Two points today. First, a lot of the wealth of Greater China is about to experience a generational turnover. Greater China is defined for this purpose as the People's Republic, including the special administrative district of Hong Kong, AND the Republic of China, aka Taiwan. Trillions are about to change hands as a critical cohort of old guys dies off and leaves their world to their heir. Second, IMHO, the People's Republic is not about to attack Taiwan. There is a fair amount of saber rattling right now, but the PRC sees its way to becoming a great regional hegemon and that way may be a lot clearer if it is seen as a force for order in the region. The relevant region is just about everything south of the old Soviet Union and north of the equator, stretching from Ethiopia to Indonesia. The People's Republic wants peace with the other China so Greater China as a single entity can become the hegemon in that vast region. A third point, subsuming each of the first...
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People who wonder about the contents of the defunct website Vote.net may never be able to see any of it. Except for the three items I highlighted last week. Why those three? There was a stochastic element to the rescue operation, I grant you. But the three I selected might well go into a time capsule entitled "things politically conscious people were talking about in the spring of 2022." Let us go over why. My "Science" item was not about science, in any purist sense. Nor was it about technology news, because the tech developments that provide some grounding for it are old "news" indeed. It was about the global competitive structure for one particular well-established technology. Greater China (a phrase one uses to combine Taiwan with the PRC) dominates the world of semiconductor manufacture. Taiwan alone, a smallish island, manufactured 22.4% of chips created anywhere in 2020. The People's Republic, that huge dragon with a curved belly near Taiwan...
Our Masters don't want us to be able to buy and sell to each other without everything showing up in official centralized ledgers. They don't like ca sh. They don't like cryptocurrencies either, but they have learned from them. The new step in the War on Cash is the central bank digital currency (CBDC). This simulates a cryptocurrency, but of course the decentralized feature that has long been part of its appeal is gone. As James Rickards wrote recently on Zero Hedge , "[A] CBDC is not a new currency. It's just a new payment channel. A digital dollar is still a dollar. A digital euro is still a euro. It’s just that the currency never exists in physical form. It is always digital, and ownership is recorded on a ledger maintained by the central bank." You might well say: so what? a lot of dollar transactions are already digital in one way or another. I use a plastic card to change the digits in various databases. By swiping the card, an account that indicates...
On January 13, 2020, the US Treasury Department de-listed the People's Republic of China as a currency manipulator. It is worth our while pausing a bit over this. https://www.reuters.com/article/us-usa-trade-china/u-s-treasury-removes-designation-of-china-as-currency-manipulator-idUSKBN1ZC2FV There are three obvious questions that come to mind: 1) why does the Treasury maintain a list of currency manipulators? 2) why was the PRC on the list? 3) why is the PRC now off the list? The most consequential currency manipulation on the planet of course is that of the United States, arranged jointly by the Treasury and the Federal Reserve. The US dollar continues to serve, through a sort of institutional inertia, as the world's currency OF currencies. And plainly its value IS manipulated for a range of political purposes. But just as plainly the US doesn't want other countries challenging it for the title of master manipulator. And China, which aspired to have its yua...
https://www.rawstory.com/2019/10/trump-trade-adviser-busted-for-making-up-whimsical-pen-name-to-quote-himself-in-his-books-for-years/ The only scholarly supporter of Trump's trade policies that Trump has been able to cite over the last three years ... turns out to have been writing fiction. Who'd a thunk?
Here’s a key point about trade. A bilateral trade deficit is NEVER by itself a policy issue. Consider a microeconomic parallel. I have a severe bilateral trade deficit with my barber. I’m a content provider for websites and my barber doesn’t even HAVE a website. He has no need for my services at all. But I regularly need my hair cut. So the trade between us is one way. I pay him cash, he provides a service to me. Is this alarming? No. Why not? First, because I do need the hair cuts and my barber does a good job of providing them. Second, because the price he charges is fair. If it weren’t fair, there would be other barbers in the world to whom I could turn. Third, because trying to cut my own hair would be an unproductive waste of my time — time better spent preparing content for websites. Likewise, there is nothing alarming if the US sells little to the People's Republic of China, and China sells a lot of stuff to us. In that case, China is the barber. Now, if I ...
October 1, 2016 was an important day for international money (monies) and an important day in the history of the People's Republic of China. The International Monetary Fund added the Chinese yuan to a basket of currencies that it uses for its loans, known as the Special Drawing Rights currencies. The SDR list also includes the US dollar, the Japanese yen, the British pound, and the euro. That's it. Full stop. With the addition of the yuan there are bow as many SFR currencies as there are veto power countries in the UN Security Council. One confusing fact about the yuan is semantic: it seems to be used as a synonym with "renminbi." Actually, the yuan is the base unit, the renminbi is the currency, in much the same way that the "pound" is the base unit of the British "sterling." But over the last few decades, "pound" has become the most customary term in any context, and "sterling" is finding itself moving into the linguisti...
Finishing up a thought of yesterday's. Though recent North Korean rocket launches have sent projectiles in the general direction of Japan, and though Japan is the "former colonial power," I very much doubt that there is any close connection between those two facts. Why? Because I ask myself, Where else could they have directed those missiles? Southward? Only when they're ready to resume the war paused more than 60 years ago. North? Siberia, a/k/a Russia. They wouldn't dare. West? The People's Republic of China. Again, they wouldn't dare. They send the missiles over the open seas, even though that makes Japan nervous, because that is the only testing range they dare employ. Mystery solved. You're welcome.
As I said in yesterday's entry, Wade argues that the human race has continued to evolve subsequent to its spread across the eastern hemisphere. When it had spread, it was in effect divided into three habitats: Africa, east Asia, and 'the rest,' that is, all Eurasia west of the Himalayas. The geographical barriers were great enough to make further evolutionary (genetic) change a matter of divergence. From this situation arose distinctions among races/subspecies that are not "social constructs," but genetic facts. As the result of a period of climate change and melting ice caps, rising sea levels cut Australia off from East Asia, though allowing for a lot of "stepping stones" between. This allowed for the divergent development of the Aborigine people of Australia. Later, around 15,000 years ago, the northernmost east Asians, Siberians, crossed into the Americas. Some genetic divergence has arisen subsequent to that crossing, too. Thus, by the time...
I generally ask myself at this time of year what were the biggest stories of the past twelve months in business/financial news. Of course, I choose the ones I do largely because they illustrate an important theme, and in the list below I'll spell out and boldface the theme. Yet the theme itself isn't the story. In terms of regional mix, with this line-up I've one whole-Pacific-basin story (March). One story is Australian (December), two European (January and June), one Chinese (May) and one Middle Eastern (July), The remaining six are US based (February, April, August, September, October, November). A nice thematic point: I both begin and end with issues over different currencies both traditional and innovative. January: Currency wars I: Switzerland abandons a peg of the franc to the euro (at 1:1.20) that has lasted for more than three years. The suddenness of the abandonment takes many market participants by surprise. February: Economics of crude oil ...
I received an annual report from a money market fund recently. It includes a Q-and-A with two portfolio managers: Joanne M. Driscoll and Jonathan M. Topper. I'll pass along a bit of their wisdom here. The first question is, "Please describe the market environment for the 12-month reporting period ended September 30, 2015?" They respond in part thus: "The steep decline in commodity prices was especially noteworthy as low oil prices have eased inflationary pressures in the U.S. economy -- keeping inflation well below the Fed's 2% target for price stability. ... the central bank left its benchmark rate unchanged at its main policy making committee meeting in July, but added that it expected to begin raising short-term rates before the end of 2015. At their September meeting, Fed policymakers delayed raising the key short-term interest rate, citing weaker macroeconomic conditions abroad and the heightened market volatility brought on by the People's Ban...
A quotation from Zachary Karabell's book, Superfusion: How China and America Became One Economy and Why the world's Prosperity Depends on It (2009). [By] 2003, the U.S. economy had become a mystery to most of the people charged with explaining it [a mystery] that was perfectly captured by Alan Greenspan in testimony to Congress [two years later] when he confessed to confusion about the 'interest rate conundrum' of long-term rates staying flat even as central bank rates fluctuated widely. That conundrum has only become more prevalent since, and China and technology are the causes -- along with the inability of people and institutions to adjust their models and orthodoxies. The statisticians kept measuring what they could measure and therefore kept missing the radical shifts that had occurred.
There are, it seems to me, many situations in which an explicit exchange of A for B is punished by the law or by societal disapproval or both, but an implicit exchange is tolerated. I'll just mention two. My real point here is the second of them, which is a simplified version of something that has been in the news recently. 1: Prostitution. A john pays a hooker, the hooker provides sex. It is all very transactional. I understand that undercover cops posing as prostitutes are told to wait for an 'explicit offer of cash' before they can make the bust. [News you can use!] On the other hand, if we see an elderly and wealthy man in the company of his stripper girlfriend 50 years or more younger, we generally figure that the A-for-B exchange is implicit, and not so immediately transactional. Like Anna Nicole Smith and J. Howard Marshall. We may shrug at the gold-digger/sugar-daddy connection, we may give it an indulgent chuckle. We don't call the police, nor do we gen...