patrick.net

FAB,

great comment especially the last paragraph.

30 something woman who is looking for a relatively successful man in his 40s because her biological clock is ticking, sounds like a nightmare to me :-) I know very well what you are talking about, saw plenty of those, it is sooooo difficult to find a confident, relaxed and attractive single woman in her late 30s. After meeting a bunch of those, you start to understand why they are still single at that age.

@HARM,

(b) Would not result in devastation to the US economy. It would cause a recession, but probably not the worst we've ever seen. Remember, we already generate 80%ish of our GDP domestically; China generates almost all of their GDP through exports/import activity (they import tons of stuff too, like agriculture).

It would hurt them so bad (b) is very unlikely until they (a1) get far enough along that they can command real world economic power like the G7/G8 do, or (a2) they have a big enough strategic military that they can do what they want within their sphere without risk of direct military retaliation.

@Sir Rick of Bulldust Says:

can you explain something? how does a country ‘peg’ its currency

Oh man. Ask me something easy next time.

The short answer is that their Central Bank buys and sells the foreign currency with which they peg in order to keep the exchange rate within a defined band.

The longer answer is that the above is not sufficient because of hedge funds that will try to exploit this and arbitrage the hell out of the CB doing the buying & selling. Hedge funds can make 10s of billions if they can "break" a peg--that is force a foreign central bank to revalue their currency, even by a small amount.

So the foreign CB has to do lots of stuff with reserve requirements, capital controls and interest rates to try to stem the tide of "hot capital" flowing in and out daily. China does this very effectively, but only at the cost of not having a functional free capital market. Others like Japan do it better by not really pegging, but instead "gently influencing" the Yen to be within acceptable range of the USD and EUR, carefully tuned to maximize their export exposure. The BOJ does this by buying & selling USD and EUR, but also by encouraging various patterns of investing and lending within Japan.

Currency pegs are usually good for emerging markets straddled with foreign debt and dependent upon lots of imports and bilateral exports, like many poor African countries. Pegs generally are bad for developing countries which are trying to compete globally, like many of South American country learned the hard way. Currency pegging in China is a unique experiment on a scale not really tested in the global capital markets. You'll find as many "experts" who claim it will all implode as you'll find who claim it is pure genius for either us or them. In reality, it's kind of anyone's guess. I tend to think it will unwind very slowly because China has a good history of strategic discipline over long periods of time.

Randy H,

"You’ll find as many “experts” who claim it will all implode as you’ll find who claim it is pure genius for either us or them. In reality, it’s kind of anyone’s guess. I tend to think it will unwind very slowly because China has a good history of strategic discipline over long periods of time."

Randy, don't know what you're drinking, but just 'cause some Shaolin monk appears to be disciplined in a Bruce Lee movie, that does not equal a history of strategic discipline over long periods of time.

Check out the bottom of the link, good summary of events of just the past 100 tumultuous years at the bottom of the page.

Chi.

http://en.wikipedia.org/wiki/Timeline_of_Chinese_history

Randy H said:
The whole cycle I keep beating on about US debt and its foreign owners is the engine of this risk. China needs to export to us (Mfg labor arbitrage) and India needs to sell to us (Service labor arbitrage, which is just a different harder to account for type of export) in order to fuel their economic expansion. But the more they do it, the less our dollar is worth, which should make their schemes less effective with each passing day. But they buy our dollars to keep the music playing. The risk to them is that they can’t engineer a soft landing, and someday their currency peg breaks. This will result in massive inflation, a reversal of capital flows and abrupt recession. They’ll probably nationalize their industries in defense of their economy, and the US corps invested in offshore operational holdings will lose.

Or they’ll succeed, meaning this game has to go on for decades and slowly unwind.

I see this whole picture quite differently to you, randy, which came up as a quiet and amicable discussion in an earlier thread. I see the Chinese and Indian economies as almost an open-ended and effectively independent system with effectively infinite quantities of cheap labour on tap. The labour arbitrage can go for decades before it's exhausted. One thing they are doing with international ramifications is bringing in foreign currency, and then having the dilemma of deciding where to invest it -- and they may choose to invest in US treasury bonds, etc. It's much like the Saudis have a trillion dollars invested in the US stock exchange because there's nowhere else to put the money except in their mattresses.

There is no nationalist conspiracy in this, it's just short-term decision-making by multinationals who are choosing to offshore to save a buck and maximise profits and return. simple micro-economic decisions with a short-term payoff. i don't see any macro intervention involved at all, apart from govt efforts to bring as much business to china or india as possible. I don't see that the chinese and indian govts have to 'artificially force down inflation' when there is a massive, effectively endless, pool of subsistence-based peasants to draw from. literally billions of people.

There is no doubt that wages etc are creeping up in places at the nexus of the offshoring arrangements, and if the pool of low income people is exhausted, then the arbitrage advantage is gone, so the work would dry up. but the supply of low income labour is effectively infinite. we only see arbitrage diminishing in places like s. korea with smaller populations who quickly escalate their quality of life with industrialisation which first came to the country through labour cost arbitrage. once costs went up, multinationals quickly moved on to cheaper labour countries, leaving the s. koreans to immediately have to get smarter and take advantage of technology transfer and sponsored development, to try to become a new Japan. koreans are determined and fanatical workaholics also, something else that might give them a comparative advantage.

further, the reason that india is service-based and china is manufacturing-based when india has had the advantage of speaking english for centuries is simply about culture -- levels of corruption, the work ethic, the desire (or lack of desire) to get rich, social organisation and social/govt control, the structure of the typical working day, etc etc. the indians have had the potential for decades to industrialise and become a 'factory for the west' to a much greater extent than they actually have -- but the well off and educated indian upper middle class just leave the place asap to get a better lifestyle in the west -- no loyalty lost at all...

FAB said:

Now that I’m older I know that the hot 19 year old sorority girls were leaving the fraternity parties early so they could sleep with good looking 38 year old guys that lived in the Oakland Hills…

FAB, I am unfamiliar with BA. What's Oakland Hills like? Isn't Oakland a dump (compared with Atherton and Menlo Park)?

OO said:

30 something woman who is looking for a relatively successful man in his 40s because her biological clock is ticking, sounds like a nightmare to me I know very well what you are talking about, saw plenty of those, it is sooooo difficult to find a confident, relaxed and attractive single woman in her late 30s. After meeting a bunch of those, you start to understand why they are still single at that age.

I once met a 35-yr old swedish woman at a bar. She's a high-power exec and owns an island outside Stockholm. But, I wasn't interested. There was a 20-yr old cute blonde who just came up next to me. Too bad. In retrospect, perhaps I should give it try. Fuck it. I don't have to work now.

Remember the old system? When you are in the military, as an officer, those middle-class folks (bourgeoises) are dying to marry their daughters to you. You do your own thing -- i.e., ride around, hang out with your buddies, duels, go out to wars and skirmishes, dabble in politics in a later life -- she takes care of house-hold financing and child rearing. It's the reverse right now. Those losers are trying very HARD to make money in order to MARRY UP. FUCK 'EM.

i find our new ‘upper class’ are a bunch of fucking heathens.

heavens, no, they are good church-going republicans with the strictest morals. they are doing what god wants, and just happen to be getting rich in the process -- and that must be because they are blessed...

tsusiat,

Then you may substituted "China is relatively more strategically disciplined than many other countries engaged in currency pegging activity.

This discussion was about currency pegging and how it works.

DS,

Don't confuse the total population with the supply of available skilled labor. In India, for example, much of the population are not candidates for the labor pool.

Danielle DiMartino for the Dallas Morning News did a great job describing the economic fall-out from the bubble and names names when it comes down to winners and losers. She details the "cottage" industries that will flourish as defaults from the trillion dollar + reset becomes reality over the next 18 months.

Yes, there is a "silver lining" but most perma bulls won't be relieved to find that it will come in the form investing in "loan servicing" companies and loss mitigation as more and more lenders are forced to do "loan work-outs" w/FBs. Can you imagine the workload? It's got to be staggering!

Michael Anderson,

Beavers WIN!

I can't believe it myself! Underdogs all the way and facing elimination every game the guys did a great job! Some will go on to the "bigs" but for most it will be a team photograph on their office wall that NEVER comes down! On your death bed you will still have been part of the 2006 Championship Team! I hope they all go on to do great things.

Randy H Says:
DS,
Don’t confuse the total population with the supply of available skilled labor.

of course not, i wouldn't dare. out of the 2.3 billion people in those countries (not counting indonesia at over 200 million and other east asian cheap labour candidate countries totalling hundreds of millions), perhaps only half of the population would be suitable, when you consider that a lot of routine clerical and manufacturing jobs don't require much intelligence or training -- they're the jobs that have left the west and leave a lot of people unemployed that hitherto would have had factory jobs. i'd say you're just looking at between one and one and a half billion relatively poor people... not including africa...

here's a comment by Stiglitz at the last Forbes conference (blegh) about a rough ride:

http://tinyurl.com/bpqws

In India, for example, much of the population are not candidates for the labor pool.

well, if it's just call centre staff, you're looking at university graduates as often as not. and they're none too pleased by the experience after a short while... i got a call from a call centre in the philippines the other day, which was very entertaining. and a really funny one from india telling me a mobile phone was coming to me in the mail.

an australian firm is setting things up so people can work for a call centre from home, and hope that the aussie accent is more palatable overseas, so it is still a comparative advantage even in a relatively high labour cost country -- and the proprietor points out that many of his staff working from home have all sorts of disabilities...

Aussie bid to reverse call centre jobs drain
May 28, 2006

THE Aussie accent is being marketed to British, American and New Zealand companies whose customers don't warm to Indian call centre operators.

Local entrepreneur Daniel Turner is exploiting a backlash against Asian operators after companies began outsourcing operations to India and the Philippines.

"There's a perception, right or wrong, that the quality of [their] service isn't as good as it could be," Mr Turner, 30, said.

"We are looking at reversing the trend of jobs going overseas."

http://tinyurl.com/jqld2

well, australia is now out of the FIFA World Cup after losing a very close match against Italy 1-0 from a penalty goal shot in the 94th minute in injury time. the spanish referee's decision was a highly controversial one.

the previous australian match against croatia (2-2) which kept australia in the competition was also marked by at least 3 controversial referee failures acting against australia (including an obvious handball and a 2 metre dragging tackle by croatia of australia's key goal scorer), and there are accusations of referees steering the outcome of the Cup and biasing decisions towards europe.

>>Michael Anderson,
>>Beavers WIN!

Yeah, I've heard a lot about it. They are a scrappy team.

But I've only been in Oregon 15 years, and I still follow the Ohio teams of my youth. Browns, Indians, Cavs, Ohio State, various high school football teams. I find it hard to get excited by these left coast teams. :-)

There’s also the community of nations bit. You cannot be building a coal plant a week and expect another free pass like Kyoto. You cannot sit with N Korea imploding on your border and take a lead role to rescue them while simultaneously planning on unrescuing Tiawan. A seat at the big table comes with an obligation to behave.

errrrhhhhhh

Michael Anderson,

I was really just as excited for my kids b/c so many of their friends go there and even knew players on the team so it has a hometown appeal for us. For me it's more about supporting the kids b/c I SURE didn't have any money on it. If you get a chance please read Danielle DiMartino's article linked here (I believe the second one down). Dark stuff. Totally plausible, very likely. "Children and dogs living together" type stuff. Enjoy!

Randy H -

you were only talking about Chinese strategic discipline on the currency peg????

That's not what you said, but even if you did, how can a twenty-thirty year peg = a good history of strategic discipline over long periods of time?

Actually, you were using a faulty logical argument:

ie-

China has a good history of strategic discipline over long periods of time (in what is unclear)

Therefore

The currency peg will, in your opinion, unwind over a long period of time rather than imploding.

Randy, you make some sense some of the time, but when you overgeneralize, do yourself a favour and admit it, denial doesn't confirm your point of view....

There is no logical connection between the first statement and your conclusion.

I might as well say China has a long history of corrupt financial genius, without citation or support, in arguing in favour of a slow unwinding of the currency peg....

Sir Rick,

You ain't kidding -- late 30s is as young as it's safe to go. I don't know WHAT these younger ladies were taught or not taught but dating them is like having an 11 year old child. They're little princesses who can't cook or clean, they're financially illiterate (and hence can't pull their weight with household bills), not conversant in any topic except maybe what Prada handbag they want at the mall, have no taste in food/wine/art/music, and then on top of that they're bossy, smug, entitled, and play "senior management" in the relationship. You can't take them anywhere because after a lifetime of coddling, they're totally unrefined and what comes out of their mouth is too often childish and embarassing. Useless! The MILFs are where it's at for sure.

I was at a meeting last week where we were making arrangements for a new executive to come on-board, and all the respective departments where there. The Facilities Manager instructs his twentysomething assistant to start prepping the new exec's office for his arrival and she says "Vacuum? Oh no -- I don't vacuum."

China has a good history of strategic discipline over long periods of time (in what is unclear)

The currency peg will, in your opinion, unwind over a long period of time rather than imploding.

The currency peg will unwind over long period of time. My instinct.

NOT INVESTMENT ADVICE

Peter P

I don't disagree with the conclusion you and Randy have on the currency peg...

I was just pointing out the irrelevance of the particular attached argument supporting that conclusion.

Poor San Diego PHD:

People get doctorate degrees because they love what they do, not because they want more money. Many of the 10 richest people in the world do not even have a degree.

People get doctorate degrees because they love what they do, not because they want more money.

People also get PhD's because they don't want to go into a cube farm with weekly blame sessions, oh and the parties + chicks help also.

I just sent $10 to patrick so he can continue to update the links. Any of you other freeloaders doing likewise?

Come on cheapskates.

tsusiat,

Thanks for the logic 101 refresher. There's no reason to go ballistic on me; I was just talking about my opinion, which I clearly demarcated as such, regarding whether China will be able to maintain their currency peg long enough to engineer a soft landing.

If you have issues with neoclassical macroeconomic theory then so be it; many do. Picking away at the specific semantic structure with ad hominem attacks of your own isn't very productive.

Randy, you make some sense some of the time, but when you overgeneralize, do yourself a favour and admit it, denial doesn’t confirm your point of view…

Please provide an example of someone on this board, myself included, who isn't guilty of that charge, please. If you cannot, then lay off the redundant non sequiturs. This isn't an academic peer reviewed journal. It is a blog.

I was just pointing out the irrelevance of the particular attached argument supporting that conclusion.

Comparatively, China did show some strategic discipline. Even the Cultural Revolution did not tear it apart. That means something.

Perhaps because the Chinese anticipates and accomodates changes, due to the influence of I Ching, they are able to remain still in a changing environment?

Randy,

for a guy who likes to haul out the facts post after post, it's kind of funny you now want to be cut some slack, by saying you were just giving your opinion.

We know it was your opinion Randy, I wasn't saying anything about your "opinion" on the currency peg, I was saying your tacked on argument was completely wrong and disconnected from supporting that opinion.

Dude, all you had to say was, yeah, I overgeneralized.

I pointed out a lazy ill-thought out overgeneralization, I suppose that made you unhappy, but I would hardly call it "going ballistic" by the standards of this board.

Let's see, I wrote:

"when you overgeneralize, do yourself a favour and admit it, denial doesn’t confirm your point of view…"

and you replied

"Please provide an example of someone on this board, myself included, who isn’t guilty of that charge, please. If you cannot, then lay off the redundant non sequiturs."

Dude, why do I need to do that? You didn't answer the question, you asked a question that is irrelevant to the original point!

You still haven't stepped up and admitted you were overdoing it.

What's the matter dude, that's so much simpler, don't you think?

Perhaps because the Chinese anticipates and accomodates changes, due to the influence of I Ching, they are able to remain still in a changing environment?

Thanks Peter. I wasn't aware that I needed to republish the macro analysis from my masters thesis on the economies of China/US/Vietnam/Mauritius every time I suggest (as opinion) that China is relatively more strategic in many historical matters.

Wow, you wrote a masters thesis?

I guess that means your opinions, are, like, more well thought out than us non-intellectuals..

Randal H, never underestimate the importance of Mauritius. It's all Mauritius nowadays.

tannenbaum,

That's what I'm talkin' about!

Did you see the data in the left hand column? Unreal! Mind you all of these figures of 100/150/195% "appreciation" is just from the first quarter of 2000! It shoots holes in the theory (firstly) that there is No National Market! Price increases were pretty uniform (meaning equally ridiculous) across the board. Secondly that the housing bubble is "strictly" a post stock market crash/9/11 driven event! True, those (along with free money) were major catalysts but the NASDAQ was STILL RISING through the first quarter of 2000! 9/11 was still another 1 3/4 years in the making.

I'm not saying this is the "smoking gun" but it tends to lend credibility to the notion that things were getting off kilter before other external influences took place! My advice to the gal in this article? Find another boyfriend.

insert image of kettle boiling...

re-lurk

More gems from tannenbaum's USAToday article:

In San Diego, biotech companies don't bother to recruit employees from outside California, because the cost of buying a home is simply too shocking, says Elizabeth Morris, CEO of the San Diego Housing Commission. Her agency helps 12,500 low-income families pay their rent each month, and there's a waiting list of 30,000.

...Julaine Anton, an 80-year-old widow, was forced out of her downtown apartment because the owner converted it to a condo. Now, she's facing that same threat in her new apartment. She needs her savings to live on, not to buy real estate. "My medical insurance, after Medicare, has gone up so much since I retired," Anton says. The $1,250 monthly rent for her two-bedroom apartment takes up all but $150 of her Social Security check.

Shit, Bob, I thought Prop. 13, UGBs and rent control were these government MAGIC BULLETS destined to "save" poor f--king grandmas from being evicted ever again! California is the PROMISED LAND of Smart Growth, High-Density, Green-Belt, urban social engineering, right? What's the deal here --didn't San Diego get the memo ???

"weekly blame sessions"

Well I don't think I've ever worked the cube farm but I am well familiar with the blame session thing. When working an IPO it becomes a DAILY blame session! Not fun.

tsusiat,

Wow, you wrote a masters thesis?

I guess that means your opinions, are, like, more well thought out than us non-intellectuals..

lol. It means nothing of the sort. My thesis, like most, was just a giant pile of busy work. All I meant by invoking it was that there is an assload of data, all cited and referenced. The conclusions are worth what you pay for them, but the data is all nicely organized for someone with no life and lots of spare time.

HARM,

Isn't it just possible that GSE's "could" have had a positive impact had it not been for the "kid gloves" preferential tax treatment RE gets? I mean I'm asking that in an open ended fashion. Fannie and Freddie were supposed to make RE MORE affordable to an ever broader audience and yet here we are. Would specuvestors be converting apts. to condos (soon to be "repartments") if SFH's were sanely priced?

Randy H

on the thesis:

fair enough and good answer, that makes total sense.

Peace.

not to nitpick, but:

[...] you wrote a masters thesis [...]
[therefore]
[you must think] that means your opinions, are, like, more well thought out than us non-intellectuals..

Is the same sort of fallacious logic. But I'll let it slide as it's probably just your opinion of my opinion.