With Steely Resolve

According to this article in the FT

China is underreporting the amount of steel it makes by about 40m tonnes a year – roughly the amount made by Germany – according to a new analysis that provides insights into the recent high prices for the main raw material used by the world steel industry.

Now, Chinese statistical discrepancies are nothing new, nor should they be unexpected. Often the goals of any kind of reporting don’t coincide with existing incentives of those who need to make the reports. This seems to be the case in the steel industry as well.

Behind the underreporting, according to Peter Fish, Meps managing director, is that plants that Beijing would like to shut down because they are not economical and produce too much pollution have stayed open to meet local demand.

One could argue that this is just another example of why economic policy should be made by the market and not the state, but the case could just as easily be made is that both monitoring and enforcement are lax on the local level. In the end, what is certain is that such discrepancies, rampant as they are in China (Local debt is another sector where this is a problem), will lead to misallocations on either the micro or macro level and the resulting imbalances will need to be rectified. Whether this will happen as a large systemic shock or a policy led soft landing remains to be seen.


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Living off the fat of the land

As Tyler Cowen puts it, there really are markets in everything.

She’s the fattest person in the world to have a baby and gets paid by her online fans to eat. Some even pay for food to be delivered to her door.

Mother-of-two from Ohio in the US, Donna Simpson, 44, has carved out a niche online where men who like large women can watch her eat – at a price.

Putting aside the health arguments involved in incentivizing someone to eat unhealthily, which strike me as reminiscent of what is happening with Man vs. Food, this seems to me to be just one example, if a highly caloric one, of how he internet contributes to economic growth.
I can’t imagine that prior to the world being as plugged in as it is now, those with an attraction to adipose found it very easy to satisfy their needs. Instead, it was more than likely a demand that for the most part went unfulfilled. Now, the world is one fatty oyster for voyeurs of all stripes.
The internet links these “niche” consumers with the appropriate producers. The anonymity of it all also helps. Any stigma that may be associated with what may be considered deviant demand is lessened if not eliminated by anonymity. The problem, of course, is that the efficiency gains of this kind are not limited to the harmless. Other “niche” demands can be also met and protected through the use of the same technological infrastructure: terrorism and even more harmful sexual deviance are also facilitated, which begs the question of whether our flat world has allowed for increases of such deviance.
It is certain that people that mean harm don’t need the internet to get things done, but if we are going to laud the system for its ability to facilitate political change, we should also look deeply into how some change it facilitates may not be something that most of us want.

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Social unrest gets off the rails

Well, it was inevitable that there would be some sort of malfunction/delay on the new Beijing Shanghai high speed rail, but considering the scale and speed of the construction, this delay doesn’t seem all that bad.

China’s official Xinhua News Agency reported late last night, in both Chinese and English releases, that the G151 train on the country’s brand-new Beijing-Shanghai high-speed railway suffered a malfunction yesterday that resulted in a delay of “more than an hour.” On the basis of reports in social media, however, news websites (including Shanghai’s Xinmin Online), reported that the delay was two hours. Xinhua reported that “this malfunction was principally caused by thunderstorms.”

The magnitude of this delay should, I think, also be taken in the context of the alternatives available for Chinese domestic transport. Airlines are routinely, and I mean ROUTINELY delayed and even canceled for reasons significantly less extreme than a thunderstorm and buses, so too are the normal train lines. Therefore, some of the reactions seem a bit extreme. In particular, I find it odd that a delay would need to be accompanied by concerns for safety, which doesn’t necessarily follow from such a delay. Some of the comments are as follows:

“And they call it the safest rail in the world,” said user “turan kongjian” (突然空闲).

“The facts clearly show that the talk of being the safest is just hot air,” said user “yinbao xiaoxiong” (尹抱小熊), responding to another user who wrote: “Strange! This should be investigated! We should hold those responsible to account according to the law!”

“I’m sure this is just the beginning,” said user “jackie51″.

“How tragic is fast-food-style China!” bemoaned “yiguogudu_ye.”

“Taking an airplane is a lot safer. I’d rather wait in the airport, at least it’s safe,” said user “cha’ersicao” (查尔斯曹).

In the end, more than specific safety concerns for high speed rail, this sentiment is emblematic of a broader lack of trust for government policies generally. Regardless of the project, be it the large scale infrastructure development projects like the Three Gorges Dam or the aforementioned high speed rail or even the local housing development projects and the associated demolitions, people are pessimistic of the intent and the implementation of these projects.

Consequently, the Chinese government is in a bit of a Catch-22 situation: Because of the financial crisis, government policy is necessary, but at the same time it lacks legitimacy. Effectively implementing the kind of comprehensive policy China needs now will inevitably be difficult without the people buying into it. Handling this problem without political liberalization is going to be a difficult task.

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Recessions and Vice

The impact of a recession on the economics of the illegal drug industry should seem obvious. People have less money, so they spend less on drugs. As a recent Irish Time article notes,

After 15 years of huge growth the trade has crashed, alongside the wider economy. Stockbroking firms don’t report on the condition of the cocaine business, but crime data from a number of sources reveal that the drug trade has contracted significantly in the recession and is now just as distressed as the housing market.

The value of drugs seized in 2010 was the lowest for 15 years, at €30.9 million, indicating a return to the levels of activity common before the boom. Long term, the drug-seizure trend has mirrored the wider economy: after rising steadily from the mid-1990s, it peaked in 2007 and 2008, with Garda seizures of more than €100 million worth of drugs in each of those years, before declining rapidly.

But this seems to fly in the face of conventional wisdom regarding drug use, which fears the ability of drugs to create their own demand. A fear which is used to justify the massive amounts of money spent in an attempt to constrain supply. It shouldn’t matter if people have less money, addiction should be the best guarantee for stable sales. A view which better explains the prevalence of drug use among the poor.

I wonder if what is happening in Ireland is merely a structural adjustment towards cheaper products–more meth than marijuana. It would make sense that drug gangs, used to a more affluent recreational drug use market would see declining sales as they inevitably leverage their existing sales infrastructure to market cheaper products.

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Bride Outsourcing

Another CS Monitor story. 

South Korea has been grappling with shifting demographics that have left many middle-aged men – particularly in the countryside – cut adrift amid a potential-wife deficit in a country that prizes the rosy picture of marriage.

As young – and now assertive – Korean women flock from their hometowns for careers in the big cities, the men left behind are increasingly looking overseas for brides. That has meant an influx from poorer Asian nations such as Vietnam, the Philippines, Cambodia, and Mongolia.

But this is more than just a mail-order bride example of increased regional economic integration. Oddly, the article blames the abuse of recent immigrant brides to a lack of follow-up by the “agencies” that brought them.

Part of the problem that has led to these fatalities, say experts, is a lack of oversight on agencies who locate foreign brides for Korean men.

It doesn’t, however, get into what incentives such agencies might have for stricter oversight and oddly, it doesn’t seem to advocate for increased government supervision. Should government always let the Market run so freely?

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Female Body Inspector: If only the FBI handled airport security screening

The CS Monitor has a hilarious article on airport security, which unfortunately will only add fuel to the fire of TSA paranoia.

TSA warning describes surgically implanted bombs

TSA warning: If terrorists hide bombs inside their bodies, current screening measures may be useless.


While I don’t want to discount the threat of terrorism or the willingness and ability of terrorists to innovate, the way that this new threat is described is amazing in the way that it seems to clearly be based on very tenuous speculation.

Surgery to implant explosives could be done a couple of days before a planned attack, said James Crippin, an explosives expert in Colorado. In order for it to work, there would need to be a detonation device, and it’s conceivable that if the explosive was implanted in a woman’s breast, the detonator could be underneath the breast so that all the operative would have to do is press downward, Crippin said.

Huh? Or, under their arm or in the fat folds of the obese. . . Now, I’m not an expert in explosives, but it seems to me that all it takes to be a airport security expert is the ability to extrapolate dangerous situations from broad premises. But don’t worry, the TSA has also pointed out ways to remain effectively vigilant.

The memo offered possible indicators of surgically implanted contraband, including a distended stomach or other unusual bulging, and visible physical discomfort from a pat-down.

So, just make sure you don’t have a hernia or are turned on by full-body searches and you should be ok. We should, however, remember that terrorists are a crafty lot.

White House spokesman Jay Carney said U.S. counterterrorism efforts must evolve as terror groups publicly indicate their interest in finding ways to conceal explosives.

“The idea that terrorists have been looking for other ways to circumvent security measures to target aircraft is not at all surprising,” Carney said. . .

The al-Qaida offshoot in Yemen has emerged as the most inventive terror organization these days and has been behind two plots that nearly brought down planes over the U.S. The group, known as al-Qaida in the Arabian Peninsula, or AQAP, was behind the Christmas Day attack in 2009 when a Nigerian hid a bomb in his underpants and nearly brought down an airliner over Detroit.

Yes, let’s not forget that we are dealing with the geniuses who let a crazy kid on a plane who ended up setting his pants on fire.


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Why Naomi Wolf is annoying


This article is another reason that I don’t much like Naomi Klein. The kind of self-serving, pseudo-scientific generalizations she makes is all the more frustrating for the number of people who buy into it. I guess in a way she’s the left-ist version of Glenn Beck. The only thing left is for her to get her own talk show on Fox.

More  here on why what she says should be taken with the Bonneville Salt Flats. 



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