Thomas Friedman says we've got a new hobby. This reminds me of a certain proverb: When a habit begins to cost money, it's called a hobby. This hobby may eventually cost us three billion dollars...
April 5, 2010
Praise to Allah for Allah is Most Great!
In the comments section of this post the infidel J was insinuating that calling the names of Allah and his prophet betrays the person's Muslim background. Oh the ignorance of filthy infidels! If calling upon Allah makes one a Muslim, then there is not a stone in the universe that does not follow the religion of Allah! Now go have it straight from the horse's mouth!
There is no god save Allah. It is He who gives life and death. Horses and cows are calling upon Allah. Birds are singing His name...
Lions roar the name of Allah...
And who, man and beast alike, never heard of the prophet of Allah (Allah bless him and grant him peace)?
The Prophet (pbuh) said, "Every son of Adam is a sinner, and the best of sinners are those who repent." Repent to God, ya infidels, and ask His forgiveness, lest ye incur the wrath of Allah and suffer a terrible punishment. Praise to Allah Subhanallah for Allah is Ever-Forgiving, Most Merciful! Praise be to Muhammad (Allah bless him and give him peace), for He is the Messenger of Allah!
The graph below pretty much illustrates the essence of the internal devaluation in the Baltic region and why it does not look as a devaluation at all.
The Bank of Latvia says:
The real hourly wage grew faster than productivity up until the end of 2007, and after that the difference between these indicators increased mainly as a result of dropping productivity.
Within six months, i.e. in the second and third quarters of 2009, one third of the difference between wages and productivity has been eliminated. Moreover, if we assume that, as in all likelihood was the case, the actual wage level prior to the leap in the second half of 2006 was lower than the level commensurate with productivity – among other factors, the income of employees in total value added, at the time among the lowest in the EU, points to that – by the end of the third quarter of 2009, the greatest part of the gap accumulated between wages and productivity was canceled.
The self inflicted mini Great Depression has wiped out almost one quarter of the Latvian economy sending unemployment surging in double digits and scattering Latvian migrant workers all across the region and beyond. The wages collapsed by 12% over year but labor costs per hour shrank by only 3.9%. As to the CPI, the consumer prices have barely bulged.
Yet the economy seems to have largely eliminated the competitiveness gap between the former Baltic tiger and its trade partners variously estimated at between 15% to 20%. The staggering loss of output and rampant unemployment suggest structural readjustment as the driving force behind Latvia's internal devaluation with productivity gains instead of price and wage deflation closing much of the competitiveness gap.
There may be several reasons as to why the internal devaluation in Latvia and elsewhere has degenerated into such a massive loss of GDP. On one hand it might be natural for massively misstructured economies whose vulnerabilities have turned unsustainable under the pressure of the global crisis. Another thing is that migration flows may have significantly undermined the flexibility of the Baltic labor markets. The anecdotal evidence indeed suggests a massive exodus of workforce. The Baltic labor markets are less distorted than others as a result of market friendly labor legislation and the absence of strong trade unions. Yet, this advantage may have been eroded by the ease of global and intra European migration flows. Migration outflows may have blunted the impact of unemployment and the downward pressure on wages it was supposed to produce.
Finally, the common market may have made local prices incredibly sticky and resilient in the face of any decline in wages and local demand. In fact, price deflation now appears as the least likely outcome of internal devaluation, even though it's this aspect that was usually watched and monitored for signs of the policy working. Undue expectations from the CPI seem to be the main reason why so many analysts came to think that the policy was not working after it has already accomplished the bulk of its task.
The great Latvian internal devaluation epic will be sure studied across the world for years to come, if only because it smashed all known records in terms of what a single nation can withstand without descending into chaos and anarchy. However, some lessons can be drawn already and the implications for the troubled EU periphery are dire.
Over the last years price and wage inflation rendered countries surrounding the EU core uncompetitive. As the global crisis went detonating trade imbalances and financial bubbles around the world, country after country along the European periphery have succumbed. Yet, even wider than the competitiveness gap between the European center and periphery is a morale abyss separating northern Europe and the EU southern flank.
From Estonia to Ireland, the EU northern periphery responded to the crisis by tightening belts and taking a headlong plunge into internal devaluation. In all Baltic nations GDP losses are running in double digits. Ireland's living standards have sustained a massive setback that the OECD defined as permanent. Those preaching about decadence and moral decline of the West (me for example) may want to rethink their thesis in the face of impressive resilience and stoicism on display along the EU northern flank.
In contrast, the EU southern periphery was thrown into disarray. In Greece an austerity program, largely born out of pressure from Germany and other EU partners, has triggered an immediate wave of strikes and riots. A big part of Spain's housing bubble is still there, while the country is paralyzed by political infighting and denial of the true scale of the crisis.
What becomes increasingly clear now is that strong trade unions and public opposition to any attempt to make a dent in wages and social benefits almost guarantee that internal devaluation in countries like Greece and Spain will be even more structural than in Latvia and elsewhere in the North. The inflexibility of labor markets leaves these countries with no other option for restoring their competitiveness rather than to destroy parts of the economy overly dependent on internal demand or unable to compete on external markets.
This process is likely to be accompanied by an even greater exodus of workforce than in the Baltic region, eventually conspiring with the pensions crisis to make the future of these countries one big doom and gloom. As a matter of fact, the population seems to be rather unprepared to submit itself to so much pain. In fact, it seems to be unwilling to sustain any significant amount of pain whatsoever.
Of course, if the going gets really tough, Spain and Greece can simply exit the EMU. It's unthinkable right now, but as the mess keeps deepening and the pain growing, persistent noises about togetherness and solidarity may eventually give way to more immediate concerns. After all, idealism is worth nothing unless it's backed up by equally ruthless pragmatism and readiness to sacrifice. The free lunch idealism, that took hold of large chunks of the West lately, has never had any feet to stand on and was only waiting for a crisis like this one to come and send it packing.
Marco Polo - A Prayer To The Music (Northern Exposure Mix)
Stocks, bonds and treasuries dropped after Fitch Ratings lowered Portugal's credit rating and US debt auction encountered an unexpectedly weak demand. This may signal that financial markets start getting tired and can no longer absorb massive debts issued by governments around the world in order to finance their stimulus programs. I don't know if this is it, but if it is, then it belongs to that famous series of "It's coming, baby!". Now everybody should better start watching their ass. Israel for example may want to start worrying about its debt to GDP ratio. These days it's smart to err on the safe side of things.
During the famous rap contest between the two greatest economists of the past century, Hayek certainly got it right with low interest rates, malinvestments and his mistrust of the boom part of the cycle. Wherever you look, it's pretty much the same story everywhere.
The Irish Times - Saturday, February 20, 2010
IRELAND “LARGELY wasted” its years of high income during the boom, with private enterprise investing its wealth “in the wrong places”, according to a new report by Davy Research.
. . .
Capital stock soared by 157 per cent in real terms from 2000 to 2008, but almost two-thirds of the increase was accounted for by housing – an “unproductive asset” in economic terms.
In the eight years to 2008, the net capital stock of the State more than doubled from €222 billion to €477 billion, data from the Central Statistics Office (CSO) shows. But once housing is excluded, “productive” capital stock rose by only €70 billion to €174 billion.
Davy said most of the increase in “core” productive capital stock was related to the State or semi-State sectors.
The report catalogues “pitiful” levels of investment by the private sector and states that as a result of a “glut of investment in the wrong places”, Ireland’s technological capacity has “not advanced much over the last decade”.
You might think that "Don’t worry, be happy" holds the key to happiness, but a new research claims that it's deep discussions that do the trick.
The study, published in the journal Psychological Science, involved 79 college students — 32 men and 47 women — who agreed to wear an electronically activated recorder with a microphone on their lapel that recorded 30-second snippets of conversation every 12.5 minutes for four days, creating what Dr. Mehl called “an acoustic diary of their day.”
Researchers then went through the tapes and classified the conversation snippets as either small talk about the weather or having watched a TV show, and more substantive talk about current affairs, philosophy, the difference between Baptists and Catholics or the role of education. A conversation about a TV show wasn’t always considered small talk; it could be categorized as substantive if the speakers analyzed the characters and their motivations, for example.
Many conversations were more practical and did not fit in either category, including questions about homework or who was taking out the trash, for example, Dr. Mehl said. Over all, about a third of all conversation was ranked as substantive, and about a fifth consisted of small talk.
But the happiest person in the study, based on self-reports about satisfaction with life and other happiness measures as well as reports from people who knew the subject, had twice as many substantive conversations, and only one-third of the amount of small talk as the unhappiest, Dr. Mehl said. Almost every other conversation the happiest person had — 45.9 percent of the day’s conversations — were substantive, while only 21.8 percent of the unhappiest person’s conversations were substantive.
Small talk made up only 10 percent of the happiest person’s conversations, while it made up almost three times as much –- or 28.3 percent –- of the unhappiest person’s conversations.
Next, Dr. Mehl wants to see if people can actually make themselves happier by having more substantive conversations.
“It’s not that easy, like taking a pill once a day,” Dr. Mehl said. “But this has always intrigued me. Can we make people happier by asking them, for the next five days, to have one extra substantive conversation every day?”
Jordan trying to help Palestinians to keep their Israeli documents valid
Last updated: March 22, 2010
March 20, 2010
In a report titled “Stateless Again,” issued last month, Human Rights Watch said that 2,700 people in Jordan lost their citizenship from 2004 to 2008, and that at least another 200,000 remained vulnerable, largely those who moved abroad at some point in search of work.
The government says it is trying to help by requiring Jordanians of Palestinian descent who fled the West Bank or Jerusalem after the war in 1967 to keep their Israeli documents valid. This has become a more urgent matter recently, political analysts and government officials said, with the accession of a right-wing Israeli government and its ultraconservative foreign minister, Avigdor Lieberman.
Jordan may try just as well to run tanks over Palestinians as during the Black September lest they forget where they came from...
March 22, 2010
And these are two cents on the subject from Nizo...
Regarding the Jordanian issue, there's a deep-rooted antipathy which is beyond just tribal, it pertains to the 3 categories of Arabs in the area: urban, countryside, Bedouin. Jordanian royalty is perceived to have been imported from Arabia and is non-native to what is essentially Palestine's hinterland or backyard. With the Hashemites came the elevation of the status of the Bedouin of the area where even their accent with the hard "G" became the de facto Jordanian one. They're category #1, those who run the show politically but not necessarily those who have all the money.
Within the Jordanians of Palestinian origins you have those who originate from the the urban centers of the West Bank. We'll call them category #2, they have the money and 5-year renewable passports the same as category #1, but they'll only ever be an economic elite, not a political one.
Finally we'll get back to category #3, the poorer less fortunate Palestinians who reside in the camps, to my knowledge Jordan recently upgraded many of them to 5-year renewable Jordanian passports, for many years they've held 1-year passports. Their status within Jordan is precarious. They have no money to contribute..
Finally category 1 supports the Faisaly football team while categories 2 and 3 support Wehdat. The rivalry and hatred are Balkan in their intensity.
The Economist reports that Brazil slapped close to $600 billions in punitive duties on US exports as a retaliation for the cotton subsidy. The sanctions were authorized by a WTO (World Trade Organization) arbitration panel. Watch this space for more countries to join; the list of nations who see themselves as victims of the US farm subsidies is long. And don't say we haven't told you so.
The new U.S. Census estimates put Chinese TFR at 1.5 instead of 1.8. According to the Economist who is recently giving increasing coverage to global demographic trends, China's demographic dividend will peak in 2010 as the current trend is about to reverse itself. From 2010 on, the deteriorating dependency ratio will start adversely affecting China's potential for growth.
It's still not too late, says the Economist, to relax the one-child policy in order to "salvage the situation". The short term effect of such a measure will be even more dependency ratio deterioration, but after a couple of decades when these children grow old enough to join the workforce, they will mitigate future labor shortages and social crises.
Meanwhile, given the general propensity of China to rapid economic growth and no less dramatic deceleration of its population growth (the workforce will stop growing pretty soon actually), the next superpower is about to transform itself into a huge vacuum machine sucking off labor surpluses from around the globe. Inside China labor shortages will develop and wages shoot up pushing labor intensive industries out of China and generating demand for these products from outside China. In short, after a decade or something, the global economy, and even more so the economies of the third world, may get a friendly push forward from the world's next superpower, and a very massive one on that occasion.
March 01, 2010
It may be happening even faster than we thought...
Factory wages have risen as much as 20 percent in recent months.
. . .
Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.
Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.
The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.
But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.
. . .
The labor shortage is not benefiting workers just through higher wages. Personnel managers here say they are also abandoning the informal tradition of not hiring anyone over 35 — they say they are now hiring workers up to 40 years old, and sometimes older, despite concerns about whether they can keep up week after week with the rapid pace of Chinese assembly lines.