Chinese structural adjustment (once more)

July 5, 2013

I am posting two articles from the China Economic Quarterly in 2001, by Tom Rawski and myself, that discussed China’s macro-economic performance during the last ‘structural adjustment’ period, when Zhu Rongji laid off 30 million+ state workers.

The point is that there is a big ‘hard landing’ debate going on just now, as we enter a new structural adjustment period. Rawski showed fairly convincingly in his article that in 98-99 real (as opposed to reported) GDP growth dipped as low as 2-3%. With the benefit of hindsight, this did not, however, lead to economic calamity. Indeed the low growth facilitated structural change as Beijing forced the provinces to adjust local economies to be less wasteful.

No two scenarios are ever the same. However, in discussing what is happening in China today, I think it is useful to look back on that late 90s period before the credit cycle that kicked off in 2002.

Let me know if this link does not work:

Rawski 1998-2000 China data issue

 

More:

FT (sub needed) today has a story on shipbuilder Rongsheng running out of cash. And how they are begging government for money. It reminds how credit starvation is the key weapon in the central government’s arsenal.

Stallone, Johnny English, Q, the works

July 3, 2013

obama downcast Johnny English Cameron finger raised

Q Dr Evil

Excellent piece in The Guardian about Da Americun Armee’s efforts to prosecute Bradley Manning into non-existence and how Sly Stallone, or whoever their lawyer is, ain’t making the case so well. If the prosecution team needs a new job after this, they could fit right in in Italy.

Meanwhile the Ecuadoreans claim to have found a bug in the London embassy where Julian Assange has been living for almost a year. Brave Dave Cameroon, we are told, does not comment on security matters, because if he did he might have to admit to being a bit of a tosser. The Ecuadorean Foreign Minister put it more diplomatically: ‘We are sorry to say so, but this is another instance of a loss of ethics at the international level in relations between governments.’

And Evo Morales was ‘kidnapped by imperialism‘ cos they thought he was giving Snowden a lift to La Paz.

Who needs Ian Fleming books, or Mike Myers or Johnny English movies, with all this going on?

BTW, have they managed to catch the guy below yet?

 

 

Later:

Philip Stephens in the FT (sub needed) has a sensible opinion piece to offer. When the FT concludes ‘whatever his motives, Mr Snowden has done the rest of us a service’, I don’t exactly feel out on a limb. Meanwhile, what is the betting that tomorrow’s Economist will be to the right of the FT? Now there is a thing…

 

Singapore reaps what it sowed

June 22, 2013

Sing smog 1 Sing smog 2

 

 

Sing smog 3

 

See the 22 April AFP story below about the life-threatening smog enveloping Singapore. It comes (largely) from deliberately set fires on and around oil palm plantations in Sumatra, fires illegally set to facilitate land clearance.

You need additional information to read the story properly. Here it is. The story identifies two firms as largely responsible for the fires:

1. APP (Asia Pulp & Paper). The tale is too long to tell in detail here. Look it up in Asian Godfathers. Controlled by the Widjaya family, who defaulted on US$14 billion of debt (no, that is not a typing error) during the Asian crisis and then set out to buy the debt back at cents on the dollar. They did this by the most extraordinary acts of financial subterfuge, many of which were run through Singapore-based and Singapore-‘regulated’ institutions. A 2002 petition by creditors to the Singapore courts to have APP taken over and run by a local administrator was rejected. The Widjayas are serial law breakers. Where is their business run from? Singapore. Where did they hole up, and who protected them, after the Asian crisis? Singapore.

2. APRIL (Asia Pacific Resources International Holdings Ltd). Controlled by Sukanto Tanoto, who in the wake of the Asian crisis in 2006 was listed by Indonesian state bank Mandiri as one of its six biggest delinquent debtors. He owed Rupiah5.4 trillion. Tanoto was also under investigation for fraud at his own bank, Unibank, which after the Asian crisis was reported by regulators to have extended 51% of its loans to Tanoto firms; the maximum legal limit for loans to related parties was 20%. Tanoto is a serial law breaker. Where is his business run from? Singapore. Where did he hole up, and who protected him, after the Asian crisis? Singapore.

Finally, what is the east Asian market where it has been least possible to distribute Asian Godfathers since its publication in 2007 (way more difficult than in ‘authoritarian’ China). That’s right. Singapore!

Palm oil companies behind Singapore smog: Greenpeace

Fires on Indonesia’s Sumatra, which have cloaked Singapore in record-breaking smog, are raging on palm oil plantations owned by Indonesian, Malaysian and Singaporean companies, environmental activist group Greenpeace International said.

“NASA hotspot data in Sumatra over the past 10 days (11-21 June) has revealed hundreds of fire hotspots in palm oil concessions that are owned by Indonesian, Malaysian and Singaporean companies,” the group said in a statement received by AFP.

Singapore’s smog index hit the critical 400 level on Friday, making it potentially life-threatening to the ill and elderly, a government monitoring site said. On Saturday morning, the reading was at 323, still in the “hazardous” zone.

Parts of Malaysia close to Singapore have also been severely affected by the smog this week.

“Fires across Sumatra are wreaking havoc for millions of people in the region and destroying the climate. Palm oil producers must immediately deploy fire crews to extinguish these fires. But really cleaning up their act starts with adopting a zero deforestation policy,” said Bustar Maitar, head of Greenpeace Indonesia’s forest campaign.

The Indonesian environment minister Balthasar Kambuaya said Friday that a team has investigated eight companies suspected to be behind the fires and promised to reveal the companies’ names after the probe.

A senior presidential aide Kuntoro Mangkusubroto said Friday that the fires happened in concession areas belonging to Asia Pulp & Paper (APP) and Asia Pacific Resources International (APRIL).

“It is very clear that the fires are in APP concessions and APRIL. We need to settle this matter,” he told reporters while showing the distribution of fires from 1 to 18 June in concession areas in Riau.

APP, the world’s third-largest paper producer said in a statement late Friday that “ground verification” detected “only 7 points that are actually forest fire, affecting around 200 hectares of land”.

“They are under and being controlled by approximately a thousand fire fighting crews and their team. Our team’s preliminary investigation found that 5 of the fires were set by the community to clear land for crops and 2 cases are still under investigation”, APP added.

APRIL could not be reached for comment.

Indonesia stepped up its fire-fighting efforts Friday by deploying aircraft to artificially create rain and to water bomb the blaze.

The haze crisis has caused a dramatic escalation in tensions between tiny Singapore and its vast neighbour, with the city-state repeatedly demanding that Jakarta steps up its efforts to put out the fires.

 

More:

Sunny places for shady people.

Weekend reading and viewing

June 21, 2013

Just started watching The Bridge, but I imagine the whole world has seen that by now. Not too bad. Below is the first 14 mins, enough time to decide if you like it.

[youtube=http://www.youtube.com/watch?NR=1&feature=endscreen&v=EH3woPBLQAs]

What journalists deserve when they ask incredibly stupid questions. We’ve all been there as hacks. But this woman really cops it from Lou Reed. An interviewee after my own heart. See the very end.

Martin Wolf’s piece on Greece (sub needed) stuck in my mind this week.

The death of Michael Hastings in a car crash made me read his remarkable Rolling Stone story about Stan McChrystal in Afghanistan. It was the end of McChrystal in Afghanistan. He is now reduced to speaking with me at a conference in Wisconsin next week.

Booked my tix for the Young Lions, below, in the Django Rheinhardt festival in NY next week. What is not to like?

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=eEPlVddEpis#at=81]

Only thing you can really say against them is that the original guy had two less (functioning) fingers

[youtube=http://www.youtube.com/watch?v=Hq0tPjdfHME]

Just in:

US government files sealed complaint against Snowden. Britain’s government and GCHQ are mindless lickspittles (again); with their own, non-existent moral bottom line.

[youtube=http://www.youtube.com/watch?v=5yB3n9fu-rM]

The Snowden White House petition will go through 100,000 signatures today, 22 June. If you are an American, sign this thing. You’ll have something that makes you proud to tell your kids.

Obama (below) does a good job of defending what has been going on (though he weasles around the hard bits). But in the end, he is wrong. Because he is defending a means of opposing terrorism that rests on intrusion into privacy and the support of despotic allies, with money and guns, instead of solving the problems that create terrorism in the first place. He needs to break out of this way of thinking. If he wants to be the greatest American president since Truman — and he should want that — he needs to go back and look at the way in which the United States headed off insurgencies in the 1945-52 period by supporting land reform programmes and tackling the root cause of poverty and anger in the third world. Think bigger. Drones and snooping are not the stuff of a great American leader.

[youtube=http://www.youtube.com/watch?v=7L6J4Jyrxws&NR=1&feature=endscreen]

It takes an anthropologist…

June 20, 2013

… to tell us what neo-classical economists never could. Read this. And then, if you are a neo-classical economist, try fitting it in your spreadsheet.

Joris Luyendijk writes a banking blog for The Guardian.

After some reflection, I think that the Vickers report is too tame, driven by some rather weak desire to be different to the US re-regulation of the finance industry. Britain should be different by doing better than US re-regulation.

The place I would start would be by turning the retail banking operations of RBS, and perhaps Lloyds as well, into mutuals, controlled by employees and depositors and restricted to doing what the customers want and think is right. Of course, this is not simple. I bank with Nationwide, which offers better service and costs than normal banks, but whose senior management still spends too much time aping the behaviour of bankers rather than trying  to think like a mutual society. We should go mutual at the retail level and concurrently improve mutual governance and incentives for mutuals to lend in ways that are profitable and help the economy (like encouraging them to develop project finance units for business lending).

Beyond that, no ring-fence. Just a total separation of the retail and industrial working capital functions of the banking system from more speculative activities. The bankers say it can’t be done. But that is because they don’t want it to be done.

It can be done. It just requires the political cojones.

More:

Bank of England calculates a £27bn capital shortfall at UK banks at end 2012 as the deleveraging process continues. Reported in the FT (sub needed) here.  Reported here in The Guardian, which notes that Nationwide was only short £400m. Note that the capital shortfalls will largely be paid up by the poor, who do not own equities and keep what little money they have in banks, which pay no interest as a result of the financial crisis. The poor are also beginning to pay in terms of rising inflation. Socialism for the rich, mon brave, capitalism for the proles!

Even more:

Just seen that Obama repeatedly referred to George Osborne as ‘Jeffrey’ at G8. Then he claimed he was confusing George with his ‘favourite’ r&b artiste, Jeffrey Osborne. Surely this is some bad-ass mind games? Obama can’t really like Jeffrey Osborne, can he? On the Wings of Love? What he’s really saying is that Jeffrey Osborne is probably George Osborne’s idea of an r&b artiste… I am actually sitting here feeling sorry for George.

Next day:

Spurred on by the anthropologist, Martin Wolf makes his boldest statement on bank/financial system reform (that I have seen) in the FT (sub needed). Not sure why they aren’t flagging it on the front page just now (FT pension fund all in bank stocks?). I agree with most of what Wolf says, though I reiterate that this ring-fence idea is silly. If the Americans don’t need it – and the concomitant risk – why do we? Also, I don’t think we need special laws for locking up bankers. I am as keen as the next man to see some City types doing time, but it should be done through regular legislation. The game is to have a simple regulatory structure that forces the money people to write stuff down, so that when they break the law there is a piece of paper that the lawyer can hold up in court and say: ‘M’lud, this asshole needs to go to prison.’ If you want a good new law, let’s have one to make the granting of honours in the British system a matter for an independent panel, so that people like Fred the Shred and Howard Davies don’t get knighthoods in the first place.

A reader sends in this link to a Youtube video. It’s kind of funny, although the authors of the skit don’t understand the first thing about John Maynard Keynes, judging from the lyrics. It’s kind of British liberal Tea Party humour, if that is possible, which I guess it must be because they’ve done it. Thank god it’s Friday…

Snowden

June 19, 2013

This guy (below) from City University in Hong Kong knows what he is talking about, relates Snowden’s place in US society to the development of institutions in Hong Kong.

I’ll be in the US next week and look forward to asking various government people what they plan to do about the fact that James Clapper lied to congress. I am not clear why it is taking so long to prepare the warrant for his arrest. (Have a look at the Guardian on this,  and the Washington Post.)

It’s pretty clear what Obama needs to do: pardon Manning and Snowden and put Clapper in the can for six months to send a message to anyone else having Nixon-like ideas about how to run America. He don’t even need a cigarette on the roof of the White House to think this one through. Of course Obama should also send the message that any more leaks are likely to lead to decades of prison. The big cats on Iraq and cyber surveillance are probably already out of the bag.

What Snowden can teach the Occupy Central movement

Wednesday, 19 June, 2013, 12:00am
Comment›Insight & Opinion
Surya Deva
Surya Deva says civil disobedience has a rightful place in the democratic playbook, and Hong Kong’s Occupy Central movement can learn a thing or two from Snowden’s approach

Since Edward Snowden first broke cover in Hong Kong, many people have been puzzled about his choice of this city to take on the US government. Despite being wedded to the rule of law and having independent courts, Hong Kong is not a “safe haven” against extradition to the US by any means. Nor is the Hong Kong government known for treating asylum claims or refugees very humanely.

Snowden’s initial explanation that he chose Hong Kong because of its “strong tradition of free speech” also could not be the tipping point; there are many other jurisdictions with similar or even higher levels of protection of free speech.

If used properly, civil disobedience can achieve what judicial reviews and elections may not accomplish

So why Hong Kong? Was it to embarrass the US about its own human rights record? After all, human rights defenders – like the blind activist Chen Guangcheng – have looked to the US for protection from repressive and authoritarian regimes.

Snowden’s recent interview with the Post brings more clarity on his rationale for choosing Hong Kong. He said: “I am not here to hide from justice; I am here to reveal criminality.”

What Snowden is seeking to do resonates clearly with civil disobedience, and Hong Kong is not a bad place to practise this. The idea of civil disobedience has been popularised here of late by the Occupy Central proposal. Nevertheless, the debate in the media about its propriety has generally shown a lack of a clear understanding of this concept.

Over the years, many renowned thinkers and political activists – from Henry Thoreau to Mahatma Gandhi, Martin Luther King, John Rawls and Ronald Dworkin – have articulated the contours of civil disobedience or practised them. Although their ideas vary, in my view the following six key conditions should determine whether civil disobedience is a justified device in a democracy:

  • It must challenge an unjust action (a law, decision or policy) of the government. The action may be regarded as “unjust” with reference to a higher authority, such as one’s conscience, or furthering justice, human rights or any other core constitutional value.
  • The unjust action should be a matter of wider public interest, rather than affecting the interests of only a selected few. This condition will, in turn, imply a certain degree of public support.
  • Civil disobedience should be pursued with the objective of pressuring the government to change the unjust action.
  • Civil disobedience aimed at challenging an unjust action should be announced openly and publicly with advance notice.
  • It is vital that civil disobedience is peaceful and the people taking part are willing to bear all legal consequences of breaking what is perceived to be an unjust action.
  • Finally, civil disobedience should generally be employed as a last resort.

When considered within these boundaries, civil disobedience can strengthen the rule of law and constitutionalism, rather than being a threat to them. In fact, it is arguable that people in a democracy not only have a right but also a duty to resist unjust, albeit legal, measures taken by the government in certain circumstances.

I believe Snowden’s action and rationale fall within the above contours of civil disobedience. It appears that the National Security Agency has been exercising sweeping surveillance powers without many checks and balances. This, in turn, has unreasonably curtailed several human rights.

In view of the extraterritorial reach of the surveillance measures, the matter is of global public interest. Snowden’s disclosures are apparently driven by a desire to change the status quo rather than securing monetary benefits or cheap publicity. There can hardly be any doubt about the peaceful nature of his actions.

By declaring his identity and whereabouts, Snowden is willing to face the consequences of breaching US laws if a fair trial can be guaranteed. Nevertheless, it is legitimate for him to seek asylum under international law and/or contest before the local courts his extradition to the US to avoid persecution for political reasons.

It is true that Snowden did not give advance public notice of his disclosures. But is it reasonable to expect advance notice in such special circumstances? Perhaps not.

Could Snowden have tried something else first? It is unlikely he could have succeeded in exposing (and potentially changing) the surveillance system while remaining in the US or by complaining to higher authorities. The US courts have not proved to be a robust guardian of human rights amid the “war on terror”.

What could the Occupy Central organisers learn from Snowden? First, they need to identify more clearly the unjust action the proposed civil disobedience seeks to assail. They should also engage the public in diverse settings and without setting artificial limits on their participation.

On this front, too, Snowden played a master stroke by expressing his intention to rely not merely on the courts, but also on “people of Hong Kong to decide [his] fate”. Snowden is trying to secure what is necessary for successful civil disobedience: mass support for a public cause.

Moreover, the Occupy Central organisers should articulate exactly what it wants to achieve, how people would benefit and why the fears expressed by the pro-establishment camp are groundless. Apart from ensuring the peaceful nature of the movement, the organisers have to explain which other means they considered to achieve genuine universal suffrage before embarking on the Occupy Central path.

The civil disobedience discourse also has advice for governments. Dworkin, for example, argues that the government should show tolerance and act with caution. If there are prosecutions, Rawls contends that courts should take into account “the civilly disobedient nature” of the protest and reduce or suspend legal sanctions.

Chief Executive Leung Chun-ying has said Occupy Central is likely to be unlawful and non-peaceful. In other words, the government will not tolerate it.

It is time to recognise that civil disobedience, within well-defined boundaries, can play a constructive role in controlling power and furthering constitutional objectives. In fact, if used properly, it can achieve what judicial reviews and periodic elections may not accomplish.

How the Hong Kong government and its courts deal with any US extradition request for Snowden, and how they treat people participating in Occupy Central, will define not only the future of Hong Kong’s autonomy, but also its status as the bastion of freedoms and the rule of law within China.

Surya Deva is an associate professor of the school of law, City University of Hong Kong

More:

The only thing I have written about Manning.

Here is the best-known signature campaign to pardon Snowden. 85,000 signatures already. 15,000 more by July 9 and Obama will have to make some kind of formal response. I am not signing at this point because I think it ought to be 100,000 Americans who sign (Be helpful and post a comment if you know whether non-Americans can sign).

The manning signature campaign has been less well organised, less well-worded. Here it is.

Pilling frames the moral debate in the FT (sub needed).

On the road

June 17, 2013

The longest trip I ever made away from the family. Three-and-a-half weeks including Astana.

From there I arrived in Beijing. Domingo Cavallo sitting in the seat next door except I didn’t recognise him. We shared a cab into town and had a nice chat.

Various talks in Beijing, but also desperately trying not to stop to smell the rose(s) and get on with my research. The revelation of this trip was Line 6, newly opened, of the Beijing Underground. What a line. It connects, on a straight, east-west route, the greedy gweilos of Chaoyang district and the paranoid, pipe-hitting, nationalistic politicians and bureaucrats in the Beihai North and Chegongzhuang areas. Plus it ends up in IT-land Haidian. It’s the golden line of money and power, with the fastest trains to match. Well built.

Beijing subway

Tianjin was easy on the 300kmh train. Back in the day I was pulled over on the expressway doing 160kmh. You are the fastest today, said the policeman. ??, I replied. He popped the fine in a briefcase, heaving with cash. Still took 2 hours door to door. The train is 30 mins. Then an interesting factory manager. Minimum wage in Tianjin this year is Rmb1,800. Ouch.

Then 5 hours on the high-speed to Shanghai. I never liked the place, but this time, for the first time, they charmed me. The urban planning is just better than Beijing. The people are calmer, less bullshitty than they were. Beautiful dinner with friends. Small dogs. I am still obsessed with where all the dog shit goes. They say no owner cleans up after the pooches. It’s the waidi ren, the peasant slave labour, that just picks up the shit early in the morning while Shanghai is dozing.

No high-speed to Guangdong yet, so took the sleeper. Beers in the dining carriage with a businessman who told a story you just could not make up. It’s like they just want to write the next book for you, take the weight… We trade numbers. A Burmese-Chinese returnee who can’t speak Chinese and a Shanghainese too.

In Guangdong I have to go to Zhongshan, near Zhuhai, to see a rather smart company. Seems to me a lovely place, not visited in 15 years. Taxi driver says street crime is on the rise. But I think the people are great, open, smiling at the gweilo.

Then across the border for a weekend on Coloane, at Pousada de Coloane. Sunday lunch at Fernando’s, my favourite anywhere. You never could book. However they have introduced a piece of paper on which you write your name after 12.30, when restaurant already full, and they use this to determine who at the bar is next. Even Portugal is making progress. I lament the changed shape of the Vinho Verde bottle.

Hong Kong is a whirr of money pigs and talks. In the midst I am drinking ??in the FCC when a svelte young colonial strides in. It is Hemlock. I hardly know him. Convex chest, unhunched shoulders, a smile… He tells me, apologetically, that he has ‘a girlfriend, almost half my age…’ Wonders will never frickin’ cease. Of course he still shoves a plate of noodles in his face at 11am. But Thus Spake Zarathustra just came to a movie theatre near you.

All in all, a lovely trip. Problem is that in the whole month only Bowring tries to really nail me, with a question at the FCC. God bless. It is one of the points that Charlie Munger lists in his guide to gentle informational murder. They just don’t challenge you. And yet without the struggle, we cannot progress.

Finally, I get home. And the wife tells me to stop swearing so much. Gravity, at last.

 

Some media stuff:

Pilling on Indian IT after a chat

Marginal Revolution likes the book. And is probably right that neither beach reader nor academic reader will be happy.

Tom Holland on the book.

Jake Van der Kamp responds to Tom Holland in the SCMP, except without reading the book. This is staggeringly lazy. File under Howard Davies. And I have often quite liked Van der Kamp’s stuff. But this thin, indolent drivel is a pretty good guide to why so many millions remain poor. How can anyone serious pass judgement on something they have not read? It is a book about stages, that takes in your view, Mr Van der Kamp, and the other one. Separately, and somewhat pedantically, ‘fulsome’ does not mean ‘full of’. It means ‘insincere’.

And now Holland responds. His main point is valid. I said at the beginning (and end) of How Asia Works that this is a book about economic development. Real development is also about social and political development. But I was not willing or capable to try to put the other parts of the equation in the same book. It would be too complex. And people would not absorb the basic message about economics. The next book will deal with the institutional stuff.

RTHK on the book. I had to download a plug-in to run this, but assume the average reader is more tech savvy than I. Trick is to do all this and then hit the play button to start the show. But first go to ‘Select segr’ and choose the 11.05 slot. With Phil Whelan. That is where the interview is. Very clunky stuff. But listenable if you get there. ACTUALLY… just did this again a slightly different way. Went here. Then just scrolled down the page and hit the button next to ‘Joe Studwell — How Asia Works’. Took a couple of secs to load up, but then fine.

Podcast interview by the Economist Intelligence Unit in Hong Kong. It was the end of the day. I am more tired than at RTHK, but still a decent chat.

Amcham in Beijing. The podcast should be here.

More to come when I remember what it was.

Spare Ball

May 26, 2013

Astana1 Astana2 Astana3 Astana4 Astana5 Astana6

An interesting couple of days in Astana in Kazakhstan at what I initially dubbed ‘Davos in the desert’.

Except that the steppe around Astana is surprisingly fertile, and the new capital that has been constructed there sits on a large river. They spent a lot of money.

I wasn’t sure about coming. A ‘World Anti-Crisis Conference’ run by a low-population petro-state with a developing onshore financial centre structure didn’t seem the obvious place to address the world’s problems.

Kazakhstan’s global image is largely defined by the Borat movie, Prince Andrew selling his home to a Kazakh politician for what was reported to be a lot more than the asking price (he is also patron of the British-Kazakh society), the loucheness of Astana’s nightclubs, and the generally hedonistic behaviour that goes on.

In the end it took a fee to get me there, although less than I get from multinationals, brokerages and industry associations (so that’s ok, then). I don’t know what the assorted economics Nobel laureates and politicians were being paid, but I had a pretty good turnout for a talk organised by UNCTAD on the theme of ’50 years of development: what have we learned?’ This next link should connect you to my official statement to the conference based on what I said.

Joe Studwell Astana Statement final

I thrust copies of the statement into the hands of Romano Prodi, Dominique Strauss-Kahn, the Saudi development minister, the Chinese Under-Secretary General of the UN, Domingo Cavallo and Edward Prescott. Well, what’s the point in going, otherwise? Mr Prescott, I am afraid, moved swiftly into poll position as the single most historically illiterate Nobel laureate in economics I have met. Note that the sample size is only 4. In his remarks about Japan’s 20-year economic hiatus, Prescott ‘explained’ that Japan developed through policies of free trade and then, from the early 1990s, ‘started to subsidise everything’ (my italics). I kid you not.

Finally, a bit of cultural fun. Standing in line at an event at this conference, someone started telling me about the very popular Kazakh game of kokpar. It is a kind of polo, played with a dead goat as the ball. This guy claimed the animal is decapitated before play commences although I didn’t have time to check. Two teams wrestle this dead goat, drop it, lean out of the saddle to pick it up, ram each other’s horses and so on, all in an effort to dunk the goat into a pile of tyres at either end of the field that is the goal. But what really took me is that sometimes the goat carcass gets eviscerated or otherwise damaged beyond a limit acceptable for play. The teams therefore have a spare ball, in the form of a live goat shackled at the side of the pitch. That must be one very unhappy spectator.

More:

Apparently I am among the world’s greatest minds.

The trip to the Kazakh embassy in London made me think about where comedians get their ideas from. I went to the Kazakh embassy in South Kensington, but unfortunately they had moved it to Pall Mall. They just forgot to change the web site. That was half a day gone, so I didn’t feel so bad about the fee. (I see that now, 26 May, they have changed the site.)

Filling out the form, I read that:

‘Wrong filling of application form can become a cause of refuse in issue of entry visa.’

Thank gog my submission accurate was.

Still, the thing was a lot more worthwhile than I expected and if it keeps getting better it could even be important.

How bubbly?

May 18, 2013

The FT decides that what I predicted in 2010 has already come true — namely an equity market bubble. I have been thinking about this myself and am more prone to concur with Krugman that this is not yet a bubble. Meanwhile, the answer to one of the sub-questions Krugman poses — about the strength of corporate profits in the last two years — is probably the one given by Hyman Minsky. Minsky argued that financial crises in countries where governments are a large share of the economy are perversely good periods for corporate profitability as costs fall but government steps in to make up for missing private sector demand (in this latest case more with QE than with direct fiscal action, but with a fair bit of the latter in the US).

Another sub-question is why employment has held up much better in the UK (less fiscal stimulus versus the US) than almost anyone predicted (see charts below showing forecasts by the British government’s Office of Budgetary Responsibility. Graham Gudgin, who provided these graphs, argues that employment has been better than expected in Britain because very low interest rates have benefited firms’ cash flows (highly sensitive to interest rates) and encouraged them to hang on to staff, even as they rein in capital expenditure. Firms can be profitable and maintain reasonable employment levels even as they doubt the economic outlook. This sounds plausible, but if true it suggests, as Gudgin further argues, that unemployment is unlikely to fall more as QE is reduced, and then interest rates rise. In other words, on the present policy trajectory, the employment outlook in the UK is less sanguine than most people believe.

Gudgin image 1

Gudgin image 2

 

Tangentially related, here is a piece from John Kay from earlier this month that is worth reading if you want to understand the sneaky moves George Osborne is making towards creating a British Fannie Mae (60 years after the US one was actually needed), and thereby creating off-balance sheet financial risk in a manner that both Blairite and Cameronite governments been guilty of. As Kay says, Osborne should support the construction sector by increasing housing supply by on-the-books investment, not through voodoo accounting that encourages more turnover of the existing stock of property. It is hard to know whether to dislike him more for the narrowness of this thinking or for his political sliminess.

 

 

 

 

Weekend reading

May 18, 2013

Just three items.

Elanah Uretsky has a very nice piece in The National Interest on yingchou (??), the merry-go-round of Chinese male bonding culture involving smoking, drinking and sex, and the health and family consequences.

Mohammed Hanif does a reasonable job of explaining the recent Pakistan election featuring Imran Khan (very rich) and Nawaz Sharif (much richer) contesting leadership of their very poor homeland.

And the FT has a nice graphic with click throughs showing the biggest real estate developments in central London.