Smokes for Karl

I just watched a video with a 30 year veteran smoker promoting this product. He thought it was great, he switched over in just one day. "Electronic cigarettes so you don't feel like a criminal!"... "You' can't do this on the patch!"

Allen Carr set me straight, and I ain't going back.

Check out the proud kit owners braggin' about making "water-vapour rings",

Inflation in China...a feature not a bug?

China has had some high inflation this year, 5.1% annualized rate in November, and now 4.6% in December. Those numbers really don't seem that high, and inflation supposedly doesn't get really nasty until wages have to be indexed, creating an inflationary spiral. (Prices go up. Workers demand more money to pay for stuff. Prices then go up again, as labor costs more. Workers then demand yet more money...repeat until you reach Brazil or Argentina.)

So China is fine, right? They don't index wages and have a vast pool of labor to exploit.

Actually, maybe not. Local governments have started to raise minimum wages multiple times this year, and by large amounts. You do this twice in one year and if I was a worker I'd start expecting it.

Workers also went on strike last year (not something usually seen in Communist China) and got big pay raises at a Japanese engine plant. I would imagine that they think they could do that again if needed.

Chinese New Year provides a great excuse for price increases, too. And not just for goods and services. Workers can sit at home and wait until wages go up enough to stir them to go back to the coastal factories. Or just find work near their ancestral homes instead as factories come to them. They may take less for a while to work near home, but I bet the labor arbitrage between coastal and interior China doesn't last long.

This seems to me to getting close to a quasi-indexation of wages - the sort of expectation that you will get more money (and rightfully so as food prices soar in China the workers need it in many respects.) This is what cause runaway inflation, a perception that everything will keep going up in price, so I'd better jack my price up too.

Now, here is my crackpot theory. I think the Chinese powers that be may actually prefer inflation, especially wage inflation, than to have price stability. I think they are letting it happen, perhaps even unintentionally, for the following reasons.

Obviously, one-party rulers that base their legitimacy on delivering the economic goodies have to keep the boom going as long as possible. Who wants to be the Suharto of China? So best to err on the side of boom not bust. Hell, that's the rule in democracies too.

To stop inflation, they would need to raise their domestic interest rates (which are essentially negative now) but that could bust the investment boom and also personally hurt the party princelings who are furiously throwing up villa apartments and hotels.

Or they could let their currency appreciate. That would hurt their export industry which is huge and employs a lot of workers. Plus, it could look like they are caving in to the Americans.

So how about this? Let inflation fly. Raise the minimum wages. The cost of Chinese products goes up but the currency peg is still technically held, and no one looks like they lost face to the Americans. The workers love all of the new raises they are getting. They might feel richer for a while, until they see the price of vegetables. The government actually put price controls on vegetable prices - we know what happens when you do that...less supply of vegetables and rationing in the form of waiting in lines. But it looks like you are doing something. The peasant farmers will complain but the city-dwelling middle class and workers won't. Buy some time and hope America recovers to keep buying Chinese stuff with borrowed money from China.

I solicit opinions on whether this is crazy - is it even possible? Did I completely blow the economics? I have a bunch of RMB sitting in accounts waiting for revaluation that may not come if this is their game plan. Shudder.

Most of the above came from this article.

Chinese Fertility Plunge

Feeling down about the world?

Check out this video showing the progress made by humanity.

MERRY CHRISTMAS!

I am all for Taiwan, Youth, Anti-Communism, and of course Corps. Who is not?

But I am confused that the leader of the Taiwan Youth Anti-Communist Corps 台灣青年反共救國團is an old guy with grey hair. And the people next to him are not exactly spring chickens.

Probably the actual youth members didn't make it in time because they were still preening over their hair

Lighting trees for the Christmas Season

Last day of work... All trees not sold by December 9th are lit.

internet supervision

You leave your kids unsupervised with a star wars thread for 5 minutes...

HAPPY HALLOWEEN

It started to snow today.

clan of the kevlar

Kev and fam stopped by 2 weeks ago today.

A fine time had by all.

This was when Kev was a tree.

On-line Advertisement

Taiwan political parties To learn about Taiwan politics from reliable, official sources!

www.taiwan.gov.tw

Seriously?

1) Why is a democratic government doing advertising this on the internet?

2) Who in their right mind considers "official sources" reliable for political information.

I did not even click the link.

Blast from the past

It's been a while since I've been on here. Happy Thanksgiving everyone! Hopefully everyone is well. Not sure how often people check things out here. Is Frenchie still around?

Anyways, I received an email a couple of weeks ago from Jim. We were able to get caught up this past Thanksgiving weekend. Great turkey feast out at my father's place. Just like old times, we recorded the Eagles- 49ers game and came back home to watch late night. We managed to avoid the score in the early evening, fast forward all the commercials and made it to bed just before sunrise. Excellent game! I won't ruin it for those of you heading over to PJ's later.

Just wanted to send a shout out to everyone. We both miss the late night card games, early morning Superbowl's and random evenings spent tipping back bottles of Qing Dao. No need to worry as we caught up on a few missed beers over the years and shared what we had to share about the writers of this blog.

Hope all is well for those left in the ROC and for those who have moved on!

China will increase minimum wages

I just read an article in the Taipei Times that says China is planning to raise their minimum wage substantially. The analyst said this was as good as a revaluation of the Yuan.

I just googled around and it seems this has already been happening. (Its also interesting that China allows cities and regions to set their own minimum wages.)

Does this mean they are going to raise the minimums again? I know Vietnam did that for a while, which angered people who invested based on certain labor cost assumptions.

My big question is if raising minimum wages is really as good as revaluing the Yuan.

If it is, then I can see China doing this instead of revaluing. You get the same effect (supposedly) but your US treasuries still come due at the original amount in Yuan terms, and your working populace feels richer, too.

Of course, its comical that the same article says that revaluing the Yuan by 20-40% would destroy the export industries...but raising labor costs by 20-30% is fine?

May have to start closing down my RMB accounts if this is the new plan in China. If they export less due to higher wages, the Yuan might depreciate even. Still, I have to wonder if this is really the same as a revaluation.

Damn Straight

Work in Taichung City - www.hess.com.tw/ - Cheaper Living Than Taipei Convenient and Laid Back Lifestyle

Yahoo Headlines

Caterpillar to raise prices up to 2 percent

Prediction: The price increases will mainly be in China for their Chinese made product line as cost of labor and other raw materials have gone up. China may get their currency appreciated via localized inflation if they aren't be careful.

Just imagine if China had bought made in the USA Caterpillar products with their export earnings in past years instead of US Fannie Mae and Freddie Mac bonds. China wouldn't have to worry about losing money on the mountain of financial assets. They would have a bunch of earth-movers they need and the USA would have more jobs and consumers for Chinese products.

Trade War with China Looms

When your average free-market economist like Robert Samuelson says we probably should have a trade war with China, you know the shit is about to hit the fan.

My modest suggestion if we were to have a trade war is not to slap any tariffs on their products - that would violate the WTO agreement. Instead devise a tax on the purchase of treasuries or other US government bonds made by foreign central banks, government institutions etc. The way China keeps its currency low is not just through controlling the exchange rate, but by using all the US dollar funds from exports to buy US financial instruments to "sterilize" their trade surplus from causing a strengthening of their currency.

This would also affect Japan, Taiwan, and Korea who also play the sterilization game to some extent or another. This is important not just because they too should not be manipulating their currencies so much, but also because China has in the past bought Yen with their US dollars. This made the Yen strong which forced Japan to step in and do China's work for them, so to speak.

Now, China could buy private bonds, but those have default risk, which makes their game far more riskier. Also, I am not sure they could find enough bonds to purchase. I would also explicitly remove US government backing from Fannie and Freddie bonds. Let China take some risk of losing money on their US dollar holdings. One reason China is afraid to allow their currency to appreciate normally, is because their mountain of US treasuries and bonds will immediately lose value. Well, adding some risk on the other side might make it more palatable for China to change their position. Personally, I think we should have given them a haircut on their Fannie and Freddie holdings back during the crisis instead of making them whole.

Incoming

I will arrive in Taichung on Wednesday.

Supposedly only there for a couple of weeks before I go to China for a long stay.

Is anybody left in Taichung now?

I will poor a Kirin down a 7-11 sewer grate in memory of my homies: Bread, Frenchie, Hannibal, Kevlar, Pimp, and Stony. (alphabetically)

Did I miss anyone?

Summer's Over, Slackers

The governor of California is in China, and is keen on Chinese high speed rail system.

"We want China, for instance, to invest in our high-speed rail, to build high-speed rail, to be part of this bidding process we are going to go through," Schwarzenegger said in a speech in Shanghai.
"Many countries will be bidding to build high-speed rail. And we are also looking for financing from China," he said, lauding the "great potential" for increasing trade between China and California.

This is causing a hoopla in California for various reasons, but let's break this down carefully, because The Terminator was not clear what Cali is looking for:

1) China is part of the bidding process = China SELLING us some or all of a high speed rail system

2)China investing in the system = China actually OWNING some or all of the high speed rail system.

3) China financing the system = China LENDING us money to buy their rail system.


Now, some people in California are worried about China "owning" the rail system - that would be option 2. Personally, since I am not sure if high-speed rail even makes money in Europe or Asia, which have higher population density, more public transport links, and shorter distances between cities, I have to wonder if letting the Chinese put some skin in the game isn't a good idea. The problem will be that if the system fails - will it be bailed out? Of course it will! But that will happen in any case. Maybe it would be better to get at least some Chinese money in there.

The most likely is option 1 & 3: the Chinese lend us the money, probably conditional on buying their equipment. If they are smart, the money they lend will not be tied to the success of the project. So, if it fails to make money, they still get paid back. I think the governor probably "misspoke" when he used the word "invest" and meant lending the money to buy their system.

MY COMMENTS AND SUGGESTIONS, BASED ON THE ASSUMPTION THAT CALIFORNIA CAN ACT JUST LIKE CHINA DOES:

1) Demand that all of the materials and equipment used in this project be built in California by Joint Ventures with California firms, where the California firms own 51% of the JV. Of course, technology transfer is part of that, including a waiver for any accidental IP infringement that happens along the way.

2) Make sure to invite lots and lots of Chinese provincial officials over and explain to them about Environmental Impact Reports. The Chinese officials should eventually figure out that you can hold up anything with these, and while CA officials cannot reap any economic rents from this, Chinese could. Make sure to offer some technology transfer of our own in this way, by training up thousands of Chinese students to become lawyers. Nothing like lawsuit after lawsuit in China to make America look better.

3) The entire deal must be financed using State of California IOU's, which will be exchanged to the RMB at a rate set by the State of California, subject to change as the State sees fit.

4) As per the bankruptcy of GITIC in 1999, all State backed bonds and State guarantees can be considered worthless. You foreigners pays your money and takes your chances.

Where's Waldo?

I went to Pj's twice. I went by the farm three times. I'm thinking he has moved, but people say he is around, Petra went to Texas and John did not move into a Tao-Feng.

CELL PHONE, Not yer number, My number: Kevin 0923289890

"Don't make me no never mind"

Ever have that feeling your shouting, but all your going to get is an ECHO!


I'm the guy catching the 11:53 Wednesday to Maple Land, and I doubt I will be near Lubbock anytime.

Globalization means...

The most wanted person in my hometown is Amandeep Singh Dhami, who is apparently part of a Punjabi gang in Sacramento.



MOST WANTED PERSON
AMANDEEP SINGH DHAMI

photo 1
Sex: Male
Height: 5'11"
Weight: 200 lbs
Date of birth: 9/17/1984
Tattoos: On forearms:"Loyalty" "916" "Soorma" "Punjabi"
Bail Amount: No Bail Amount
Wanted For: Murder. Attempted Murder. Discharge of a firearm in grossly negligent fashion.

UPDATE:

They have their own youtube channel.

"SUCK MY MOTHAFUCKAS. YA'LL KNOW WHO WE ARE NIGGA. QUICK TO PULL THE TRIGGER. AND WE FRM SAC HOMIE. WE OUR OWN SHIT. WE DN'T NEED NOBODY OR FOLLOW SUM NIGGAS. ALL U FOBS NEED TO STEP YO WIEGHT UP. AND BEATZ RAP. AHAHA CUM SEE NIGGA. I STAY ON GERBER U PUNKASS NIGGA. WE ARE KINGS OF THE SOUTH NIGGA. AMERIKAZ MOST WNTED U FAGGOT ASS NIGGGA. RUN UP OR SHADUP MOTHAFUCKAS. AND 5RIVER FLOWZ. MY CUZION IS OLD SCHOOL UNION CITY HOW U GNNA TELL U WHO PUT PUNJABIS ON MAP? RUNS IN MY FAM NIGGA. BAY 2 SAC WE KEEPIN HUNDID"

Glad to see they are assimilating correctly.