tag:blogger.com,1999:blog-89748572024-03-07T16:59:37.823+08:00Sharing with Wong Tak Choi --- A realist but may be an economistAll fellows are welcome to express their views here!! 歡迎所有人士發表見解,談論經濟與天下事William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.comBlogger77125tag:blogger.com,1999:blog-8974857.post-43844916242557316992009-09-01T18:12:00.000+08:002009-09-01T18:14:33.611+08:00John Law and the Mississippi Bubble<a href="http://disembedded.wordpress.com/2009/03/20/aig-greed-redux-john-law-and-the-mississippi-bubble/"><strong>John Law and the Mississippi Bubble</strong> </a><br /><br /><embed src="http://v.wordpress.com/f1pujnIl" width="400" height="300" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true"></embed><br /><br /><div align="justify">"...Richard Condie's 1978 animated short film, John Law and the Mississippi Bubble, offers up a history lesson about that sensational get-rich-quick scheme, which took place in France over 200 years ago. The film won the Best Film Award at the 1980 International Short Film Festival in Tampere, Finland. With economist John Law at the helm, the plan was to open a national French bank and exchange bank notes for gold at wildly inflated share prices to mask the fact that the country's gold had been depleted in the building of Louis XIV's palace. In the film, when the inevitable rush to cash in the notes takes place, poor John Law is left broke and broken-hearted."</div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-18315496487404631742009-07-04T21:27:00.012+08:002009-07-05T07:22:26.607+08:00The U.S. households should save more & our Chinese spend more<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkleORgmXf5tituyK-PPfVP8m_sXl9qIzAsTrrqXFYqYpuy9jPBKQJJwqDKTXP_xhDn87AGy_T2IrcityeJBYDhYT_Nrx1amaQYdBHdwUWovqxXNbqQubdVHc-tXxz6rMjeBMD/s1600-h/imgCircularFlow.jpg"><img id="BLOGGER_PHOTO_ID_5354598778008974770" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 182px; CURSOR: hand; HEIGHT: 158px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkleORgmXf5tituyK-PPfVP8m_sXl9qIzAsTrrqXFYqYpuy9jPBKQJJwqDKTXP_xhDn87AGy_T2IrcityeJBYDhYT_Nrx1amaQYdBHdwUWovqxXNbqQubdVHc-tXxz6rMjeBMD/s200/imgCircularFlow.jpg" border="0" /></a> <a href="http://chinanewswrap.com/2009/07/03/zhou-xiao-chuan-hopes-that-surplus-savings-will-flow-to-developing-countries/#more-2270"><strong>Zhou Xiao-chuan hopes that “surplus savings will flow to developing countries”</strong></a><strong><br /></strong><br />A speech was delivered by Zhou Xiao-chuan, the head of China's central bank, at the first Global Think Tank Summit in Beijing hosted by China Center for International Economic Exchanges. Zhou has expressed his “hope that surplus savings flow towards developing countries.”<br /><br />Excerpts from the speech ...<br /><br />“Analysis of balanced adjustment of the global economy.”<br /><br />“There are several possible situations in which imbalances in the global economy can be re-adjusted. There will also be differences in the policy direction for differing situations.”<br /><br />“Situation 1 is being discussed quite frequently. That is, U.S. household savings and the total savings rate increases, Chinese personal consumption also increases, and the global imbalance is largely corrected. This is the most ideal of circumstances. ”<br /><br />“Situation 2, the U.S. household savings rate increases, and the United States does not import so many products from China. China will suffer from even more pronounced overcapacity, the equipment usage rate will fall, and employment levels will fall, which will cause China to enter a period of low-GDP growth. We should strive to avoid this situation occurring.”<br /><br />“Situation 3, the U.S. household savings rate increases, China's personal consumption rate increases, yet the increase is inadequate. At the same time, investment in urbanization increases, and the combined strength enables surplus savings to fall. ... However, it will require a corresponding reform of urbanization finance and investment methods- such as the municipal government bonds which have been discussed for many years.”<br /><br />“Situation 4, the U.S. household savings rate increases, and imported Chinese products are no longer required in such large quantities. At the same time, China, by means of investment abroad, shifts part of its production capacity towards developing countries.”<br /><br />“Situation 5, the U.S. household savings rate increases, yet not smoothly and persistently. Adjustment in China proceeds relatively smoothly, with a partial shift in production capacity to other countries, which achieves a relative balance in overseas trade. Overcapacity will be no longer directed at the United States, but divided between other countries. ”<br /><br />“Situation 6 is the one which we would least like to see, where adjustments are unsuccessful, and current international economic imbalances persist, while trade protectionism becomes more and more severe.”<br /><br />“... China increases its strength of reform, expands consumption, and urbanization achieves great progress. However, considering that the high saving rate in China, it is still possible to have overcapacity. However, it can be directed towards other developing countries. Nevertheless, this will require the support of the international financial as well as the monetary system to improve the global production rate and the income distribution.”<br /><br /><a href="http://wongtc.blogspot.com/2009/07/blog-post_04.html"><span style="font-size:78%;">http://wongtc.blogspot.com/2009/07/blog-post_04.html</span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-72448909354615580292009-06-22T16:47:00.014+08:002009-06-25T08:35:06.635+08:00The Saving Motive in China<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh4P8MfYbOfWtmNlI32fUJqjcIcWiBiqD5UaqDyaskA97SXow26JKMBxPsuhKk93xTpJi7M-wGqnS3FB-naH8y6YGXQGSN46ofkUu0652CXYPKbADwOG0kZddprRo52C7vhFyL/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5350071576323866130" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 130px; CURSOR: hand; HEIGHT: 98px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh4P8MfYbOfWtmNlI32fUJqjcIcWiBiqD5UaqDyaskA97SXow26JKMBxPsuhKk93xTpJi7M-wGqnS3FB-naH8y6YGXQGSN46ofkUu0652CXYPKbADwOG0kZddprRo52C7vhFyL/s200/images.jpg" border="0" /></a><br /><div align="justify"><strong>The Saving Motive in mainland China: Rising Sex Ratio Imbalance and Savings Rates</strong><br /><br />High savings rates in certain countries are said to be a major contributor to the recent housing price bubbles and the global financial crisis by depressing long term interest rate in the last decade (Greenspan, 2009). The Chinese national savings rate is at about 50% of the GDP in 2007.<br /><br />The high savings rate in China may have global impact and it may be due to the rising sex ratio imbalance in China as described in a NBER working paper recently.<br /><br />This paper proposes a saving motive as a new explanation to the problem of property bubbles: "as the country experiences a rising sex ratio imbalance, the increased competition in the marriage market has induced the Chinese, especially parents with a single son, to postpone consumption in favor of wealth accumulation. The pressure on savings spills over to other households through higher costs of house purchases."<br /><br />The paper has shown evidence to support this hypothesis. The factor can account for about 50% of the actual increase in the household savings rate during 1990-2007. "In 2007, the household savings was about 30% of the household disposal income in mainland China" as said in the Paper. </div><div align="justify"><br />Is it logicially relevant by the "Paradox of Thrift" in economics (which has the same implication on the "Paradox of Deleveraging") ?</div><div align="justify"> </div><div align="justify"><strong>'Thriftiness, while a virtue for the individual, is disastrous for an economy.’</strong> </div><div align="justify"><br />The result of thriftiness as falling of saving is paradoxical because an increase in the desire to save autonomously leads to a plunge in national income eventually and saving drops in turn.</div><div><br /><a href="http://wongtc.blogspot.com/2009/06/blog-post_21.html">http://wongtc.blogspot.com/2009/06/blog-post_21.html</a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-86315212494394488462009-04-11T22:28:00.002+08:002009-04-11T22:36:44.501+08:00The US Collapse Of 2009 ! What'll be the next then?The horrible events of bailing-out in 2008 and 2009 in the US...<br /><br />It's really trouble that the catastrophic hyper-inflation is coming back!<br /><br /><object width="480" height="385"><param name="movie" value="http://www.youtube.com/v/R2Npvl3fUks&hl=en&fs=1&rel=0"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/R2Npvl3fUks&hl=en&fs=1&rel=0" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="385"></embed></object>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-88987939745939387762009-04-10T09:19:00.000+08:002009-04-10T09:19:12.059+08:00Op-Ed Columnist - America the Tarnished - NYTimes.com<a href="http://www.nytimes.com/2009/03/30/opinion/30krugman.html?_r=2&partner=rssnyt&emc=rss">Op-Ed Columnist - America the Tarnished - NYTimes.com</a>: "Op-Ed ColumnistOp-Ed Columnist"William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-59180504565705706102009-04-08T11:37:00.002+08:002009-04-08T11:44:11.496+08:00American Thinker: What President Obama Should Know About RecessionsGreat minds usually think alike.<br /><br />Mr. Earl A Thompson exactly has profound knowledge and penetrating insight about the 2008 economic recession. <br /><br />He said, "As macro-economies falter and the aggregate demand for labor falls, monetary authorities should automatically expand the money supply so as to quickly restore the original demand for labor and corresponding wage level. Failing to do so invites many workers to erroneously maintain their previous wage demands in the face of a falling aggregate demand for labor and thereby lose their jobs, creating inefficiently low aggregate employment levels......"<br /><br />By Earl A Thompson, Professor of Economics, UCLA<br /><br /><a href="http://www.americanthinker.com/2009/03/what_president_obama_should_kn.html">American Thinker: What President Obama Should Know About Recessions</a>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-57241891236361882532009-03-11T21:39:00.002+08:002009-03-13T14:25:19.631+08:00Response To the Chinese Government Stimulus, M↑& V↑--> PY↑<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSx9xAQRijgkvB2NgpTrTb5E-593cB_mrWrKTfD6J2OtwT4dRE6uvQhsbbtBUgSJPmpCpRPCCXECDw9VcNFrfJEm8iIP5btAb8_jDPuzOfUlTUE29PHzz2DqZsKRVmVrw51tRr/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5310441902519265858" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 130px; CURSOR: hand; HEIGHT: 90px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSx9xAQRijgkvB2NgpTrTb5E-593cB_mrWrKTfD6J2OtwT4dRE6uvQhsbbtBUgSJPmpCpRPCCXECDw9VcNFrfJEm8iIP5btAb8_jDPuzOfUlTUE29PHzz2DqZsKRVmVrw51tRr/s200/images.jpg" border="0" /></a> Chinese Premier Wen Jiabao, unveiling the government's economic stimulating plan for this year, reaffirmed its commitment to a 4 trillion yuan investment program and announced a record budget deficit of about 950 billion Yuan, though confusion remains over the real scale and impact of the stimulus plan.<br /></div><div align="justify"></div><br /><div align="justify">I think the 4 trillion Yuan is only a rough figure of the spending plan. Actually about 1.2 trillion yuan will be financed by the Chinese central government. The rest will be financed by the local governments. The impact on the economy as a whole should be more than 4 trillion. Assuming the spending multiplier be 2.5, through the multiplier effect, it exerts a significant impact on the GDP. I think it will contribute about extra 2 to 3 percent of economic growth this year. The rescue action should be bold and swift ("出手要快要狠") as asserted by our Premier Wen Jiabao otherwise the unbearable economic pain may persist.</div><br /><div align="justify"></div><div align="justify">Beside the 4 trillion yuan fiscal impulse, I urge the Chinese decision-makers do aggressively manipulate the fiscal and monetary tools in order to regulate the ailing economy back to its right track in the midst of this global economic tsunami. Further stimulating domestic consumption and preventing deflation expectation hold the key to sustain the current recovery of our Chinese economy. I'm glad to know that the reaction to the stimulus package was the sharp surging in bank lending. The government report shows that she will target up to 5 trillion yuan bank lending this year. I think it can further raise the monetary base (cash and bank reserves) which gives it the right way to boost the economy.</div><br /><div align="justify">The increase in spending in real estate property and private consumption will also stimulate the economy, as hundred of other related trading sectors will be boosted as a whole. Social security for the vulnerable groups should be enhanced. The Gini Coefficient, the indicator showing the gap between the rich and poor, is about<strong> 0.45</strong> that is higher than those figures in Western European countries. Government assistance should help to social stability during this economic downturn. Short and medium term sustainable growth should then be maintained as the confidence be restored by such government effort.<br /></div><br /><div align="justify"></div><div align="justify"><a href="http://wongtc.blogspot.com/2009/03/blog-post_07.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2009/03/blog-post_07.html</span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-70046549597498228992009-03-06T12:01:00.022+08:002009-03-11T12:13:51.814+08:00How to avoid the coming back of the 30's great depression ?<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwcuhOxjAvOAhsF4oipn7_CHfUUPsIS7KFPMjSDkoIk0P98sl7TDCU0SDjUhPBhdbujAuVDRiJGF8Y4YZvy9YBnaOgThrnuUcylX1nOgO5ImMOo6hyphenhyphengBPwUN5XRiA2pjUGw7rL/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5309922778643084130" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 136px; CURSOR: hand; HEIGHT: 97px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwcuhOxjAvOAhsF4oipn7_CHfUUPsIS7KFPMjSDkoIk0P98sl7TDCU0SDjUhPBhdbujAuVDRiJGF8Y4YZvy9YBnaOgThrnuUcylX1nOgO5ImMOo6hyphenhyphengBPwUN5XRiA2pjUGw7rL/s200/images.jpg" border="0" /></a>It recalls me one of the famous economists, Irving Fisher, living in the 30's economic great recession last century after Obama was elected as the US president. Obama said, "We are facing an economic crisis…We now risk falling into a deflationary spiral that could increase our massive debt even further."<br /><br />Irving Fisher's assertion is surely relevant to the global economic slump today as the real burden of debt increases whilst the stocks and collaterals shrink in value. Income is dropping as well. The process of debt-repayment, the so-called deleverage, forces the outright asset sales and further driving the asset prices down. It is a vicious cycle that leads to desperate recessional spiral. Finally, the economy may brew into great depression for no immediate correction was acted to stop it.<br /></div><strong><div align="justify"><br />In the 30's great depression, Irving Fisher wrote that,</strong> <em><strong>"Over investment and over speculation are often important; but they would have far less serious results were they not conducted with borrowed money. The very effort of individuals to lessen their burden of debts increases it, because of the mass effect of the stampede to liquidate…the more debtors pay, the more they owe."</strong></em></div><div align="justify"><strong><em></em></strong></div><div align="justify"><br /><strong>Irving Fisher described "debt deflation" that deflation would increase the burden of debt. </strong>It is because following a sequence of panic selling of assets, the asset prices fall. As the asset prices drop further, more distress-selling will be triggered. With a decrease in the velocity of money circulation, dumping of assets and distrust as well as hoarding will be possible and leading to a further plunge. Cases of bankruptcy and bank runs may be resulted.</div><br /><div align="justify"></div><div align="justify">No doubt, it is the government and our decision-makers' role that could put a stop to the potential deflationary cycle and avoid economic catastrophe developed in the near future.</div><div align="justify"></div><div align="justify"><br />* ---In the early last century, Fisher asserted the quantity theory of money in "The Purchasing Power of Money" as related to the equation of exchange, which holds that M the supply of money multiples its V the velocity of circulation (the rate that a currency circulates in the economy) is equal to P the general price level times Y the real output; MV=PY. He explained how the change in M, V and P could cause real output and real interest rate be changed to a new equilibrium position that may cause the booms and busts of the economy.</div><br /><span style="font-size:85%;">See also at </span><a href="http://wongtc.blogspot.com/2009/02/blog-post_21.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2009/02/blog-post_21.html</span></a>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-72579321779638663312009-02-16T17:14:00.004+08:002009-02-16T17:40:30.510+08:00ITER Project for fusion energy<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiSbfUaOPrei9AvPhVFdMQmhu0Xh7AY7C_iIBarsxddHu-9nj-53wVNcXFcDQrx5G89T0TIkRwEBLymbNXyvqTY5NeUeNPx_ZtXeSaUQfznZpC_E-uqxhpt2Iwsy4j7rt9GXQv/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5303321306617008114" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 112px; CURSOR: hand; HEIGHT: 112px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiSbfUaOPrei9AvPhVFdMQmhu0Xh7AY7C_iIBarsxddHu-9nj-53wVNcXFcDQrx5G89T0TIkRwEBLymbNXyvqTY5NeUeNPx_ZtXeSaUQfznZpC_E-uqxhpt2Iwsy4j7rt9GXQv/s200/images.jpg" border="0" /></a>The China South Locomotive and Rolling Stock Industry (Group) Corp. (CSR) (1766) has participated in the ITER project--- an international experimental fusion reactor project by investing about 10 billion Yen RMB.<br /><br />ITER (International Thermonuclear Experimental Reactor) is a joint international research and development project that aims to demonstrate the scientific and technical feasibility of fusion power. The partners in the project - the ITER Parties - are the European Union , Japan, the People´s Republic of China, India, the Republic of Korea, the Russian Federation and the USA. ITER will be constructed in Europe, at Cadarache in the South of France.<br /><br />Fusion is the energy source of the sun and the stars. Fusion research aiming at this energy source can be used to produce persistently electricity in a safe way, with abundant fuel resources, to meet the needs of growing population.<br /><br /><a href="http://wongtc.blogspot.com/2009/02/iter.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2009/02/iter.html</span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com1tag:blogger.com,1999:blog-8974857.post-37320849741774263062009-02-13T13:37:00.010+08:002009-02-13T13:57:44.837+08:00How heavy the inflation tax imposed by Zimbabwe Government<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIV5yqkDaYjQblrA-KPKllqcWBHjHWvVEWqsIEra-Y87wvUoB9utpP3sE_pXBOytXbFYG0Sd3DQIR8O3c99LC-QsXGlW3SxKATCl2YGfDcbCRNX3OHNYqbNH8LSg_dIynq6ALR/s1600-h/note.JPG"><img id="BLOGGER_PHOTO_ID_5302152852316676514" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 85px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIV5yqkDaYjQblrA-KPKllqcWBHjHWvVEWqsIEra-Y87wvUoB9utpP3sE_pXBOytXbFYG0Sd3DQIR8O3c99LC-QsXGlW3SxKATCl2YGfDcbCRNX3OHNYqbNH8LSg_dIynq6ALR/s200/note.JPG" border="0" /></a>Zimbabwe central bank issued notes denominated in 100 trillion.<br /></div><div align="justify"></div><div align="justify">Reserve Bank of Zimbabwe promises to pay the bearer (of the note) on demand...</div><div align="justify"><br />One-Hundred-Trillion Dollar bank note = Zim$100,000,000,000,000</div><div align="justify"><br />In order to keep abreast of her domestic runaway hyper-inflation, the central bank of Zimbabwe issued banknote denominated in 100 trillion (100 trillion). Zimbabwe's economy has become devastated.</div><div align="justify"><br />According to unofficial market exchange rate: Zim 100 trillion to U.S. 300 dollars convertible. Zimbabwe currency transactions are usually carried out in the free market (black market) and local currencies plunged every day.</div><div align="justify"><br />Reserve Bank of Zimbabwe (Zimbabwe Central Bank) will issue three other trillion-banknotes, i.e. 10 trillion, 20 trillion and 50 trillion.</div><div align="justify"><br />How heavy the inflation tax imposed by the irresponsible Zimbabwe government! </div><div align="justify"><br /><em>My previous post on the issue last year:</em><br /><a href="http://tcwong.blogspot.com/2008/07/inflation-reaches-critical-levels-in.html">http://tcwong.blogspot.com/2008/07/inflation-reaches-critical-levels-in.html</a> </div><p><span style="font-size:85%;">See also at: </span><a href="http://wongtc.blogspot.com/2009/02/blog-post_12.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2009/02/blog-post_12.html</span></a></p><p></p>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-8682132339159599402009-02-11T19:14:00.038+08:002009-02-16T09:26:32.433+08:00Everything has a trade off<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMMqnUZoz7u2xnB-9kq2bJ8uvGerGsRaUDHQALYzkoUC3JMFKwkkZ0AfCAqj1HbhBCc7jcHqYd5CTh_9I8o40zq5w-DKJm0rszPaT39HUCjKsYAMYCFGHOB4A_K9NdLUd3FjmT/s1600-h/images1.jpg"><img id="BLOGGER_PHOTO_ID_5301498293682649794" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 125px; CURSOR: hand; HEIGHT: 90px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhMMqnUZoz7u2xnB-9kq2bJ8uvGerGsRaUDHQALYzkoUC3JMFKwkkZ0AfCAqj1HbhBCc7jcHqYd5CTh_9I8o40zq5w-DKJm0rszPaT39HUCjKsYAMYCFGHOB4A_K9NdLUd3FjmT/s200/images1.jpg" border="0" /></a> Markets plunge after US plan announcement ---<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbivef9hMBHrTZ3s-z10mCQj5_JzHqSmZ-P_-qzLuSugoGgHeiLvHBQWgmhmUJRmVppZbCUivsXmmBQ3MYRtRfWgo4y_Qro899dpyTSfIlu4NJUo_qr2np_uiX0oAQEdj-KTf2/s1600-h/images1.jpg"></a> </div><div align="justify">The Dow stock index plunged 3.5 percent immediately after the US Treasury Secretary, Mr. Timothy Geithner's announcement. There was a similar reaction in European stock exchanges that London's FTSE 100 index shed 2.19%, while in Paris the CAC 40 lost 3.64 percent, as did the Frankfurt Dax.</div><div align="justify"><br />The US Senate has approved an 838-billion dollar economic stimulus plan. In addition, the US Treasury Secretary Mr. Timothy Geithner has unveiled a three-part program to stabilize the financial system. He said "the government would strengthen the financial system to get the economy back on track. A key element would be a public-private investment fund, starting with 500-billion dollars, to help cleanse the banking system of toxic real-estate assets. The second part would include additional capital injections into banks. The third element would see Treasury and the Federal Reserve expand a program to boost lending for mortgages and other consumer and business loans to up to one trillion dollars. "<br /><br />The US central bank said "it was preparing a substantial expansion of credit flowing. "<br /><br />However, the general economic outlook is still pessimistic in the midst of US carmaker General Motors has confirmed to cut 10,000 jobs by end of 2009. Britain, the United States and all European countries are in serious economic recession as the International Monetary Fund predicted that the UK economy would shrink 2.8%. Consumer spending falls continuously and economic contraction prevails as a result of a perilous vicious cycle.<br /><br />Even U.S. Treasury Secretary Timothy Geithner announced program to save the banking industry through the acquisition of the banks' toxic assets and lending for mortgages to prevent the foreclosure of the property owners, it seems helpless to revive the downturning economy.<br /><br />I think the deficit budgetary policy would lead to endless debts for the government borrowing money from the public and other nations, esp. China. It will also stimulate market interest rate hike in response to the heavy burden of interest payments on long-term debts and significantly boosted government spending. That is the so-called "crowding out effect" as described in most macroeconomics textbooks. Inevitably, the private sector would be suppressed and drags back the economy. The whole economy is by no way to be corrected through automatic recovery itself. Thus, it will be put on its right track at the expense of price stability, i.e. inflation, by pouring large amount of money supply to the economy by the government.<br /><br />A loose monetary policy reinforcing with the fiscal policy seems to be the possible solution. The consequence being that the soaring rate of inflation cannot be avoided. The evil of inflation and the benefit of economic revival should be in a trade off. This is really scary. What a terrible senario is ahead!</div><div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOwrM9vDAOnD42WVH5_OOA_RuARDvj0sg2g8ZJYYK2rlYVgdZWWrXhm6gdp33dB77mHeM_hRemDvmlODro0RnBNs5S9sjRkqGp5DgnULAO5iDCCeKoRBKtA7ZF2rp7jNtpCODW/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5301497834306948354" style="WIDTH: 124px; CURSOR: hand; HEIGHT: 93px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOwrM9vDAOnD42WVH5_OOA_RuARDvj0sg2g8ZJYYK2rlYVgdZWWrXhm6gdp33dB77mHeM_hRemDvmlODro0RnBNs5S9sjRkqGp5DgnULAO5iDCCeKoRBKtA7ZF2rp7jNtpCODW/s200/images.jpg" border="0" /></a><br /><span style="font-size:85%;">See also at: </span><a href="http://wongtc.blogspot.com/2009/02/blog-post_11.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2009/02/blog-post_11.html</span></a> </div><div align="justify"></div><div align="justify"><br /><strong>**Crowding Out Effect ---- </strong>The displacement of private spending by government expenditure financed by borrowing. When a government borrows heavily, it leads to higher price (interest rate) for loanable funds. The private sector, which is usually sensitive to change in interest rate, will likely reduce investment. That is the investment being crowded out. The rising interest rates will curb individual consumption too.</div><div align="justify"><br />The weakening of fixed investment and other interest-sensitive expenditure counteract the expansionary effect of government deficits to a certain extent. However, more importantly, a fall in private fixed investment could hurt long-term economic growth.</div><div align="justify"><br />However, this crowding-out effect is moderated by the fact that government spending expands the market for private-sector products through the multiplier and thus stimulates – or "crowds in" – fixed investment.</div><div align="justify"><br />Crowding out, in principle, can be avoided if the deficit is financed by simply printing money, but this carries concerns of accelerating inflation.</div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-21936046387058068032009-01-18T10:49:00.017+08:002009-01-21T15:03:04.715+08:00Is there no REVERSE --- "Stagflation" ?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTSr0bReVOfD-aYCzQzL5b67-MI3LTPILI0EwY35IyyCbrkQygLBQCjQiPciRjiKyhdvYR3xJofmdUF4G-mNdgXd4WMwfQ1y7NNQzzynbV0wyo9KFySVAdDqV0eXO4c7kxhY5w/s1600-h/economic+downturn.jpg"><img id="BLOGGER_PHOTO_ID_5292463049821824674" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 116px; CURSOR: hand; HEIGHT: 97px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTSr0bReVOfD-aYCzQzL5b67-MI3LTPILI0EwY35IyyCbrkQygLBQCjQiPciRjiKyhdvYR3xJofmdUF4G-mNdgXd4WMwfQ1y7NNQzzynbV0wyo9KFySVAdDqV0eXO4c7kxhY5w/s200/economic+downturn.jpg" border="0" /></a><br /><div align="justify">Appropriations Committee of the U.S. House of Representatives has just announced an 825 billion U.S. dollars economic stimulus plan --- "American Recovery and Reinvestment Plan" (ARRP) to finance the expenditures of the infrastructure and clean energy investment as well as to provide assistance to the persons badly hit by this economic downturn.<br /><br />The United States Government launched the so-called "quantitative easing" monetary policy since last December in an attempt to resolve its economic problem. "TARP" is an abbreviation for the "Troubled Asset Relief Program" which is the largest part of the United States' so-called "$700 billion bailout plan. It is a program to purchase assets and equity from financial institutions in order to strengthen the financial sector. In an attempt to lower the long-term interest rates and further leads mortgage interest rate down, The U.S. Government trys to buy back a large amount of bonds and commercial papers from the market directly.<br /><br />As the president-elect Obama came to power he should realize his promise to keep a substantial increase in tax-cuts or tax-rebates as well as federal spending. Reportedly the federal debts may reach an astronomical figure of two trillion U.S. dollars just in the year 2009. In other words, the U.S. government may activate a large number of banknote printing to address the crisis. The banking institutions may no longer to hoard their money in vaults. The worse situation of the so-called "liquidity trap" may be reversed then.<br /><br />Therefore, it is leading to excessive asset bubbles and inflationary rational expectations will be reinforced. People will no longer hoard money and inflation or even hyper-inflation may occur despite the stock market rebound. However, a rebound in commodity prices could foster cost rising in the manufacturing sector too. The wage increase demands prevail and further push the production cost up that drags the long-term economic growth. The 70s' scenario of "stagflation" occurred in the last century will come back again.<br /><br />Stagflation is a worse situation that we'll experience both economic recession and inflationary spiral. The phenomenon of coexistence of the so-called "stagflation" come once again that we should try to think over the dilemma and the paradox of Keynesian economics! However, the IT innovation nowadays may enhance the flexibility and quicken the right response of the governments and financial institutions. That's what I wish.<br /></div><div><br /></div><div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_UjeUi7g_3uqneYWjo5Nkt7-dclS1MfryvT_qFT5fSvcJKbO5bx2DwXCnisVF6o1SsxCYG2DJLXyDkgcoDkexwJWng4CyOVMM9mJ6qw9pOPs0NOftMZBXXN4syNXi2572iBMv/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5292462693943862562" style="WIDTH: 126px; CURSOR: hand; HEIGHT: 84px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_UjeUi7g_3uqneYWjo5Nkt7-dclS1MfryvT_qFT5fSvcJKbO5bx2DwXCnisVF6o1SsxCYG2DJLXyDkgcoDkexwJWng4CyOVMM9mJ6qw9pOPs0NOftMZBXXN4syNXi2572iBMv/s200/images.jpg" border="0" /></a> </div><div align="justify"></div><div align="justify">P.S. : According to the newly published webpage of Paul Krugman, the rational inflationary expectation of Americans is still low as indicated by the very narrow TIPS spread at the current stage. </div><div align="justify"></div><div align="justify">----"These days I’m looking at the TIPS spread: the difference between nominal US bond rates and rates on Treasury Inflation-Protected Securities. This spread is an indicator of expected inflation. And what it shows isn’t good." By Paul Krugman</div><div align="justify"><a href="http://krugman.blogs.nytimes.com/2009/01/16/the-tips-spread/">http://krugman.blogs.nytimes.com/2009/01/16/the-tips-spread/</a><br /><br />See my Chinese blog on the same issue at: <a href="http://wongtc.blogspot.com/2009/01/blog-post.html"><span style="font-size:85%;"><em>http://wongtc.blogspot.com/2009/01/blog-post.html</em></span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-71217264118153666912008-12-26T16:18:00.028+08:002008-12-29T17:53:39.628+08:00<span style="font-size:130%;">X'mas and New Year Holiday is a good reflective time and I'd like to share in this Boxing Day.</span><br /><span style="font-size:130%;">瑠璃色の地球</span><br /><span style="font-size:130%;">Seiko Matsuda - Our Blue colored Globe (Lazurite Earth)</span><br /><span style="font-size:130%;"></span><br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/ZPDbEtBmB68&hl=zh_TW&fs=1&rel=0"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/ZPDbEtBmB68&hl=zh_TW&fs=1&rel=0" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object><br /><span style="font-size:130%;"></span><br /><span style="font-size:130%;"><strong>Maintain our crystal-like and fragile Globe at what cost?</strong></span><br /><br /><span style="font-size:130%;">In the night seemingly with no dawn, </span><br /><span style="font-size:130%;">You mutter.</span><br /><span style="font-size:130%;">Lighthouse stands at the promontory, </span><br /><span style="font-size:130%;">Staring the dark and deep ocean. </span><br /><br /><span style="font-size:130%;">The days of sadness always torture me.</span><br /><span style="font-size:130%;">However, because of you there, </span><br /><span style="font-size:130%;">Light up my life and keep me alive.</span><br /><br /><span style="font-size:130%;">From the horizon morning sun generates thousand rays of light, </span><br /><span style="font-size:130%;">Together with the crystal-like, fragile and solitary Planet binds us tight. </span><br /><br /><span style="font-size:130%;">Show delighted smile, tears drenched the world no more; </span><br /><span style="font-size:130%;">For the vulnerable people easily to be suffered please stop war.</span><br /><br /><span style="font-size:130%;">A secret force of love in the world must exist.</span><br /><span style="font-size:130%;">In the distant edge of the vast blue ocean </span><br /><span style="font-size:130%;">Is our Galaxy rotating in the boundless Universe.</span><br /><br /><span style="font-size:130%;">We are the brigade friends in the voyage crossing the boundless Universe,</span><br /><span style="font-size:130%;">And the guardians of the Earth that belongs to you and me.</span><br /><span style="font-size:130%;">The only Earth we treasure.</span><br /><br /><span style="font-size:130%;">From the horizon morning sun generates thousand rays of light, </span><br /><span style="font-size:130%;">Together with the crystal-like, fragile and solitary Globe binds us tight. </span><br /><br />See Chi. version at:<br /><a href="http://wongtc.blogspot.com/2008/12/blog-post_25.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2008/12/blog-post_25.html</span></a>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-72368895866394224542008-12-12T15:30:00.011+08:002008-12-12T20:35:12.475+08:00Why does a fall for the longer and rise for the shorter trip fare echo an impact?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkSyxq1_nTq1M1WX9hUFjO8MtMjIhB0kY-_tGQbY1bPTDU1RgiXkpEMvTknMgwexjwyO65Dvzpr24K8LPHvN5i1q6Wpuf7EwObMqCmIaTxZVi_aj9jB_eHI-us6HeuAMRRvlbj/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5278880867982887730" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 140px; CURSOR: hand; HEIGHT: 112px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkSyxq1_nTq1M1WX9hUFjO8MtMjIhB0kY-_tGQbY1bPTDU1RgiXkpEMvTknMgwexjwyO65Dvzpr24K8LPHvN5i1q6Wpuf7EwObMqCmIaTxZVi_aj9jB_eHI-us6HeuAMRRvlbj/s200/images.jpg" border="0" /></a><br /><div align="justify">Recently, some taxi drivers blocked traffic in Hong Kong as a way to reflect their dissatisfaction with the new taxi fare adjustment regulated by the HKSAR Government. The consequences are not only damaging the social order and affecting the image of Hong Kong but also expose the administrative vulnerability of the Hong Kong SAR Government. The immediate problem unsolved today is around the taxi fare pricing mechanism and the timing of the implementation not to be synchronized for both the green and red cabs. As a matter of fact, this new fare adjustment decision was finally hammered after a thorough discussion and advisory procedure. Why did some drivers still have to appeal by demonstration?<br /><br />In a completely laissez faire point of view, some people may still insist to assert that the taxi market needs not to be regulated and can reach equilibrium itself by the use of market invisible hand, i.e. by the free market through the supply and demand force. However, I think it might not be true in such a case should we consider some specific constraints that already exist in the real world. That is the so-called market failure may be found in this industry. The use of free market mechanism entails prohibitively high "transaction costs" such as the information cost, negotiating cost and time costs. In addition, the volatility of the elasticities of demand should also be considered. The existence of such high transaction costs will inevitably as well as greatly reduce the market efficiency.<br /><br />It is no doubt that an unregulated taxi fare system will be leading the taxi market into social chaos and inefficiency. The taxi drivers and the passengers will inevitably waste precious time in fare bargaining. It is what a ridiculous thing in such a hustle and bustle metropolitan place like Hong Kong! Both parties may end up in loss in view of such a lot of constraints there.<br /><br />In a hurry, it is impossible for us to call a taxi after thorough search for the latest market information as it is wasteful and loss of efficiency. The discounted taxi fare practice may be only possible for the long-distance taxi ride. It is economically reasonable for such pricing adjustment that the taxi fare lowered for the longer and rises for the shorter distance. Both sides are willing to accept the deal with lower cost of bargaining. The demand for shorter distance ride is usually highly price inelastic and therefore the passengers may be willing to pay little more.<br /><br />In a nutshell, "opportunity cost" should be also counted in all market situation.<br /><br />See also at<span style="font-size:85%;"><em> </em></span><a href="http://wongtc.blogspot.com/2008/12/blog-post.html"><span style="font-size:85%;"><em>http://wongtc.blogspot.com/2008/12/blog-post.html</em></span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-89551331026085032582008-11-26T13:29:00.011+08:002008-12-19T22:09:55.638+08:00"Money", "Fiat Money" as Debt!<span style="font-weight: bold;">Fiat Money as Debt!<br /><br /></span><div style="text-align: justify;"><span>“Money is a new form of slavery, and distinguishable from the old by the fact that it is impersonal, there is no human relation between master and slave.”</span><br /><span> ~ Leo Tolstoy</span><br /><br /><span>“None are more enslaved than those who falsely believe they are free.” </span><br /><span>~ Goethe</span><br /><br /><span>“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” </span><br /><span>~ Woodrow Wilson, President of the United States 1913-1921</span><br /><br /><span>“Whoever controls the volume of money in our country is absolute master of all industry and commerce... and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” </span><br /><span>~ James A. Garfield, assassinated President of the United States</span><br /><span></span><br /><span>“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity.”</span><br /><span> ~ Abraham Lincoln, assassinated President of the United States</span><br /></div><br />Episode 1 : The Origin of Bank<br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/_36o9TZovGY&hl=zh_TW&fs=1"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/_36o9TZovGY&hl=zh_TW&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object><br /><br />Episode 2 : Making Loans<br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/u51ef93dciQ&hl=zh_TW&fs=1"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/u51ef93dciQ&hl=zh_TW&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object><br /><br />Episode 3 : Fiat Money as Debt<br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/aWXrllZ9lSc&hl=zh_TW&fs=1"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/aWXrllZ9lSc&hl=zh_TW&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object><br /><br />Episode 4 : The so-called Monetary System<br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/VPtzmHQcSGs&hl=zh_TW&fs=1"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/VPtzmHQcSGs&hl=zh_TW&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object><br /><br />Episode 5 : Bank credit to creat enough money? Monetary System is Debt System! "Usury once in control wil wreck any nation" & " The world is now more sophisticated & prepared to march towards a world-governemnt. To serve the money or be served by the money?<br />"Money is a new form of slavery and distinguishable from the old simply by the fact that it is impersonal. There is no human relation between master and slave." By Leo Tolstoy<br /><br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/JF5YZPk3NUc&hl=zh_TW&fs=1"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/JF5YZPk3NUc&hl=zh_TW&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object><br /><br />See also at:<br /><a href="http://wongtc.blogspot.com/2008/11/blog-post.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2008/11/blog-post.html</span></a>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-60926933684251936072008-11-17T12:47:00.010+08:002008-11-22T22:35:28.829+08:00China Growth Will Help World Economy. Is Chinese Economy the messiah to rescue the global financial meltdown ?<div align="justify"><a style="" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzY2JPt56hDmaSQdlUZ3SO_sOe-yUshOD6k3IuRnWQjD-bOOMFA5mKEtejSik1uWv_EwoycpsUaL6XgIQlAU1nfKHiQufEbtL8NH-eKb2qJxrRun9L4S32iJ0PHj_3oZx8B2mF/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5269485382019837586" style="margin: 0px 0px 10px 10px; float: right; width: 91px; height: 137px;" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzY2JPt56hDmaSQdlUZ3SO_sOe-yUshOD6k3IuRnWQjD-bOOMFA5mKEtejSik1uWv_EwoycpsUaL6XgIQlAU1nfKHiQufEbtL8NH-eKb2qJxrRun9L4S32iJ0PHj_3oZx8B2mF/s200/images.jpg" border="0" /></a><br />Speaking to the leaders from the Group of 20 nations in Washington, Chinese President HU said China can help lessen the impact of the global financial crisis and slowing growth by stimulating our Chinese economy.<br /><br />Hu said, "steady and relatively fast growth in China is in itself an important contribution to international financial stability and world economic growth. China has taken an active part in the international cooperation to deal with the financial crisis." Hu also urged countries not to raise trade barriers to protect their economies also in view of the fact that China is the second-biggest exporting nation in the world.<br /><br />"The international community should prevent all kinds of trade and investment protectionism and promote the Doha round of trade talks to achieve positive progress," HU said. He also urged industrialized nations to play their part in tackling the global financial crisis, which triggered an equity shrink that's halved the market value of worldwide stocks to about US$30 trillion so far this year.<br /><br />Last week China announced a RMB 4,000 billion economic stimulus, focused on building low-rent housing, roads, railways and airports. The package also allows tax deductions for fixed assets such as machinery to stimulate investment. Farmers will also benefit from more subsidies.<br /><br />China accounted for 27 % of global economic growth last year under purchasing power parity calculations(more than others) according to the IMF. Purchasing power parity (PPP) accounts for differences in the exchange rates of national currencies.<br /><br />China's stimulus plan came as growth is slowing down. GDP grew by 9% in the third quarter from a year earlier that is the least in five years.<br /><br />From the beginning of the 30-year economic reform onwards, China recorded an astonishing 12.3% GDP growth rate in 1978. Only about a growth rate of 5% was recorded in the years of 1981, 1989 and 1990. China maintained about 8% to 11% of economic growth for the rest of the majority years and even as high as 16.2% which was achieved in 1984.<br /><br /><span style="font-size:85%;"><em>Also written in Chinese at </em></span><a href="http://wongtc.blogspot.com/2008/11/4.html"><span style="font-size:85%;"><em>http://wongtc.blogspot.com/2008/11/4.html</em></span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-15632995749548266492008-10-13T22:07:00.007+08:002008-10-13T22:27:45.726+08:00Paul Krugman Wins Nobel for Economics<div align="justify"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmi2I24pfQ893AWcKe9-VjvIm3RbmDcer4J2kSuWXR39L7D-wpLDJJrJQT5X0HW5wN4qLj_By5bObqUA1oZfoDeQEREqTmeGD2e79irEm1F0YX76o53a4lwP3te6L0c4N5xfc8/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5256640736610101186" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmi2I24pfQ893AWcKe9-VjvIm3RbmDcer4J2kSuWXR39L7D-wpLDJJrJQT5X0HW5wN4qLj_By5bObqUA1oZfoDeQEREqTmeGD2e79irEm1F0YX76o53a4lwP3te6L0c4N5xfc8/s200/images.jpg" border="0" /></a><br /></div><div align="justify"><strong>The Nobel Prize in Economic Sciences 2008 goes to.....</strong></div><div align="justify"><br /></div><div align="justify">The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 goes to Paul Krugman "for his analysis of trade patterns and location of economic activity".</div><div align="justify"><br />The Royal Swedish Academy of Sciences said the award recognised Mr Krugman's analysis of trade patterns and where economic activity takes place. Mr Krugman, aged 55, a Princeton University professor, had formulated theories that answered questions about free trade and globalisation as well as the driving force behind worldwide urbanization.</div><div align="justify"><br />He said we are now witnessing a crisis that is as severe as the crisis that hit Asia in the 90s. This crisis bears some resemblance to the Great Depression. </div><div align="justify"><br />He teaches economics and international affairs at Princeton University in New Jersey, and also writes a regular column for the New York Times. He is a fierce critic of President George W Bush arguing thatBush's economic policies helped to spark the current financial crisis. </div><div align="justify"><br />Links to other sites :--- </div><div align="justify"><br />Paul Krugman, Woodrow Wilson School, Princeton University, USA.</div><div align="justify"><a href="http://wws.princeton.edu/people/display_person.xml?netid=pkrugman"target="_blank">http://wws.princeton.edu/people/display_person.xml?netid=pkrugman</a> &</div><div align="justify"><br />Paul Krugman's personal blog at the New York Times</div><div align="justify"><a href="http://krugman.blogs.nytimes.com/"target="_blank">http://krugman.blogs.nytimes.com/</a></div><div align="justify"></div><div align="justify"><br /></div><div align="justify">Chi. version: <a href="http://wongtc.blogspot.com/2008/10/paul-krugman.html"><em><span style="font-size:85%;">http://wongtc.blogspot.com/2008/10/paul-krugman.html</span></em></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-87901698375173536812008-10-09T15:25:00.016+08:002008-10-12T22:51:20.311+08:00Financial Seizure Leads to Global Stock Markets Falling<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLbPC9OsF0Lkc9D-45c1Qv3KEcsEFn4cnRr3Zj_I5xuHWXnngSA4WA9WD9s8FvawPiXyy_7IyHKAs5hfTMhj_sYYUaDxuut6OSvDnOsXqsyIIQClAyxcIJztq-k3k8lJV2CJOW/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5255052773856488386" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLbPC9OsF0Lkc9D-45c1Qv3KEcsEFn4cnRr3Zj_I5xuHWXnngSA4WA9WD9s8FvawPiXyy_7IyHKAs5hfTMhj_sYYUaDxuut6OSvDnOsXqsyIIQClAyxcIJztq-k3k8lJV2CJOW/s200/images.jpg" border="0" /></a><br /><div align="justify">Stock prices have been falling heavily on exchange markets around the world in a couple of days. The Dow Jones Index on Wall Street closed down below 10000 to 9258 yesterday. The global stock indexes also tumbled by 5 to 6 percent on average last day.<br /><br />Yesterday, Japan's Nikkei index suffered its biggest fall by over 9 percent to 9203 and Hong Kong's Hang Seng Index fell to 15431, which marked a fall of about 8% just in a single day.<br /><br />The US treasury secretary, Henry Paulson, has warned some American banks will still fail despite the US$700 billion Troubled-Asset-Relief-Program (TRAP program?) to shore up the financial system. Mr Paulson said the financial crisis would not end soon.<br /><br />There was a warning from the IMF (International Monetary fund) that global financial markets were facing their most dangerous shock since the 1930s. In a co-ordinated move central banks cut interest rates by 0.5 percentage yesterday.<br /><br />I think the global credit seizure is due to growing distrust among banking institutions that they are afraid of credit defaults in the midst of today monetary market chaos as reflected by the soaring of inter-bank interest rates such as HIBOR, LIBOR, NIBOR and the TED spread(see note below). Dis-leverage works amid global credit seizure due to hoarding of cash.<br /><br />Firstly, I think the credit seizure is possible in the presence of "liquidity trap". As we learn in monetary economics, a liquidity trap occurs when the nominal interest rate is close or equal to zero. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. In a liquidity trap situation, banks and other financial intermediaries are unwilling to lend. Thus, the central bank's newly created liquidity is trapped behind the banks even the government eagers to inject money into the economy.<br /><br />Therefore, the monetary authority is unable to stimulate the economy with monetary policy tools such as interest rate cut or/and increasing the monetary base. This makes a recession even more severe and can contribute to deflation.<br /><br />Secondly, I was really inspired by the Quantity Theory of Money seeking an explanation for the above phenomenon. This can be explained with the aid of an equation that originally modeled from an identity: MV=PY, where M stands for money supply in the economy and V represents the velocity of money circulation that measures the speed at which a given sum of money circulates in the economy. And, P stands for the general price level and Y refers to the real output so that P times Y referring to the nominal income of the economy. V seems not stable now and decelerates in view of the prevailing global credit seizure and M is relative stable in the short run despite the US$700 billion bailout plan. Therefore, we may predict that either P or Y falls or both P and Y together (the nominal income) fall then. Thus surely, the global credit seizure accompanied by the loss of public confidence would bring disastrous consequence to our economy. The results may be the disguised deflation and economic depression if the government stops injecting money to the market and default risk keeps rising. </div><div align="justify"></div><div align="justify"><br /></div><div align="justify">The immediate result is that the asset prices will be going down further as investors try to acquire adequate liquidity to run their businesses.<br /><br />The credit crunch could stall the economic growth. However, on the other hand, if the public confidence returns swiftly and credit default risk lowers significantly, the market scenario will be reversed and the credit leverage works again.</div><div align="justify"></div><div align="justify"><br /><br />Note: TED spread --<br /><br />The TED spread is the difference between the interest rates on inter-bank loans and short-term U.S. government debt ("T-bills").<br /><br />Initially, the TED spread was the difference between the interest rates for three-month U.S. Treasuries contracts and the three month Euro-dollars contract as represented by the London Inter Bank Offered Rate (LIBOR).<br /><br />The TED spread is an indicator of perceived credit risk in the general economy.</div><div align="justify"><br /></div><div align="justify"></div><div align="justify">Chinese Ver. at <a href="http://wongtc.blogspot.com/2008/10/blog-post.html"><span style="font-size:85%;"><em>http://wongtc.blogspot.com/2008/10/blog-post.html</em></span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-10251598286009845582008-09-22T20:29:00.032+08:002008-10-13T19:31:57.164+08:002008 Credit Crisis vs Government Bail-out<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5eQAyQtAUclhgdUPSFKETbuOwFgu_bAa1Ud2mljB-FnlVCLt6bZQeSQzusmOXrEmKryiR9CFqzq4Myl8Sg6DkrwgiUW7Qjl9H86sDUG-w65F_aLslZ6lg-a6aSj0FR-ZtkTHT/s1600-h/Lehman+Brothers.jpg"><img id="BLOGGER_PHOTO_ID_5248822487360677426" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5eQAyQtAUclhgdUPSFKETbuOwFgu_bAa1Ud2mljB-FnlVCLt6bZQeSQzusmOXrEmKryiR9CFqzq4Myl8Sg6DkrwgiUW7Qjl9H86sDUG-w65F_aLslZ6lg-a6aSj0FR-ZtkTHT/s200/Lehman+Brothers.jpg" border="0" /></a><br /><div align="justify">One of the oldest and prestigious investment banks in the United States, Lehman Brothers was filing for bankruptcy protection, after suffering multi-billion dollar losses largely in the US mortgage market and oweing debts totalled to 6.13 hundred billion. In addition, the Bank of America said it had agreed to buy the world's largest brokerage firm, Merrill Lynch, for about 50 billion US dollars, and the world's biggest insurance company, AIG, was seeking emergency funding from the US central bank, the Federal Reserve. It was followed by the US govt bail-out plan of the Fannie Mae and Freddie Mac in early September. The credit crunch seems difficult to be brought to an end and the credit crisis spread globally that it was described as the 'monetary tsunami' originating from US. The latest news was Bush government proposed to use US700 billion dollors to bail out the deteriorated mortgage loans.</div><div align="justify"><br />What is going wrong to the so-called free market economic operation nowadays? In the absence of the intervention (bail-out) of the central banks, things will be further deteriorating as nobody is willing to lending out money and resulting in inadequate liquidity in the circular flow. In return, the economic activity will seemingly come to a halt and the asset prices will then be going down further. What a horrible scene then!</div><div align="justify"><br />It is incorrect for the central banks arbitrarily to cut the interest rate or to bailout the problematic institutions once a financial crisis prevails from the view point of a believer of the efficient-market theory. However, we face a dilemma. Without the help of central government, the economy will inevitably collapse and contract further. However, such government intervention will justify the wrong doing of the excess speculation and heavy trading of the high leverage financial derivatives by investment banks nowadays. It creates a moral hazard and further economic bubble is inflating leading to booms and busts as a result.</div><div align="justify"><br />Should the central banks respond by doing something, I think the market today are not as efficient as some believe. In the midst of a monetary crisis, it seems the market itself is extremely painful to re-adjust without any government help. I think it is due to the fiat-money-standard instead of the gold-standard adopted in 1971 following the United States' suspension of convertibility from dollars to gold. The Bretton Woods agreement made in 1944 for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value in terms of gold (price pegged at US$35/oz of gold and they were convertible) <strong>collapsed</strong> then. The recent market chaos have shown that ultimately it does get the credit crunch to come once the drop in public confidence prevails. And in turn, it may lead to deep economic recessions.</div><div align="justify"><br />In view of the credit growth far outweighing the economic growth nowadays, I assert the necessity of restraining excessive credit creation as a goal to relieve the danger of economic "booms and busts". Moreoever, the people should be lusted to saving more money instead of loaning more. In other words, a painful adjustment is justified. </div><div align="justify"><br />The latest report was US Treasury Secretary Paulson had drafted out a plan of using US$700 billion bailout money to purchase the US troubled assets so as to provide liquidity injection to the banks. Nevertheless, I am quite sceptical that the US$700 billion bailout plan will really end the credit crunch. <div align="justify"></div><br />Chinese version at <span style="font-size:85%;"></span><a href="http://wongtc.blogspot.com/2008/09/2008-vs.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2008/09/2008-vs.html</span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-81917760659147077552008-08-03T11:09:00.004+08:002008-08-03T11:18:02.196+08:00HKSAR Govt accused of 'behind closed doors' appointments<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbpcM-wUCITjhno6Mzb4SF4Xo_QJrmB-lyHYbEoFomwHiY2l2pKmqvWBUQN9S8RCliDKz34Eszsx1DN7-SGM20Ronn2N-9zjfzfXw7iOdSz_6B8nFruTysvNXnCruOkn69yu7r/s1600-h/080617b.kml_resize.jpg"><img id="BLOGGER_PHOTO_ID_5230124633450735362" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbpcM-wUCITjhno6Mzb4SF4Xo_QJrmB-lyHYbEoFomwHiY2l2pKmqvWBUQN9S8RCliDKz34Eszsx1DN7-SGM20Ronn2N-9zjfzfXw7iOdSz_6B8nFruTysvNXnCruOkn69yu7r/s200/080617b.kml_resize.jpg" border="0" /></a><br /><div>A Chinese poem has been composed as follows to address the issue:<br /><br /><span style="font-size:130%;">回首前塵夢一場, 閒雲相競出岫忙,<br /><br />勸君莫待鴻鵠至, 且效東龍守門堂。</span> </div><br /><div><br />The Hong Kong Government has been criticised for lacking transparency in the recent appointments of political assistants and undersecretaries.<br /><br />Mr Norman Chan, the Director of the Chief Executive's Office, was blamed of selecting preferred candidates behind closed doors that he failed to explain the procedure and criteria for selecting the appointees. Actually, the master mind behind was the CE himself. The matter had become political blunder for our CE's administration.<br /><br />Note: </div><br /><div>Looking back Qianchen 前塵 => after the 97 handover as the chief executive promising and showing the splendid new housing number 85,000, the Cyberport, Chinese Medicine Port and so on ... but all in vain.<br /><br />Compete to showing off => the recent appointments of political assistants and undersecretaries who possess different nationalities have to assume office at the expense of more than HK 50 million dollars of public fund. Should the slogan of "big market, small government" be changed to "small market, big government"?</div><br /><div></div><br /><div><a href="http://wongtc.blogspot.com/2008/08/blog-post.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2008/08/blog-post.html</span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-49668041005829876682008-07-26T23:19:00.006+08:002008-07-26T23:36:57.684+08:00Inflation reaches critical levels in Zimbabwe<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKBsVFOFV4Mp-Gixwqdg3rTBYMGnjtY6LU2z4QmW55BoZZ-JWQTgVhg-VHB58fdhXr1mtHe69BBhJ_-SwdgwfZcOUmZIqZI4MjJlBVF8DChpfKVxeIgFG88Nqk45eCrRRnlw6J/s1600-h/money.jpg"><img id="BLOGGER_PHOTO_ID_5227343779330685634" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKBsVFOFV4Mp-Gixwqdg3rTBYMGnjtY6LU2z4QmW55BoZZ-JWQTgVhg-VHB58fdhXr1mtHe69BBhJ_-SwdgwfZcOUmZIqZI4MjJlBVF8DChpfKVxeIgFG88Nqk45eCrRRnlw6J/s200/money.jpg" border="0" /></a><br /><div>Linkage:<br /><div><a href="http://www.nationalpost.com/news/world/story.html?id=675199">Inflation reaches critical levels in Zimbabwe</a><br /><br />"In Zimbabwe on Wednesday, a Z$100-billion note would just buy two loaves of bread. The country's biggest bakery was forced to shut down this month after it ran out of flour.<br /><br />The new denomination banknote was issued on Monday in an attempt to keep up with the country's roaring hyper-inflation, that has reached an official rate of more than 2.2 million per cent. Economists estimate it is actually closer to 12.5 million per cent.<br /><br />At the beginning of June, a loaf cost Z$600-million, up from a relatively affordable Z$15-million before the March 29 presidential election....."</div><div> </div><div><span style="font-size:85%;">See also at </span><a href="http://wongtc.blogspot.com/2008/07/news.html"><span style="font-size:78%;">http://wongtc.blogspot.com/2008/07/news.html</span></a></div></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-60994863901594143022008-07-21T12:00:00.010+08:002008-07-21T12:24:45.445+08:00China's GDP up 10.4 percent in first half year--<a href="http://english.china.com/zh_cn/business/news/11021613/20080717/14974877.html"target="_blank"><span style="font-family:verdana;font-size:130%;">China's GDP up 10.4 percent in first half year--</span></a><span style="font-size:130%;"> </span><br /><br /><p>Full Story:</p><p><a href="http://english.china.com/zh_cn/business/news/11021613/20080717/14974877.html"target="_blank"><span style="font-size:85%;">http://english.china.com/zh_cn/business/news/11021613/20080717/14974877.html</span></a><br /><br />See also at <a href="http://wongtc.blogspot.com/2008/07/130619-104.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2008/07/130619-104.html</span></a> in Chinese.</p>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-69314403194907518702008-07-12T02:51:00.006+08:002008-07-21T12:25:44.265+08:00Vice-President Xi Jinping calls for unity in HK<a href="http://www.rthk.org.hk/rthk/news/englishnews/20080708/news_20080708_56_504169.htm"target="_blank">RTHK News</a>: <a href="http://www.rthk.org.hk/rthk/news/englishnews/news.htm?englishnews&20080708&56&504169"target="_blank">"Vice-President Xi Jinping calls for unity in HK"<br /></a><br />See also at :<br /><strong><a href="http://wongtc.blogspot.com/2008/07/blog-post.html"><span style="font-size:85%;">http://wongtc.blogspot.com/2008/07/blog-post.html</span></a></strong>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-83383789972069481192008-06-26T00:15:00.010+08:002008-07-21T12:27:49.330+08:00A Tale Of Three Cities - TIME<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirF6K1X1Cf0atFipR3hqSXivBEt4m8sbfsaR8VPAW7BRhQmYblM0nkQYvKxQf-OkNLxFYhDBBN7LRRg5jiyRH3dIi49Up24bYXe4D34V6V9OoS4MA_Iqq38mmIsoGJQ1YzR7NY/s1600-h/davos_opener.GIF"><img id="BLOGGER_PHOTO_ID_5221945068454870834" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirF6K1X1Cf0atFipR3hqSXivBEt4m8sbfsaR8VPAW7BRhQmYblM0nkQYvKxQf-OkNLxFYhDBBN7LRRg5jiyRH3dIi49Up24bYXe4D34V6V9OoS4MA_Iqq38mmIsoGJQ1YzR7NY/s200/davos_opener.GIF" border="0" /></a><br /><div><a href="http://www.time.com/time/magazine/article/0,9171,1704398,00.html" target="_blank"><span style="font-size:130%;">A Tale Of Three Cities - TIME</span></a><br /><br />Three connected cites drive the global economy:<br /><br />"They tend to be an optimistic lot, the bankers and business leaders, politicians and pundits, who every year make their way to the annual meeting of the World Economic Forum in Davos, Switzerland. Those who have power and influence often have much to be optimistic about, to be programmed to lift up their eyes to the hills — of which Davos has plenty — and see more prosperity coming their way. ........ " Quoted from <a href="http://www.time.com/time/magazine/article/0,9171,1704398,00.html">A Tale Of Three Cities - TIME</a><br /><br />---- <a href="http://www.time.com/time/magazine/article/0,9171,1704398,00.html" target="_blank"><span style="font-size:130%;">By MICHAEL ELLIOTT of TIME</span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0tag:blogger.com,1999:blog-8974857.post-47966472084934340632008-06-20T09:51:00.013+08:002008-06-20T10:56:11.781+08:00China raises fuel prices --- the late move but the right move<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHQJoUiTFgNRLJied1ePfpAWV7Domx61c6M1k9EwUSIKeBgfehS_ilLOd89GQzvXTz_HfUgkdR871AQxdS-VPBNOiL8u5sx8gZmf946BTzylbhawn6eFEAwQt0tjz4spx1dogb/s1600-h/images.jpg"><img id="BLOGGER_PHOTO_ID_5213776927999117410" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHQJoUiTFgNRLJied1ePfpAWV7Domx61c6M1k9EwUSIKeBgfehS_ilLOd89GQzvXTz_HfUgkdR871AQxdS-VPBNOiL8u5sx8gZmf946BTzylbhawn6eFEAwQt0tjz4spx1dogb/s200/images.jpg" border="0" /></a><br /><div align="justify">The National Development and Reform Commission of China has announced to raise petrol and diesel prices by around 18 percent. The price adjustment was to reduce the gap with soaring international oil prices. The cost of aviation fuel is also going up.<br /><br />Electricity prices will also be raised from the 1st day of July. It's a good news from the market economists' point of view.<br /><br />Although the move was late, it's right as it could dampen fuel as well as electricity consumption. The excessive energy consumption could be checked as a result.<br /><br />After the price hike announcement, paradoxically the price of future oil fell in New York by 3.5 percent to settle at $131 per barrel on the New York Mercantile Exchange after China disclosed plans to raise prices for gasoline and diesel fuel by 16 percent and 18 percent respectively.<br /><br /></div><div></div><div><span style="font-size:85%;"><em>My Chinese version also at </em></span><a href="http://wongtc.blogspot.com/2008/06/blog-post_19.html"><span style="font-size:85%;"><em>http://wongtc.blogspot.com/2008/06/blog-post_19.html</em></span></a></div>William, Wong Tak Choihttp://www.blogger.com/profile/15941668484757442260noreply@blogger.com0