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U.S.
I.R.S. Investigator to Reopen Inquiry Into Applications
The Internal Revenue Service’s inspector general said that he was expanding his investigation of I.R.S. treatment of political groups that applied for tax-exempt status.
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Business Day
Hauling New Treasure Along the Silk Road
With freight trains as their caravans, manufacturers like Hewlett-Packard are reviving an ancient way to ship products made in China to markets in Western Europe.China’s Ponzi Bicycle Is Running Into A Brick Wall
Link fixed
In this morning’s session, I found myself using various metaphors to explain pretty much the same points I made in today’s column.
One of them was that in a way, China’s low-consumption high-investment economy was a kind of Ponzi scheme. Chinese businesses were investing furiously, not to build capacity to serve consumers, who weren’t buying much, but to serve buyers of investment goods — in effect, investing to take advantage of future investment, adding even more capacity. Would there ever be final buyers for what all this capacity could produce? Unclear. So, a kind of Ponzi scheme.
Also, my worries are that China doesn’t know how to slow down — that it’s a bicycle economy that falls over if it stops moving forward.
And of course I’ve argued that running out of peasants creates a wall.
So, the Chinese Ponzi bicycle is running into a brick wall. Also, the fascist octopus has sung its swan song.
Still not sure I’m living up to the world’s worst sentence, however.
http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?partner=rssnyt&emc=rss
In this morning’s session, I found myself using various metaphors to explain pretty much the same points I made in today’s column.
One of them was that in a way, China’s low-consumption high-investment economy was a kind of Ponzi scheme. Chinese businesses were investing furiously, not to build capacity to serve consumers, who weren’t buying much, but to serve buyers of investment goods — in effect, investing to take advantage of future investment, adding even more capacity. Would there ever be final buyers for what all this capacity could produce? Unclear. So, a kind of Ponzi scheme.
Also, my worries are that China doesn’t know how to slow down — that it’s a bicycle economy that falls over if it stops moving forward.
And of course I’ve argued that running out of peasants creates a wall.
So, the Chinese Ponzi bicycle is running into a brick wall. Also, the fascist octopus has sung its swan song.
Still not sure I’m living up to the world’s worst sentence, however.
http://www.nytimes.com/2013/07/19/opinion/krugman-hitting-chinas-wall.html?partner=rssnyt&emc=rss
"All economic data are best viewed as a peculiarly boring genre of
science fiction, but Chinese data are even more fictional than most. Add
a secretive government, a controlled press, and the sheer size of the
country, and it’s harder to figure out what’s really happening in China
than it is in any other major economy.Yet the signs are now unmistakable: China is in big trouble. We’re not
talking about some minor setback along the way, but something more
fundamental. The country’s whole way of doing business, the economic
system that has driven three decades of incredible growth, has reached
its limits. You could say that the Chinese model is about to hit its
Great Wall, and the only question now is just how bad the crash will be.
Start with the data, unreliable as they may be. What immediately jumps
out at you when you compare China with almost any other economy, aside
from its rapid growth, is the lopsided balance between consumption and
investment. All successful economies devote part of their current income
to investment rather than consumption, so as to expand their future
ability to consume. China, however, seems to invest only to expand its
future ability to invest even more. America, admittedly on the high
side, devotes 70 percent of its gross domestic product to consumption; for China, the number is only half that high, while almost half of G.D.P. is invested.
How is that even possible? What keeps consumption so low, and how have
the Chinese been able to invest so much without (until now) running into
sharply diminishing returns? The answers are the subject of intense
controversy. The story that makes the most sense to me, however, rests
on an old insight by the economist W. Arthur Lewis,
who argued that countries in the early stages of economic development
typically have a small modern sector alongside a large traditional
sector containing huge amounts of “surplus labor” — underemployed
peasants making at best a marginal contribution to overall economic
output.
The existence of this surplus labor, in turn, has two effects. First,
for a while such countries can invest heavily in new factories,
construction, and so on without running into diminishing returns,
because they can keep drawing in new labor from the countryside. Second,
competition from this reserve army of surplus labor keeps wages low
even as the economy grows richer. Indeed, the main thing holding down
Chinese consumption seems to be that Chinese families never see much of
the income being generated by the country’s economic growth. Some of
that income flows to a politically connected elite; but much of it
simply stays bottled up in businesses, many of them state-owned
enterprises.
It’s all very peculiar by our standards, but it worked for several
decades. Now, however, China has hit the “Lewis point” — to put it
crudely, it’s running out of surplus peasants.
That should be a good thing. Wages are rising; finally, ordinary Chinese
are starting to share in the fruits of growth. But it also means that
the Chinese economy is suddenly faced with the need for drastic
“rebalancing” — the jargon phrase of the moment. Investment is now
running into sharply diminishing returns and is going to drop
drastically no matter what the government does; consumer spending must
rise dramatically to take its place. The question is whether this can
happen fast enough to avoid a nasty slump.
And the answer, increasingly, seems to be no. The need for rebalancing
has been obvious for years, but China just kept putting off the
necessary changes, instead boosting the economy by keeping the currency
undervalued and flooding it with cheap credit. (Since someone is going
to raise this issue: no, this bears very little resemblance to the
Federal Reserve’s policies here.) These measures postponed the day of
reckoning, but also ensured that this day would be even harder when it
finally came. And now it has arrived.
How big a deal is this for the rest of us? At market values — which is
what matters for the global outlook — China’s economy is still only
modestly bigger than Japan’s; it’s around half the size of either the
U.S. or the European Union. So it’s big but not huge, and, in ordinary
times, the world could probably take China’s troubles in stride.
Unfortunately, these aren’t ordinary times: China is hitting its Lewis
point at the same time that Western economies are going through their
“Minsky moment,” the point when overextended private borrowers all try
to pull back at the same time, and in so doing provoke a general slump.
China’s new woes are the last thing the rest of us needed.
No doubt many readers are feeling some intellectual whiplash. Just the
other day we were afraid of the Chinese. Now we’re afraid for them. But
our situation has not improved."
3
Magazine
A Donation Deal Goes Awry
The plan was to give $10,000 each to the other’s charity of choice. He cheated.
4
Opinion
Why Men Need Women
The mere presence of female family members — even infants — can be enough to nudge men toward being generous, studies show.
5
Opinion
Losing Our Way in the World
Technology has obscured a more primal sense of relating to our surroundings.
6
Business Day
Wealth Taxes: A Future Battleground
Rising wealth is likely to be a tempting target for governments seeking new revenue sources.
7
Business Day
Dissent Over a Device to Help Find Melanoma
MelaFind, a system for imaging skin lesions, has been polarizing the field of skin-cancer detection.
8
Technology
Apple Buys 2 Mapping Companies
Apple confirmed on Friday that it had bought the mapping start-ups HopStop and Locationary, giving Apple more expertise in an area where it has struggled.
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Business Day
U.S., Urging Worker Safety, Outlines Steps for Bangladesh to Regain Its Trade Privileges
The Obama administration released an “action plan,” pressing Bangladesh to significantly increase the number of labor, fire and building inspectors and to improve their training.
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Health
Farmers' Market Chickens Higher in Bacteria
Up to 52 percent of grocery store chickens tested positive for bacteria that can cause food poisoning. But chickens bought at farmers’ markets were the most contaminated of all, according to a small study in Pennsylvania.
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Travel
A Pilot’s Views on Flight Safety
Patrick Smith, who writes a blog called Ask the Pilot, explains why he thinks air travel is so safe and offers tips for fliers.
13
Opinion
Fast Time and the Aging Mind
Is it possible that learning new things might slow our internal sense of time?
14
U.S.
N.S.A. Imposes Rules to Protect Secret Data Stored on Its Networks
The new mission formalizes America’s use of a class of weapons that the Obama administration has rarely discussed in public.
15
Technology
Digital Tools to Curb Snooping
While no technological tool is perfect, there are ways to limit one’s digital footprint.
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Opinion
Halfhearted Labor Reform in Bangladesh
A new law does not do enough to empower workers and improve workplace safety only a few months after the tragic collapse of a factory building.
17
Opinion
Justice Sequestered
Washington’s automatic budget-cutting is hurting the courts and imperiling the federal public defender program.
18
Magazine
Danger! This Mission to Mars Could Bore You to Death!
Astronauts go through years of training. But what can prepare them for millions of miles through nothingness?
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Fashion & Style
Torts? Pass the Sunscreen
With their toes in the sand and their nose in a book, hopeful lawyers are bypassing stuffy libraries to study for the all-important bar exam.
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