Results for “age of em” 16719 found
Christopher Balding on the real risk in China
In the past 5-8 years, and especially the past 3, China has built an enormous amount of stuff that nobody wants, needs, or uses. Fueled by a lending boom that began in late 2008 and tripled total lending in 2009, Chinese government at all levels has been spending money like a drunken sailor on leave. What should scare people however, is just how poorly this money has been spent. To give you a few examples:
- The Beijing government admits that 50% of apartments sit empty. A similar number is found in most major cities in China, not to mention the entire cities that sit empty.
- After major investment in wind power generation, most wind power capacity was incapable of generating power because…..it was not hooked up to the grid.
- Housing price to income ratios that would make a California real estate bubble blush. The average home price to income ratio peaked around 12 in California. The China Daily (the Communist party mouth piece) speaks regularly of ratios in excess of 25. One recent article noted that the average price per square foot in Beijing was nearly $300 while monthly per capita GDP was only $435. That means using the long term global average for the income to housing price ratio, the average Beijinger should be able to buy a 7.6 square foot apartment.
- Industrial capacity utilization that is officially at 60%. (If you believe the official numbers I have a 7.6 square foot apartment I’d like to sell you) This is driven by state owned banks and enterprises that over invested in 2009 due to the stimulus fueled lending boom.
His full post is here.
The culture that is Singapore
A Singapore property developer is targeting the super rich with parking problems by marketing luxury apartments that allow owners to keep their cars next to their living rooms, even if they are on the top floor of the 30-storey block.
The development, near the city-state’s main thoroughfare of Orchard Road, features what are described as “en suite sky garages” that automatically transport cars in a lift up to the desired level at the touch of a biometric pad in the basement entrance.
…Singapore, along with Hong Kong, is home to more Maseratis, Ferraris and Lamborghinis per capita than anywhere else in the world.
From the FT, by Jeremy Grant, here is more.
From the excellent Yichuan (Lulu) Wang
You all should be following him, or so it would seem to me. Here are excerpts from his post What China Could Be Building:
The real risk is not that the housing won’t be used, but that the crash would have secondary effects. Local governments are dependent upon land sales for revenues, meaning a housing crash could have serious implications for government. In Guangdong province, some local governments are actually tearing down mountains to make new land in the ocean, all to sell the land. This, along with the recent reversal of capital flows and possible insolvency of private wealth management firms, represents a serious liquidity risk that can have disastrous consequences.
…So let’s answer Scott’s [Sumner] fundamental question:
So here’s my question for all of you China skeptics that insist they are building way too much housing, infrastructure, heavy industry, etc. What precisely do you want them to build more of? And what are the 100s of millions of Chinese living in tiny ramshackle homes to do? Sit tight for a few more decades while resources pour into nice urban services for the pampered elite?I want them to start building leaf blowers, so we don’t have so many Chinese people in the low productivity position of sweeping streets. I want them to start building farm equipment, so we don’t have so many Chinese farmers tending the fields. I want them to build more laundry machines, to free the rural Chinese from scrubbing clothes on washboards. I want them to build electric stoves, so my Grandpa can put away the coal fired outside oven. I want them to build computers that can deliver cheaper education to the masses.
Instead of just focusing on “building,” I want them to invest in human capital, so productivity can be at a level that we don’t need “make work” jobs. I want them to build more schools and hire better teachers, so classes aren’t as large and you’re not damned if you can’t make it in a top elementary school. I want productivity to be high enough that high end stores don’t need more clerks than actual customers.
I want these things among many others that will only be more obvious in a freer market.
That Scott can get a haircut for $4 or an ice cream cone for 50 cents shows how low productivity and wages are in China. Yet they will not grow any faster with more housing or more state directed investments. Cheap subway rides are nice, but are they not just another sign that transportation infrastructure has been built too quickly? I’m not saying China is hitting a ceiling for growth, or that vast swaths of China are condemned to poverty. But what I am saying is that we need to worry about the systemic fragility that underpins the Chinese system, and be very, very concerned about the unknown magnitude of the downside risk.
Chris Hayes responds
In this segment Chris Hayes gives a gracious and interesting response to my post Racism by Political Party.
Visit NBCNews.com for breaking news, world news, and news about the economy
The path dependence of astronaut walks
…there was a fierce behind-the-scenes battle between them to be first to set foot on the Moon. Early plans were for Aldrin, as module pilot, to step out first, but one version reported by Smith has it that Armstrong, as mission commander, lobbied more vigorously than Aldrin, and Nasa backed him up because he would be ‘better equipped to handle the clamour when he got back’ and, more mundanely, because his seat in the lunar module was closer to the door. Aldrin paid Armstrong back by taking no photographs of him on the Moon: the only manually taken lunar image of the First Man on the Moon is in one of many pictures Armstrong snapped of Aldrin, showing himself reflected in the visor of Aldrin’s spacesuit.
That is from this excellent Steve Shapin article, hat tip goes to @MauraCunningham. I liked this part:
…they were on the same basic pay rates as other US military officers: most were captains, making about $17,000 a year. (On their missions to the Moon, they were entitled only to the standard $8 per diem for being away from base, with deductions for ‘accommodation’ provided in the spaceship.)
Assorted links
1. Via Chris F. Masse, robot stand-ins for professors.
2. Is the falling U.S. birth rate a temporary or permanent demographic shift?
3. Response to Orszag on competitive Medicare bidding.
4. Keeping Indian roots music alive.
5. The Chinese electricity numbers are scary.
6. “The fact that I don’t hear more people delivering the same clear message suggests to me that we don’t have enough objective observers.” Link here, that is James Hamilton, “Federal Receipts and Expenditures.”
Another Chinese bridge collapses
According to the official Xinhua news agency, the Yangmingtan Bridge was the sixth major bridge in China to collapse since July of last year. Chinese officials have tended to blame the bridge collapses on overloaded trucks, and did so again on Friday.
Bridges in the United States are built with very large safety margins in case heavy loads cross them, however. Many in China have attributed the recent spate of bridge collapses to corruption, and Internet reaction to the latest collapse was scathing.
Here is more.
On the Origin of Specie
An article in The Economist (from which I have nabbed the title of this post) argues that money, particularly coins, had to have “developed not as a private-sector attempt to minimise the costs of trading, but as a government operation.” In fact, there are many examples of private coinage. In an earlier post on George Selgin’s excellent book Good Money I wrote about private coinage in Britain:
At the dawn of the industrial revolution as workers left the fields and moved to industrial employment the demand for a means of payment increased dramatically. Workers, once paid in kind, needed to be paid in a medium they could use to buy the necessities of life. Small-tender bank notes, however, were illegal and in Great Britain the production of coin was monopolized by the Royal Mint which failed to provide enough high quality coin to meet the demands of workers and business.
The Royal Mint had neither the will nor the technology to meet demand. In a story reminiscent of the Soviet nail factory one historian explained the incentives of the Royal Mint:
The public coiner, the Royal Mint, was charged with providing a stipulated amount of coinage each year rather than a stipulated number of coins. It did not take the eighteenth-century equivalent of rocket science to figure out that it was far easier to strike, say, a thousand golden guineas than 504,000 copper halfpence (24 x 21 x 1,000). The less-than-overworked denizens of Tower Hill cheered the discovery… But even had the Royal Mint been more co-operative, more inclined to rise to the challenge presented by the new wage earners, it would have been hard-put to assist. It still relied on antiquated machinery inherited from an earlier epoch….
The private sector responded, if the public sector would not.
To meet this shortage, Birmingham button makers started to coin tokens which circulated widely as money. Counterfeits and forgeries were common, however. Frustrated with the shortage of good money, Matthew Boulton, James Watt’s business partner, hit on the idea of using Watt’s steam engine to create steam presses. The new presses could apply more force thereby creating precise edging that would be difficult to forge or clip and they could do so on a mass scale. You can read the fascinating story in Selgin’s Good Money but suffice it to say that Boulton was eventually successful in producing the best coinage the world had ever seen not only for Great Britain but also for India, Singapore, Bermuda and elsewhere. Nor was Boulton’s the only example of private coinage. See Selgin’s post at Free Banking for U.S., Japanese and other examples.
Here are some of the coins from Boulton’s Soho Mint.
Mexico’s investment in the United States
No, I am not referring to immigration. The net flow of immigrants is negative, but capital investment is rising:
Cemex, the Mexican cement and building materials manufacturer, is now the largest producer in its segment in the US – commanding 10.5 per cent of a highly fragmented market.
In 2010, Grupo Bimbo, the Mexican baker, announced the purchase of Sara Lee, the US baker, in a deal initially estimated at US$959m. The acquisition, which received approval from the US Department of Justice late last year on condition of some divestitures, consolidated Bimbo as America’s biggest breadmaker.
Televisa, the Mexican broadcaster, significantly deepened its exposure to the US market in 2010, investing $1.2bn in Univision, the US’s largest Spanish-language network. It took an initial 5 per cent stake and debentures convertible into an additional 30 per cent equity stake in the future.
Probably the most recognised Mexican brand in the US in the past 20 years is Corona Extra, the beer in the clear glass bottle served, in the US at least, with a wedge of lime in the neck. Corona is now the best-selling imported beer in the US – a title it has held every year since 1997.
Even Alfa, the Mexican conglomerate with interests stretching from petrochemicals to food processing, has started to drill for natural gas – not in Mexico, where the country’s constitution restricts private investment, but in Texas in a partnership with Pioneer Natural Resources and Reliance.
Between 2006 and 2011, the US received US$8.4bn in direct investment from Mexico, according to data from the US Department of Commerce’s Bureau of Economic Analysis. The figure is higher than that for any previous six-year period (though 2000 was the highest year on record with US$5bn).
The article gives further good economic news about Mexico, a country which is oddly understudied in the United States.
Are the conservative books winning out?
Amazon has introduced a heat map of the political books sold in the U.S. An overwhelming lean toward red hues suggests that conservative-themed books are outselling left leaning ones coast to coast.
Amazon is quick to point out that the system isn’t scientific. The map presents a rolling 30-day average of book-buying data and classifies them as red or blue depending on promotional materials and customer classifications. And there’s no sliding scale. A book is either red or blue, so there’s no nuance for centrists. “Just remember, books aren’t votes,” Amazon says on the heat map site. “So a map of book purchases may reflect curiosity as much as commitment.”
Still, there’s no getting around the fact that even reliably blue states like California come out in shades of red in the Amazon map. According to publishing-industry analyst Michael Norris, of Simba Information, that might be due to the right’s ability to connect with its readers. “I can tell you that there are conservative imprints and conservative publishers that are just brilliant at figuring out what kind of books their audience wants to read,” Norris told Wired. “There just aren’t aggressively left-leaning imprints like that.”
Caveat emptor, but an interesting perspective. The full article, with some visuals, is here. Addendum: Ezra Klein comments.
*Science Left Behind*
The authors are Alex Berezow and Hank Campbell, and the subtitle is Feel-Good Fallacies and the Rise of the Anti-Scientific Left. I agree with many of the particular claims in this book, and also I find those undervalued in broader intellectual discourse. Nonetheless I am struck by a mismatch between the book’s message and some of its tone, as well as the sense that one side should be singled out for condemnation (the same point can be made about left-wing books on related topics).
This excerpt made me giggle:
…despite what some progressives will contend, the purpose of this book is not to demonize all progressives. We just want to demonize the loony ones.
Education as loss leader?
And then there is the Walt Disney Company. It is building a chain of language schools in China big enough to enroll more than 150,000 children annually. The schools, which weave Disney characters into the curriculum, are not going to move the profit needle at a company with $41 billion in annual revenue. But they could play a vital role in creating a consumer base as Disney builds a $4.4 billion theme park and resort in Shanghai.
Here is more, mostly on whether media companies enjoy any synergies in education markets, interesting throughout.
Assorted links
1. Who dies from Russian roulette?
2. Interview with the new GMU President, Ángel Cabrera.
3. Lawrence Summers on government growth (very good piece), or try this link, and a Reihan follow-up.
4. Sokurov’s Faust will be out on DVD soon, it has received rave reviews.
5. Updated results on right to carry laws, and Medicaid seems to improve black child mortality but perhaps not white child mortality.
Evan Soltas is now writing for Bloomberg
Here is his excellent column on decentralized provincial health care provision in Canada. Excerpt:
By fixing the maximum federal contribution, block grants offer Canada’s provincial and territorial governments far better incentives to reduce the cost and improve the quality of the medical services they purchase. When costs rise, the provinces that run the programs are forced to pay 100 percent of the added costs at the margin, unlike in the U.S., where state governments pay an average of 43 cents at the margin for every dollar of added Medicaid expense.
Decentralized administration gives provinces the flexibility and the accountability to design their programs according to their needs and particular local challenges, rather than federal “one-size-fits-none” imposition. It also creates opportunities for innovation. By sharing notes, provinces and territories learn from one another and improve their Medicare programs.
Canada has been using block grants for 35 years. After several years of ruinously high growth in Medicare expenses during the 1970s, their federal government abandoned a 50-50 cost-sharing plan in 1977. Through the Canada Health Transfer program, which gives states some money directly and some through tax-shifting agreements, Canadian provinces and territories receive equal per capita aid, regardless of actual health care expenditure.
Hat tip goes to Miles Kimball.
Recent figures on capacity utilization
Industrial production picked up in July after two months of slight growth, the Federal Reserve said Wednesday in the latest reading that shows the economy in the third quarter got off to a decent start. Industrial production picked up 0.6% in July after slender 0.1% monthly gains in May and June, the Fed said. The Fed had previously reported a 0.4% gain in June and a 0.2% drop in May. The 0.6% gain was as expected in a MarketWatch-compiled poll of economists. Capacity utilization rose to 79.3% in July from 78.9% in May – the highest level since April 2008. Even so, it’s still 1% below its average from 1972 to 2011.
The link is here. It suggests there is excess capacity, but not in wild amounts. Elsewhere, in China:
Capacity utilisation has dropped from about 80% before the crisis to a mere 60% in 2011. That compares with about 78.9% for the US currently for total industry (which is not very high by US’s historical average), and 66.8% at the financial crisis trough according to the Federal Reserve. In other words, current capacity utilisation in China appears to be even lower than that of the US during the 2008/09 financial crisis.
Beware all Chinese numbers, but still that cannot be taken as a good sign. Note that the real estate bubble probably is not fundamental to the Chinese economic crisis (though it is a problem), but excess capacity is.