Kim Jong-il Revisited: R-O-C-K in DPRK

♠ Posted by Emmanuel in at 2/27/2009 11:03:00 AM
We often forget that North and South Korea are officially still at war. However, given the DPRK leader's legendary hairdo, it may be appropriate to speak not of "the fog of war" but "the fog of hair." The goings-on in the DPRK are famously opaque; hence, articles such as these:North Korea's Kim spotted smoking on the slyNorth, South Korea 'at brink of war' North Korea missile 'can hit Guam'Babies killed in North KoreaAgainst this backdrop of daily stories are other indications of the Hermit Kingdom opening up, such as the Kaesong Industrial Complex featured in a slick video on the official website touting economic cooperation among the Koreas. In his inimitable way, Dear Leader is asking that you invest in North Korea [1, 2]. Optimistically, the website speaks of becoming the "most important hub for trading in North East Asia." Notably, while the webpage discusses reasons why this will become so, it does not elaborate on the claim about having the lowest labor cost in Asia. Once...
Read More

IFIs to Give Eastern Europe $31.2B

♠ Posted by Emmanuel in , at 2/27/2009 09:45:00 AM
This post is pretty much self-explanatory as the events which led to it are obvious. During the Asian financial crisis, many affected countries decided to borrow in other currencies such as the US dollar and Japanese yen to take advantage of lower interest rates abroad. For one reason or another, Eastern European countries unwisely put off adoption of the euro during better times. Now that the world economy is souring, many of these countries are faced with the usual difficultly of paying off foreign loans when exports are down and their currencies have depreciated because, well, investors feel safer holding euro denominated...
Read More

Reflections on Obama's Projected $1.75T Deficit

♠ Posted by Emmanuel in at 2/26/2009 01:19:00 PM
News of the Obama administration projecting a $1.75 trillion deficit in 2009 comes as no surprise to anyone. Some thoughts:We may be reaching the upper end of estimates in our favorite parlor game, "How much more will Sammy the Beggar owe in 2009?" I say this because the Bush administration routinely overshot the mark in making these estimates. The "logic" is that the executive can subsequently claim, "See? Our fiscal responsibility ensured that we didn't run a deficit as high us our estimates." Nevertheless, outdoing the debt fetishist Bush would be some achievement;The "special FX" of dollar strength as the US gets ready to print money like mad is becoming more pronounced. For how long can repatriation flows buoy this piece of junk? Yes, Virginia, markets can be illogical, insensible, and downright delusional;Obama keeps talking of "hard choices." How about raising personal income tax rates across the board to pay for this spending spree? He offers no change, just bigger deficits....
Read More

Volcker Tells Grandson Truth About Financial WMD

♠ Posted by Emmanuel in , at 2/26/2009 07:55:00 AM
In the course of maintaining this blog, I've subscribed to countless newsletters. Although most are quite interesting, their sheer volume has led me to prune my Inbox with extreme prejudice. Fortunately, though, I was about to zap a recent entry from John Mauldin's newsletter (highly recommended, BTW; you can subscribe here) when I caught sight of its title about "Saving Capitalist Banking and a Speech by Paul Volcker." The latter contained this very interesting excerpt concerning the former Fed chairman's views about his quant grandson's choice of profession:Compensation practices had gotten totally out of hand and spurred financial people to aim for a lot of short-term money without worrying about the eventual consequences. And then there was this obscure financial engineering that none of them understood, but all their mathematical experts were telling them to trust. These two things carried us over the brink.One of the saddest days of my life was when my grandson – and he's...
Read More

Black Swan Guy Blesses Subprime Solution du Jour

♠ Posted by Emmanuel in at 2/25/2009 01:09:00 PM
There's a new entity in town that I am now backing concerning this subprime business. You won't read about it from Nouriel Roubini or the Baseline Scenario just yet for the simple reason that it hasn't really been attempted. A few posts ago, I briefly discussed Richard Murphy's solution for the UK involving the separation of the system for facilitating payments from the banks that are currently making a ham of things due to activities largely unrelated to processing day-to-day financial transactions. As I've said, while the details need to be worked out, this would be the ideal solution for dispelling the "moral hazard" of...
Read More

Obamanite Carmageddon: Of Bailouts & Invention

♠ Posted by Emmanuel in at 2/25/2009 11:26:00 AM
For all the hullabaloo it raised, Al Gore was misquoted by his opponents for political purposes when what he intended to say was that he supported funding for the Internet. He did not really mean that he "invented the Internet." Fast-forward to 2009 and we have a similar controversy. I watched the US President's address to the joint session of Congress with interest. One of the things I was looking out for was mention of how he would deal with problematic automakers GM and Chrysler. Together, they are reportedly about to ask Washington for $21.6 billion more in aid on top of the $17.4B they've already been given. Unfortunately,...
Read More

Going All In: US and EU Tussle Over Cybergaming

♠ Posted by Emmanuel in , at 2/24/2009 12:53:00 PM
This is probably the first and last time I'll feature something from an outlet called Poker News Daily. For obvious reasons, though, I have found consistently informative coverage of the current state online gaming regulation in the US from these sites. Before I get to that, a bit of history. The 2006 SAFE Port Act was crafted largely in response to security concerns that terrorists may load US-bound cargo with explosive material or the like. At the last minute, the Unlawful Internet Gaming (UIGEA) was tacked on as a largely unrelated measure by the then-Republican majority. Basically, Internet gaming Stateside by offshore...
Read More

Deliver Us from Evil: ASEAN+3 Ups Chiang Mai

♠ Posted by Emmanuel in ,,,, at 2/22/2009 01:03:00 PM
Any number of Asian economies are feeling the pinch as the global economic slowdown wends its way across the globe. Featuring many economies highly reliant on exports, East Asia is vulnerable to slowdowns in demand elsewhere. Importantly, these countries still bear memories of the trauma inflicted by the IMF at the height of its Washington Consensus phase involving liberalization, privatization, and deregulation. During that crisis, the US was keen on shooting down any incipient Asian economic cooperation as it wanted to maintain influence in the region. Somewhat famously, the ever-controversial Larry Summers went ballistic...
Read More

Largest Swiss Party: Let's Kick US Hiney Over UBS

♠ Posted by Emmanuel in at 2/22/2009 10:51:00 AM
So it had come to pass: I have previously discussed various industrialized countries bearing down on tax havens of every sort as times get tough and state revenues dwindle. At the moment, the US is waging jihad against Switzerland's standard bearer, UBS. Having applied a $780 million fine on UBS and obtained cooperation from Swiss authorities to fork over details about American tax dodgers, America is now going after what it believes are $14.8B in squirreled assets among 52,000 account holders. It appears the Swiss are drawing the line at the latter demand. Those with short memories are once again blabbing about "the end of...
Read More

A Protest I Would Like to Join

♠ Posted by Emmanuel in , at 2/20/2009 08:15:00 AM
If the turkeys are going under, then let them go under. The current strategy of partial nationalization does nothing to clean these banks up or prevent further beggary. I am surprised how the archetypal man on the street knows of the two contrasting options in handling America's financial woes. Either this drip-drip-drip process of creating zombie firms alike Japan's lost decade continues or the US bites the bullet and goes for the hard medicine of Swedish-style nationalization for a couple of years to (hopefully) clean up these banks before privatizing them again. While the latter option sounds more attractive to me, I've...
Read More

Japan's FinMin Learns of 'Drinking' on the Job

♠ Posted by Emmanuel in at 2/17/2009 10:42:00 AM
The list of persons gaining notoriety for allegedly drinking on the job grows longer. Infamous folks who have done so include the Exxon Valdez's Captain Hazelwood, who ran his supertanker aground in Alaska, causing one of the largest oil spills in maritime history in pristine northern hinterlands. Being one of those cynical academics, I've always thought of international gatherings as fine opportunities to waste taxpayer money, party hard, Normal 0 false false false MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;}...
Read More

American Badass: Securitization Lobby Revisited

♠ Posted by Emmanuel in , at 2/15/2009 06:20:00 AM
The moniker "American Badass" evokes a rich vein in US (marketing) history, from outlaws of the Wild West to today's more commercialized varieties such as self-styled trailer trash Kid Rock and pro wrestling's Undertaker. From what I gather, the Undertaker has used Kid Rock's song entitled such to make his ring entry on a motorbike. Today, however, I will discuss the true American badass. This is not the time for me to semantically parse what being "badass" really is. Nevertheless, posing to sell records and faking ring violence pale in comparison with causing $2.2 trillion in financial losses worldwide (and counting) as well...
Read More

A Double Dose of Aussie-fied Protectionism

♠ Posted by Emmanuel in , at 2/13/2009 02:37:00 PM
The forest is not the only thing on fire in the Land Down Under. Here is a quick take on two stories. The first is about the Chinese state-owned company Chinalco buying a hefty 18% stake in the world's third largest mining firm, Rio Tinto. Previously, I've discussed how China was keen on breaking up a mooted BHP Billiton takeover of Rio [1, 2]. The PRC feared that such an entity could exercise monopoly power on it. Now that the Billiton bid is history, China (and Chinalco) are probably delighted to be able to stretch their investment money a whole lot more after the commodity boom petered out. Rio Tinto certainly isn't coping...
Read More

Me So Toxic: India Underdogs in a WTO Toy Case

♠ Posted by Emmanuel in ,, at 2/12/2009 07:05:00 AM
As you can see, this story presents me with another opportunity to doctor photos for my (fleeting) amusement. To me, international economic diplomacy is the most ridiculously fascinating thing--it's just that many do not present the subject matter in lively enough fashion. [As a plug, Birmingham is one of the few schools offering a graduate-level course.] Certainly, there is enough comic fodder here to last a lifetime--banana wars, bra wars, etc. Today we feature the ongoing toy wars. A few days ago, I featured news that China was about to launch a formal complaint at the WTO over India banning toy imports from China without...
Read More

Czechs Affronted by French Auto Protection Stunt

♠ Posted by Emmanuel in at 2/11/2009 08:29:00 AM
Commenting on how national character affects international economic diplomacy is a tricky act. Some would say it's a futile one. Nevertheless, I do believe that what we have here is a genuine case of miscommunication between the Czech Republic and France. Recently, French President Nicolas Sarkozy bad-mouthed French automakers relocating production to Eastern Europe to cut costs, spurring the current row. Before I get to that, let me digress a little. A Yanqui teacher I once had spelled out what most are probably aware of about the American national character: their primary interest is in commerce. People have often misunderstood...
Read More

Wussonomics: Russian Petro-Tyrant in Hard Times

♠ Posted by Emmanuel in at 2/10/2009 10:16:00 AM
It wasn't too long ago that Russian President-cum-Premier Vladimir Putin bestrode the globe like a colossus-in-waiting. His country's future--and I do mean his country--looked assured given strong global growth and seemingly boundless demand for the country's energy exports. There he was going on a shirtless fishing expedition after meeting up with Prince Albert II of Monaco in August 2007. At the end of that year, he was named TIME's Person of the Year. Before handing power to his handpicked successor--ol' what's his name--Dmitri Medvedev, Putin was definitely a man in control of his country's destiny with much discretion...
Read More

The Rebirth of British Manufacturing (No, Really)

♠ Posted by Emmanuel in at 2/09/2009 08:36:00 AM
Auto enthusiasts are no doubt familiar with wisecracks about British car brands from the days of yore. There is, of course, the bumper sticker saying "genuine British parts are falling from this motorcar." Instead of Germany's supplier of ever-reliable parts, Robert Bosch, many British makes had to do with Joseph Lucas--AKA "The Prince of Darkness" for its history of electrical failure. Although foreign carmakers now dominate the auto manufacturing scene in the UK, their sales aren't faring too well for obvious reasons. Nevertheless, there is a movement afoot led by no less than Mandy (New Labour stalwart and former EU Trade...
Read More

Yerkes-Dodson Law: Stimulus in Blagojevichland

♠ Posted by Emmanuel in , at 2/06/2009 01:19:00 AM
Einstein once said that insanity was doing the same thing over and over again and expecting different results. So it is with modern-day America. Just as the current mess was brought about by Bushian untax-and-spend policies, the current administration is attempting to undo the mess by enacting even larger untax-and-spend policies. Unfortunately, America expects this orgy of nonsensical spending to be at LDCs' expense. I'll spare everyone why the rest of the world should tell Uncle Sam to go suck an egg when given such an indecent proposal as I've covered this before [1, 2] This pile of mostly unrelated spending takes a "toss...
Read More

Shoe Made Hu: PRC Blameless in Crisis Says Wen

♠ Posted by Emmanuel in , at 2/06/2009 01:14:00 AM
I almost missed this fascinating Financial Times interview with Chinese Premier Wen Jiabao, recently on the receiving end of a shoe-throwing tantrum. You can also read the full transcript and see the video from the first link. The post's title concerns the blame game now being waged by major world economies. Just who started this mess? From my POV, American dissaving and investment in unproductive endeavors are largely responsible. From others' POV, an excess of LDC savings "forced" the US to use surplus global investment in suboptimal ways. More reasonable commentators would say that there's plenty of blame to go around....
Read More