Another chart showing the growth in energy consumption in the developed vs developing world from 2000 to 2011. Wow!

I just this one after the one I just previously posted.

The change in energy use JUST since 2000 is quite amazing.  The BRIC countries, Brazil, Russia, India and ESPECIALLY China have all increased their consumption of energy (from a variety of sources, mostly carbon based) and developed countries for the most part consume a smaller share.

This can be good, bad, or ugly---depends on which side of the economic development scale you reside in. 



Source: BusinessInsider

Nice infographic showing the growth in carbon emissions in China. We can congratulate ourselves on our efforts to reduce emissions, but does it matter?

If you are interested in the topic of carbon emissions, this graphic is for you. It shows the changes in carbon emissions primarily in China and secondarily in other parts of the developing world.

I have seen a recent graph that shows carbon emissions in the US have dropped dramatically in the last few years. Some due to efficiencies, some due to the wider use of natural gas,  BUT I would venture to guess MOST of the decrease is due to the recession and high(er) gas prices.

Do we have global carbon emission reductions (lead by the US) or has it just shifted to other places?

New and improved US Debt charts with China---always stunning to see how it has changed in just 10 years...

Don't know why I like debt graphs/charts as they relate to China.  I suppose it is because of the shocking rise of it such a short period of time. 

The first one (smaller one with yellow bars) shows the dollar amount of US Treasury's owned by China ( I assume by the Govt and/or its citizens). The second part of the graph shows the total US PUBLIC debt of $10 Trillion. This excludes the portion of the total National Debt (approx $5 Trillion) that is called PRIVATE debt. This is the debt incurred by the Federal Govt as it borrows from various Trust Funds, such as Social Security, that the Federal Govt administers. In other words, money the Federal Govt borrows from itself (that is another story for another day).

Source: Christian Science Monitor

The next chart shows in the same time period, China's change in direct investment outside of its borders (the US and elsewhere). This could include other financial investments stocks, commodities, bonds (how much of YOUR house or student loans or car is owed to them??) or investments in physical properties (businesses, land, natural resources, etc).

Source: Christian Science Monitor

You might be asking yourself: "Where do they get all this money since 2001 to loan us or to invest?"

This chart shows the difference between what we EXPORT (BLUE line) and what we IMPORT (RED line) from China.  You can easily see US Net Exports ($$$ Exports minus $$$ Imports) is negative. We import much more from China than we export to them.

The net flow of dollars on merchandise and services between our two countries is we send many more dollars to China than they return back to the US to buy our merchandise and services.  What do they do with all those surplus dollars? Go back to the beginning of this posting and start again---it is a continous loop. Those dollars we send them don't just disappear. A good number of them come back to the US to buy our debt instead of our merchandise. Crazy system, ain't it??? :)

Where have all the dollars gone? Look East, young man/woman. Nice graphics showing the flow of dollars since 1991...

A nation's stock of Foreign Currency Reserves is one way you can look at patterns of trade. The more a nation holds of a particular foreign currency, oh, say, dollars, is another way of saying that nation sells more ''stuff" than it buys from the other nation, oh, say, the US.  Hence, they are net holders of dollars.  China holds currencies other than dollars, but the perponderance of the reserves are US dollars.

This interactive from the Financial Times shows an amazing transition of foreign currency holdings just since 1991.  In the 2000's there is a massive tilt in one direction.  What to do with all those dollars? Well, we know at least one place it ends up...

 Well, we know at least one place it ends up...

Economix

Where's Waldo? Likely calling a moving company to book a move to China...Need more evidence that it is in your interest to know more about China? See this graphic, graphic...

We can choose to view China as a problem or as an opportunity. The Genie IS out of the bottle and my advice for young people is to seriously look at what you can to do to prepare yourself for a future with a more prosperous China. Can't ignore hundreds of millions of potential new customers for US goods and/or services.

Below is a graphic from moving company data on international corporate moves. If you are in college, or are about to be, then consider mixing in a little instruction in Mandarin.  Spend a semester there.  Regardless of your major, whether it is medical, technical, business, marketing, etc, it will only enhance your marketability.   



Source: WSJ


Movers Pick Up China Business

""The rising numbers of U.S. workers and students moving to China are a bright spot for moving companies like St. Louis-based UniGroup Worldwide, which has seen domestic business decline.

The closely held company, an affiliate of Mayflower Transit and United Van Lines, handles moves for corporate clients that pay to relocate employees. Between 2008 and 2010, the number of moves from the U.S. to China it handled grew nearly 47% to 396. Meanwhile, United Van Lines saw interstate moves in the continental U.S. decline 26% to 146,837 in the same time period.


China was the third-most common international destination for UniGroup, behind the United Kingdom and Germany, according to the company, which handled more than 15,000 moves last year.

In part to handle the growth in Asia, since 2007, UniGroup has purchased offices in China, Hong Kong and Singapore, among other locations, said president Brian Iles.

Ernst & Young, which has about 9,000 employees in China, has hired more than 1,500 in the last year and plans to hire another 2,000 by next July, said Bin Wolfe, people leader for the company's Asia-Pacific region. Although most of those employees will be native Chinese, Ms. Wolfe said in the last couple years, more employees from the U.S. have sought to get experience in emerging markets such as China.

Chinese students studying in the U.S. are also increasingly moving back to their native country upon graduation, she said.

"There is a lot of competition out there. People with strong experiences and bilingual skills are in high demand," she said.""

While the giant slept the world moved on to eradicate poverty...We just don't get what is happening in the rest of the world.




Source: CSM

  The world is changing rapidly and is becoming less dependent on the success of the US.  We are still very relevant but, in my opinion, the economic success of the rest/most of the world is eroding our status .  And, I fear, we are letting them.  1.4 Billion  Chinese, 1.3 Billion Indians, 190 million  Brazilians, AND the continent of Africa are rapidly developing middle-classes. These middle-classes are not to be confused with the US middle-class, which in dollar terms is way ahead of the aforementioned countries.  BUT the purchasing power of 100's of millions of people is increasing at an increasing rate.  Rising incomes around the world should not be seen as a problem for us, but an opportunity.  Instead of complaining about the "fairness" of trade with the rest of the world, I would prefer we as a nation welcome them out of poverty and ask if there is anything we can sell them (YES! We do make stuff!) that they would FREELY like to buy from us...THAT is what a competitive country does. 

Surging BRIC middle classes are eclipsing global poverty

The world will, for the first time in history, move from being mostly poor to mostly middle-class by 2022, the Organization for Economic Cooperation and Development projects. Asians, by some predictions, could constitute as much as two-thirds of the global middle class, shifting the balance of economic power from West to East. Already, some analyses of International Monetary Fund data suggest that the size of the Chinese economy could eclipse that of the United States in just five years.


By 2030, the global middle class is widely projected to at least double in size to as many as 5 billion – a surge unseen since the Industrial Revolution. This boom, however, is more global, more rapid, and is likely to have a far different – and perhaps far greater – impact in terms of global power, economics, and environment, say economists and sociologists.

But today's middle-class boom is unlike the Industrial Revolution, in which rising prosperity became a catalyst for increased individual and political freedom. Those in the emerging global middle classes – from an Indian acquiring a flush toilet at home to a Brazilian who can now afford private school to a Chinese lawyer with a new car in the driveway – are likely to redefine their traditional roles, and in doing so, redefine the world itself. 

 "I would expect that as the global middle class gets transformed by the entrance of hundreds of millions of Indian, Brazilian, and Chinese families, the concept of what we see as the middle-class values may change," says Sonalde Desai, a sociologist with the National Council of Applied Economic Research in Delhi (NCAER). "Historically, sociologists have defined 'middle class' as those with salaries…. I think 'middle class' is very much a state of mind."

Wages paid to Chinese factory workers are increasing rapidly. Does this mean a resurgence in US manufacturing? Does globalization have a natural "self-correcting" mechanism?

The graphic below shows the rise in wages paid to the average Chinese worker in the past year. In dollar terms, the amounts are still small compared to US wages, but they are increasing. China has become the world's manufacturing floor based on its comparative advantage in relative wages paid to workers, but that advantage is slipping.  This bad news for consumers of imported Chinese products because they WILL become more expensive in the near and medium term.  The GOOD news is that the closing of the wage gap will aid US workers in parts of the US where wage rates are generally lower.  Even though the wage differential is still significant, it will become less advantageous for producers to re-locate to China based solely on wages paid to workers.  Once the wage gap between American and Chinese workers closes, the only other significant criteria for locating a business in either place is worker productivity.  Are we ready to match them head to head?

China's Rising Wages Propel US Prices

Donald Trump will get tough with China on Trade...Hmmm...then who is going to make his signature shirts and ties?

Donald Trump has said he will get tough with the Chinese on trade. He believes they take advantage of the US and plays us for chumps. Is he going to get tough BEFORE or AFTER they make the shirts with his name on them...just askin'...

Source: HT Carpe Diem

Chinese cotton farmers are with-holding cotton in hopes of getting a higher price---how does this affect the Supply Curve? Shift it or Move along it?

Timely---We are doing the basics of Demand and Supply right now in class.  In today's Wall Street Journal there is an article on Chinese farmers hoarding cotton in hopes of getting a higher price in the near future:

WSJ: Chinese Take a Cotton to Hoarding

""Yu Lianmin, a cotton farmer in Huji, China, harvested 6,600 pounds of cotton this year. Despite record cotton prices, he didn't sell any of it.

Instead, mounds of cotton are piled up in two empty rooms of Mr. Yu's home, and the homes of many of the farmers in his small township of Yujia, which is part of the bigger township of Huji in northern Shandong province, 220 miles southeast of Beijing. The farmers are holding out for higher prices, aiming to help overcome higher costs of labor and fertilizer, which are up about 20% in the past year.

"I think there's still hope for prices to go higher," he said....""

This affects the supply-side of the market.  One of the determinants of supply is "Producer Expectations". If the farmers have a reasonable expectation the price of cotton will be higher in the future they will with-hold some/all of that supply.  Graphically, it looks like this:

The quantity supplied at every price is LESS on Supply1 relative to Supply*.  The Supply curve shifts to the left, representing a decrease in Supply.  Now, these farmers are VERY small suppliers in a world-wide market for cotton so their with-holding of cotton would NOT increase the price as illustrated above. What they are hoping for is a continued INCREASE in Demand for Cotton world-wide (and domestically) which WILL tend to increase the price:

The farmers can then increase their QUANTITY SUPPLIED of Cotton (13 bushels) at the higher price (this will help the cotton market move ALONG the supply curve from Point "A" to Point "C").  Remember, they are not increasing their quantity supplied at a lower price, which would shift the whole supply curve to the right. A subtle but important difference.

Video of an extremely large mall in China that is virtually empty...AND the developer has plans to EXPAND!!! Gee Whizzz...

Video of an extremely large mall in China that is virtually empty...AND the developer has plans to EXPAND!!! Gee Whizzz...

A Haunting Tour Inside One Of China's Massive Ghost Malls

Stairway to Heaven? Not even for God if this real estate developer has their way...

Daily Mail: Developers demolish all the stairways of a building in bid to evict family on the seventh storey

""A furious family is suing property developers after they demolished every staircase in a seven-storey apartment block to make them quit their top floor flat.



Mum Zhao Yanhong, 42, claims developers - who want to demolish the flats in Mianyang, south west China, to build a factory - hired thugs to force out other residents but she refused to budge.


'Then one day they turned up with machines and men and knocked out all the stairs to strand us here. They are just trying to bully us out of our home,' said Yanhong.""

China's decision to restrict rare-earth minerals may affect the price of gasoline---find out how here.

WSJ: Rare-Earth Ripple Effect Hits Gasoline Producers
I don't know what the wholesale price of gasoline is and I don't know what the increase in cost of the rare-earth material will be, but assume for simplicity sake they are $2.00 and $.50 respectively (gas price is probably too low and mineral cost is probably too high).

""The skyrocketing cost of rare-earth metals from China is pushing up the cost of gasoline production in the U.S., the latest sign of the wide-reaching impact of Beijing's decision to restrict exports of the minerals.
Prices for some of the chemicals refiners use to process gasoline have risen exponentially after China, which controls about 95% of the world's rare-earth supply, said it would reduce exports of the metals by 35% in 2011.""

The cost of producing a gallon of gasoline may increase for gasoline refiners, unless they can off-set the decrease in price of rare-earth minerals with a decrease in some other cost of production. Let's assume they cannot cut another cost. This is the graph of the Market for Gasoline in equilibrium. 

At Point "A" the market quantity supplied is 100 gallons (again, a simplistic number for illustration purposes). Ceterus Paribus, if the cost of producing gasoline increases by $.50 then to produce 100 gallons the refiner will need to receive $2.50, Point "B". See graph below:

If "Supply*" is our market supply curve, then we have to assume that at every price and quantity supplied combination on Supply* the cost of production will increase $.50 as well. The next series of graphs illustrates this. Look at each one carefully.

Now we have Points A, D, B and E that lie parallel to the LEFT of Supply*.  If we remove the clutter and connect the points, we find we have a new supply curve, Supply 1, that represents a DECREASE in Market Supply.

Only one of these points intersects with Demand*--Point "D".  We cannot forget our demand curve! In reaction to the increase in price, driven on the supply-side, the QUANTITY DEMANDED decreased.  We moved up and to the left on our demand curve, just as the Law of Demand would suggest. We have reach a new market equilibrium price of $2.25 and market quantity of 75 gallons.  Notice the market price did not increase by the full $.50 increase resource cost.  Because of relative elasticities of demand and supply (slopes of the two curves), the increase in cost of production is going to be jointly shared between producers and consumers.  In this case, the producer will absorb roughly $.25 and the consumer $.25 as well. 

As an alternative view to see how the new equilibrium's are reached, look at this graph:

Assume at our original equilibrium Point "A" the market does not fully recognize what went on. At the market price $2.00 the quantity supplied would be 50 gallons, Point "C", but the quantity demanded would still be 100, Point "A". The market is in disequilibrium where quantity supplied is LESS than quantity demanded. There is a SHORTAGE in the market of 50 gallons.  The price will be bid up--suppliers will increase the quantity supplied at higher prices (Point "C" to "D") and demanders will decrease the quantity demanded at higher prices (Point "A" to "C").  The suppliers and the demanders will each move along their respective curves until a new equilibrium price of $2.25 and market quantity of 75 are reached at Point "D". The market has now been cleared of the shortage of gasoline.

Stay tuned to your gas station of choice and monitor the prices...guessin' a change is a comin'....

We don't have a trade deficit with China anymore!! So why all the protectionist talk?

Well, it has not been entirely eliminated, but is it nearly as bad as it is portrayed? As with many (most?) economic statistics, Gross Domestic Product (GDP) accounting is very imperfect and often misleading measure of a country production of goods and services.  Finished goods are called "outputs" and all the components that go into making the finished good are called "inputs". GDP does not count the market value of inputs because they are not in their "final end-use condition"--they are just on their way into making a final good.  This is not really a problem if all the inputs are produced in the same country they are assembled.  The problem arises when the supply chain becomes globalized and the component parts come from multiple countries. Under traditional GDP measure, the country at the end of the production chain gets full "credit" for the market value of the good, even if they contribute very little to the overall value of the good.  The point of the article below is that this distorts the trade situation with China, which in large part is the final assembly point for lots of high-value inputs produced elsewhere.  The i-Phone is used as an example of how GDP accounting affects the trade balance with China.  The inputs are high-value production and the assembly is low-value.  However, the countries that produced the high value items get no GDP accounting credit for what they produce, ONLY the GDP debit for importing it and consuming it...Perhaps a new measure of GDP is in order to keep up with globalization???

WSJ: Not Really 'Made in China'

Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China's contribution is the last step—assembling and shipping the phones.


So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.



Need an excellent, concise explanation of why we have such a large trade imbalance with China? No, I did not write it, that is why it is excellent and concise...

Here is an excellent, concise explanation on one of the principle reasons we have such a large trade imbalance with China--a fixed versus flexible exchange rate regime.  It will go a long way in helping you understand the issues surrounding this hot political and economic issue...I particularly like the last paragraph---it says alot in just a few words:

""...Put more simply, China has exported goods and services to America, while America has exported ownership of its real and financial assets to China. This is a major area of concern for US policy makers, who would like to see a more balanced current account between the two countries, since it is the export of goods and services that creates jobs for American workers, not the sale of bonds, stocks and real estate."" ---Welkerswikinomics

I recommend you read the whole blog entry. It will be well worth your time!

Some jobs are saved, some may be created, and some are lost. So what is the net effect of protectionism? Yeah, I don't know either

If a country gets into a trade spat/war with another country, it is important to remember it is a two way street.  As with any fight, the other guy has weapons at his disposal too.  Frederic Bastiat reminds us from the grave, what is "seen" with protectionism are the jobs saved when the government intervenes (because the politicians make sure they tell us) to protect certain industries, but what is "unseen" (or at least murky) are the jobs that are lost or NEVER created by protectionist measures.  Some jobs are saved, some may be created, and some are lost.  So what is the net effect of protectionism? Yeah, I don't know either...Below is a list of states that will likely have causalities in the event of a tit-for-tat trade spat with China...

10 US States That Will Get Murdered If China Slows Its Imports(click on link to see the rest of the states)

#1 California

$9.7 billion of exports to China last year
175% growth over decade
--computers and electronics worth $2.9 billion

--waste and scrap worth $2.1 billion

--machinery (except electrical) worth $925 million

--transportation equipment worth $824 million

--chemicals worth $758 million

#2 Washington

$9.1 billion of exports to China last year

379% growth over decade

--transportation equipment worth $4.1 billion

--crop production worth $3.3 billion

--waste and scrap worth $423 million

--computers and electronics worth $265 million

--minerals and ores worth $134 million

#3 Texas

$8.9 billion of exports to China last year
513% growth over decade
--chemicals worth $3.6 billion

--computers and electronics worth $1.5 billion

--machinery (except electrical) worth $916 million

--crop production worth $703 million

--waste and scrap worth $565 million