Today is the one hundredth anniversary of the beginning of the uprising that overthrew the Manchu Dynasty and established China as a republic under Sun Yat-sen.
The Republic of China (Taiwan) celebrates "Double Ten" as China's national day, as do many overseas Chinese in other countries. The event truly was crucial to China's eventual modernization and its transformation from a source of luxury goods (silk, tea and porcelain) to a modern industrial nation.
There were many obstacles and detours along the way, including the Opium Wars with England (1838-1842 and 1856-1860), the Tai Ping Rebellion (1850-1864), the Sino-Japanese War (1894-95) and the Boxer Rebellion (1898). These events led to the partition and control of China (at least the trading centers) by Western and eventually Japanese imperialist powers.
One of the goals of the 1911 uprising was for China to eventually reestablish control of her own territory and people.
It took a long time, but few can dispute that China has finally achieved that goal.
Monday, October 10, 2011
Saturday, October 8, 2011
Re Shoring
For a long time now American manufacturers have been moving their operations off shore. Many have moved to China.
It seems fair to ask whether these manufacturers are American at all. Most of us would at least hope that American businesses would do everything in their power to continue operating from American soil and contributing to American prosperity.
I have talked about this with an industrial designer who visits Oriental from time to time. He and I share the view that many manufacturers have moved offshore for very minor benefits.
Last Thursday's Financial Times reports that the trend may be reversing itself. Some factories whose products in recent years were entirely manufactured in China are now moving back to the US.
Among the factors supporting such a move: US producers are becoming more competitive; US-based factories can respond more quickly to customer desires; products are freed from shipping delays; customs issues do not arise.
FT calls the process "re-shoring." I would have thought "on-shoring" (opposite of "off-shoring") would be more appropriate.
This might be good news. One reason China works so hard to control their currency exchange rate is to try to prevent companies from returning to the US. But China's labor costs are rising.
It seems fair to ask whether these manufacturers are American at all. Most of us would at least hope that American businesses would do everything in their power to continue operating from American soil and contributing to American prosperity.
I have talked about this with an industrial designer who visits Oriental from time to time. He and I share the view that many manufacturers have moved offshore for very minor benefits.
Last Thursday's Financial Times reports that the trend may be reversing itself. Some factories whose products in recent years were entirely manufactured in China are now moving back to the US.
Among the factors supporting such a move: US producers are becoming more competitive; US-based factories can respond more quickly to customer desires; products are freed from shipping delays; customs issues do not arise.
FT calls the process "re-shoring." I would have thought "on-shoring" (opposite of "off-shoring") would be more appropriate.
This might be good news. One reason China works so hard to control their currency exchange rate is to try to prevent companies from returning to the US. But China's labor costs are rising.
Friday, October 7, 2011
Chinese Acrobats
A bill is working its way through the US Senate that would retaliate for Chinese currency manipulation by raising tariffs on certain Chinese manufactured products. The bill has raised the usual cries of alarm: "Awk! Free Trade!" opponents shout.
A bit of history is in order.
From the end of World War II until the 1970's, exchange rates for currency used in world trade were fixed. That is, they were firmly set. The Japanese Yen, for example, traded at an exchange rate of 360 yen to a dollar. That was the rate for years.
We would hear from time to time about a "balance of payments" problem or a "gold flow" problem. That might be caused by a country persistently buying more goods and services abroad than it sold abroad. That caused a balance of payments deficit. Another country might have a balance of payments surplus.
It was the intent of the Bretton Woods system established near the end of World War II that such a circumstance would be addressed by adjusting the relative value of currencies. The country with a persistent surplus would increase the value of its currency and the country with a persistent deficit would reduce the value of its currency. Trade would then more readily approach balance.
This almost never happened. In practice, only the country with a persistent deficit would adjust its currency by a devaluation. One day, for example, a British Pound might be worth 2,000 Italian Lira and the next day worth 2,200 Lira.
Fortunes could be made speculating in currency. Suppose you had one day converted two million Lira to pounds. If you timed it right, the next day the thousand Pounds you bought would be worth two million two hundred thousand Lira. More interestingly, the very fact that you had bought the thousand pounds (and other speculators did so as well), put pressure on the Lira, increasing the likelihood that the Italian central bank would devalue the Lira.
George N. Halm, my professor of international economics, was one of the leading economists who advocated doing away with fixed exchange rates, replacing them with flexible rates. Under the flexible rate system, it was thought, more gradual adjustments would allow the foreign exchange market to make continual adjustments. This would do away with the instant fortunes to be made by speculators.
But what if, instead of speculators, a large government with (practically) unlimited resources were to manipulate the market to give their industries a significant trade advantage?
It seems clear that is exactly what China is doing.
Here's a graph provided by economist Jared Bernstein, illustrating what China is doing.
A bit of history is in order.
From the end of World War II until the 1970's, exchange rates for currency used in world trade were fixed. That is, they were firmly set. The Japanese Yen, for example, traded at an exchange rate of 360 yen to a dollar. That was the rate for years.
We would hear from time to time about a "balance of payments" problem or a "gold flow" problem. That might be caused by a country persistently buying more goods and services abroad than it sold abroad. That caused a balance of payments deficit. Another country might have a balance of payments surplus.
It was the intent of the Bretton Woods system established near the end of World War II that such a circumstance would be addressed by adjusting the relative value of currencies. The country with a persistent surplus would increase the value of its currency and the country with a persistent deficit would reduce the value of its currency. Trade would then more readily approach balance.
This almost never happened. In practice, only the country with a persistent deficit would adjust its currency by a devaluation. One day, for example, a British Pound might be worth 2,000 Italian Lira and the next day worth 2,200 Lira.
Fortunes could be made speculating in currency. Suppose you had one day converted two million Lira to pounds. If you timed it right, the next day the thousand Pounds you bought would be worth two million two hundred thousand Lira. More interestingly, the very fact that you had bought the thousand pounds (and other speculators did so as well), put pressure on the Lira, increasing the likelihood that the Italian central bank would devalue the Lira.
George N. Halm, my professor of international economics, was one of the leading economists who advocated doing away with fixed exchange rates, replacing them with flexible rates. Under the flexible rate system, it was thought, more gradual adjustments would allow the foreign exchange market to make continual adjustments. This would do away with the instant fortunes to be made by speculators.
But what if, instead of speculators, a large government with (practically) unlimited resources were to manipulate the market to give their industries a significant trade advantage?
It seems clear that is exactly what China is doing.
Here's a graph provided by economist Jared Bernstein, illustrating what China is doing.
Tuesday, October 4, 2011
Closed Town Meeting October 4
After completion of the agenda, Commissioner Bohmert moved to close the meeting for "personnel."
I think I have mentioned this before, but the relevant provision of NC General Statutes has no general "personnel" exception to the Open Meetings Law. There are in fact four separate purposes relating to personnel, and the motion to go into closed session must specify which one. They are:
a: To establish or instruct the staff or agent concerning the negotiations of the amount of compensation or other terms of an employment contract.
b: To consider the qualifications, competence, performance, condition of appointment of a public officer or employee or prospective public officer or employee.
c: To hear or investigate a complaint, charge, or grievance by or against a public officer or employee.
d: To plan, conduct, or hear reports concerning investigations or alleged criminal conduct.
Neither I nor anyone else attending tonight's meeting has any idea which of the above authorized purposes was effected by the closed meeting.
The meeting was, therefore, improperly closed.
If any member of the Board of Commissioners is interested in making a correct motion to go into closed session, I recommend the model motion posted on the web site of Western Carolina University here.
I think I have mentioned this before, but the relevant provision of NC General Statutes has no general "personnel" exception to the Open Meetings Law. There are in fact four separate purposes relating to personnel, and the motion to go into closed session must specify which one. They are:
a: To establish or instruct the staff or agent concerning the negotiations of the amount of compensation or other terms of an employment contract.
b: To consider the qualifications, competence, performance, condition of appointment of a public officer or employee or prospective public officer or employee.
c: To hear or investigate a complaint, charge, or grievance by or against a public officer or employee.
d: To plan, conduct, or hear reports concerning investigations or alleged criminal conduct.
Neither I nor anyone else attending tonight's meeting has any idea which of the above authorized purposes was effected by the closed meeting.
The meeting was, therefore, improperly closed.
If any member of the Board of Commissioners is interested in making a correct motion to go into closed session, I recommend the model motion posted on the web site of Western Carolina University here.
Oriental Town Meeting October 4, 2011: Rainy Day?
Bizarre town meeting tonight. Only four commissioners present (Commissioner Styron was absent).
After an interminable discussion of minutes, the board considered a request by the town manager to amend the budget. Purpose: to appropriate funds to pay bills incurred and projected for hurricane clean up and remediation, including mosquito control. When two commissioners pointed out that there are still unexpended funds in the budget, the manager explained that he has no authority to expend those funds for any purpose other than the authorized line items. Except for hurricane expenditures, the approved budget is being implemented with no problems. He further explained that hurricane expenditures will be reimbursed 75% by FEMA and 25% by the State of North Carolina. The purpose of the amendment is to allow the town to pay its bills before FEMA and state reimbursements are received.
"Well what if they don't reimburse us?" Commissioner Johnson asked. "I'm worried that the Oriental taxpayers will be stuck with the bill."
After reiterating that he has negotiated the details both with FEMA and the state and explaining that he is carefully establishing a project number for each job, following FEMA guidelines, the manager posed a key question. Suppose there were no FEMA and no funds from the state. Is there anything the town is doing (debris pickup, mosquito control, etc.) that the board wouldn't want the town to do anyway. He received no answer.
The board rejected the motion to approve the budget amendment.
Commissioner Johnson then introduced a new motion to approve a smaller amount than requested for hurricane debris pickup and for mosquito control.
A similar series of actions first rejected a requested amendment to the water fund, and then approved a lower amount than requested.
"Oh, we don't want to dip into the reserve fund," Commissioners Johnson, Roe and Bohmert explained.
In many states, the reserve fund is known as the "rainy day fund."
We just had a very rainy day (Irene) and the health and welfare of the residents of Oriental are seriously threatened. And our commissioners want to dither about whether to pay for contracted services for which we will be reimbursed.
Looks like tonight was another rainy day at the meeting.
After an interminable discussion of minutes, the board considered a request by the town manager to amend the budget. Purpose: to appropriate funds to pay bills incurred and projected for hurricane clean up and remediation, including mosquito control. When two commissioners pointed out that there are still unexpended funds in the budget, the manager explained that he has no authority to expend those funds for any purpose other than the authorized line items. Except for hurricane expenditures, the approved budget is being implemented with no problems. He further explained that hurricane expenditures will be reimbursed 75% by FEMA and 25% by the State of North Carolina. The purpose of the amendment is to allow the town to pay its bills before FEMA and state reimbursements are received.
"Well what if they don't reimburse us?" Commissioner Johnson asked. "I'm worried that the Oriental taxpayers will be stuck with the bill."
After reiterating that he has negotiated the details both with FEMA and the state and explaining that he is carefully establishing a project number for each job, following FEMA guidelines, the manager posed a key question. Suppose there were no FEMA and no funds from the state. Is there anything the town is doing (debris pickup, mosquito control, etc.) that the board wouldn't want the town to do anyway. He received no answer.
The board rejected the motion to approve the budget amendment.
Commissioner Johnson then introduced a new motion to approve a smaller amount than requested for hurricane debris pickup and for mosquito control.
A similar series of actions first rejected a requested amendment to the water fund, and then approved a lower amount than requested.
"Oh, we don't want to dip into the reserve fund," Commissioners Johnson, Roe and Bohmert explained.
In many states, the reserve fund is known as the "rainy day fund."
We just had a very rainy day (Irene) and the health and welfare of the residents of Oriental are seriously threatened. And our commissioners want to dither about whether to pay for contracted services for which we will be reimbursed.
Looks like tonight was another rainy day at the meeting.
Cracks In Flood Aid
Last Sunday's Sun Journal had an article examining cases of victims of hurricane Irene who "fell through the cracks" in FEMA's flood relief efforts. The stories concerned those whose houses had been flooded during hurricane Isabel and had received flood relief assistance to repair their houses. FEMA had informed them they must get flood insurance or they would not be eligible for repair assistance in the future.
Some blame FEMA for not providing repair assistance to these victims. But the decision doesn't lie with the Federal Emergency Management agency. The policy was set by the US Congress.
Last Friday's New York Times had a very interesting debate by five experts entitled Who Benefits From Federal Flood Aid? The debate examines a number of problems with federal flood aid, including the federal flood insurance program itself.
An underlying assumption of much of the discussion is that people who live in areas prone to flooding are sufficiently wealthy to be able to afford insurance that covers flood damage. Or they shouldn't build there.
But what of the 90 year old widow living on social security in the house she grew up in? Or the minimum wage worker living in manufactured housing in a low cost area? What of a person whose choice is between buying food or paying for flood insurance? A person who lacks the resources to move?
None of the solutions presented in the New York Times debate addresses these questions.
Some blame FEMA for not providing repair assistance to these victims. But the decision doesn't lie with the Federal Emergency Management agency. The policy was set by the US Congress.
Last Friday's New York Times had a very interesting debate by five experts entitled Who Benefits From Federal Flood Aid? The debate examines a number of problems with federal flood aid, including the federal flood insurance program itself.
An underlying assumption of much of the discussion is that people who live in areas prone to flooding are sufficiently wealthy to be able to afford insurance that covers flood damage. Or they shouldn't build there.
But what of the 90 year old widow living on social security in the house she grew up in? Or the minimum wage worker living in manufactured housing in a low cost area? What of a person whose choice is between buying food or paying for flood insurance? A person who lacks the resources to move?
None of the solutions presented in the New York Times debate addresses these questions.
Thursday, September 29, 2011
Class Warfare
The clearest comment I have heard on the "class warfare" issue was by Elizabeth Warren, who is runniing for the US Senate in Massachusetts.
The video of her explaining why wealth should be taxed is plain, clear and to the point. Worth watching.
http://youtu.be/htX2usfqMEs
The video of her explaining why wealth should be taxed is plain, clear and to the point. Worth watching.
http://youtu.be/htX2usfqMEs
Wednesday, September 28, 2011
Buy Now, Pay Later
We've heard a lot about debt lately. According to some (mostly conservatives), public debt is illegal, immoral and probably fattening as well. This is only a slight variation on themes we have heard ever since Franklin Delano Roosevelt was inaugurated in 1933.
Our current economic downturn, though, was not caused by public debt. It was brought on by a breakdown in the over leveraging of private debt. It was a consequence of financial deregulation and the resulting bubble in housing. After the bubble collapsed, in 2007, 2008 and 2009, we saw a massive reduction in overall debt in the U.S. Overall borrowing (net increase in debt, including US state and local government, federal government, financial companies, non-financial companies, and US household borrowing) dropped like a shot from about four and a half trillion dollars in 2007 to two and a half trillion in 2008 to negative 438.4 billion dollars in 2009. Yes, federal government borrowing increased, but that increase was overwhelmed by reductions in borrowing and spending by state and local governments and private borrowers.
"Neither a borrower nor a lender be," Polonius advises Laertes in William Shakespeare's Hamlet.
That's very bad advice if the goal is economic prosperity. In fact, debt (properly managed and regulated) was the foundation of our postwar prosperity. Without consumer debt, aggregate demand for products would be a fraction of what it became in the 1960s.
Just imagine the consequences to the economy if we were to abandon "buy now, pay later." Actually, I don't have to imagine it. I remember it. If my grandmother wanted to buy something at the department store - say a winter coat - she would put it on "lay-away." She would pay the store a certain portion of the price and the store would set it aside (or lay it away) until she completed paying for it. Then she could take it home.
It was possible in the 1940's to take out a loan for a major purchase such as a car. It helped to know the banker. That was possible, since most banks were local businesses. That made travel a problem. Only local businesses would accept a check made on your local bank. If you went on a trip you needed to take enough cash for expected expenses. There were no credit cards.
If you worried about being robbed of your cash, you would buy traveler's checks before setting out. To cash a traveler's check, you had to countersign it in front of the cashier. That system was "pay now, buy later."
The ordinary transactions of daily life were very much more complicated sixty years ago than they are now.
Do you remember long distance telephone calls? I'll save that for another time.
Our current economic downturn, though, was not caused by public debt. It was brought on by a breakdown in the over leveraging of private debt. It was a consequence of financial deregulation and the resulting bubble in housing. After the bubble collapsed, in 2007, 2008 and 2009, we saw a massive reduction in overall debt in the U.S. Overall borrowing (net increase in debt, including US state and local government, federal government, financial companies, non-financial companies, and US household borrowing) dropped like a shot from about four and a half trillion dollars in 2007 to two and a half trillion in 2008 to negative 438.4 billion dollars in 2009. Yes, federal government borrowing increased, but that increase was overwhelmed by reductions in borrowing and spending by state and local governments and private borrowers.
"Neither a borrower nor a lender be," Polonius advises Laertes in William Shakespeare's Hamlet.
That's very bad advice if the goal is economic prosperity. In fact, debt (properly managed and regulated) was the foundation of our postwar prosperity. Without consumer debt, aggregate demand for products would be a fraction of what it became in the 1960s.
Just imagine the consequences to the economy if we were to abandon "buy now, pay later." Actually, I don't have to imagine it. I remember it. If my grandmother wanted to buy something at the department store - say a winter coat - she would put it on "lay-away." She would pay the store a certain portion of the price and the store would set it aside (or lay it away) until she completed paying for it. Then she could take it home.
It was possible in the 1940's to take out a loan for a major purchase such as a car. It helped to know the banker. That was possible, since most banks were local businesses. That made travel a problem. Only local businesses would accept a check made on your local bank. If you went on a trip you needed to take enough cash for expected expenses. There were no credit cards.
If you worried about being robbed of your cash, you would buy traveler's checks before setting out. To cash a traveler's check, you had to countersign it in front of the cashier. That system was "pay now, buy later."
The ordinary transactions of daily life were very much more complicated sixty years ago than they are now.
Do you remember long distance telephone calls? I'll save that for another time.
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