Economics

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Global economy set for best years in decade, IMF says
April 22, 2004

Editor's note: What is such a bullish news article doing on such a bearish website? Normally I would throw this up for a balancing view on the news page, but this is so contrary to what I believe the near future will hold that I want it here on the site, to serve as future reference, right or wrong. Add your comments at the end.

Michael

http://business.timesonline.co.uk/article/0,,8209-1083212,00.html



THE world economy is on course for its best two years of expansion for more than a decade, the International Monetary Fund said yesterday.

The Fund’s bullish view came as Alan Greenspan, the Federal Reserve Chairman, stepped up his campaign to prepare markets for a rise in American interest rates, delivering his second signal in two days that an increase is on the cards by autumn.

In its bi-annual World Economic Outlook, the IMF said accelerating world growth meant that it was time for higher interest rates in most large economies.

The Fund raised its forecast for world growth to a buoyant 4.6 per cent, and projected growth of 4.4 per cent in 2005.

Raghuram Rajan, the IMF chief economist, said: “The tentative buds of recovery we observed six months ago are now blooming in many parts of the world.”

But as the IMF highlighted a series of risks to recovery, it stepped up pressure on Mr Greenspan to raise US rates soon. “The ground should continue to be prepared for future monetary tightening,” it said.

The IMF said that, if rates were kept low across Western economies, markets could become over-valued and potentially volatile when rates did rise.

Mr Rajan issued a call for leading economies to use the recovery to strengthen public finances and build ammunition to deal with future economic shocks.

The IMF also reinforced calls for the US to curb its budget deficit and highlighted risks from rising oil prices and terrorism.

In his latest hint at an impending rate rise, Mr Greenspan dropped his use of the word “patient” to describe the Fed’s stance and said rates “must rise at some point”.

Most economists now expect a move in August. But markets were rattled by what they saw as a hawkish stance from the Fed chairman.

The dollar jumped while shares on Wall Street were flat. The dollar’s gains pushed the euro to a five-month low of $1.1823.

Sterling slumped 2.5 cents to a four-month low.

Mr Rajan also sounded a warning that the global economy will be undermined if politicians in the US or other countries succumb to demands to throw up barriers to competition for foreign goods and services.

Mr Rajan reinforced his plea with a swipe at the climate of fear in many leading Western economies over the emergence of China as a potent force in world trade.

Economics

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My Life as a Deadbeat American
April 15, 2004

Editors Note: This is a reprint from our friend at Halfpast Human. Please visit the site, and the original post at: http://www.halfpasthuman.com/HPHBASTARD.htm. Add your comments at the end.

By Frmr Sftwr Engnr
------------------

It all began with the bastard from Bombay, India that is, and actually they call it M’umbai, now, but that sure didn’t stop the fellow from cursing up a storm in a flat, mid-western, American accent.

He had called me to try collect on my credit card debt. The irony of him calling me on the low cost, high-bandwidth telephony service that I helped to engineer in the early 80’s was not lost on me as I detected the slightest hint of Hindu accent in his speech. However, the fellow from M’umbai did not take kindly to my pointing out the irony of the situation…me, a long term unemployed telephony and other software engineer, being hounded for debts by a fellow halfway round the planet and ONLY because 20 years ago I worked my ass off with hundreds of other engineers to provide a signal switching network that allows for the low cost long distance we enjoy today.

“…and it let’s you work in M’umbai for American based companies where you hound Americans over our own cheap phone lines.” I pointed out.

“You are just another DEADBEAT AMERICAN” he screamed back at me, and then continued on with his scare tactics approach.

“Hey, wait a minute,” I responded, getting a bit touchy here. “You can’t say certain things here while trying to collect debt. We have this law…”

“Yes,” he shouted, “ I know all about the Fair Collections Law you have. But DO I CARE? NO! YOU DEADBEAT AMERICAN! I AM IN INDIA! YOU MUST PAY ME NOW! I KNOW ABOUT YOU NOW. YOU MUST PAY ME!”

“What? What was that? What is it you know about me?” I asked, starting to get really ticked off. This was NOT the usual collection call I had received.

“YOU ARE DEADBEAT AMERICAN. I am trained about you.” He shouts into my ear on crystal clear phone lines from the other side of the planet. “ALL YOU AMERICANS LIVE BEYOND YOUR MEANS. YOU ALL LAZY. YOU ARE NOT WILLING TO WORK, ONLY TO SPEND. YOUR WHOLE COUNTRY LIVES ON THE BACK OF THE WORLD. YOU ARE A DEADBEAT AMERICAN!” he shouted with genuine anger.

Actually, prior to this call, I had been pleasantly surprised to discover how civilized the collection process actually had become. It had been decades ago, as a poor student, when I had last had a brush with collections, and the landscape has really changed since then. True, the portion of our debt that went into arrears was (at that time) only credit card based, as I had wisely decided, after the layoff, that the mortgage and health insurance came first. So when the last of the savings went, I simply stopped making credit card payments.

“Just until I get a job.” I had thought at the time. I even went so far as to send a note to that effect with each of the last payments to the various card companies. I explained in the letter that unemployment did not even cover the mortgage and health insurance costs, to say nothing of such incidentals as food and energy, so credit card payments had to take a back seat.

Now, like most Americans, the wife and I had had several credit cards ‘active’ while I was working, and while living from paycheck to paycheck was not pleasant, at least the debt service was manageable and we felt like we had a chance to get ahead.

Then came the Bush Boom (my guess for the title to be given to this period by historians) and there went my job. The real problem was that the Bush Boom also took whatever replacement job had been out there waiting. No one needed software engineers, at least not anywhere near as many of us.

Once laid off, I discovered many of my fellow software and computer co-workers over the last decade were in similar straits. I had sort of gotten a feel for this as there were a number of calls from former co-workers, while I was still working, asking about any work I could through their way. Soon, I found myself on the other side of those conversations.

Every call to every prospect, or former co-worker, or former client, or friend, always ended the same, “…no work here. How about so-and-so?” they would always ask.

Then I would say that old so-and-so was also unemployed and looking. Then another few minutes of commiseration, and off the line, and onto the next call.

None of it did any good. No work here. Notice that we are not conversing about jobs. ALL of us ‘long term unemployed’ know that there are no jobs, except perhaps in the imagination of labor-statistic bureaucrats, and the dreams of politicians. No, we just speak of work. “Got any work? A few hours? Some device driver tweaking maybe?”, we ask our employed friends, but never about jobs. Those don’t really exist any more in America.

At the time I lost my job (early March of 2003), there were 1041 jobs advertised in the local paper for work in the Southern Puget Sound area, most under 32 hours a week, and in the health care area. Now, a year and a month and a day later, there are 513 jobs advertised in the local paper, most under 32 hours a week, and in the health care field.

No software engineering jobs at all. No software maintenance, installation, no anything. Gone, poof. So, as a good citizen, wishing to be productive again, you go to your local contact at the Unemployment office where you are informed that as an old, bald, hard-working, innovative, sharp-brained software engineer, you have two choices: one, move to India or China (I don’t speak either Hindi or Chinese, and as an American, foreigners scare me so option one is out), or two, get retrained.

Of course, no one in government has ever given a thought to the issue of trying to retrain older tech workers to become caring, health care workers. In my personal case, it won’t happen. I am your typical engineer, I can’t stand myself most days, let alone anyone else. And, if I had been gifted with even average people-skills, would I really have chosen to spend my working life glued to a screen and keyboard for nearly 20 hours a day? Probably not, is my guess. But they don’t ask me, after all, I don’t count.

You see, once you reach ‘exhaustion’ and by that the government means you have used all the unemployment benefits you will get, you ‘fall off the back end’ of the unemployment-industry rolls, and quite simply don’t count any longer. And are mostly not counted.

Except, in India, where at least I still am counted, if only as a debt with some unknown level of potential for recovery. Or in the case of the Indian collection firms, I am at least counted as an ‘active account’ for which, presumably, some American based company whose infrastructure my taxes helped to provide, is now billed.

And at least someone has work.

Yes, it finally sunk in, during that phone call. I am as he declared, just and accurately, though as near as I can tell, not through any fault of my own. I know I am a deadbeat American because I have been told so by that bastard from Bombay.

---

Original post at: http://www.halfpasthuman.com/HPHBASTARD.htm

Economics

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Kudlow & Cramer - The Show Stinks
April 02, 2004

Presented by Jeff Kassel for your reading pleasure: A couple of emails to Jim Cramer about his show, and a couple of responses.

MESSAGE 1.

From: Jeff Kassel
Sent: Friday, March 26, 2004 11:58 PM
To: Kudlow & Cramer
Subject: The show stinks

I liked Kudlow better when he was using Coke. Viewers turn this show off. I see it, I turn it off after a few minutes.....after listening to one or two laughable lies. Both of these guys have nothing to contribute. They are both obvious hacks and need to be replaced with people that are serious. CNBC has some serious staff people that do make some sense.....but not these guys. You're losing the viewer. Maybe CNBC doesn't care about the time slot. But it's prime time. You should be running something good. Why not do a roundtable with serious people. Mix it up with people that see problems........I mean running one optimist after another is not exactly balanced.

In the last few weeks we are hearing about Social Security running out of money and needing restructuring as well as medicare.........does this suggest our economy is well run. Interest rates at historical lows that are causing the dollar to drop like a rock. What about 520 billion dollar deficits that are really more like 700 billion dollar deficits. What about China and Japan buying 250 billion of our debt. This means they have us by the balls. If they stop buying treasuries........interest rates rise and choke off this recovery.

I have wondered if Kudlow and Cramer or organizations are buying the time slot....kind of like Sue Orman....another hack.

You guys have some obligation to the viewing public. It would be nice to see wrap-ups that are more than happy talk and propaganda.

Do something about this. The show stinks. It has always stunk.

Jeff Kassel

CRAMER'S 1st RESPONSE.

From: Cramer, Jim (NBC, CNBC)
To: 'Jeff Kassel'
Sent: Monday, March 29, 2004 2:10 PM
Subject: RE: The show stinks

for you to say that about larry is so horrifying that i cant begin to think what kind of animal you are
jjc

MESSAGE 2.

To: Cramer, Jim (NBC, CNBC)
Cc: JeffKassel
Sent: Monday, March 29, 2004 9:49 PM
Subject: Cramer..one more thing

Jim Cramer,

I seem to have your attention. Four years ago I liked you as a guest on CNBC in the morning. You were a breath of fresh air. You were a nice counterpoint to the polished styles of the regular anchors. And you had something to say....it was a message that was delivered in an authentic style that was often funny and usually pretty interesting. I particularly remember your complaints about Microsoft not taking the Justice Department lawyers seriously as the anti-trust activity started. Even though you were wrong, but it was fun to listen to you. You should have been right but Microsoft won that round...they weren't so lucky in Europe. Actually, as corporate gangsterism goes, Microsoft was a junior high school player. We got into college with Enron and Adelphia and Worldcom and all the other Wall Street criminals.

But, Jim, there is a big difference between being a guest once a week for an hour, and a host every night. Plus there is the Kudlow problem. Kudlow is a smart guy...just like you...but Larry Kudlow is a mindless supplysider/propagandist who has been predicting great things for the stock market whenever there's a TV camera around. I'd love to see an accurate history of his investments because if he invests the way he suggests other invest, from 2000 to 2002 he would have lost a ton of money. Finally in 2003 Kudlow was finally right and the market did rise, but you and I both know there are all kinds of problems with an economy that's running on the interest rate cocaine promoted by the Fed.

Savers and retired people in this country are being severely punished with artificially low interest rates so government can bail out corporations that have misallocated capital. This was once a country that saved and produced things. Now we have economic engineers who think we can borrow our way to prosperity as millions of jobs are exported to police states like China. When the Japanese and Chinese decide to stop buying treasuries, you will see what will happen Kudlow's utopian, ever-expanding economy, fueled by tax cuts for millionaires and capital gains reductions.

Because I watched you in the mornings, I had high hopes for your show and I was really disappointed. I am not alone. Serious viewers are not so very impressed with shameless self-promotion and investment puffery. We used to pay our bills in this country and Republicans used to promote balanced budgets. Kudlow is a member of the "New Republican" cadre who believes that deficits approaching a trillion dollars a year represent good government policy. Maybe his mind has been twisted with all that ass kissing he and everybody else does when the words, Allen Greenspan are uttered. Greenspan....one of the worst fed governors in history who choked when it came time to take his foot off the gas. Someone should take him out behind the Federal Reserve building and give him the beating of his life for trying to wreck the world.

I'm not as smooth and sycophantic as Kudlow, nor do I share his cockeyed optimism. For most of my unremarkable life I've paid my bills, saved for retirement and worried about excessive spending for government programs that are unaffordable. Looking back on it, I suppose that makes me an idiot because you and your partner are on TV and I am not. But if I was on TV, I would not be hawking companies that are selling for 50 times earnings as national bankruptcy looms on the horizon.

Do yourself a favor and do some tough interviews on your show...give me a call when you decide to take apart some happy talking sector analyst so that after 30 seconds, sh** is running down both of their legs. People are kind of tired of bs.....aren't you?

Jeff Kassel

CRAMER'S 2nd RESPONSE.

From: Cramer, Jim (NBC, CNBC)
To: 'Jeff Kassel'
Sent: Monday, March 29, 2004 2:09 PM
Subject: RE: The show stinks

jeff you are really funny, especially when you beat your children
jjc

Economics

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Dow Drops Tranny
March 11, 2004

To those of you not familiar with the Dow Theory, it’s an old fashioned indicator, so you probably shouldn’t pay much attention to it. All these old indicators, such as PE ratios, dividend yield, price-to-book – they don’t really mean anything anymore in the new economy.

But just for fun, just for a little history lesson, let me give you a brief overview of the Dow Theory. Dow theory is a description of market behavior, invented by Charles Dow, of Dow Jones fame, as a way to track the primary trend in the market. It divides the price moves of the stock market into three types of trends: primary (lasting from months to years), intermediate (weeks to months) and minor (days to weeks). It looks at only two indices as a model of the market in general, and it looks only at price action. The two indices were originally the Industrial Average, and the Railroad Average (the “Rails”). This was back at the turn of the last century – 1900 or so – when the “Industrials” numbered only 12 stocks, and the great railroads of this country were the primary means of transporting the goods produced in the industrial factories of the north to the south and out west. The theory thus takes into account the two primary factors of economic value: production and transportation.

The original theory stated that when a change in direction of either the Industrial Average or the Railroad Average is confirmed by the other, a primary change of trend in the overall market is signaled. Simultaneous movement of the DJIA and the DJTA to new highs or lows provides the theory with the signals of trend change.

Can Dow Theory be trusted today? After all, the “Industrials” are no longer really such. Now they include stocks such as Disney, Microsoft, AT&T, Citigroup, Merck and SBC, which produce very little in the way of physical goods. As for the old “Rails” index – it is now called the Transportation index, it is dominated by the airliners, which are notorious for losing money anyway. Fedex and UPS, both primary movers of goods in today’s economy are also components.

The thing about the new economy is that stock prices have no relationship to the underlying economy. This is why those old fashioned indicators mentioned above don’t work any longer. So the Dow’s dropped its tranny and issued a sell signal? Pshaw! This is an election year. The Powers That Be aren’t going to let the market fall before Dubby gets back in office.

Are they?

Forget about the economy. Do your patriotic duty, borrow some money and buy something. Don’t think so much. It’s a bull market. Pay no attention to what the statistics say, or for that matter what the market is saying. It’s a bull market. Chock full of bullsh*t!

Economics

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The True Unemployment Rate - 10.9%
February 07, 2004

Special thanks to George Ure at Urban Survival for pointing out the truth about the unemployment statistics released last week. The link that George supplied is to the Bureau of Labor Statistics, Table A-12. Alternative measures of labor underutilization

"Alternative measures of labor underutilization?" Hmm...What does it mean in English? Also known as the U-6 number, it is a more accurate measure of the nation's unemployment rate.

This page estimates the "total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers at 10.9%. What are "marginally attached workers?" According to the BLS, "marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. " Do you know anyone like that? They're not counted in the big, pretty headline number (Unemployment rate falls to 5.6%) that is reported on the six o'clock news. How come?

As we said, 'The second great depression will not be televised.'

If you've got some time on your hands, how about writing some of your journalist friends and ask why they consistenly ignore this number?

***
I just finished reading "Animal Farm" this weekend. It is a great refresher to remember how the govenment operates.

Economics

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Real Estate 21st Century Style
January 16, 2004

Currently my business is centered on finding people in pre-foreclosure. I "buy" their house to prevent the foreclosure, then either sell it to a new buyer or lease it back to the current owner for 1-3 years until their financial status is better. When I say I "buy" their house, in reality I get control of the property through a land trust, then find my new buyer without actually transferring title to myself. When I get the new buyer, the old buyer sells it to me, then 30 seconds later I sell it to the buyer I found in what is called a "dual close." That way I have no out-of-pocket costs. Of course the new buyer buys the property for 20-30k more than I "paid" for it. At this point, I have several such deals in the pipeline, but nothing has come out the other end yet (I haven't been doing this very long). However, I know several people who do this full-time, and they are raking it in!

Right now in the greater Portland area, there are about 100 foreclosures a week. I believe we have the highest rate in the country. Every month, 50,000 people in this area are late making their mortgage payment. For the clients I have met, the most common cause is job loss. These people typically get a house where they need two incomes to afford them, and when one of them loses their job, they are screwed. I see people who have borrowed 125% of the value of their home, and others who have their home financed at over 10% (presumably because they routinely overextend themselves so their credit is shot). In my first deal, I have a house in Oregon City where the owners managed to borrow 230k on a house maybe worth 160k. This was possible because the bank just did a drive-by appraisal. The bank that holds the second mortgage of 50k will probably lose most of it. I see this all the time.

Since I was laid off from my job in March, I have been collecting unemployment insurance as I get my business going. I receive $1070 a month in rental income from my two rental units (I own a tri-plex). With this as my financial situation, I am pre-qualified for a 100%, non-owner-occupied loan at 7.8% interest rate. True I have excellent credit, but the fact that I can get this type of loan with no real income is a bit scary.

Nonetheless, given that the high-tech industry has collapsed, and I will not be able to get a web programming job in the foreseeable future (and probably never again), I think this is the best business for me to be in. Basically, I'm going to take the money and run. I ultimately want to invest the cash in small apartment buildings where I can realize a steady income. I want to ultimately buy several of these in many different parts of the country, with the idea that when things get bad they don't always get uniformly bad (for instance, Portland is really suffering right now, but there are parts of the country that are doing better). To buy commercial property you need 20% down, which I hope will shelter me from significant downturns in the housing market. I also want to own a home outright (so I don't have to worry about payments), and of course clear my debt. I don't know if your predictions will come true, but I have been through enough already to know that I need to plan for disaster, just in case.

"Short the bank" refers to a technique real estate investors use to get a better price for a property. In a foreclosure auction, liens (i.e. mortgages) are paid in the order in which they are applied. So, for instance, the money paid for a house at auction is given to the holder of the first lien. Whatever is left over is paid to the second lien holder; whatever is left over from that is paid to the third lien holder, etc. (if property taxes are owed, they are always paid first). Because a property never sells at auction for its full value, and the lien holders know this, they are usually willing to deal. You approach the bank and offer them less money for their lien than the amount of the mortgage. The offer you give them depends on what position they hold.

Real world example: Lets say you have a house worth about $150,000 that is mortgaged at 100% (I see this all the time). Suppose they have a 100k first mortgage and a 50k second. I am virtually guaranteed to be able to "short" the second by a substantial amount. That second lien holder will usually take about 5k for that 50k mortgage. Therefore, I have just created 45k in equity. And, because the first and second lien holders are almost never the same bank, I can sometimes even short the first, say take them down to 80k-90k (they are in a stronger position, so you can't discount as much). If the property is in bad shape, all the better, because they know they will not get much for it at auction. So, when I approach the bank, I show them pictures of all the bad things about the house. Banks make their money by making loans, not by holding on to distressed houses.

This technique was actually invented by Fannie Mae, and is a common practice in the home loan industry. However, in most cases only a new buyer can short the bank. The homeowner cannot. There are exceptions to some of this. For instance, VA loans usually cannot be shorted more than 5% of value. And, some lenders won't deal at all (but most will).

When I approach a client, I need their full cooperation to do this, because the banks want financial info from the client to ensure the client does not have the means to pay their mortgage. Usually this is not a problem, because the client is against a wall and has no alternatives. I tell them that I will buy their house for the cost of all liens held against the property, but that I have to specify a dollar amount on the purchase and sale contract that I show the bank. So, I write down a very low number for the purchase price. If I am not embarrassed by the offer, it is too high. For the above house, I would offer something like $72,500. Of course the bank won't take that, but it starts the negotiating process.

Notice that when you are dealing in real estate you are dealing with expensive things (houses), so even a measly 5% can translate into thousands of dollars. I am expecting my deals to average about $15,000 apiece (though I suspect this is a very conservative estimate; probably by half). How many deals do I have to do in a year, at 15k apiece, to make a good living? Keep in mind that I have been doing this for six weeks, and I currently have four people under contract and potentially four more ready to sign. I know I am going to make money at this, but as yet nothing has come out the other end of the pipeline.

If I find a deal that I do not want to do for whatever reason, I can "wholesale" the property. Basically, I can go to my real estate club and sell my contract for 1-3k to another investor. Or, in "lease-backs" (where I buy the house and lease it back to the current occupants), I can refer that property to CCN for a flat $1800 referral fee. How many of those do I have to do to make a good living? Also, keep in mind that after I get a signed contract I immediately begin marketing the property. Since I am getting it at a significant discount, I can afford to price it cheap to sell it fast. In most cases, I never have to actually buy the house. The out-of-pocket on these deals is the $10 I give the homeowner when I sign the contract (money has to change hands for the contract to be legal) plus the marketing cost. Currently, I spend about $500/month on direct mail, plus miscellaneous office expenses.

When I sell a house, I can also be creative. I can do a lease-to-own, where the buyer gives me 3% down as a security deposit, and pays rent with the understanding that they will buy the house from me at a set price in 1-3 years. Because that 3% down is a deposit, it is not taxable income (until it is actually applied to the purchase). Also, because the tenant is intending to buy the property, and they put a substantial amount down as a deposit, they are virtually guaranteed to be good tenants.

Economics

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What Would You Do?
November 19, 2003

What would you do if you woke up one morning, fired up your browser, and were faced with the strange creature above staring back at you? No matter what you did, you couldn’t get out to the internet. This cheerfully sinister little space bug man was blocking your path.

This is what happened to me on Monday, and it was a terrible surprise. I thought I’d been hacked, and this little man hardly looked cute to me after trying again and again to get through him. In truth, this was some kind of a new security feature by my ISP here in Taiwan. I don’t know if you’ve ever been locked out of the internet, but it is a terrible experience.

I was so happy to be back online that I thought I’d finally put up a new entry on the new blog. Life has been busy lately for both me and my partner Rich Lancaster. We run the site together from opposite sides of the planet – Rich in Seattle and me in Hsinchu, Taiwan. We meet out here in cyberspace. This was my week to put up the links on the homepage, but I was locked out, so I couldn’t. My apologies!!

Taiwan
I’ve been in Taiwan for about 3 months now, and it is interesting since I don’t speak Chinese. But it is not really necessary to function, since Taiwan is part of Western Civilization, and Western Civilization is basically ‘plug and play.’ I’m basically a functional illiterate here, but you don’t have to be able to read in the plug and play world. All the elements of western society are here: Roads, cars, busses, modern department stores and grocery stores.

I have been thinking about the signatures of Western Civilization – what are some of the defining characteristics? Feel free to add your comments below on what you think. To me, it has to do with roads and the internal combustion engine, allowing for the expansion outward. Western Civilization is characterized by sprawl, even in a country as tiny as Taiwan. One thing is certain, though. Western Civilization is huge. It encompasses the planet.

And you know what they say, ‘The bigger they come, the harder they fall.’

China
Being so close to China, I hear a lot more news. The problem for Taiwanese manufacturers is the same as for American or European ones. China is simply flat out the cheapest place to make anything, so all production is moving there. I didn’t know how much until I moved here, but Taiwan makes a lot of computer equipment. They are number one in market share for 14 computer products, including:

Notebook PCs, LCD Monitors CD-R Drives, CD-RW Drives, the disks themselves, DVD Drives, PC Cameras, Ethernet Cards, Ports, Hubs, ADSL Modems, Wireless LAN devices, Analog Modems, IC Foundry, Mask ROM and IC Packaging

Amazing for a tiny country of only 22 million. But alas, all of this production will be moving to China. What will Taiwan do? What will we all do? This is the great hollowing out of industry that is happening all over the world so that China may work hard and join the ranks of Western Civilization with the rest of us.

I just wonder if China joining the party will be the end of the party for everyone. How will planetary systems deal with a billion more cars, refrigerators, air conditioners, and all the other trappings of the good life? We’ve already taxed global resources to the max. To say nothing of the fiat currency system upon which it is all based. Gold is really heating up now. She kissed $400 yesterday. Rich and I have had the debate going since our predictions last year. I didn’t think Gold would get past $400 this year, while he predicted a high of $450. He’s got a month & a half for a 12% rise or so…

It is early for you, but it is late for me. 10:30 pm is bedtime in Taiwan, but market open time in the U.S. Stocks are off to a positive start…barely. Gold has stood back down to 397. She’d have to fall a long way for my prediction to come true. The winds of inflation and uncertainty seem to blowing too hard for that to happen.

Cheers.
Michael

Economics

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What Would You Do?

What would you do if you woke up one morning, fired up your browser, and were faced with the strange creature above staring back at you? No matter what you did, you couldn’t get out to the internet. This cheerfully sinister little space bug man was blocking your path.

This is what happened to me on Monday, and it was a terrible surprise. I thought I’d been hacked, and this little man hardly looked cute to me after trying again and again to get through him. In truth, this was some kind of a new security feature by my ISP here in Taiwan. I don’t know if you’ve ever been locked out of the internet, but it is a terrible experience.

I was so happy to be back online that I thought I’d finally put up a new entry on the new blog. Life has been busy lately for both me and my partner Rich Lancaster. We run the site together from opposite sides of the planet – Rich in Seattle and me in Hsinchu, Taiwan. We meet out here in cyberspace. This was my week to put up the links on the homepage, but I was locked out, so I couldn’t. My apologies!!

Taiwan
I’ve been in Taiwan for about 3 months now, and it is interesting since I don’t speak Chinese. But it is not really necessary to function, since Taiwan is part of Western Civilization, and Western Civilization is basically ‘plug and play.’ I’m basically a functional illiterate here, but you don’t have to be able to read in the plug and play world. All the elements of western society are here: Roads, cars, busses, modern department stores and grocery stores.

I have been thinking about the signatures of Western Civilization – what are some of the defining characteristics? Feel free to add your comments below on what you think. To me, it has to do with roads and the internal combustion engine, allowing for the expansion outward. Western Civilization is characterized by sprawl, even in a country as tiny as Taiwan. One thing is certain, though. Western Civilization is huge. It encompasses the planet.

And you know what they say, ‘The bigger they come, the harder they fall.’

China
Being so close to China, I hear a lot more news. The problem for Taiwanese manufacturers is the same as for American or European ones. China is simply flat out the cheapest place to make anything, so all production is moving there. I didn’t know how much until I moved here, but Taiwan makes a lot of computer equipment. They are number one in market share for 14 computer products, including:

Notebook PCs, LCD Monitors CD-R Drives, CD-RW Drives, the disks themselves, DVD Drives, PC Cameras, Ethernet Cards, Ports, Hubs, ADSL Modems, Wireless LAN devices, Analog Modems, IC Foundry, Mask ROM and IC Packaging

Amazing for a tiny country of only 22 million. But alas, all of this production will be moving to China. What will Taiwan do? What will we all do? This is the great hollowing out of industry that is happening all over the world so that China may work hard and join the ranks of Western Civilization with the rest of us.

I just wonder if China joining the party will be the end of the party for everyone. How will planetary systems deal with a billion more cars, refrigerators, air conditioners, and all the other trappings of the good life? We’ve already taxed global resources to the max. To say nothing of the fiat currency system upon which it is all based. Gold is really heating up now. She kissed $400 yesterday. Rich and I have had the debate going since our predictions last year. I didn’t think Gold would get past $400 this year, while he predicted a high of $450. He’s got a month & a half for a 12% rise or so…

It is early for you, but it is late for me. 10:30 pm is bedtime in Taiwan, but market open time in the U.S. Stocks are off to a positive start…barely. Gold has stood back down to 397. She’d have to fall a long way for my prediction to come true. The winds of inflation and uncertainty seem to blowing too hard for that to happen.

Cheers.
Michael