I’ve pointed out on several occasions that Korea has a weak supplier infrastructure even if it has become a high tech powerhouse.
Samsung and Hynix, the two top contenders in the memory sector, have agreed to use the semiconductor equipments developed by the Korean SMEs. They have imported five times more equipment from overseas. In the meantime, the Korean government is providing R&D funding for the equipments and promise to buy their products if SMEs meet the performance requirements.
Good seems to come out of the economic crisis.
Monday, December 7, 2009
Sunday, December 6, 2009
A Decoupling from Reality
Experts in the Western financial sectors lament “a growing gap between what we read in the papers and what really happens in the global economy.” In the case of Korea, GDP is up and consumer spending has increased. Yet, there is a growing concern over declining household income and expanding household debt. There is growth in Korea, but while some are making more money, there are even more people who don’t, which is the case for the U.S. as well. This gap appears to be widening, as Dr. Warren at Harvard and Dr. Reich at Berkeley contend. In the U.S. case, the worst financial crisis becomes the best year in bonuses and compensation on Wall Street.
Yes, there seems to be a decoupling from reality around the globe, and again, we are long the real economy.
Yes, there seems to be a decoupling from reality around the globe, and again, we are long the real economy.
Friday, December 4, 2009
Japan to Pursue QE Again to Fight Deflation
Japan is reportedly set to launch quantitative easing again.
How can the Bank of Japan be ignorant of the effect that the two decades of poor decision has had on Japan’s economy? Japan poured 1.4 quadrillion yen, or 3 years worth of Japan’s GDP for the last 17 years, but it is still mired in deflation. Despite Japan’s failure, the U.S. is following the Japan’s path. We sure seem to live in interesting times.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIJs51f_KJ0U&pos=2
How can the Bank of Japan be ignorant of the effect that the two decades of poor decision has had on Japan’s economy? Japan poured 1.4 quadrillion yen, or 3 years worth of Japan’s GDP for the last 17 years, but it is still mired in deflation. Despite Japan’s failure, the U.S. is following the Japan’s path. We sure seem to live in interesting times.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIJs51f_KJ0U&pos=2
Senator Bunning Says to Bernanke “You Are the Definition of a Moral Hazard”
Bernanke used to be a professor at Princeton. Obviously, he is a well-educated and intelligent person. And yet, how to use that education and intelligence for the common good seems to be an entirely different matter. I’m curious as to what he tells his children and grandchildren about his life: he’ll tell them “I just take care of myself and my family as we all should do”?
http://www.msnbc.msn.com/id/21134540/vp/34258918#34258918
A Partial Transcript:
Alan Greenspan refused to look for bubbles or to do anything other than create them. Likewise it is clear from your statements over the last four years that you failed to spot the housing bubble despite many warnings.
Under your watch every one of the major banks failed or would have failed had you not bailed them out.
After taking over the Fed you did not seen any need for more substantial regulation of derivatives until it was clear that they were headed into the financial meltdown thanks in part to those products.
The Greenspan policy on transparency was to talk a lot, use plenty of numbers, but say nothing. You promised congress more transparency when you came to the job. You promised more transparency when you came begging for TARP. To be fair you have published more information than before but those efforts are inadequate and you still refuse to provide details on the Fed's bailout last year on all the toxic waste you have bought.
Chairman Greenspan sold the Fed's independence to Wall Street on the so called "Greenspan PUT". Whenever Wall Street needed a boost, Alan was there. But you went even farther than that when you bowed to the political pressure of the Bush and Obama Administrations, and turned the Fed into an arm of the Treasury.
Under your watch the "Bernanke PUT" became a bailout for all large financial institutions, including many foreign banks.
And you put the printing presses into overdrive to fund the government's spending and hand out cheap money to your masters on Wall Street.
In short, you are the definition of a moral hazard.
You are repeating the same mistakes as Japan in the 1990's on a much larger scale while sowing the seeds for the next bubble.
The AIG bailout alone is reason enough to send you back to Princeton.
I will do everything I can to stop your nomination and drag out this process as long as I can. We must put an end to your and the Fed's failure and there is no better time than now.
Your Fed has become the creature from Jekyll Island.
http://www.msnbc.msn.com/id/21134540/vp/34258918#34258918
A Partial Transcript:
Alan Greenspan refused to look for bubbles or to do anything other than create them. Likewise it is clear from your statements over the last four years that you failed to spot the housing bubble despite many warnings.
Under your watch every one of the major banks failed or would have failed had you not bailed them out.
After taking over the Fed you did not seen any need for more substantial regulation of derivatives until it was clear that they were headed into the financial meltdown thanks in part to those products.
The Greenspan policy on transparency was to talk a lot, use plenty of numbers, but say nothing. You promised congress more transparency when you came to the job. You promised more transparency when you came begging for TARP. To be fair you have published more information than before but those efforts are inadequate and you still refuse to provide details on the Fed's bailout last year on all the toxic waste you have bought.
Chairman Greenspan sold the Fed's independence to Wall Street on the so called "Greenspan PUT". Whenever Wall Street needed a boost, Alan was there. But you went even farther than that when you bowed to the political pressure of the Bush and Obama Administrations, and turned the Fed into an arm of the Treasury.
Under your watch the "Bernanke PUT" became a bailout for all large financial institutions, including many foreign banks.
And you put the printing presses into overdrive to fund the government's spending and hand out cheap money to your masters on Wall Street.
In short, you are the definition of a moral hazard.
You are repeating the same mistakes as Japan in the 1990's on a much larger scale while sowing the seeds for the next bubble.
The AIG bailout alone is reason enough to send you back to Princeton.
I will do everything I can to stop your nomination and drag out this process as long as I can. We must put an end to your and the Fed's failure and there is no better time than now.
Your Fed has become the creature from Jekyll Island.
Thursday, December 3, 2009
Why Has North Korea Engaged in the So-Called Economic Reform?
From Time:
North Korean leader Kim Jong Il and his cohorts labeled this week's sudden change in the country's currency, which has left chaos in its wake, economic "reform." On Monday the North Korean regime decided to lop off two zeroes from the existing paper currency, the won, and gave North Koreans less than a week to exchange all their old notes for new ones.
In many countries, economic reform can be a good thing. Even draconian changes to paper currency can help governments draw a line between "bad economic policies of the past, often after taming a hyperinflation," says Marcus Noland, an economist at Washington's Peterson Institute of International Economics. However, this being North Korea, one of the most repressive and impoverished nations in the world, that's not the case. The government announced that it would limit the amount an individual can exchange to just 100,000 won — or less than $40 at black-market exchange rates — and any amount above that threshold would be, in effect, worthless. NGOs in Seoul reported that in response to citizens' immediate and widespread anger, those limits were raised to 150,000 won in cash and 500,000 won in bank notes.
So why would Pyongyang make such a change? As usual, parsing the reasons the North Korean government does anything is murky business. But Pyongyang watchers in Seoul believe the crackdown comes for two main reasons. First, there has been a widening gap between the haves and the have-nots in North Korea, partly due to the prevalence of relatively free markets, says Cheong Seong-chang, senior fellow at the Sejong Institute, a think tank in Seoul. Since 2000, the bigger traders in North Korea have come to live a life "almost as lavish as South Koreans," says Cheong. "They have big refrigerators, color televisions, DVD players." In a socialist utopia like North Korea, such economic divides are unacceptable; the currency change would reduce inequality by making a broad swath of the North Korean population poorer.
The second reason for the crackdown — as ever with Pyongyang — is control. The government allowed black markets to proliferate this decade out of desperation, but they had grown to the point where the leadership may have begun to feel threatened. Small traders and black markets existed outside of government control, and by definition at some point the regime was not going to tolerate that, analysts say. "The breakaway, snowballing market is a threat to the regime," says Lim Kang-taeg, senior research fellow at the Korean Institute for National Unification, a government-sponsored think tank in Seoul. "This is a significant blow leveled at the market, and will help the government tighten up control."
Tighten up control — once again at the expense of the poor, benighted North Koreans citizens.
http://www.time.com/time/world/article/0,8599,1945251,00.html
From Al Jazeera:
According to South Korea's Yonhap news agency, the surprise announcement sent many North Koreans rushing to the black market to convert hoarded bills into US dollars and Chinese yuan.
Shops, restaurants and other businesses have closed while the switch is taking place.
Groups in South Korea with contacts in the North say the move has hit private market traders with large hoards of the old currency particularly hard.
In one case guards blocked the entrance to a bank in the city of Hoeryong after a stampede of people trying to offload old banknotes, the Seoul-based Network for North Korean Democracy and Human Rights said, citing unidentified sources.
Analysts have said the surprise switch appears to be part of a government crackdown on private markets, which have become an essential part of the food-supply system in aid-dependent North Korea.
The markets, which have gradually emerged across North Korea in recent years, have become a profitable business for some traders.
But their growth outside of government controls is believed to have unnerved authorities.
Faced with mounting food shortages, rigidly-controlled North Korea began allowing some private markets including farmers' markets to begin trading in 2002.
The markets have encouraged trade and boosted the supply of food, but they also become a source for banned goods such as films and soap operas from South Korea, which the government sees as a threat to its rule, analysts say.
http://english.aljazeera.net/news/asia-pacific/2009/12/200912371139615612.html
Fom YTN:
북한의 화폐 개혁은 2002년 '경제 관리 개선 조치' 이후 경제 자유화 흐름과 함께 개인적인 부를 쌓고 국가적 통제를 벗어나려는 중산층의 태동 움직임을 막으려는 북한 신보수주의 조치라고 북한 문제 전문가가 분석했습니다.
옛 동독 출신으로 김일성 종합대학에서 공부한 오스트리아 빈 대학의 루디거 프랭크 교수는 미국 안보 전문 연구 기관 노틸러스 연구소 홈페이지에 올린 보고서에서 이같이 분석했습니다.
프랭크 교수는 사적 경제 영역에서 활동하며 시장 경제적 요소를 주도하는 중산층을 겨냥한 이번 화폐 개혁이 단기적으로 국가가 주도하는 계획 경제를 복원하는 데 기여하겠지만, 장기적으로는 북한 체제 정통성을 잃게 하는 정치적 위험 요소를 동반하고 있다고 지적했습니다.
North Korean leader Kim Jong Il and his cohorts labeled this week's sudden change in the country's currency, which has left chaos in its wake, economic "reform." On Monday the North Korean regime decided to lop off two zeroes from the existing paper currency, the won, and gave North Koreans less than a week to exchange all their old notes for new ones.
In many countries, economic reform can be a good thing. Even draconian changes to paper currency can help governments draw a line between "bad economic policies of the past, often after taming a hyperinflation," says Marcus Noland, an economist at Washington's Peterson Institute of International Economics. However, this being North Korea, one of the most repressive and impoverished nations in the world, that's not the case. The government announced that it would limit the amount an individual can exchange to just 100,000 won — or less than $40 at black-market exchange rates — and any amount above that threshold would be, in effect, worthless. NGOs in Seoul reported that in response to citizens' immediate and widespread anger, those limits were raised to 150,000 won in cash and 500,000 won in bank notes.
So why would Pyongyang make such a change? As usual, parsing the reasons the North Korean government does anything is murky business. But Pyongyang watchers in Seoul believe the crackdown comes for two main reasons. First, there has been a widening gap between the haves and the have-nots in North Korea, partly due to the prevalence of relatively free markets, says Cheong Seong-chang, senior fellow at the Sejong Institute, a think tank in Seoul. Since 2000, the bigger traders in North Korea have come to live a life "almost as lavish as South Koreans," says Cheong. "They have big refrigerators, color televisions, DVD players." In a socialist utopia like North Korea, such economic divides are unacceptable; the currency change would reduce inequality by making a broad swath of the North Korean population poorer.
The second reason for the crackdown — as ever with Pyongyang — is control. The government allowed black markets to proliferate this decade out of desperation, but they had grown to the point where the leadership may have begun to feel threatened. Small traders and black markets existed outside of government control, and by definition at some point the regime was not going to tolerate that, analysts say. "The breakaway, snowballing market is a threat to the regime," says Lim Kang-taeg, senior research fellow at the Korean Institute for National Unification, a government-sponsored think tank in Seoul. "This is a significant blow leveled at the market, and will help the government tighten up control."
Tighten up control — once again at the expense of the poor, benighted North Koreans citizens.
http://www.time.com/time/world/article/0,8599,1945251,00.html
From Al Jazeera:
According to South Korea's Yonhap news agency, the surprise announcement sent many North Koreans rushing to the black market to convert hoarded bills into US dollars and Chinese yuan.
Shops, restaurants and other businesses have closed while the switch is taking place.
Groups in South Korea with contacts in the North say the move has hit private market traders with large hoards of the old currency particularly hard.
In one case guards blocked the entrance to a bank in the city of Hoeryong after a stampede of people trying to offload old banknotes, the Seoul-based Network for North Korean Democracy and Human Rights said, citing unidentified sources.
Analysts have said the surprise switch appears to be part of a government crackdown on private markets, which have become an essential part of the food-supply system in aid-dependent North Korea.
The markets, which have gradually emerged across North Korea in recent years, have become a profitable business for some traders.
But their growth outside of government controls is believed to have unnerved authorities.
Faced with mounting food shortages, rigidly-controlled North Korea began allowing some private markets including farmers' markets to begin trading in 2002.
The markets have encouraged trade and boosted the supply of food, but they also become a source for banned goods such as films and soap operas from South Korea, which the government sees as a threat to its rule, analysts say.
http://english.aljazeera.net/news/asia-pacific/2009/12/200912371139615612.html
Fom YTN:
북한의 화폐 개혁은 2002년 '경제 관리 개선 조치' 이후 경제 자유화 흐름과 함께 개인적인 부를 쌓고 국가적 통제를 벗어나려는 중산층의 태동 움직임을 막으려는 북한 신보수주의 조치라고 북한 문제 전문가가 분석했습니다.
옛 동독 출신으로 김일성 종합대학에서 공부한 오스트리아 빈 대학의 루디거 프랭크 교수는 미국 안보 전문 연구 기관 노틸러스 연구소 홈페이지에 올린 보고서에서 이같이 분석했습니다.
프랭크 교수는 사적 경제 영역에서 활동하며 시장 경제적 요소를 주도하는 중산층을 겨냥한 이번 화폐 개혁이 단기적으로 국가가 주도하는 계획 경제를 복원하는 데 기여하겠지만, 장기적으로는 북한 체제 정통성을 잃게 하는 정치적 위험 요소를 동반하고 있다고 지적했습니다.
Chinese Official Criticize Western IBs for Derivatives
At least Chinese officials seem to be fully aware of the derivative nightmare engineered by Western financial entities and criticize it.
From the Financial Times:
A senior Chinese official who oversees the country’s largest state-owned enterprises has publicly slammed western investment banks for “maliciously” peddling complicated derivative products that caused huge losses for Chinese companies over the last year.
In Beijing’s strongest criticism on the matter to date, Li Wei, vice director of the State-owned Assets Supervision and Administration Commission, singled out Goldman Sachs, Morgan Stanley, Merrill Lynch and Citigroup in a long and highly critical article in the latest issue of an official Communist party newspaper.
The large losses suffered by Chinese state companies were “closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions,” Mr Li asserted. “To a certain extent some international investment banks were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo.”
http://www.ft.com/cms/s/0/9d3ce434-e029-11de-8494-00144feab49a.html
From the Financial Times:
A senior Chinese official who oversees the country’s largest state-owned enterprises has publicly slammed western investment banks for “maliciously” peddling complicated derivative products that caused huge losses for Chinese companies over the last year.
In Beijing’s strongest criticism on the matter to date, Li Wei, vice director of the State-owned Assets Supervision and Administration Commission, singled out Goldman Sachs, Morgan Stanley, Merrill Lynch and Citigroup in a long and highly critical article in the latest issue of an official Communist party newspaper.
The large losses suffered by Chinese state companies were “closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions,” Mr Li asserted. “To a certain extent some international investment banks were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo.”
http://www.ft.com/cms/s/0/9d3ce434-e029-11de-8494-00144feab49a.html
Wednesday, December 2, 2009
America without a Strong Middle Class?
I had a post-up about Elizabeth Warren’s views on the demise of the American middle class before. She is voicing her opinion again in her article in the Huffington post. She has written several books on this issue. She is a professor of Law at Harvard and is currently the chair of the congressional oversight panel created to oversee the banking bailouts.
From the Huffington Post:
Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.
www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
In the meantime, Robert Reich, a professor at the U.C.-Berkeley and former Secretary of Labor, echoes Warren’s view, confirming the destruction of middle-class jobs:
From the Huffington Post:
The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.
Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.
This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.
Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.
www.huffingtonpost.com/robert-reich/the-economic-reality-that_b_377167.html
From the Huffington Post:
Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security. Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.
America without a strong middle class? Unthinkable, but the once-solid foundation is shaking.
www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
In the meantime, Robert Reich, a professor at the U.C.-Berkeley and former Secretary of Labor, echoes Warren’s view, confirming the destruction of middle-class jobs:
From the Huffington Post:
The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.
Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.
This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they've lost higher-paying jobs and are now in a new ones that pays less.
Yet reducing unemployment by cutting wages merely exchanges one problem for another. We'll get jobs back but have more people working for pay they consider inadequate, more working families at or near poverty, and widening inequality. The nation will also have a harder time restarting the economy because so many more Americans lack the money they need to buy all the goods and services the economy can produce.
www.huffingtonpost.com/robert-reich/the-economic-reality-that_b_377167.html
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