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Krugman is at it again. January 21, 2011

Posted by hslu in China, Economics, Global Affair, jobs, Nursing, Politics.
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Paul Krugman has been saying the same thing about the Renminbi for a long time. A bad economic theory from Krugman’s mouth can sound like true after he tirelessly say it a thousand times.If you ask 11 economists for their opinions, you get 12 answers. Krugman’s rant is the 12th answer here.
http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y
I am not sure that a stronger Renminbi is good for the US unemployment picture. The US may get a few thousand jobs here and there in the exporting industries but everyone in the US will pay more at Wal-Mart for goods coming from China. Is that good for the US economy? I am not so sure.
As of now, there is no other country in the world can replace China’s manufacture capacities. No one. In 10 years maybe. But not now.
No other country has the infrastructure to produce the amount of goods that China is exporting to the rest of the world now. If the US wants to blame someone, I am telling you that it was all Bill Clinton’s fault. His pro-Chinese policy triggered a tsunami of foreign direct investments rushing into China to build plants after plants. These American companies did it not because they don’t like American union workers. It was because they liked the Chinese worker much more. They don’t take 10 days of sick leaves a year. They don’t take 30 minute coffee breaks once every a few hours. They don’t read newspapers on company time. They don’t ask for double digit raises every few years. They don’t have fat pensions. They don’t have unsustainable health insurance benefits. They don’t come late and they don’t leave early. And they got paid at 1/5 or even 1/10 of the union wage doing similar work.
Who is the guilty party here? Americans, look into the mirror. That’s who. I haven’t mention that all these Amercian companies wnat to sell something to all these Chinese workers too.
The US promotes free trade. This is free trade. Live with it, Krugman.
The US has no one to blame but itself. Krugman, wake up and face the reality. It is not Renminbi problem. the problem lies with the costs of American workers. It is structural. It is system wide. There is no use to blame the Chinese currency. The America’s workers are not as competitive as you might believe. Period.
Hmm, did I mention other American problems such as QE2, The TARP, the first Obama stimulus and second smaller stimulus disguised as pay roll tax relief? The world will face a bigger inflation problem thanks to the Fed and US Congress. Is that what the world needs? Krugman?
So, shut up! Krugman!
Don’t talk up the Renminbi to hide the real problem of the United States. You can’t use a stronger Renminbi to compensate for a less competitive American worker force. If it ain’t so, the American companies will not move their capitals to China. They would more than happy to stay in the US. No one put a gun to the heads of these companies’ CEOs. They did it willingly. They did it with the support of their board members.

China is looking after its own interest just like the US does. What Krugman is not aware of or his sheer inability to think clearly is that China is not a pure capitalism country. The central government in China can direct significant power to where the problem is  that no US agency or Obama can match its effectiveness.What Chinese government is doing now is take a moderate, step-wise approach just like Chinese have been doing for hundreds of years.
What didn’t work in the Nixon era may be the right medicine in China if it is done judicially. Everyone predicted a 6+% inflation rate in December for China. It came in at 4.8%. Did you check your numbers, Krugman?
If the Chinese government wanted to, their actions can be swift and focused. As for the US, they have to weigh the pros and cons of every policy and each one of these policies is subject to attacks whether the government like it or not. As a Democracy, by default, many policies are moderate in nature at best because special interest groups will make sure it is so.
Except the ObamaCare which Democrats got it done behind closed doors, lie to the public, phony math and illegal bribes using public money. Well, that a topic for another day.


http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y

Krugman is right on the foreclosure mess October 16, 2010

Posted by hslu in Congress, Economics, Global Affair, Politics.
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If you are waiting for the housing market to stabilize, you’ll have to wait for two or three more years until the foreclosures mess is resolved.

For once, I agreed with krugman and the big banks have no one else to blame but themselves.

http://www.nytimes.com/2010/10/15/opinion/15krugman.html?th&emc=th

I think the Attorney General Eric Holder should investigate these banks and some people should go to jail for their actions.But I don’t think he will.

Time after time, Walls Street power houses and major banks have done their best  to fill their own pockets at our expenses. When they failed, the government bailed them out using our tax money.

And what do we get in return? The same irresponsible bunch of crooks and liars. And not even a “Thank You” note at Christmas from them!

The financial system of the United States is broke. Once mighty America is brought down to its knees by its own financial system from inside. Once the shinning example for the entire world is now responsible for the slow down in many countries.

The politicians, such as Barney Frank and Chris Dodd, are in the pockets of their big donors, most notably Fannie Mae and Freddie Mac. All the way back in early 2002 and 2003, the Bush administration wanted to fix Fannie and Freddie but the legislature was blocked by Frank and Dodd. They, among others, are responsible for the bankruptcy of these two companies and for the recession and slow down all over the world too.

But have they been punished? Were they held accountable for their actions? No!They politic system does not allow for that. We’ll have to wait for an election to do that if they can be replaced.

This can only point to one thing: The once proud example of the American political system is broken as well.

And did the politicians come up with any resolution for Fannie and Freddie in the latest financial reform?

No! They didn’t touch it. They made the mess themselves and they didn’t want to touch it with a 10-foot pole. They leave the 烂摊子 “lan4 tan1 zi3” to the next congress to deal with.

In the mean time, the Fannies and Freddie need another $100+ billion to bail them out. That’s $100 billion of our money!

The whole thing makes me sick!

Wake Up, Krugman September 27, 2010

Posted by hslu in China, Economics, Global Affair, jobs, Obama, Politics.
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Krugman’s Op-Ed  piece on NY Times on 9-27-2010 debunked the myth of structural nature of the massive unemployment rate in the United States.

http://www.nytimes.com/2010/09/27/opinion/27krugman.html?th&emc=th

He said that Minneapolis Fed president Narayana Kocherlakota and Bill Clinton’s claim that  “people don’t have the job skills for the jobs that are open” is simply not true and not supported by employment data in the nation.

He argued that the problem is not structural and the real reason is

Well, there you go again, Krugman.

You are right that the structural problem is not the reason for the high unemployment rate. I give you credit for that because I agree with you on this point.

You are wrong to claim that the real problem is a “lack of policy resolve” from the US government. You said that because you are preaching the government solution again to solve the problem as a faithful liberal would do.

Well, what is so shocking to me from reading Krugman’s piece is this:

How come a Noble prize winner on economics doesn’t have any common sense?

The real reason for the high unemployment rate in the US is people are simply running out of money to spend in the first place. It actually happened in the Fall of 2005 when the housing bubble started to burst.

The academia called this “deleveraging.” It was a fancy word to say that Americans are having a debt up to their eyebrows. They didn’t have money in their savings account. They barely have enough to pay the bills on any giving month. They didn’t have any money to speak off in their 401(k) and, worse off, they may even have a loan on their accounts. They did save any money for their retirement. And they didn’t have money saved for their children’s education. What they do have are boats on the drive way. Huge flat panel TV in their living room. Fancy kitchen upgrades and a home theater in the basement or near the den. Plus a huge house that’s under water for the past three or four years.

Adding more salt to the the wound, the Three Stooges of the 21 century: Obama, Pelosi and Reid ran the federal government to the ground with lies and deceits and passed policies against people’s will with more government spending, unfunded liabilities, record-breaking deficits and extremely high national debt.

Of course, massive direct foreign investments to China and other markets in Asia and South America from US so many companies since 1993 have resulted in wholesale export of manufacturing jobs to these countries. And this was the root cause for the “structural” change of the industry and the labor market in the United States.Well, the United States has no other to blame but themselves and the capitalism because money flows to where it is treated the best.

American people who still have a job will save more at the expense of a crawling economy and a stubbornly high unemployment rate for at least two more years.

Now that the US government, like many Americans, is broke, the massive spending has to stop which American people are concisely doing right now. Let the market takes care of itself. Once people saved enough money and feel secure with their future,  they will spend again and the unemployment rate will come down structural or not.

Wake up, Krugman. Forget about arguing with other academia and the likes of Bill Clinton. You need to get out of your office and talk to people on the main street from time to time. It is no more complicated than this.

Do you trust government’s projection 10 years out? February 5, 2010

Posted by hslu in Economics, Health Insurance, Politics.
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According to Krugman’s Op-Ed piece on New York Times today, short-term federal budget deficits are no big deal because the government is the only machine that can create jobs now. He said that we shouldn’t worry about the budget deficit for the next few years or even the next decade.

He cited government’s recent budget proposal which suggests that interest payments on federal debt is projected to be only 3.5% of the GDP 10 years out. His comment is : How scary is that? He added that: it’s about the same as interest costs under the first President Bush.

My questions to Krugman is this:

  • How good is federal government’s projection on economics 10 years away?
  • Why did you take that projection as a fact instead of questioning its validity?
  • When was the last time any projection by the federal government, or for that matter, any economist with or without a Noble Prize, worth the paper it was printed on?

He did concede that the long-term picture of the U.S. federal budget deficits is dire. He added that even a fully recovered US economy will not balance the federal budget, ever.

His remedies: increase revenue, control costs and doing something about the health care costs.

In case you are not familiar with the coded words, let me explain what those remedies mean:

  • Increase revenue – increase personal and corporate income taxes, increase payroll taxes and maybe a value-added tax later on.
  • Control costs – Delay social security benefits for everyone.
  • Doing something about health care costs – reduced benefits on Medicare and Medicaid.

I guess tax reduction is out of the window because Krugman conveniently ignored to mention the fact that the new $3.8 trillion BHO budget includes almost $1 trillion new taxes.And even with that new taxes, the deficits in 2011 is still more than $1 trillion dollars.

WOW!

What about a smaller federal government?

Shall we ask for a across-the-board 10% salary cut for every federal employees retroactive to January 1, 2009? Many employees in the private sectors got 10% less in 2009?

Shall we ask for a across-the-board 5% head count reduction on every department of the federal government every year? After all, many private companies did so in 2009? We need to get rid of the dead woods in the federal government a long time ago.

If you don’t agree with me, just take a look of the US postal Office. Ask someone who still works there and see how they compare with FedEx or UPS even after recent re-organization.

China’s Currency Policy January 25, 2010

Posted by hslu in China, Economics, Global Affair, Politics.
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China’s Currency Policy

I saw an article on January 21, 2010 by Wharton’s on Chinese currency policy which stated that, in the long run, it is beneficial to China if it allows RMB to float over time. New York Times’ Krugman also warmed that China’s currency is predatory.

I don’t think that’s a good idea.

Critics say that a fixed-currency policy makes Chinese goods artificially cheap on world markets; helps China grow its exports and reduce its unemployment rates. However, these critics argue that this is unfair to competitors in other countries. They say that people buy Chinese goods because it is cheap, not because it is the best.

China is doing that because China is looking after its own interests. And what’s wrong with that? Every country does the same thing.

The other argument against an artificially low currency is that it feeds into inflation. But the central bank can adjust the exchange rate when it sees fit if it deems a stronger RMB is necessary. Raise RMB’s value by 20 to 30% as suggested by many experts means that China’s exports will suffer resulting in higher unemployment rate in these industries. This may cause social upheaval which is highly undesirable when export has down by as much as 30+%.

Keeping RMB low also resulted in huge foreign currency reserves being held by the Chinese government. As such, it helped to lower the interest rate in the United States which stimulated American’s economy. Without a lower RMB, hence a lower interest rate, America’s economy will suffer even more than it has been in 2008 and 2009.

Some experts argued that a higher RMB will reduce trade surplus with the US and create America jobs. But Americans have to pay more for goods at Wal-Mart if RMB is allowed to strengthen. Is that what Americans really want?

I think the biggest reason why China didn’t want to float its currency is this:

Allowing RMB to float freely means that Chinese government has to hand the control of its currency to currency traders and foreign central banks. No matter how much foreign reserves a country has, it is hard to compete with currency traders to manipulate its currency on the open market.

Look at Japan, its currency is so strong it practically killed its export industries except a few that have dominated the world market such as auto, electronics and a few others. It can not compete in many other industries which partially contributed to its stagnant economy and higher unemployment rates during the past 20 years. Japan has limited options to change its currency in order to compete with foreign countries. In this regard, the U.S., British, France and Germany were the key architects who through coordinated effort (The Plaza Accord) forced Japanese Yen to strengthen in the early 1990’s.

As a result, the Japanese economy crushed in early 1990’s and has suffered its worst set back since after WWII till this date.

China is determined not to follow Japan’s footsteps.

Chinese Yuan – Is it undervalued? October 24, 2009

Posted by hslu in China, Economics, Global Affair.
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Chinese Yuan – Is it undervalued?

Mr. Krugman of the NY Times suggested in his op-ad that Chinese Yuan is undervalued because it is pegged to the US dollar. As US dollar losing its value on the world market, Chinese Yuan is also headed lower.

He suggested that Yuan should strengthen and the United States should do something about it. A lower Yuan helps China exporting its goods to the world. At the same time, Krugman failed to point out, consumers all over the world also benefit from lower inflation.

His comments stemmed from Treasury Department’s assessment of Chinese monetary policy in a report to Congress last week. The report declared that China is not manipulating its currency but expressed “concerned” of Chinese government’s action.

The timing of the report was most intriguing because the YS president is about to visit China and he didn’t want to offend China which holds more than $800 billion of US treasury notes.

There are several points that I found interesting:

  1. I believe the US is now in a much weaker position economically against China compared to what it did in mid-1980 against Japan. Mounting national debt and blooming federal deficits boxes the US in a corner which is hard to get out in the near future. Since the deficit is expected to get worse in the next few years under current administration’s push for a bigger government, the US has to kowtow to China to avoid further decline of the US dollar. In mid-1980, the US, with coordinated efforts from other developed countries, forced Japan to strengthen its currency through what was called the Plaza Accord. The rapid rise caused in part the collapses of its stock market and asset values pushing Japan into two-decade long recession.
  2. The president is about to visit China. The beta male mindset of the current president dares not to offend its host before the visit which resulted in the language of the Treasury Department report.
  3. Chinese Yuan is pegged to a combination of currencies including the US dollar which Krugman conveniently failed to point out in his article too.
  4. Why should China raise the value of its currency when it is facing rising unemployment and troublesome social unrests? China knew what the US did in the mid-1980 to Japan and has gradually allowed it to rise in the past two years or so. I think China has learned the lessons and will raise the value of Renminbi on its own terms no matter who is making the noise; Nobel Price winner included.
  5. A weak nation will also lose out to the demands of a stronger nation. This is the norm instead of an exception in the world of global economic war and politics. Every nation in the world should protect its own interests but in reality some countries win while others lose the battle in the process.
  6. A crucial question Krugman failed to ask in his op-ad is who is responsible for a weak US dollar in the first place? He knows that the answer is the United States itself. The current administration does not care about the mounting unemployment rate and the ill-conceived stimulus package failed badly to create jobs promised by the president in January 2009. At the same time, he, with support of Pelosi and Reid, pushes his social agenda, increase the size of the government and ran up government debt to as far as eyes can see. It is none other than the reckless action of the president which is responsible for a weak dollar.
  7. I believe that the United States actually likes to see a weak US dollar because the export sector is the only sector that is showing any sign of life in the current economy.

I think it is unavoidable that the United States will gradually see China as a rival instead of a strategic partner. It may have already happened behind the scene in the corner offices of Pentagon and in the war room of the White House after China’s impressive showing of military capability at the celebration of China’s 60 year Anniversary earlier this month. With second-class naval fleets, China is by no means a military threat to the US. What the US is concerned about is that sooner or later China will pose a threat to the US a decade or two later.

Slide1

China has money and I have every reason to believe that its leaders will use it wisely such as the development of advanced technologies in the fields of outer space, weaponry and first-class naval fleets.

The United States is living on borrowed funds and will sink the nation deeper into a rat hole. However, the United States is still the strongest nation in the world but it is dying a slow death which will take decades to complete. Spain, France and Great Britain all had their time under the sun. For 60 years, the United States has enjoyed the unprecedented prosperity since WWII. However, the baggage is catching up with them fast. Once the economy shows any signs of recovery, interest rate will go up and the US will pay much more interests to debt holders such as China and Japan. Well, the United States can always crank up the printing press. The question is whether the other nations will continue to buy it in the future.

Maybe Mr. Krugman should devote some time to address this issue.

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