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Tuesday, February 28, 2006Speaking of Bursting Bubbles...
In addition to the potential economic failure of China, The U.S real estate market appers to have already run out of steam.
Sales of previously owned homes fell 2.8 percent to an annual rate of 6.56 million in January from 6.75 million in December, the Realtors association's report today showed. The supply of unsold home rose to the highest since 1998. Home sales in 2006 are forecast to decline after five record years.
The supply of homes for sale, another measure of housing demand, rose 2.4 percent to 2.91 million in January from 2.85 million the month before. ...
Home resales fell 10 percent in the Northeast, 7.7 percent in the Midwest and 3.5 percent in the West to 1.37 million. Sales rose 2.6 percent in the South.
Update: The Housing Bubble even has it's own Blog!
At Marginal Revolution:
To most Western observers, China’s economic success obscures the predatory characteristics of its neo-Leninist state. But Beijing’s brand of authoritarian politics is spawning a dangerous mix of crony capitalism, rampant corruption, and widening inequality. Dreams that the country’s economic liberalization will someday lead to political reform remain distant. Indeed, if current trends continue, China’s political system is more likely to experience decay than democracy. It’s true that China’s recent economic achievements have given the party a new vibrancy. Yet the very policies that the party adopted to generate high economic growth are compounding the political and social ills that threaten its long-term survival...
The Chinese state remains deeply entrenched in the economy. According to official data for 2003, the state directly accounted for 38 percent of the country’s GDP and employed 85 million people (about one third of the urban workforce). For its part, the formal private sector in urban areas employed only 67 million people. A research report by the financial firm UBS argues that the private sector in China accounts for no more than 30 percent of the economy. These figures are startling even for Asia, where there is a tradition of heavy state involvement in the economy. State-owned enterprises in most Asian countries contribute about 5 percent of GDP. In India, traditionally considered a socialist economy, state-owned firms generate less than 7 percent of GDP.
Tyler Cowen adds:
Here is much more, and I will go on record in agreement. More specifically, how about a bone-crunching, bubble-bursting, no soft landing, Chinese auto crash-style depression within the next seven years? This is also my biggest worry for the U.S. economy, I might add.
If you are not convinced, raise your right hand and repeat after me: "China in the 20th century had two major revolutions, a civil war, a World War, The Great Leap Forward [sic], mass starvation, the Cultural Revolution, arguably the most tyrannical dictator ever and he didn't even brush his teeth, and now they will go from rags to riches without even a business cycle burp." I don't think you can do it with a straight face.
From the Economist:
A wave of cross-border mergers is sweeping across Europe. But as globalisation and no-holds-barred capitalism gather strength on the continent, France and others are trying to stiffen the barriers to economic integration on “strategic” grounds. The latest example of this is the attempt by Dominique de Villepin, the French prime minister, to prevent an Italian bid for Suez by merging it with another French utility.
Read the rest... (Subscription Required)
Update: Jeff Goldstein at Protein Wisdom has more to add. (sense of humor required)
Monday, February 27, 2006One More for the Road...
A prisoner had just been sentenced for a heinous crime and was returned to his cell. An inquisitive guard could not wait to ask him about the outcome.
Guard:"What did you get for a sentence?"Prisoner: "I could choose life or 100 years."Guard: "And what did you choose?"Prisoner: "Well, life, obviously. Statistically speaking that is shorter."
Over at the Volokh Conspiracy, David Kopel has some intersesting thoughts on the Proliferation of Stand your ground laws.
Three statisticians went out hunting, and came across a large deer. The first statistician fired, but missed, by 3 feet to the left. The second statistician fired, but also missed, by 3 feet to the right. The third statistician didn't fire, but shouted in triumph, "We got it!"
For anyone intested in a well-rounded introduction to classic literature. I highly recommend The Well Educated Mind, By Susan Wise Bauer.
It's a great read that has exceeded my expectations!
This weeks Economist has a great article on the Wal-Mart effect.
Check out the following summary:
[David Neumark, Junfu Zhang and Stephen Ciccarella, of the Public Policy Institute of California] ...track Wal-Mart's progress through 3,032 counties from 1977 to 1995. The arrival of a store in a typical county destroys about 180-270 retail jobs, they conclude, which suggests that each Wal-Mart associate does the job of 1.5-1.75 people at a rival. However, this does not imply a rise in overall joblessness: those displaced by Wal-Mart will tend to find work elsewhere.
What about wages? Mr Neumark and his colleagues could not measure wages directly. But they did estimate Wal-Mart's impact on retail payrolls, which averaged $13,860 per worker in their sample. The opening of a Wal-Mart store reduces these by only about 1%.
The Other Side of the Coin...
Wal-Mart may shave payrolls, but it slashes shopping bills...[Emek Basker, an economist at the University of Missouri]...estimates that the prices of goods such as toothpaste, shampoo, aspirin and laundry detergent fall by 7-13% five years after Wal-Mart's arrival in a city. Some analysts think the company has to offer lower prices to compensate customers for a less pleasant shopping experience.
[Jerry Hausman, of the Massachusetts Institute of Technology, and Ephraim Leibtag, of America's Department of Agriculture]...reckon the existence of big-box retailers, such as Wal-Mart, is a substantial boon to shoppers—equivalent to offering households 25 cents back for every dollar they spend on groceries, or about $450 a year on average.
I myself have only shopped at Wal-Mart a few times but the central argument - that "box stores" such as Wal-Mart raise real incomes and thus creates economic growth - has always seemed very plausable to me.