China's Next Prize: Global Financial Crown

By Andy Xie 09.07.2011

But the first step toward coronation, and boosting the world economy, should be an international equities board

Labor surplus globalization helped China's economy expand more than 20-fold in nominal dollar terms over a period of just two decades, building what's now the world's second-largest economy and largest international trading nation.

Globalizing China's current capital surplus would make it even bigger. Not only could China take the crown as the largest economy on the planet, but it may become the world's biggest financial center as well.

Each of these developments would be in the best interests of China and the rest of the world. So how can we globalize surplus capital? The first step should be to internationalize China's savings through equities by following through with plans to launch an international board on the Shanghai stock market.

An international equities board would have a significant, positive impact on the global economy. Through board mechanisms, China's surplus savings would be invested in multinational companies, thus contributing to the global economy by inspiring multinationals to expand.

China currently has a highly developed manufacturing sector but a backward financial sector dominated by state ownership and caged by a closed capital account and fixed currency exchange rates. Moreover, China lacks certain conditions necessary to qualify as a global financial center, including the rule of law, strong private property protection and transparency.

Opening an international board, though, would offer a jump-start for the changes needed to improve China's financial environment and lay a foundation for building a global financial center.

For starters, China should lay down rules so that the global top 500 companies can list on the international board. It should be a transparent process that does not include tight controls or force companies to individually lobby the government.

To date, China has missed opportunities to accept significant responsibility for the healthy functioning of the global economy. Its foreign assets of some US$ 4 trillion are overwhelmingly parked in government bonds. These lopsided allocations have created huge distortions in relative prices for bonds and stocks – a distortion that's had a destabilizing effect on the global economy.

An international board could encourage rebalancing. And now that the world economy is double-dipping, the time is ripe. A remedy to this lopsided predicament is needed – as soon as possible.

Surplus to Surplus

Globalizing China's surplus labor was the single most important factor in China's modern-day economic development. Two decades ago, the surplus depressed domestic labor costs to less than 5 percent of developed economy labor prices, even though China's labor quality was several times higher than relative wages suggested.

Since then, opening China to foreign-direct investment and building a supportive infrastructure led to rapid industrialization and export growth.

But in recent years, the labor surplus has clearly disappeared. Indeed, a shortage of blue-collar workers is plaguing many industries in China. Wages for basic labor are rising at double-digit rates. In some industries, such as mining, wages have doubled over the past three years.

Wage levels, however, are still just one-tenth of those found in developed economies. Costs have yet to become a barrier to China's ongoing industrialization, and manufacturing is making the right moves by upgrading in response to the labor shortage. China is now preparing to compete against Germany and Japan.

As China's labor surplus gradually integrated into the global economy, the country migrated from a capital shortage to a surplus situation. The trade surplus grew to today's level of between US$ 200 and US$ 400 per capita – a range that's relatively low by East Asian standards.

The trade surplus per capita could rise by five times or more. But because China has a vast population, a big jump in per capita would create an aggregate surplus that's huge relative to the global economy.

For example, China's trade surplus would be US$ 1.4 trillion to reach US$ 1,000 per capita, which is a modest amount by East Asian standards. If China upgrades its industries successfully in response to rising labor costs, as Japan did in the 1970s and South Korea and Taiwan did in the 1990s, its trade surplus could rise to US$ 1 trillion, and the per capita jump to US$ 715.

China's enormous surplus could eventually exceed all the funds raised on all stock markets worldwide. How that money is spent, logically, would have a huge impact on the global economy.

From Trade to Finance

A country becomes a world financial center after succeeding as a trade center. London won status as a global financial center because Britain overtook other countries to become the largest trader of goods and services. New York rose as a financial center after the United States replaced Britain as the top international trade player.

China is solidifying its position as the world's largest trading nation. By 2020, it could dwarf all others, becoming twice as big as the second-largest country. So could China become the world's financial center? Yes. Should it? I think the answer is, again, yes.

In terms of industrial energy consumption, China is already the biggest industrial economy in the world. The dollar value isn't there yet because Chinese goods are still inexpensive. China could raise prices to absorb rising labor costs in this decade and still grow exports at more than 10 percent per annum. By 2020, China could become twice as big as Germany in international trade.

Nevertheless, China must do something to build its status as an international financial hub. Inaction would hurt its own economy as well as the rest of the world's.

In the past, financial services set up shop after traders were in place because most financing was related to trade. Most financial firm profits were derived from trade, too.

One can see the connection in Pingyao, the little town in Shanxi Province that's small and poor but once dominated China's financing in the 19th century. At that time, Pingyao served as a link between makers of Chinese goods and buyers in the rising Russian Empire. Pingyao bordered both worlds and could arbitrage price differences, creating a national financial center until seaborne trade eclipsed land routes, and Shanghai became China's financial hub.

The United States didn't plot to supplant Britain as the international financial center. It happened because the United States replaced Britain first as the biggest industrial power and trading nation. Wall Street's importance is a consequence of American industrial success.

The most important economic development in the 21st century will be China's rise as the largest industrial nation. I have anticipated this for a long time. This is a consequence of globalization and China's cultural characteristics. The government has adopted supportive policies, i.e., not standing in the way. And no other country is on the horizon to challenge China's industrialization.

Some may argue that things have changed since Pingyao's glory days. The IT revolution has made the physical place for asset trading irrelevant. But Germany's plight is a reminder that when profit sources and financial centers are disconnected, bad things happen.

Germany amassed the world's biggest trade surplus over the past decade, but its financial system has been woefully underdeveloped. So it has had to rely on London bankers to recycle money into other countries. Naturally, London bankers can screw Germany; they're even paid to do so.

A decade or two from now, as a result of this mismatch, Germany may become a poor country. People may look back and pin Germany's downfall to the country's hyper-competitive manufacturing combined with an inadequate financial sector.

No Substitute

China has avoided Germany's fate so far by pouring its surplus capital into government bonds, especially U.S. Treasuries. This strategy has worked: Major economy government bonds have held up in value, even though their economies are in shambles.

But government bonds cannot sustain value if underlying economies are in constant crisis. At some point in these situations, either government debt levels become too high or tax revenues are too low. Central banks are then forced to bail out governments by printing money. China would get its money back in this scenario, but only after currency depreciation.

Unless China changes its strategy, it cannot avoid Germany's fate. China's net foreign assets have risen twice as fast as its trade surplus, mainly due to capital inflow, especially from overseas Chinese, to avoid the dollar's depreciation.

The Chinese government is essentially taking on currency risks for the entire, overseas Chinese community. If China loses its foreign exchange reserves, the central government may go bankrupt and the country's financial foundation will vanish.

In addition to risking assets, China's foreign reserves strategy is distorting the global economy. The sharp price divergence for stocks and bonds is mostly due to the fact that money is concentrating in institutions that only buy government bonds, including those in China. Oil exporting countries have even more money than China in the bond market.

Putting all that money into bonds keeps stock prices low and discourages company investment and hiring, thus destabilizing the global economy. A country that saves a lot of money must instead allocate that money effectively and efficiently to help the global economy, not just governments.

Over the past decade, though, China has been one of several countries that amassed savings but did a bad job allocating surplus capital. And over the next decade, China's money pile may grow until it dwarfs all others. If China fails to allocate this wealth effectively, the world will blame China for its ills.

Stop Sauntering

To successfully allocate this surplus capital, then, China must become the world's biggest financial center. The money must be deployed efficiently, i.e. put toward things that improve rather than impede global growth. Otherwise a backlash would impede China's development, and everyone would suffer.

An alternative to a trade surplus would be to create a massive asset bubble that exaggerates domestic demand. Japan did that in the 1980s. China is doing quite a bit now. Without a domestic asset bubble, I think, China's trade surplus would be twice its current size.

Running a bubble, though, merely delays the inevitable and leads to financial crisis. China's total property value, including work-in-progress and land reserves, is already five times GDP. The bubble is about 100 percent above the sustainable level but could double if the government allows.

When the bubble is big enough, the country will start running trade deficits rather than surpluses. But if the bubble bursts and China's currency is devalued, property values would fall to 2.5 times GDP or less and create a huge trade surplus equal to more than 10 percent GDP.

The world won't tolerate such an outcome. Countries would react with protectionist policies that shut down the global economy for everyone.

Neither will the global economy wait for China to saunter along at its own financial services development pace. Surplus capital must be injected into the global economy, and soon.

The only way out is to develop a global financial center that allocates China's surplus capital effectively and efficiently to boost global economic growth, thus safeguarding its ability to earn surpluses.

Another argument for a new board is that multinationals must expand in emerging economies such as China because their home countries don't have surplus capital. It makes sense for them to raise money in places where that money will be invested.

Many argue that an international board would hurt the A-share market. This is petty reasoning. A-share market values are low because it's concerned about growth at home and abroad. The international board would help the global economy, which would be good for China's economy. Besides, the A-share market could rally as multinational business confidence improves.

Liquidity is not a problem in China. And appropriate policy adjustments can help maintain liquidity levels that support stock investing on domestic markets.

To boost stock demand, the Chinese government could introduce new sources of funds for equities. A 401K-like retirement plan, for example, could boost A-share demand greatly, possibly by more than 100 billion yuan per annum, sufficiently offsetting fund-raisings on the international board. Raising stock investment ratios for insurance companies would provide another source of domestic equity demand.

In the end, China must internationalize its surplus capital for the global economy and its own to function normally. The alternatives are asset bubbles and financial crises. Continuing to lock up surplus money could encourage protectionism and destroy the global economy.

Xie: Great summer slowdown

Global Economy on a Slow Summer Burn
By Andy Xie

excerpts:

It appears euro zone countries have managed to keep Greece afloat for the time being by providing cash assistance and getting bondholders, mainly West Europe banks, to accept a "voluntary" rollover. This deal merely kicks the can down the road. When the next wave of Greek bonds comes due, we'll see the drama repeated. Rolling over debt doesn't make the debt good, and even a rookie analyst can see that Greece can't pay its debt.

The economy in Greece is only 2 percent of the European Union's. Its national debt is 340 billion euros, less than 2 percent of total EU credit outstanding. So, in theory, a Greek bankruptcy would be no worse than that for a major corporation – painful but manageable. Besides, bankruptcy is inevitable unless someone else pays a national debt level equal to around 80,000 euros for each of Greece's 4.4 million citizens.

Why are European governments trying so hard to delay the Greek bankruptcy? Because the nation's finances are linked to the wider banking system, with two-thirds of the money owed to western banks and other foreign investors. Hence, France and Germany in particular are trying to delay it.

But the delay is just an accounting gimmick. Investors have obviously lost money, and it's sad to see European governments engage in this self-deception. Greek bonds are already pricing in bankruptcy by trading at massive discounts to par. If banks with bonds mark to market, they'd have to recapitalize immediately.

Three big rating agencies are challenging European practices by noting that the debt rollover is de facto bankruptcy. Their opinion matters because the European Central Bank can't hold bankrupt government bonds as collateral. U.S. banks pledged worthless subprime paper to the Federal Reserve to secure loans during the 2008 crisis, and now European banks are doing the same to the ECB.

Obama on a back foot.

President Obama made a big mistake when he listened to economists who advised big stimulus to get the economy and employment going again after the 2008 crisis. It would have been better to let the economy land where it would, and then recover on more solid ground in time for the 2012 election.

That's what Ronald Reagan experienced when he was president in the 1980s. Then-Fed Chairman Paul Volker raised interest rates aggressively to tame inflation and the economy crashed. But recovery came by the time Reagan was seeking re-election in 1984. He won. By then, the economy had cleaned out most of the dirt that accumulated during the high-interest rate period.

In hopes of winning the election, Obama may add to his previous mistake by piling more stimulus, providing a temporary fix but setting the stage for another crash later.

Another byproduct of Obama's mistaken policy is a new round of declines for property prices. Based on historical data, U.S. housing prices should have been cut in half after the 2008 crisis, but the government stimulus and the Fed's QE 2 gave property owners hope for recovery. So they hesitated, and the market recovered a bit last year, only to deflate hopes again. That led to the current wave of defaults, triggering another price decline.

Overheard this...

.
"Capitalism without bankruptcy is like Christianity without hell"

hahaha
.

Election contest update

Updated Constituency list, voter number (estimated), and probable contestants.


Single Seat Ward (12, Total voters: 309,964)

Bukit Panjang (33,035)
PAP = Teo Ho Pin
SDP

Hong Kah North (27,691)
PAP = Amy Khor
RP

Hougang (24,532)
PAP = Desmond Choo Pey Ching
WP

Joo Chiat (22,027)
PAP = Charles Chong
WP

Mountbatten (23,712)
PAP = Lim Biow Chuan
NSP = Jeannette Chong-Aruldoss

Pioneer (25,732)
PAP = Cedric Foo Chee Keng
RP = Kenneth Jeyaratnam

Potong Pasir (17,306)
PAP = Sitoh Yih Pin
SPP = Lina Loh (Chiam's wife)

Punggol East (33,261)
PAP = Michael Palmer
WP

Radin Mas (31,001)
PAP = Sam Tan Chin Siong
RP = Alec Tok

Sengkang West (26,869)
PAP = Lam Pin Min
WP

Whampoa (21,615)
PAP = Heng Chee How
WP

Yuhua (23,183)
PAP = Grace Fu



4-Member GRC (2, Total voters: 179,057)

Holland-Bukit Timah (91,559)
PAP = Vivian Balakrishnan, Christopher De Souza
SDP = John Tan, Dr Vincent Wijeysingha, Michael Fernandez

Moulmein-Kallang (87,498)
PAP = Lui Tuck Yew
WP


5-Member GRC (11, Total voters: 1,512,303)

Aljunied (143,024)
PAP = George Yeo
WP

Bishan-Toa Payoh (122,416)
PAP = Wong Kan Seng
SPP

Chua Chu Kang (158,552)
PAP
RP

East Coast (120,207)
PAP = Lim Swee Say, Maliki Osman,
WP

Jurong (125,214)
PAP
NSP

Marine Parade (154,340)
PAP = Goh Chok Tong
DPP

Nee Soon (148,168)
PAP = K Shanmugam, Muhammad Faishal Ibrahim
WP

Sembawang (142,351)
PAP = Khaw Boon Wan


Tampines (137,437)
PAP = Mah Bow Tan
NSP

Tanjong Pagar (139,638)
PAP = Lee Kuan Yew
DPP

West Coast (120,956)
PAP
RP

6-Member GRC (2, Total voters: 347,767)

Ang Mo Kio (178,933)
PAP = Lee Hsien Loong


Pasir Ris-Punggol (168,834)
PAP = Teo Chee Hean
SDA


Total voters: 2,349,091

Source

Xie on Australia and Japan

From Between a Crutch and Walking Stick: Why the dollar has got to go as the world's reserve currency – and how the euro will replace it.

Australia

Some (developed economies) are behaving like nothing has happened. Australia stands out in that regard. Its household debt has surged by 20 percent since the Crisis hit and recently surpassed 100 percent of GDP. Its household debt to disposable income ratio, at 156 percent, is the highest among major economies in the world. Australia has had 4.5 percent of GDP in annual current account deficit for two decades, i.e., its household debt is funded by foreign capital inflow. Its property market is still booming. When you see rapidly rising household debt, a big current account deficit, and a booming property market, it is a credit-cum-property bubble for sure.

Australia's bubble has survived the 2008 crisis because commodity prices came on the back of the Fed's zero interest rate policy and China's massive credit growth. The Australian bubble is very likely to burst when commodity prices fall sharply. Either a substantial economic slowdown in China or spiking U.S. interest rates would trigger it.

Australia is an exception. The booming commodity market is giving it the choice not to adjust. Some economies must adjust and fast, because they depend on foreign capital for financing. Iceland, Greece, and Ireland are small economies that depend on foreign capital to fund their fiscal deficits, i.e., they run large current account deficits and don't have sufficient domestic savings to fund their government deficits.


Japan

Japan is another economy that hasn't decreased its leverage; the belt tightening in the private sector has been offset by the government's deficit spending. Japan's debt level is truly frightening. But, it has been that way for two decades. The reason for its stability is due to its high domestic savings rate. Japan has been consistently running large current account surplus, i.e., sending its savings surplus abroad, for decades. Japanese people have extremely high home bias in deploying their savings. Japan's government can borrow at extremely low interest rate. Hence, it has no incentive to change its behavior.

Only a sustained current deficit would change Japan's dynamics. An aging and declining population is slowly bringing down Japan's savings rate. But Japan's investment need is declining too. Hence, it is still running a significant current account surplus. The situation will change in a decade or so. Japan is unlikely to change without an external constraint. I suspect that Japan will look the same a decade from now.

Amy Chua is a Wimp

By DAVID BROOKS
January 17, 2011


Sometime early last week, a large slice of educated America decided that Amy Chua is a menace to society. Chua, as you probably know, is the Yale professor who has written a bracing critique of what she considers the weak, cuddling American parenting style.

Chua didn’t let her own girls go out on play dates or sleepovers. She didn’t let them watch TV or play video games or take part in garbage activities like crafts. Once, one of her daughters came in second to a Korean kid in a math competition, so Chua made the girl do 2,000 math problems a night until she regained her supremacy. Once, her daughters gave her birthday cards of insufficient quality. Chua rejected them and demanded new cards. Once, she threatened to burn all of one of her daughter’s stuffed animals unless she played a piece of music perfectly.

As a result, Chua’s daughters get straight As and have won a series of musical competitions.

In her book, “Battle Hymn of the Tiger Mother,” Chua delivers a broadside against American parenting even as she mocks herself for her own extreme “Chinese” style. She says American parents lack authority and produce entitled children who aren’t forced to live up to their abilities.

The furious denunciations began flooding my in-box a week ago. Chua plays into America’s fear of national decline. Here’s a Chinese parent working really hard (and, by the way, there are a billion more of her) and her kids are going to crush ours. Furthermore (and this Chua doesn’t appreciate), she is not really rebelling against American-style parenting; she is the logical extension of the prevailing elite practices. She does everything over-pressuring upper-middle-class parents are doing. She’s just hard core.

Her critics echoed the familiar themes. Her kids can’t possibly be happy or truly creative. They’ll grow up skilled and compliant but without the audacity to be great. She’s destroying their love for music. There’s a reason Asian-American women between the ages of 15 and 24 have such high suicide rates.

I have the opposite problem with Chua. I believe she’s coddling her children. She’s protecting them from the most intellectually demanding activities because she doesn’t understand what’s cognitively difficult and what isn’t.

Practicing a piece of music for four hours requires focused attention, but it is nowhere near as cognitively demanding as a sleepover with 14-year-old girls. Managing status rivalries, negotiating group dynamics, understanding social norms, navigating the distinction between self and group — these and other social tests impose cognitive demands that blow away any intense tutoring session or a class at Yale.

Yet mastering these arduous skills is at the very essence of achievement. Most people work in groups. We do this because groups are much more efficient at solving problems than individuals (swimmers are often motivated to have their best times as part of relay teams, not in individual events). Moreover, the performance of a group does not correlate well with the average I.Q. of the group or even with the I.Q.’s of the smartest members.

Researchers at the Massachusetts Institute of Technology and Carnegie Mellon have found that groups have a high collective intelligence when members of a group are good at reading each others’ emotions — when they take turns speaking, when the inputs from each member are managed fluidly, when they detect each others’ inclinations and strengths.

Participating in a well-functioning group is really hard. It requires the ability to trust people outside your kinship circle, read intonations and moods, understand how the psychological pieces each person brings to the room can and cannot fit together.

This skill set is not taught formally, but it is imparted through arduous experiences. These are exactly the kinds of difficult experiences Chua shelters her children from by making them rush home to hit the homework table.

Chua would do better to see the classroom as a cognitive break from the truly arduous tests of childhood. Where do they learn how to manage people? Where do they learn to construct and manipulate metaphors? Where do they learn to perceive details of a scene the way a hunter reads a landscape? Where do they learn how to detect their own shortcomings? Where do they learn how to put themselves in others’ minds and anticipate others’ reactions?

These and a million other skills are imparted by the informal maturity process and are not developed if formal learning monopolizes a child’s time.

So I’m not against the way Chua pushes her daughters. And I loved her book as a courageous and thought-provoking read. It’s also more supple than her critics let on. I just wish she wasn’t so soft and indulgent. I wish she recognized that in some important ways the school cafeteria is more intellectually demanding than the library. And I hope her daughters grow up to write their own books, and maybe learn the skills to better anticipate how theirs will be received.

The War on Logic

By PAUL KRUGMAN
January 16, 2011

My wife and I were thinking of going out for an inexpensive dinner tonight. But John Boehner, the speaker of the House, says that no matter how cheap the meal may seem, it will cost thousands of dollars once you take our monthly mortgage payments into account.

Wait a minute, you may say. How can our mortgage payments be a cost of going out to eat, when we’ll have to make the same payments even if we stay home? But Mr. Boehner is adamant: our mortgage is part of the cost of our meal, and to say otherwise is just a budget gimmick.

O.K., the speaker hasn’t actually weighed in on our plans for the evening. But he and his G.O.P. colleagues have lately been making exactly the nonsensical argument I’ve just described — not about tonight’s dinner, but about health care reform. And the nonsense wasn’t a slip of the tongue; it’s the official party position, laid out in charts and figures.

We are, I believe, witnessing something new in American politics. Last year, looking at claims that we can cut taxes, avoid cuts to any popular program and still balance the budget, I observed that Republicans seemed to have lost interest in the war on terror and shifted focus to the war on arithmetic. But now the G.O.P. has moved on to an even bigger project: the war on logic.

So, about that nonsense: this week the House is expected to pass H.R. 2, the Repealing the Job-Killing Health Care Law Act — its actual name. But Republicans have a small problem: they claim to care about budget deficits, yet the Congressional Budget Office says that repealing last year’s health reform would increase the deficit. So what, other than dismissing the nonpartisan budget office’s verdict as “their opinion” — as Mr. Boehner has — can the G.O.P. do?

The answer is contained in an analysis — or maybe that should be “analysis” — released by the speaker’s office, which purports to show that health care reform actually increases the deficit. Why? That’s where the war on logic comes in.

First of all, says the analysis, the true cost of reform includes the cost of the “doc fix.” What’s that?

Well, in 1997 Congress enacted a formula to determine Medicare payments to physicians. The formula was, however, flawed; it would lead to payments so low that doctors would stop accepting Medicare patients. Instead of changing the formula, however, Congress has consistently enacted one-year fixes. And Republicans claim that the estimated cost of future fixes, $208 billion over the next 10 years, should be considered a cost of health care reform.

But the same spending would still be necessary if we were to undo reform. So the G.O.P. argument here is exactly like claiming that my mortgage payments, which I’ll have to make no matter what we do tonight, are a cost of going out for dinner.

There’s more like that: the G.O.P. also claims that $115 billion of other health care spending should be charged to health reform, even though the budget office has tried to explain that most of this spending would have taken place even without reform.

To be sure, the Republican analysis doesn’t rely entirely on spurious attributions of cost — it also relies on using three-card monte tricks to make money disappear. Health reform, says the budget office, will increase Social Security revenues and reduce Medicare costs. But the G.O.P. analysis says that these sums don’t count, because some people have said that these savings would also extend the life of these programs’ trust funds, so counting these savings as deficit reduction would be “double-counting,” because — well, actually it doesn’t make any sense, but it sounds impressive.

So, is the Republican leadership unable to see through childish logical fallacies? No.

The key to understanding the G.O.P. analysis of health reform is that the party’s leaders are not, in fact, opposed to reform because they believe it will increase the deficit. Nor are they opposed because they seriously believe that it will be “job-killing” (which it won’t be). They’re against reform because it would cover the uninsured — and that’s something they just don’t want to do.

And it’s not about the money. As I tried to explain in my last column, the modern G.O.P. has been taken over by an ideology in which the suffering of the unfortunate isn’t a proper concern of government, and alleviating that suffering at taxpayer expense is immoral, never mind how little it costs.

Given that their minds were made up from the beginning, top Republicans weren’t interested in and didn’t need any real policy analysis — in fact, they’re basically contemptuous of such analysis, something that shines through in their health care report. All they ever needed or wanted were some numbers and charts to wave at the press, fooling some people into believing that we’re having some kind of rational discussion. We aren’t.

The first of the gang to die

.
Dedicated to all the gangs out there!
Especially the biggest one of them all in white hahaha...




.

Those who choose not to empathise enable real monsters

JK Rowling is the creator of the famous Harry Potter fantasy series. She delivered this very humbling Commencement address at the Harvard graduation in June 2008. Although her speech is titled 'The Benefits of Failure, and The Importance of Imagination', it is really about something else and more...

President Faust, members of the Harvard Corporation and the Board of Overseers, members of the faculty, proud parents, and, above all, graduates.

The first thing I would like to say is ‘thank you.’ Not only has Harvard given me an extraordinary honour, but the weeks of fear and nausea I have endured at the thought of giving this commencement address have made me lose weight. A win-win situation! Now all I have to do is take deep breaths, squint at the red banners and convince myself that I am at the world’s largest Gryffindor reunion.

Delivering a commencement address is a great responsibility; or so I thought until I cast my mind back to my own graduation. The commencement speaker that day was the distinguished British philosopher Baroness Mary Warnock. Reflecting on her speech has helped me enormously in writing this one, because it turns out that I can’t remember a single word she said. This liberating discovery enables me to proceed without any fear that I might inadvertently influence you to abandon promising careers in business, the law or politics for the giddy delights of becoming a gay wizard.

You see? If all you remember in years to come is the ‘gay wizard’ joke, I’ve come out ahead of Baroness Mary Warnock. Achievable goals: the first step to self improvement.

Actually, I have wracked my mind and heart for what I ought to say to you today. I have asked myself what I wish I had known at my own graduation, and what important lessons I have learned in the 21 years that have expired between that day and this.

I have come up with two answers. On this wonderful day when we are gathered together to celebrate your academic success, I have decided to talk to you about the benefits of failure. And as you stand on the threshold of what is sometimes called ‘real life’, I want to extol the crucial importance of imagination.

These may seem quixotic or paradoxical choices, but please bear with me.

Looking back at the 21-year-old that I was at graduation, is a slightly uncomfortable experience for the 42-year-old that she has become. Half my lifetime ago, I was striking an uneasy balance between the ambition I had for myself, and what those closest to me expected of me.

I was convinced that the only thing I wanted to do, ever, was to write novels. However, my parents, both of whom came from impoverished backgrounds and neither of whom had been to college, took the view that my overactive imagination was an amusing personal quirk that would never pay a mortgage, or secure a pension. I know that the irony strikes with the force of a cartoon anvil, now.

So they hoped that I would take a vocational degree; I wanted to study English Literature. A compromise was reached that in retrospect satisfied nobody, and I went up to study Modern Languages. Hardly had my parents’ car rounded the corner at the end of the road than I ditched German and scuttled off down the Classics corridor.

I cannot remember telling my parents that I was studying Classics; they might well have found out for the first time on graduation day. Of all the subjects on this planet, I think they would have been hard put to name one less useful than Greek mythology when it came to securing the keys to an executive bathroom.

I would like to make it clear, in parenthesis, that I do not blame my parents for their point of view. There is an expiry date on blaming your parents for steering you in the wrong direction; the moment you are old enough to take the wheel, responsibility lies with you. What is more, I cannot criticise my parents for hoping that I would never experience poverty. They had been poor themselves, and I have since been poor, and I quite agree with them that it is not an ennobling experience. Poverty entails fear, and stress, and sometimes depression; it means a thousand petty humiliations and hardships. Climbing out of poverty by your own efforts, that is indeed something on which to pride yourself, but poverty itself is romanticised only by fools.

What I feared most for myself at your age was not poverty, but failure.

At your age, in spite of a distinct lack of motivation at university, where I had spent far too long in the coffee bar writing stories, and far too little time at lectures, I had a knack for passing examinations, and that, for years, had been the measure of success in my life and that of my peers.

I am not dull enough to suppose that because you are young, gifted and well-educated, you have never known hardship or heartbreak. Talent and intelligence never yet inoculated anyone against the caprice of the Fates, and I do not for a moment suppose that everyone here has enjoyed an existence of unruffled privilege and contentment.

However, the fact that you are graduating from Harvard suggests that you are not very well-acquainted with failure. You might be driven by a fear of failure quite as much as a desire for success. Indeed, your conception of failure might not be too far from the average person’s idea of success, so high have you already flown.

Ultimately, we all have to decide for ourselves what constitutes failure, but the world is quite eager to give you a set of criteria if you let it. So I think it fair to say that by any conventional measure, a mere seven years after my graduation day, I had failed on an epic scale. An exceptionally short-lived marriage had imploded, and I was jobless, a lone parent, and as poor as it is possible to be in modern Britain, without being homeless. The fears that my parents had had for me, and that I had had for myself, had both come to pass, and by every usual standard, I was the biggest failure I knew.

Now, I am not going to stand here and tell you that failure is fun. That period of my life was a dark one, and I had no idea that there was going to be what the press has since represented as a kind of fairy tale resolution. I had no idea then how far the tunnel extended, and for a long time, any light at the end of it was a hope rather than a reality.

So why do I talk about the benefits of failure? Simply because failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. Had I really succeeded at anything else, I might never have found the determination to succeed in the one arena I believed I truly belonged. I was set free, because my greatest fear had been realised, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so rock bottom became the solid foundation on which I rebuilt my life.

You might never fail on the scale I did, but some failure in life is inevitable. It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all – in which case, you fail by default.

Failure gave me an inner security that I had never attained by passing examinations. Failure taught me things about myself that I could have learned no other way. I discovered that I had a strong will, and more discipline than I had suspected; I also found out that I had friends whose value was truly above the price of rubies.

The knowledge that you have emerged wiser and stronger from setbacks means that you are, ever after, secure in your ability to survive. You will never truly know yourself, or the strength of your relationships, until both have been tested by adversity. Such knowledge is a true gift, for all that it is painfully won, and it has been worth more than any qualification I ever earned.

So given a Time Turner, I would tell my 21-year-old self that personal happiness lies in knowing that life is not a check-list of acquisition or achievement. Your qualifications, your CV, are not your life, though you will meet many people of my age and older who confuse the two. Life is difficult, and complicated, and beyond anyone’s total control, and the humility to know that will enable you to survive its vicissitudes.

Now you might think that I chose my second theme, the importance of imagination, because of the part it played in rebuilding my life, but that is not wholly so. Though I personally will defend the value of bedtime stories to my last gasp, I have learned to value imagination in a much broader sense. Imagination is not only the uniquely human capacity to envision that which is not, and therefore the fount of all invention and innovation. In its arguably most transformative and revelatory capacity, it is the power that enables us to empathise with humans whose experiences we have never shared.

One of the greatest formative experiences of my life preceded Harry Potter, though it informed much of what I subsequently wrote in those books. This revelation came in the form of one of my earliest day jobs. Though I was sloping off to write stories during my lunch hours, I paid the rent in my early 20s by working at the African research department at Amnesty International’s headquarters in London.

There in my little office I read hastily scribbled letters smuggled out of totalitarian regimes by men and women who were risking imprisonment to inform the outside world of what was happening to them. I saw photographs of those who had disappeared without trace, sent to Amnesty by their desperate families and friends. I read the testimony of torture victims and saw pictures of their injuries. I opened handwritten, eye-witness accounts of summary trials and executions, of kidnappings and rapes.

Many of my co-workers were ex-political prisoners, people who had been displaced from their homes, or fled into exile, because they had the temerity to speak against their governments. Visitors to our offices included those who had come to give information, or to try and find out what had happened to those they had left behind.

I shall never forget the African torture victim, a young man no older than I was at the time, who had become mentally ill after all he had endured in his homeland. He trembled uncontrollably as he spoke into a video camera about the brutality inflicted upon him. He was a foot taller than I was, and seemed as fragile as a child. I was given the job of escorting him back to the Underground Station afterwards, and this man whose life had been shattered by cruelty took my hand with exquisite courtesy, and wished me future happiness.

And as long as I live I shall remember walking along an empty corridor and suddenly hearing, from behind a closed door, a scream of pain and horror such as I have never heard since. The door opened, and the researcher poked out her head and told me to run and make a hot drink for the young man sitting with her. She had just had to give him the news that in retaliation for his own outspokenness against his country’s regime, his mother had been seized and executed.

Every day of my working week in my early 20s I was reminded how incredibly fortunate I was, to live in a country with a democratically elected government, where legal representation and a public trial were the rights of everyone.

Every day, I saw more evidence about the evils humankind will inflict on their fellow humans, to gain or maintain power. I began to have nightmares, literal nightmares, about some of the things I saw, heard, and read.

And yet I also learned more about human goodness at Amnesty International than I had ever known before.

Amnesty mobilises thousands of people who have never been tortured or imprisoned for their beliefs to act on behalf of those who have. The power of human empathy, leading to collective action, saves lives, and frees prisoners. Ordinary people, whose personal well-being and security are assured, join together in huge numbers to save people they do not know, and will never meet. My small participation in that process was one of the most humbling and inspiring experiences of my life.

Unlike any other creature on this planet, humans can learn and understand, without having experienced. They can think themselves into other people’s places.

Of course, this is a power, like my brand of fictional magic, that is morally neutral. One might use such an ability to manipulate, or control, just as much as to understand or sympathise.

And many prefer not to exercise their imaginations at all. They choose to remain comfortably within the bounds of their own experience, never troubling to wonder how it would feel to have been born other than they are. They can refuse to hear screams or to peer inside cages; they can close their minds and hearts to any suffering that does not touch them personally; they can refuse to know.

I might be tempted to envy people who can live that way, except that I do not think they have any fewer nightmares than I do. Choosing to live in narrow spaces leads to a form of mental agoraphobia, and that brings its own terrors. I think the wilfully unimaginative see more monsters. They are often more afraid.

What is more, those who choose not to empathise enable real monsters. For without ever committing an act of outright evil ourselves, we collude with it, through our own apathy.

One of the many things I learned at the end of that Classics corridor down which I ventured at the age of 18, in search of something I could not then define, was this, written by the Greek author Plutarch: What we achieve inwardly will change outer reality.

That is an astonishing statement and yet proven a thousand times every day of our lives. It expresses, in part, our inescapable connection with the outside world, the fact that we touch other people’s lives simply by existing.

But how much more are you, Harvard graduates of 2008, likely to touch other people’s lives? Your intelligence, your capacity for hard work, the education you have earned and received, give you unique status, and unique responsibilities. Even your nationality sets you apart. The great majority of you belong to the world’s only remaining superpower. The way you vote, the way you live, the way you protest, the pressure you bring to bear on your government, has an impact way beyond your borders. That is your privilege, and your burden.

If you choose to use your status and influence to raise your voice on behalf of those who have no voice; if you choose to identify not only with the powerful, but with the powerless; if you retain the ability to imagine yourself into the lives of those who do not have your advantages, then it will not only be your proud families who celebrate your existence, but thousands and millions of people whose reality you have helped change. We do not need magic to change the world, we carry all the power we need inside ourselves already: we have the power to imagine better.

I am nearly finished. I have one last hope for you, which is something that I already had at 21. The friends with whom I sat on graduation day have been my friends for life. They are my children’s godparents, the people to whom I’ve been able to turn in times of trouble, people who have been kind enough not to sue me when I took their names for Death Eaters. At our graduation we were bound by enormous affection, by our shared experience of a time that could never come again, and, of course, by the knowledge that we held certain photographic evidence that would be exceptionally valuable if any of us ran for Prime Minister.

So today, I wish you nothing better than similar friendships. And tomorrow, I hope that even if you remember not a single word of mine, you remember those of Seneca, another of those old Romans I met when I fled down the Classics corridor, in retreat from career ladders, in search of ancient wisdom:
As is a tale, so is life: not how long it is, but how good it is, is what matters.

I wish you all very good lives. Thank you very much.

When is 'Your Turn'?

.

.

Tonight's gonna be a good night

Xie: Inflation, not deflation!

.
"The global economy seems to be bifurcating into the ice-cold developed economies and red-hot developing economies. Will the bifurcation persist? If the two sides converge, which side will dominate?

Let me write the conclusions first: Inflation, not deflation, will dominate the global economy. The deflation scare causes the central banks in the developed economies to sustain a loose monetary policy. It will fuel inflation in emerging economies. Through trade, currency markets, and ultimately inflation expectations, inflation will hit developed economies.

Globalization has severely restricted the effectiveness of economic stimulus. Trade plus FDI are half of the global GDP. Trade is visible in terms of stimulus leakage. But, where investment occurs in response to demand growth is far more important. Multinationals can invest anywhere in response to demand. It cuts the linkage between demand stimulus and investment response. The latter is crucial to employment growth, which is necessary for sustaining demand growth beyond stimulus. Essentially, demand is local, but supply is global. This is why the old assumptions on stimulus are no longer reliable.

The above analysis always applies to a small, open economy. A typical macroeconomics textbook will study the extreme cases of a small, open economy and a large, closed economy. In the former, the leakage is so powerful that stimulus is futile. The latter has no leakage and has maximum stimulus effectiveness. The economies in the real world are in between. A large economy like the U.S.'s is always assumed to resemble a closed economy, while a small trade-oriented economy like Singapore's is close to a completely open economy."

.

Only You 周星馳

...


LOLOL

.

Krugman: Early stages of the next Depression

.
The Third Depression
By PAUL KRUGMAN
Published: June 27, 2010

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
.

China's labour squeezing business model - how long can it last?

.
Dismantling Factories in a Dreamweaver Nation
by Andy Xie

A new generation is challenging China's labor-squeezing business model and an older generation that apparently doesn't get it

A decade ago, I took a group of fund managers to an assembly line at an electronics manufacturing contractor in China. We saw rows and rows of young women hunkered down, concentrating on putting together tiny parts. They had few toilet breaks, and during rest periods they had to sit at their benches.

"They're all 18," the line manager told me. "We need nimble fingers. In a few years, we will replace them with another batch of 18-year-olds."

I wrote a story after that visit. I didn't judge the situation but stated that a compliant labor force willing to be pushed to the extreme was the fuel for China's economic miracle. The engine was the mutually beneficial relationship between western companies with technologies, brands and distribution channels, and China-based manufacturing outsourcing companies that specialized in taking advantage of China's vast, cheap labor force. These included Taiwanese companies, which have been by far the most successful in the original equipment manufacturer (OEM) business.

The fund managers with me on the visit wanted to determine sustainability and profitability before deciding whether to buy the company's shares. They thought an endless supply of labor would ensure the model's profitability, and they were bullish about the company. What's happened in the years since has proven them right.

But will they be right indefinitely? To answer that question, we can glance back to the days of silent film star Charlie Chaplin. In his movies, Chaplin parodied the inhumane nature of the modern factory system, especially monotonous human movement on assembly lines. What he portrayed vanished a long time ago in developed countries, driven out by rising labor costs. Factory owners invested in automation, such as robots that now dominate modern auto assembly plants.

When multinational companies outsourced production to China, though, their business became less capital intensive. They took advantage of low labor costs and abundant supply. Some businesses, such as battery makers, started substituting machines with people. But no one could have predicted how far the outsourcing model, particularly in the electronics sector, would go while companies scaled up and maximized economies of scale by using cheap labor.

Scaling Higher

Economies of scale are typically associated with capital intensive industries. When a business requires a lump-sum fixed investment, it requires a certain scale to make the investment pay. Outsourcing businesses in China are labor intensive but have scaled up massively. Some businesses employ hundreds of thousands, often at a single location. So where do they get the economies of scale?

I know of two factors that can be scaled up in such businesses: customer relations, and what I call labor squeeze.

Good relations with big buyers such as Apple and HP are not easily obtained. Years of interaction are needed to build necessary trust. Suppliers that prove better than others are retained, while the rest are dumped. As time goes by, the number of suppliers shrinks and the survivors expand.

Thus, economies of scale are improved through good management of customer relations. Apple, for example, demands total secrecy in the production of its products. This goal cannot be met if it uses many suppliers, so when it signs with a trustworthy supplier a virtuous cycle is created.

An even more important factor is labor management. What I observed during my visit 10 years ago was actually the key to economies of scale. To put it bluntly, the key competence of a successful OEM in China is to squeeze labor to the maximum extent possible. That skill is developed within an organization. When a company employs hundreds of thousands from all over China, it needs a massive machine that involves recruiting, housing, training, and worker management on the factory floor.

For example, the factory I visited derives its economies of scale from 1) knowing where to find all the 18-year-old girls, 2) convincing them to stay in factory dormitories, 3) training them to put the parts together, and 4) ensuring that no one takes too many toilet breaks. This is all part of a huge system that can derive considerable economies of scale by processing hundreds of thousands of workers.

Labor management as a core competitive advantage in East Asia began in Japan. After the Meiji Reforms, Japan wanted to industrialize quickly but faced the challenge of turning agricultural labor into industrial labor. It looked to the military for a role model. The military faced a similar challenge: It had to turn farm boys into soldiers. The answer was maximum pressure and total regimentation. Factory uniforms, morning exercises, company loyalty indoctrination, etc., thus became unique characteristics of Japanese factories.

This model becomes less relevant as the transition from rural to urban labor force winds down and labor costs rise. Nowadays, Japanese factories have few workers and lots of robots on factory floors.

The Japanese military factory management system spread to other parts of East Asia, especially Taiwan. It was a Japanese colony for a half-century and receptive to Japanese management skills. When the yen's value rose in the 1970s, Taiwan got its first opportunity to take away Japanese market share by adopting the Japanese factory management system.

And when the Taiwanese took their businesses to the mainland, they found a place for applying their skill with 50 times as many people. Because they combine the Japanese system and knowledge of China's labor force, they are better than Japanese in managing factories in China.

The magnitude of scaling up by Taiwanese businesses is beyond what the Japanese could have imagined. Indeed, no other businesses have done what Taiwanese businessmen have with hundreds of thousands of workers in labor intensive operations.

This Taiwanese success drove an economic restructuring in the United States. It allowed multinational companies to focus on research and development, branding and distribution. Today, a U.S. brand company can dream up a product and order it from a Taiwanese company with factories in China as easily as ordering a pizza from Pizza Hut. Without Taiwanese factories in China, it is hard to believe that Wal-Mart and Apple, the era's quintessential creatures, could have become as successful as they are.

This sustainability of this profitable relationship between U.S. brand and distribution companies and Taiwanese factories is based on a Chinese labor force that continues to be plentiful and willing to accept working conditions.

How Much Longer?

In early 1990s, when I was working in Latin America, I became bullish on China's future. I saw Chinese workers would go much farther than elsewhere to earn a little money for two reasons: a cultural acceptance of "eating bitterness" in life; and familial obligations.

The girls at the factory I visited were earning US$ 100 a month, which was not a bad wage. That money could be used to pay for a younger brother's tuition, a mother's medical bill and, if circumstance permitted, building a house for the whole family. Each worker was willing to sacrifice herself for the family; she was not living for herself. Essentially, she accepted hardship.

These factors have changed. Today's young adults are less willing to eat bitterness. They are the first generation to grow up during prosperity, without worrying about food and shelter. Many were pampered by parents sensitive to the one-child policy. They are more like counterparts in other countries, which is good for China's international relations.

Moreover, rural families are not desperate as they were a decade ago. Siblings are few, and the government pays much more for rural education. Health insurance is decreasing the numbers of families facing financial crises due to sickness. Most rural families have built houses. And familial obligations for today's rural youth are not as urgent as in the past.

Meanwhile, inflation has severely eroded income value. Today's rural youth aspire to live in big cities, yet property prices in cities have grown twice as fast as wages. Dreams of owning a house in a comfortable city are becoming more distant.

Recent events at Foxconn and Honda factories are symbols of this new China. The labor force isn't as plentiful or compliant as before, and the ways that governments and businesses are handling the situations expose their ignorance of a new reality. They still think these are isolated incidents and, through pressure and bribery (such as a little wage increase for all and then firing rebel leaders) can bring the situation back to normal.

They think this way because of a generation gap, and the unusual relationship between local governments and businesses in China. The economy has raced three times faster than western economies did a century ago, and the generation gap seems three times larger as well. Today's young adults and their parents may as well be from different centuries. But government and business leaders are all from the parental generation, handling labor crises from this old perspective.

The governing class judges everything on short-term, marginal economic improvement rather than according to dreams and long-term goals. Today's young people are more concerned about what will happen to them in the future. They want to settle down in big cities and have interesting, well-paying jobs – just like their counterparts in other countries. This vast generation gap in perception is the force behind social tension over China's property bubble as well as factory working conditions.

The current factory system is unable to realize the dreams of today's young people. China's factories are often in isolated locations and self-contained. Youths who leave villages for these jobs find themselves more isolated than at home, with little hope of integration into urban communities. Indeed, they are neither in city or village. It's the most isolated life possible.

The compensation system makes their lives extremely difficult as well. Base pay is low, and only with massive overtime can they expect close to 2,000 yuan a month. They have no time for self improvement or integrating into modern urban life. In a few years, they will lose their youth and jobs, but they still will not have the ability or financial resources to live in cities.

Business leaders and government officials, of course, are asking why these workers aren't willing to accept these conditions, like the workers of a decade ago. They grew up in poverty and rule the country with a view that marginal economic improvement is the purpose of life. They don't appreciate, however, that times have changed: The previous generation focused on economic benefits for relatives in villages, not their own futures.

The unusual relationship between factory owners and local governments makes it difficult to resolve or prevent labor problems. Most coastal factories have workers from interior provinces. The governments have few ties to workers, but they are very connected to factory owners through tax revenues and other benefits. Local governments, therefore, side with the businesses when dealing with workers.

To improve the situation, the central government should limit these major, isolated factory sites. In the future, they should be located close to cities. As in other countries, workers should be encouraged to rent housing rather than live in factory dormitories. They should have a chance to integrate into urban life.

For example, future factories should locate close to provincial capitals such as Changsha, Chengdu, Hefei and Nanchang, which until now have been supplying workers for coastal regions. As a general rule, these cities should discourage factory dormitories but instead build public transportation systems to link factories and residential areas.

For many, these sorts of solutions to China's labor challenges may be apparent. But government and business leaders may not understand them at all. They are blinded by the urge to continue operating within the confines of the old model while protecting businesses from potential buyers in the West. So, when dealing with crises such as those at Foxconn and Honda, they try temporary fixes.

I'm afraid similar yet greater problems will eventually surface. Ultimately, market force will bring down the current system. Workers don't have to show up for factory jobs. They can join the urban service sector instead, where wages may be a bit lower but lifestyles are much better, and have a chance to integrate into urban life.

Rising labor costs will ultimately force factories closer to labor sources, and working conditions will turn more humane. The biggest losers will be coastal governments that side with the factories to protect their revenues. If they refuse to change, they will lose the factories and all those nimble fingers.

Moving backwards 20 years!

I was chatting with two friends, A and B, on the msn. The topic strayed towards the ever declining service standards in Spore...

A: actually it all comes down to the service
A: how they present themselves
B: i know the local staff got problem with the PRC workers
B: that day i saw one ask a prc staff to go photostat something, the fella go come back say cannot find, all kind of excuses
B: these PRC really fucked up, chao keng to the max
A: that is the side effect of singapore importing all the prc
A: we are moving backwards 20 years in terms of service
B: they r just fucking lazy
A: these days very obvious in retail and F&B
B: my place now some cleaning staff from china... same, always hide somewhere talk on their mobile
A: singapore service is totally fuck up
B: the malays are better
A: u compare with HK
A: HK u remember in the 80's has a bad name in service but they have caught up in the last 10 years
B: my friends say HK is ahead of SG many yrs ago liao
A: today Hk service is FUCKING EXCELLENT
B: chee bye PAP (haha i LOL at this)
A: thailand is also better than us
A: but what really surprised me was taiwan
A: when i went taipei a few years ago, their service also much better than us
A: and the locals are more orderly,
B: taiwan all the while is better lah
A: in every other asian country, the locals bother to stand one side when on the escalator
A: singapore is the only fucking country where local hog and block the escalator

what can i say except.... Thank you PAP! hahaha!
.

Increase the Weight-age, not reduce!

A response i posted in Yawning bread's blog on the Mother Tongue issue.

have u heard japanese speak english? have u heard our foreign talent scholarship holders from china etc speak english? hahaha!
yet u hv these ppl having no problem getting admission into local uni. is fluency a big criteria? (ok i admit uni admission is more the fucked up garment's FT policy, still the point on fluency stands.)

so why when it comes to Sgians this obsession with fluency?

the key is literacy.
and really u can dig up all the pseudo-psycho-neuro-empirical justifications possible and there will still be no conclusion and end to this. Becos the fact is MOST people have no problem mastering or passing two languages. (i mean it is unlikely to claim someone is a strong student etc if he/she cannot even pass 2nd lang after putting in effort lol)

the education system at primary school level certainly needs to be looked at, but IMO it is the REVERSE that should be done. INCREASE weightage on 1st and 2nd language weightage, reduce weightage on maths, science, etc! Increase weightage will drive greater emphasis on the soft subjects like languages, this is crucial becos it is the soft subjects that are the primary foundations for the eventual development and prowess in hard subjects like science and maths later on. And these foundations need to be strengthened at the pri school level and not later.

Also posted another reply in TKL's blog... hahaha.

i am surprised that the PAP gabrament has allowed the 2nd Lang issue to degenerate to such a state.

the MOE is also showing a profound lack of basic understanding what primary sch education should be all about. Too many yes-men who cannot think critically?

Pri sch level is when u build foundations, foundations that are the building blocks to hard subjects like sciences and maths later on. And the most basic foundations of all are language skills. Strong lang skills (soft subjects) make the subsequent learning of hard subjects like science and maths much easier in sec sch level and beyond. That is what education has always been about.

So instead of reducing weightage in 2nd Lang etc. I say INCREASE the weightage of the two languages at pri sch level! This move will straight away divert more real resources into the teaching and learning of language skills instead of token lip service by the PM and the clueless edu minister.

NNB so simple also don't know, these million dollar ministers realli jiak sai!

Without You

Biggest BS story ever told

Hahaha!

Preserving the status quo

I am refering to the Budget Speech 2010.

There is nothing in it that brings real benefits to majority Sporeans.

No minimum wage.
No foreign worker quota.

End of day how will Sporean workers benefit? especially since there is no genuine unions to fight for Sporean workers' rights. And the raised foreign worker levy does not address the fact that businesses and employers have the wonderful "flexibility" to pass the cost onwards by further depressing wages, LOL.

With the help of the 154th running dog media, the public will get the sense that PAP garment is doing something, when really there is nothing of substance at all.



.

Temasick... it's not funny though

.

Feb 18, 2010
Adviser to Temasek chief
Role is a more active one than was first thought; he will help in 'leadership development and talent management'

THE former chief executive officer of the Singapore Exchange (SGX), Mr Hsieh Fu Hua, has been appointed as 'special adviser' to Temasek Holdings' CEO Ho Ching.

This follows news of his appointment to the Temasek board earlier this month.The announcement yesterday shows that Mr Hsieh, a non-executive director, will be taking on a more active role at the Singapore investment agency than was first thought.

Temasek said yesterday that his remit would involve supporting management 'in leadership development and talent management'.

What's the point??
"Someone" should just fucking resign for good.
.

Xie: Trapped in a Property Bubble

By Andy Xie 01.10.2010 18:32
When China's real estate bubble finally bursts while exports become less competitive, the consequences could be severe.

The next 10 years will be more challenging than the past decade. Indeed, unless economic policies are adjusted, China's inflated real estate market could suddenly shrivel while the decade is still young.

China's market share gains in global trade and foreign direct investment due to low costs and rising global demand drove the nation's success. But China is no longer the lowest of the low-cost producers, and it's unlikely to gain market share. Moreover, global demand isn't likely to rise as fast as before; expect economic development at one-third previous speeds.

The biggest risk to China's economy is the desire to maintain past economic growth rates by maximizing investments in property -- an unproductive asset. It supports short-term growth by sacrificing long-term growth as capital's average productivity declines over time.

Local government performance in China is measured according to GDP and fiscal revenue. Property development can achieve high numbers for both quickly. This is why property's share in China's capital allocation is rapidly rising as prices appreciate and volumes increase. This is a politically driven bubble -- and it's already massive. Unless the trend is reversed by reforming incentives for local governments, China's property bubble could mushroom in two years from what's now a dangerous level. The burst could happen in 2012, endangering social and political stability.

The first decade of the 21st century began when an IT bubble burst. It was laced with 9-11 and SARS, and ended with a global financial crisis. It was a horrible decade. Now, much of the world has stagnated or regressed. Western prosperity mid-decade turned out to be a mirage manufactured on Wall Street.

The West didn't accept the need for adjusting living standards as emerging economies caught up, which led to a delayed bubble that made the problem bigger. Now the West, particularly the United States and Britain, faces a terrible decade ahead.

Amid the horror, China has risen like no other. Its GDP in dollars has quadrupled while exports quintupled. Adjusting for dilution due to dollar's external depreciation and internal inflation, from outside looking in, China's economic strength has still more than doubled in real value. It is an unprecedented accomplishment for such a massive country. And the primary drivers of success were gains in global trade and investment market share.

Low base, reform and luck could explain China's success. When the Asian Financial Crisis hit more than a decade ago, China chose not to devalue to maintain competitiveness but lowered state sector costs. When the global economy normalized, China became more competitive. Joining the World Trade Organization was an insurance policy that maximized low-cost benefits, and China's global market share tripled. Internally, China built infrastructure for growth without inflation that could erode competitiveness. The policy mix was perfect.

Neither competitiveness nor winning share in a shrinking market can guarantee growth. But by increasing consumer debt, the United States sustained demand while losing in areas of global investment and income. The credit bubble maintained global demand while China's market share gained rapidly. It was a lucky break for China, but now it's run out. The 2008 financial crisis means the United States is likely to cut debt-financed consumption with half as much growth over the next decade, while Europe and Japan are likely to have zero growth.

Meanwhile, China over the past five years has seen rising prices for production factors such as labor, raw materials, land, environmental control and taxes. These prices had been stable previously. Now, wage costs for export factories have roughly doubled in yuan terms, as have raw material prices. Before the Asian Financial Crisis, China's wage costs were half of Southeast Asia's. Now they are twice as high. Bangladesh's wage costs are even lower. It's likely China will lose market share to these low-cost competitors.

Two of three factors for the past decade's success are gone, so China needs to depend more on improved efficiency for growth. But instead, the recent trend seems to be going the other way. Rising costs and weak demand are making manufacturing less profitable. Hence, capital investment is weak, as reflected in weak equipment import data.

Most local governments seem to embrace property development as a growth savior. But shifting surplus capital into property is likely to lower future growth by decreasing average capital efficiency. This deters consumption development by increasing property expenditure expectations, and threatens financial stability by increasing loan levels, using overvalued land as collateral.

Other Asian economies such as Japan, South Korea and Taiwan failed to shed export dependency and develop domestic growth. Periodic spikes in consumption are usually due to asset inflation. Once a country loses export market share on rising costs, it stagnates because property bubbles during high growth periods deter consumption while overwhelming the middle class with housing expenses. China may be following the same path: Despite a decade of talking about promoting consumption, that share of GDP has been declining year in, year out.

Japan stagnated roughly at per capita income of US$ 40,000 over the past two decades. Hong Kong, South Korea, Singapore and Taiwan have stagnated at about US$ 20,000 for the past decade. Stagnation at such high income levels doesn't seem bad. However, China's size means its exports face challenges at much lower per capita income levels. Unless China changes its growth model, it could stagnate at a much lower level.

The overwhelming desire for getting rich quick dominates every nook, fissure and strata of Chinese society. Such desires cannot be fulfilled; the terrible logic of economics is that money must circulate. Creating bubbles can temporarily blind people to this logic, as overvalued assets substitute for money to fill psychological needs. This is why, whenever conditions permit, China seems to have asset bubbles.

Bubbles exaggerate reality but are not formed out of thin air. Cheap money and strong growth are the usual ingredients for bubble-making. Both existed over the past five years. But now, China depends entirely on cheap money to support overvalued assets. Cheap money came from past exports and was warehoused in banks. Cash also came from hot money inflows due to the yuan's peg to the dollar and weak Fed dollar policy.

Neither money source is sustainable. The dollar has bottomed. The Fed will begin raising interest rates in 2010. The combination of China's strong loan and weak export growth is reducing bank liquidity, but inflation soon may force China to tighten anyway. The cheap money may not last long.

China's exports are recovering from a low base – a trend that may last through 2010. But one should not confuse low base recovery with a revival of past trends.

The high export growth era is over for three reasons. China's market share in global trade is twice as big as its GDP share. The odds are low that China could continue to expand its market share. Second, the tide won't rise as fast as before. The Greenspan era saw a credit bubble supercharge western consumption, but the bubble has burst. Odds are that future trade growth will be half or less as in the past. Finally, a western employment crisis will lead to protectionism targeting China. Other developing countries may gain market share at China's expense.

One possible way to prolong the bubble is to appreciate the currency, as Japan did after the Plaza Accord, to contain inflation and attract hot money. Such a strategy will not work in China. Japan's businesses were already at the cutting edge in production technologies and had pricing power during currency appreciation. They could raise export prices to partly offset currency appreciation. Chinese companies don't have such advantages but rely on low costs to compete.

After export-led growth peaks, consumption is the alternative to sustaining growth at a lower rate. This transition would require a wholesale change in the political economy. The key is to increase middle class disposable income and lower consumption costs. No East Asian economy has made this transition.

China has been trying to promote consumption for a decade. However, consumption's share of GDP has declined annually. The reason is the policy environment has been squeezing China's nascent middle class through high property and auto prices along with high income tax rates. China's disproportionate dependency on exports and withering consumption components are results of national policies, not the peculiar characteristics of Chinese households.

A large, vibrant middle class is the foundation of a stable, modern society. China's policies rightfully care for the lower class. Yet the semi-market economy offers a few spectacular gains from arbitrage and speculation. Society is drifting toward a small, super-rich minority along with a small -- possibly less than 20 percent of the population – yet heavily burdened middle class, and a vast, low-income majority. Such an income structure cannot support a balanced economy, forcing export dependence.

China's rapid economic growth has spawned millions of white-collar jobs: managers, engineers, accountants and bankers. Such jobs should provide middle class income for buying property, cars and vacations. However, property prices have increased more rapidly than middle class income, increasing fear of the future.

China's property market is creating winners and losers based on timing. All other factors – including education and experience -- have been marginalized as the economy rewards speculators. And as more play the game, the speculator ranks rise and fewer people work, perhaps contributing to a labor shortage.

In the previous decade, the West refused to acknowledge its competitiveness problem and created a bubble to hide it. I am afraid China could try the same in the next decade, and the consequences could be serious. Fear of consequences could lead many to argue for sustaining the bubble, but that worsens the problem.

During a bubble period, most people think nothing will bring it down. But bubbles always burst, and the longer one is prolonged, the more severe the consequences. Oversupply or rising interest rates will bring down China's property bubble. The former brought down the U.S. bubble, and later Hong Kong's.

China's banks always seem ready to roll over credit lines for developers during market downturns. Hence, supplies tend to dry up during market downturns, preventing price adjustments. Such manipulation has created a speculative psychology that theorizes the government would never let prices fall. When speculators think prices won't fall, speculative demand lasts as long as banks have the liquidity.

The liquidity environment, however, is likely to turn against the bubble soon. The killer is inflation driven by a surge in money printing. The average lag between currency creation and inflation is 18 months in the United States. China's lag could be two years since the government uses subsidies to suppress inflation. By 2012, China could experience 1990s-like inflation. And that's when the property bubble will probably burst.

Hello 2010

.

The beginning of a new decade!

Goodbye 2009 Hello 2010!



.

Central Banks, Arsonists and Playing with Fire

Andy Xie: Money supply growth has sparked an asset market boom that supports the economy, not the other way around. Don't get burned.

Oct 28

(Caijing Magazine) Is money demand efficient? The answer could help decide what's best for monetary policy. Moreover, as financial institutions have demanded more money to support their leverage, money demand efficiency has become equivalent to financial system efficiency.

I think the answer is no. Monetary authorities and central banks have a responsibility to take this reality into account. Their best approach would be to limit the deviation of monetary growth from nominal GDP growth. In particular, sustained deviation should be corrected -- even if the underlying economy suffers in the short term.

This is a serious academic topic these days. Some of the world's most prominent economists hold different views. Why discuss it here? First, it's important to everyone. After all, retail investors dominate China's asset markets, and most base their investments or speculation decisions on expectations that the government will not let asset prices fall. The credibility of this expectation depends on whether money available for government spending is limited. A discussion on monetary expansion's limits can help Chinese investors assess the risks of their investment decisions.

Second, money supplies worldwide are rising much faster than nominal GDP growth rates. That is, monetary growth is being used to support leverage, mostly in the financial sector. Of course, the reason is central banks have responded to the financial crisis by cutting interest rates and sometimes force-feeding banks with liquidity in hopes more lending will boost the economy. But instead, money has flowed into and led to buoyancy in asset markets (stocks and bonds in developed economies, and almost everything in emerging economies).

Buoyant asset prices have stabilized the global economy. Most analysts say buoyant asset markets reflect correct expectations of a buoyant global economy. I don't think this is true. As we saw in the past decade, the latest asset market boom is supporting the economy, not the other way around. In other words, it's a bubble.

Even though the global economy is staging a modest recovery, mainly on inventory restocking and fiscal stimuli, the overall economic situation is still difficult. Unemployment rates in OECD countries are at record highs. Global trade is still at one-fifth its peak level. The small- and medium-sized economies that employ most of the world's people are struggling. We see a contrast – unprecedented in modern times -- between the asset market boom and real economic difficulties.

The gap is creating social tension around the world. While workers and businesses struggle, asset players are reaping substantial paper profits again. As the central bank's monetary policy is behind the asset boom, we should ask whether the policy is achieving its goal by helping the real economy, or whether it is just helping speculators and hoping they have something left over for the real economy.

The financial crisis exposed gross inefficiencies in the massive amounts of money financial institutions received from central banks. Supplying so much money to the same people who caused the crisis -- and with the same incentives -- does not feel right. The argument in favor of this policy is that, when the house is on fire, you have to do whatever to extinguish the fire and find the culprit later. The problem is that, in this case, the arsonists have been asked to put out the fire. How can we be sure they won't start another fire?

Most argue that the answer is not to limit the money supply but to reform the financial system. In this way, future demand for money would be efficient. But so far, no corrective reforms have been implemented in response to the financial crisis. Why? Because the global financial system became so big over the past decade that it has co-opted central banks, legislators and entire governments. Any reforms that do come will not address the main factors leading to the current crisis.

Even the best reforms will never resolve a problem based on the fact that financial professionals generally risk other people's money: They get big rewards when bets go right and don't have to pay when bets go wrong. The problem with this incentive system suggests the global financial system is structurally biased toward taking on more risk than what would be taken in an efficient market.

The only way to counter this is for central banks to limit money supplies. Asset inflation over the past 10 years and the catastrophe incurred when it burst lend credibility to this argument.

Stagflation in the 1970s spurred economists to study why monetary stimulus, over time, loses its punch. Demand is stimulated, but that leads to inflation. And it's led to development of the rational expectation theory to explain the average Joe's response to monetary policy. Its conclusion, although obvious to the uneducated, is that policymakers cannot fool people again and again. For that observation, many have won Nobel prizes. Milton Friedman advocated money supply growth targets as a guiding principle for central banking. Such an approach would put central banking on autopilot with a target of money growth and leave the market to decide interest rates.

The rational expectation theory was extended further to explain investor behavior. This led to the efficient market theory, which posits that, under some conditions, rational investors will lead to efficient asset prices that correctly anticipate the future. Academic jargon for efficient asset price says that it includes all useful information about the future. That laid the foundation for tearing down the regulatory structure built from the lessons of the Great Depression.

Stagflation of the 1970s led to central banking to focus narrowly on short-term inflation. The efficient market theory prompted central banks to completely accommodate financial institutions that demanded money for leverage funding. This combination of policy steps laid the foundation for the big bubble in the past decade. As globalization kept inflation low, Wall Street could source an unlimited amount of liquidity from central banks for bubble making.

Even though globalization has maxed out, and the global economy has now entered an inflation age, the bursting of the last bubble is a negative demand shock that's keeping inflation low for the time being. This has created another window for bubble-making. A last-train psychology means this bubble is growing quickly, totally oblivious of economic fundamentals. In addition to the usual misinformation from market makers who want to sucker people, government officials, financial professionals and the media are also saying what speculators want to hear. This is yet another episode of an inefficient market adventure.

Institutional investors dominate financial markets in western countries, while retail or individual investors are the main players in the east. Neither group is thinking or behaving rationally. Most institutional investors are benchmarked against market indexes quarterly, and with cash-holding limits. These constraints obviously have disadvantaged them and made it extremely hard to outperform the indexes. This is why most institutional investors are closet indexers. Extra management costs guarantee that most institutional investors under-perform market indexes and don't add to market efficiency.

Absolute performance funds or hedge funds are the biggest development in financial market in the past 10 years. But they have been amplifying market volatility rather than improving efficiency. The hedge fund industry has made managers rich, not investors, because managers are remunerated with a cut on the upside, and don't pay up for the downside. So they are structurally incentivized to long volatility while playing something like the coin-flip game "heads I win, tails you lose."

Regardless how one tries to improve the incentive structure for institutional investors, nothing could overcome the incentive distortions tied to the practice of managing other people's money. Institutionalization, once hailed as a great step forward in improving market efficiency, has proven to diminish efficiency. Developing countries that face highly volatile markets have been looking to institutionalization as a way to calm them. They should think twice. Institutionalization may decrease short-term volatility but make up for this advantage with a big crash.

Retail or individual investors routinely mistake volatility for trend. Their herd behavior creates self-fulfilling trends that are mainly temporary. From time to time, such herd behavior lasts a long time and leads to big bubbles, which in turn lead to major misallocations of resources.

To minimize chances of future financial crises, one could reform the financial system to make it less crisis-prone, or target both asset and CPI inflation when setting monetary policy. When the crisis began a year ago, policymakers around the world swore to reform the system while ridding it of corruption and excess leverage. After governments bailed out financial institutions with trillions of dollars, the impetus for reform waned. Reform bills in the U.S. Congress have been watered down so much that they would not prevent another major crisis.

Capital requirements and transparency are key elements to address in any effective financial reform. And unless reforms target problems in the derivatives market, they will not be effective. Over-the-counter derivatives carry hundreds of trillions of dollars in notional value, thriving in an opaque environment. Derivatives in theory help buyers decrease risk, but in practice they are merely tools for taking on more risk, hiding leverage through complex structuring. Market-makers can earn high profits by fooling buyers and regulators, overcharging while putting up little capital to warehouse such high-risk products. If the market is made transparent and capital requirements are reasonable, this business would shrink.

Every party ends sooner or later, and I see two scenarios for the next bust. First, every trader is borrowing dollars to buy something else. Most traders on Wall Street are Americans, British or Australians. They know the United States well. The Fed is keeping interest rates at zero, and the U.S. government is supporting a weak dollar to boost U.S. exports. You don't need to be a genius to know that the U.S. government is helping you borrow dollars for speculating in something else.

But these traders don't know much about other countries, particularly emerging economies. They go there once or twice a year, chaperoned by U.S. investment banks eager to sell something. They want to think everything other than the U.S. dollar will appreciate; Wall Street banks tell them so. Since there are so many of these traders, their predictions are self-fulfilling in the short-term. For example, since the Australian dollar has appreciated by 35 percent from the bottom, they now feel very smart while sitting on massive paper profits.

When a trade like this one becomes too crowded, a small shock is enough to trigger a hurricane. There must be massive leverage in many positions, but one just never knows where. When something happens, all these traders will run like mad for the exit, and that could lead to another crisis.

Surging oil prices could be another party crasher. This could trigger a surge in inflation expectation and crash the bond market. The resulting high bond yields might force central banks to raise interest rates to cool inflation fear. Another major downturn in asset prices would reignite fear over the balance sheets of major global financial institutions, resulting in more chaos.

Twice in recent years, oil prices surged into triple-digit territory, wreaking havoc on financial markets and the global economy. In 2006, surging oil prices toppled the U.S. property market, debunking the story that property prices never fall -- a premise upon which subprime lending was based. Oil prices fell sharply amid the subprime crisis period while the market feared collapse in demand. The Fed came to the rescue and, in summer 2007, began cutting interest rates aggressively in the name of combating the recessionary impact of the subprime crisis. Oil prices surged afterward on optimism that the Fed would rescue the economy and oil demand. It worked to offset the Fed's stimulus, accelerated the economic decline, and pulled the rug out from under the derivatives bubble. The ensuing fear of falling demand again caused oil prices to collapse.

Oil is a perfect ingredient for a bubble: Oil supplies cannot respond to a price surge quickly. It takes a long time to expand production capacity, and oil demand cannot decrease quickly due to lifestyle stickiness and production modes. Low-price sensitivities on both demand and supply sides make it an ideal product for bubble-making. When liquidity is cheap and easily obtained, oil speculators can pop up anywhere.

Oil speculators are no longer restricted to secretive hedge funds. Average Joes can buy exchange traded funds (ETFs) that let them own oil or anything else. Why not? Central banks have made clear their intentions to keep money supplies as high as possible, debasing the value of paper money to help debtors. It seems no good deed is unpunished in this world. If you speculate big, governments will offer a bailout when your bets go wrong and cut interest rates and guarantee your debts, allowing bigger bets. People who live within their means and save some for a rainy day see dreams shattered. Central banks can't wait to break their nest eggs.

It is better to be a speculator in this world. The powers that be are with you. Maybe everyone should be a hedge fund; ETFs give you this opportunity. As the masses are incentivized to avoid paper money while buying hard assets, the price of oil could surge to triple-digit territory again. Oil bubbles are easy to come and quick to go because the oxygen needed for its existence disappears after it kills other bubbles.

A word of caution for all would-be speculators: You'll want to run for your life as soon as the bond market takes a big fall. And the case for a double dip in 2010 is already strong. Inventory restocking and fiscal stimuli are behind the current economic recovery, and when these run out of steam next year, the odds are quite low that western consumers will take over. High unemployment rates will keep incomes too weak to support spending. And consumers are unlikely to borrow and spend again.

Many analysts argue that, as long as unemployment rates are high, more stimuli should be applied. As I have argued before, a supply-demand mismatch rather than demand weakness per se is the main reason for high unemployment. More stimuli would only trigger inflation and financial instability.

Stagflation in the 1970s discredited a generation of central bankers. They thought they could trade a bit more inflation for a lot more economic growth. Today's crisis will discredit a generation of central bankers who ignore asset inflation by sometimes trading asset inflation for a bit of economic growth. Those who play with fire often get burned, even when the arsonists don't.

.