Monday, May 30, 2005

Friday, May 27, 2005

What I Say; What I Am

From USA Today:

Bomb kills at least 20 at Pakistan shrine
ISLAMABAD, Pakistan (AP) — An apparent suicide bomb detonated Friday as hundreds of Shiite Muslims recited verses from the Koran during a religious festival at a shrine near Pakistan's capital, killing at least 20 people and wounding dozens, witnesses said.

Pakistani Muslim devotees mourn Friday's deaths near Islamabad.


Rallies abroad protest alleged desecration of Koran
ISLAMABAD, Pakistan (AP) — Thousands of Muslims marched Friday in Islamic countries from Asia to the Middle East, burning symbols of America to protest the alleged desecration of the Koran by military personnel at a U.S. prison in Guantanamo, Bay, Cuba.

The rallies in Pakistan, Egypt, Lebanon, Indonesia, Malaysia and elsewhere followed an admission Thursday by U.S. investigators that Islam's holy book was mishandled at Guantanamo. But American officials claimed it was often inadvertent and denied that any Korans were flushed down a toilet, as Newsweek magazine had reported in a now-retracted article.

Now if certain persons who called themselves "Christian" were to protest maltreatment of the Bible and then go to a church and blow up the congregation, everyone would say those persons were:
  1. Not Christian
  2. Sociopaths
Now about those "Muslims"....

Thursday, May 26, 2005

Fair Trade Deficit

A couple of diverging articles appeared today:

US' Snow-need "significant" China forex move
Thu May 26, 2005 04:43 PM ET
WASHINGTON, May 26 (Reuters) - Treasury Secretary John Snow repeated on Thursday that China should take steps to make its yuan currency more flexible and said that any action must be dramatic enough to be meaningful.
And from Cafe Hayek, Dr. Don Boudreaux extols the virtue of a Dr. Walter Williams (also of George Mason University) article on the Trade Deficit where Dr. Williams states:
The fact that foreigners are willing to exchange massive amounts of goods in exchange for slips of paper in the forms of currency, stocks and bonds should be a source of pride. It means America, with its wealth, rule of law and the sanctity of contracts, inspires foreigners to hold large amounts of their wealth in U.S. obligations. Their willingness to do so means something else: Trade increases competition. Ultimately it's competition, many producers competing for his dollar, that truly protects the consumer. What protects producers, at the expense of consumers, are restrictions on competition. The quest to restrict competition is what lies at the heart of the trade deficit demagoguery. When's the last time you heard a consumer complaining about his buying more from a Chinese or Japanese producer than that producer buys from him?
Some thoughts on those thoughts:
  1. While Dr. Bourdeaux has stated often that a trade deficit is not debt, he then thinks it is perfectly all right for the outflow of funds from the U.S. to create an opportunity for foreign investors to support the increase of the government's debt through borrowing.
    • The outflow of funds is partially a result of manipulation of currencies that allow the Chinese to be more "competitive"
    • The outflow of funds is partially a result of manipulation of home markets that keep out the U.S. from Japan allowing the Japanese to be more "competitive"
    • The erosion of the U.S. industrial base converts high tax revenue jobs into low tax revenue jobs thus "encouraging" the U.S. government to "borrow" from our "competitors"
  2. Consumers are also businessmen who own the businesses against which the Chinese and Japanese "compete". Consumers are also the skilled workers and tradesmen who produce goods against which the Chinese and Japanese "compete". Consumers are also the taxpayers who see a large portion of their remaining income taxes go to those "competitors" who are undermining their ability to make a living wage. I think I have met quite a few "consumers" who are "complaining about his buying more from a Chinese or Japanese producer than that producer buys from him."
What Secretary Snow is discussing is the manipulation by the Chinese that undermines the very concept and practice of "fair trade". What Secretary Snow is challenging is the continued policy of currency manipulation to undermine the U.S. producers in the global marketplace. But according to Drs. Boudreaux and Williams, what that means is:
Some politicians gripe about all the U.S. debt held by foreigners. Only a politician can have that kind of audacity.
No, not necessarily. But perhaps some economists really can't see the bigger picture.

Saturday, May 21, 2005

Profession versus Practice

No, I'm not referring to doctors....

If anyone has read the news lately, it is clear that the so-called "religious fanatics" in the Middle East... those "Muslims" who proclaim "holy wars" against other Muslims, are guilty of the age-old practice of ignoring what they profess. Killing your brother is all right if it is done for religious conviction.

Mankind seems to have this innate (or inane) ability toward hypocrisy. Oh, I'm certain the hypocrites do not even realize they are such. They rationalize that they have the "truth"... the "word of God/Allah". They are the ones who interpret God's will correctly.

Don't misunderstand me. I'm not picking on Muslims. I'm picking on those who would "lead" us with their particular religious knowledge of what is "God's will". To the point, there are always gray areas. Is war evil? Well, it is destructive, but would anyone argue that fighting against Hitler was "evil"? Maybe a few.

One can make a case that actions meant to improve the quality of life and relationships among people are good and those meant to create division and hardship are bad. Case in point:

Koreans shake up stem cell creation
Is it the "Will of God" to oppose such research? Is that a valid question? When is the line crossed that separates the "good" actions from the "bad"? If I profess to love my neighbor as myself, do I practice that by withholding a potential cure for his serious disease or crippled body?

Thursday, May 19, 2005

Excessive Spending - $3,600 Chevy... Chery

Cue the theme music from the "Twilight Zone".

You have found a car to meet your budget. Offered with zero percent financing, you are able to purchase this new vehicle with 36 monthly payments of $100. You sign the contract. You have entered the Chinese currency manipulation zone.

In the Detroit Free Press:

AUTOS IN CHINA: Chery gears up for the U.S.

Maker of the $3,600 QQ aims to load its cars with deluxe features, low prices
No one is saying that China's currency does not reflect its real value... okay, they are saying that. No one is saying that China is using slave labor to build those cars... but, gee, if their currency really reflects reality, then this must be slave labor:
China is able to produce cars at such prices because its labor costs are far below those of the rest of the automaking world. Its autoworkers make barely $2 a day, even as auto plants adopt modern technology.
That's $60 per month. Obviously, they can't afford clothes or homes or food with those wages. Wait, there is the official valuation used for world trade and then there is the real valuation which lets these workers have homes and clothes and conveniences.

In a totally unrelated article, Reuters reported that:
The U.S. stock market's upbeat reaction to the heated rhetoric between Washington and Beijing over China's currency has puzzled some strategists who say a revaluation of the yuan is ultimately negative for equities.
These analysts see that any upward valuation of the yuan would simply increase our Current Account (Trade) deficit because we would keep buying from China anyway.

Maybe. But if the yuan were realistically valued... if that $2 per day became even $40 per day... the cost of that Chery Chevy would definitely not be $3,600 on the world market. The cost of the steel and plastic and rubber and electronics would reflect the fact that the workers could actually afford decent homes and food and clothes and amenities.

And the U.S. manufacturers who are presently competing with $2 per day labor might actually have a real chance to compete for sales. Yes, there would be a period of adjustment. "Inflation" ... as measured by our government ... would have a period of growth. We might even have some layoffs as Wal-Mart finds it tough to compete with the corner hardware store. But, in the end, we might actually save our U.S. based industries.

In the U.S., if you have two sets of books when you run your business... one public and one private... you tend to be viewed as a criminal. Someone ought to mention that to China.

Wednesday, May 18, 2005

Getting Married Is The Easy Part

Last night, I went with my son to look for a place to have his wedding and reception. He and his fiance have started the arduous process of budgeting, planning, adjusting, re-adjusting, and re-re-adjusting the commencement ceremony.

The first shock to him was the amount of money that this ceremony could devour. He is a frugal person who was appalled to see that this place required a bar expense of $22 per person. First, he doesn't drink alcohol himself and, second, he thinks that anyone who consumes $22 of alcohol shouldn't drive home.

Well, I agree with the second point except that the charges at such functions are always inflated, so that's just a few drinks over the course of the entire evening for most folks. But he is right in that there is no real reason to spent $4-5,000 for booze. He leaves open the possibility of a wine and champagne bar, but isn't even too happy about that. His fiance has been told by friends that weddings without alcohol are always a bit boring. Maybe they need to get a life!

Well, as I said, the process is just starting... and that's the easy part of marriage. 30 or 50 or so years later you get a different perspective about the commencement ceremony.

Saturday, May 14, 2005

Detroit will shoot itself in the foot again

"Trooper charged in slaying," reads the headline on The Detroit News article.

"Trooper pays price for Detroit's incompetence," read the headline on another article.

A Michigan State Police trooper shot a man who approached in the middle of the night with his hand behind his back... after the man disregarded the officer's command to show his hand and stop. The scene is captured on tape.

It turns out the man was not armed.

Flash back to Iraq. Soldier kills unarmed man in a building where shots had been fired toward the troops. It's dark and dangerous. The scene is captured on tape. The soldier is charged with shooting the wounded man who the soldier thought might detonate a bomb.

In both cases, men were sent into uncertain, dangerous situations and expected to make decisions instantly about their safety and the intentions of those facing them. If their decisions were faulty, they were then treated as criminals by those who could review the situation at their leisure... in safety.

Question: at what point will those young men simply stop responding to those calls to action in those uncertain situations? The City of Detroit has once again seen an official act rashly... no, stupidly. The City will suffer as a result... suffer more, that is.

Friday, May 13, 2005


Classes at Cambridge University, graduation, marriage proposals, going into business, high-rise living in Chicago... so many things happening in our sons' lives.

I watch with a great deal of pleasure and a little bit of sadness as they stake out their independent paths. It's all my wife and I could have hoped for them... maybe more.... We were lucky; whatever it was we did with them and for them seems to be working. The house is emptying. Oh, the younger ones are still hanging around for a little longer while they build up their personal funds so that they can purchase homes and cars. But the change is clearly here.

It's strange how so much gain can feel like so much loss. More free time, less expenses, less responsibility... but the thought of a house without young people outweighs those positives. It was tough when the oldest left, but having the younger ones around softened that change. Now the second one is about to leave and the third will follow soon after. They'll be nearby, but it will be very different.

We'll get used to it, but I'm not sure how well we'll like it. That's life: the destination is not nearly as welcome as the journey.

Sunday, May 08, 2005

Love and Proposal

Graduation turned out to be a bigger day than we expected.

Congratulations, Whitney and Kevin!

Saturday, May 07, 2005

Spring and Graduation

A glorious day to celebrate.

My youngest son decided to skip graduation exercises because, technically, he is not quite finished with his college courses... and he doesn't get too excited about such events. But since he won't have another opportunity until December to participate in the ceremony... and he will not be the least interested... I'll celebrate the day for him.

My second son's girl friend is also graduating from the same college today. She decided to participate in the festivities and we will probably stop in to congratulate her.

Despite what the ceremony may or may not mean to these young people, it means much to their parents and families and to their communities. They are no longer the "future" for us; they are now part of the contributing "present". We celebrate their achievements, but we also celebrate our roles in their achievements, too.

The caps and gowns and ornate pieces of paper are nice touches, but the real reward is that they have been tested and found able... they are prepared for their lives and to contribute to the next generation's support. It is time to commence.

Thursday, May 05, 2005

Da Duh Factor

Some items in the Detroit Free Press today:

  • Gotta have it... "We have to look like and act like the dope dealers," said Police Chief Ella Bully-Cummings after the City Council rejected a proposal to lease "four luxury cars -- at $100,000 a year over two years. One of the rides is a 2005 Lincoln Navigator." That, after the blowup about the Mayor leasing one for his wife and charging to the city.
  • An appropriate name... "Denise Fordia Coke was arraigned in 37th District Court in Warren on a charge of possession with intent to deliver cocaine...."
  • Somehow slipped our mind... "New York's Freedom Tower, the tallest skyscraper planned for the site of the destroyed World Trade Center, will be redesigned to address security issues.... Police officials last month presented concerns, including that the tower's planned location, 25 feet from a six-lane highway, would leave it vulnerable to a truck bomb."
Not exactly humorous... but entertaining anyway.

Monday, May 02, 2005

Excessive Spending - Creating competition

I've written several times about what I believe to be the fallacy in thinking that goes roughly: "It doesn't matter if our manufacturing capability is lost (outsourced) or how much we import. Our future lies in our ability to be world leaders in the high-tech, new idea realms. Other nations will still need our leadership in cutting edge industries and that is our future."


China's Lenovo has become world's No. 3 PC maker

Company completes $1.75-billion deal for IBM division

May 2, 2005

BEIJING -- Chinese computer maker Lenovo Group Ltd. has completed its $1.75-billion purchase of IBM Corp.'s personal computer division, creating the world's third-largest PC maker, the company said Sunday.

The deal -- one of the biggest foreign acquisitions ever by a Chinese company -- is expected to quadruple sales of Lenovo, already Asia's biggest computer maker, the company said earlier.

"Within weeks, we will be introducing new products as the new Lenovo," Stephen Ward, Lenovo's CEO, said in a company statement without providing specifics."

Let's watch over the next few years as China, which has been amassing billions of U.S. dollars, begins to purchase other advanced manufacturing capabilities and informtion. These are all tiny chips at the base of a massive monolith, but eventually the base can't support the rest. Let's hope that those 27 percent of parents who do think that a college education is a good idea (see yesterday's article) provide enough leadership for our nation's future.

Sunday, May 01, 2005

Education Failure - All should get a college education

... even if they don't want one.

Two interesting articles in The Detroit News Commentary section:

  • Attitude may make Mich. the new Mississippi

    "Michigan is doomed to be the new Mississippi. A backward state locked to a last-century industry, awash in ignorance and unprepared to seize the opportunities presented by new technologies and scientific advancements.

    That's the only fortune to tell for a state where just 27 percent of parents consider a good education essential for a successful life, and nearly half don't agree that everybody should go to college."

  • Michigan must stress college for all students
    By Gov. Jennifer Granholm

    "If there is one factor critical to creating a stronger economy and more good-paying jobs in Michigan it is this: states with the most educated populations have the most robust economic growth and the lowest unemployment.

    Unfortunately, Michigan rings in at the wrong end of the spectrum on both counts. Only 22 percent of adults in Michigan hold a bachelor's degree. That's more than 10 points below the leading states. And we all agree that the state's unemployment rate is unacceptable.

    Our call to action is clear: We must make a college education a universal goal for every student in Michigan...."

    "This past week, along with Rep. Tupac Hunter of Detroit and Sen. Michael Switalski of Roseville, I introduced bills creating a new Merit Scholarship. The scholarship guarantees that any student who completes two years at any Michigan college or university will get at least $4,000 in scholarship aid. That's enough to pay for an associate's degree at most Michigan community colleges."

I may be missing something here, but passing a bill that says students who finish two years of college will get $4,000 aid may not have much impact on a population with a dysfunctional attitude toward education.

Yes, it may help motivated students... that is fine. But let's not fool ourselves into thinking that members of educationally dysfunctional subcultures... and there are several of those represented in Michigan... will suddenly change their outlook on life because they get a "resigning bonus" after two years of college... which they don't intend to start anyway.

Some earlier posts that may be relevant:

2020 Preparations - Step 1: Education

2020 Preparations - Step 1: Education (continued)

2020 Preparations - Step 1: Education (Continuing?)

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)