Super Volatile

Fourth, China’s supply chain is sophisticated and supple. Professor Zheng Yusheng of the Cheung Kong Graduate School of Business argues that the right way to measure manufacturing competitiveness is not by comparing labour costs alone, but by comparing entire supply chains. Even if labour costs are a quarter of those in China to make a given product, the unreliability or unavailability of many components may make it uneconomic to make things elsewhere.

When we were not paying attention, China graduated from a mere supplier of cheap labor to a country with the most efficient and flexible supply chain on the planet, making manufacturing elsewhere – wasteful.

Psychology aside, a major factor in the West’s comprehension problem is that virtually everyone in Tokyo benefits from the doom and gloom story. For foreign sales representatives, for instance, it has been the perfect get-out-of-jail card when they don’t reach their quotas. For Japanese foundations it is the perfect excuse in politely waving away solicitations from American universities and other needy nonprofits. Ditto for the Ministry of Foreign Affairs in tempering expectations of foreign aid recipients. Even American investment bankers have reasons to emphasize bad news. Most notably they profit from the so-called yen-carry trade, an arcane but powerful investment strategy in which the well informed benefit from periodic bouts of weakness in the Japanese yen.

The article boils down to the point that perceived failure of Japanese economy in the last 20 years is just an elaborate plot do deceive the West.

EARLIER this year a Federal Reserve official tried to tamp down worries about inflation by noting that, while food and petrol were getting more expensive, you could now buy an iPad that was twice as powerful for the same price as the previous model. The remark, soon lampooned as “Let them eat iPads”, predictably drew derision. But it typified a tactic to which American leaders frequently turn when they need a rejoinder to economic doomsaying: cite an Apple product.

Not much is left to cite now for America.

Even if American opposition means the tax cannot be imposed worldwide, say the Germans, it should be adopted by the European Union. If that proves impossible because of British resistance, it should begin in the euro area. The objections of banking havens such as Ireland and Cyprus may not count for much; one is a ward of the euro zone, and the other may soon become one. Sweden, which is outside the euro, says its own transactions tax in the 1980s served only to push bond- and derivative-trading to London. “We cannot foresee that we would introduce such a tax in our system again,” says Anders Borg, Sweden’s finance minister. Let the traders relocate, Germany seems to be saying, and let London bear the risk; when the euro zone demonstrates the value of the tax, others will surely follow.

Explanation of the roots of Germany's conservative approach to fighting the euro crisis.

Such decisions aren't made lightly; CCP employs two full-time economists to keep the economy running as smoothly as possible and to deal with changes such as the introduction of Aurum.

Fascinating story of the clash between virtual and real-world economics in EVE Online. Despite having fewer users than World of Warcraft (300k vs. 12 million), EVE seems to have created much more sophisticated virtual society.

Whenever I feel as if I'm on a path toward certain doom, which happens every time I pay attention to the news, I like to imagine that some lonely genius will come up with a clever solution to save the world. Imagination is a wonderful thing. I don't have much control over the big realities, such as the economy, but I'm an expert at programming my own delusions. I make no apology for that. A well-crafted delusion can be a delicious guilty pleasure. And best of all, it's totally free. As a public service, today I will teach you how to wrap yourself in a warm blanket of imagined solutions for the government's fiscal dilemma.

Scott Adams gives some crazy ideas to boost up creativity in the fight with US debt crisis. So far I haven't heard of better alternatives.

The Journal illustrated the pattern this way, through costing out the components of an iPhone. Using current counting techniques, in which the phone's entire value is assumed to be "Chinese," on its own it accounts for nearly $2 billion of the Chinese surplus with the U.S. But if it is allocated to its real sources, most of the surplus is from Japan (famous for its "failed" economy), and second-most from Germany. The US-China direct exchange is actually a small surplus for the US.

Interesting information on how export deficit is calculated and why it can be so easily misleading.

I believe it is better to introduce students to economics with topics about which there is more of a professional consensus. In chapter two of the book, I include a table of propositions to which most economists subscribe, based on various polls of the profession. Here is the list, together with the percentage of economists who agree:

Probably the “news” won't hit the spotlight, but it's interesting to see that there's a lot of areas where experts actually agree.

Meanwhile, the timing of recent economic growth strongly supports the notion that stimulus does, indeed, boost the economy: growth accelerated last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.

Paul Krugman and his “I told you so” summary of Obama's fiscal stimulus, possibly just before another one.

On property rights, Russia came 119th, right down there with Malawi and Nicaragua; on judicial independence, 116th; on reliability of police services, 112th; and on professional management, 77th. Despite steady macroeconomic growth driven by rising oil and gas prices, there are few signs that it is developing beyond oil. “Only free, independent, and enterprising people are capable of being the driving forces behind modernization, but those are exactly the people whom the state is persecuting,” says Vladimir Ryzhkov, a leader of a prominent opposition party, Another Russia. “How can Russia attract Western investors when the country’s most successful businessmen are forced to flee the country for fear of arrest?

Why this article may be biased and don't take into account real offenses committed by Russian businessmen, it still highlights why Russia still has such a bad reputation as a place to make business.