more likely: to be optimistic about their future then pessimistic; to quit and find better job instead of jealously guarding a job they don’t even like; to invest their profit instead of hording cash; to embrace change instead of fearing reform; to attract oversea capital and talent instead losing them; to study and work hard instead of asking for government hand-outs, to collaborated instead of pulling each other down.

They are in a positive feedback loop. Optimistic economic prospect encourages investment, which creates jobs, thereby increase consumption, demand goes up, investment to boost supply soon follows, and so on and so on. Diminishing return wont come into play just yet because every round of investment is likely to be made with increasing sophisticated technologically either imported from overseas or developed domestically by growing pool of educated talent. This economic growth will eventually slow down as the China and India close-in on the technology front tier and supply catches up to demand. Considering the state of development and population of China and India, it will be a while (China: 15 years; India: 25 years?) for that to happen.

This is not a economic miracle nor a new phenomenon, it has happen before to Japan, the East Asian tigers (South Korea, Hong Kong, Singapore and Taiwan), and United States during the 19 century.

The likely continue success of China and India raises three issues: First, China may become the first major country to not democratize after significant economic modernization, contrary to what the likes of Francis Fukuyama suggest; Second, India’s development model may also represent an alternative model to proponent of Developmental State thesis, where a strong state guide economic development; Lastly, China and India represent the first non-western region hegemon, since the end of 15 century. Theses are issues for me to ponder in future posts.

PS. I initially intended this to be a single short paragraph commentary on the interview. Things got a little out of hand.

PPS. This is my first post written with Windows Liver Writer and I love it. It’s the best full blogging experience by far. Another reason to dump my Mac and jump back on Windows’ bandwagon.