I believe that the % of jobs in the construction industry is higher in some bubble areas such as SoCal (I hear around 1/3rd in SoCal).

Gross's analysis makes sense only if we were to assume that the bubble would gently deflate into a soft landing. However, each month this becomes less and less likely as frenzied speculation continues.

We know that a real estate bubble without fundamentals to back it up collapses with very messy results. See Japan for an example. A lot of new home purchases in some of the bubble areas are driven by the belief that housing prices always rise. A lot of new loans are IO or ARM loans. If interest rates rise, the results could be bad for a lot of new buyers, for homebuilders, for banks and others.

Can we all become millionaries selling houses to each other ?

Compared to the regulatory, demographic, and political uncertainties present in Europe, Japan, and yes, even China, the U.S. looks pretty good.

Dan, how do the short (and long) term interest rates on bonds issues by Europe, Japan, and China compare to the rates on their American counterparts?

IIRC, interest rates in the Eurozone are at historical lows --- considerably lower than what the US is now getting. Could the "popularity" of US issued securities be less a reflection on these "uncertainties", and simple the rational response of markets to the availability of higher interest rates in the US (especially considering that these notes are marketable 24/7... its not like anyone has to actually hold on to a 10 year note for ten years --- if interest rates go up, they can sell ASAP and cut their losses....)

I don't understand how China's economy will continue to grow, with no free speech. I picked up on the Times story, as well, and blogged about it here.

Incidentally, in a sort of support of my question, the Wall St. Journal has an editorial in today's edition in which it explains that China has banned an edition of its sister publication, the Far Eastern Economic Review, because said paper published a story about Mao's legacy.

The link to that editorial is in my blog post, FWIW.

Good article. I agree with what you said. Yes...we have a defecit problem. Yes as a nation our debt it way too high but, as you say, everything is relative to another country.

There are other things working in this economy that could make many of our economic woes completely irrelevant. One is the rising productivity figures. Biotechnology and nanotechnology could revolutionize the way we live in a relatively short period of time.

Here's one small example of how technology will make something better.

Part of the expense for seniors owning a home is property taxes...but these taxes are only part of the expense. Another expense is often something as mundane as yearly lawn care. Robotic lawnmowers have hit the market. They are expensive at present but their cost will come down. When they do, seniors will no longer have to fork over $40-$80 a week to have someone cut their grass. This will make owning a home less costly.

Now multiply this invention by a thousand others and you can begin to see how technology and increasing productivity will make all our lives better inspite of a rising defecit.

The point is that there are good things happening to this economy but they are not getting the attention that they should.

It can be risky to rely on the official statistics distinguishing official from private capital inflows. The foreign central banks could be routing their purchases through hedge funds or other entities to disguise their strategy. Remember, Bank of Italy had money with LTCM so this is not a new strategy for the central banks.

No doubt that official inflows were a bit smaller than in q4. in q4 emerging economies added something like $200 b to their reserves, china alone almost added $100 b to its reserves. the dollar/ euro move added to dollar reserve accumulation, but even adjusting for that, the pace was exceptionally strong.

I disagree a bit with uncritically accepting the data for q1 tho. we know the data was influenced by heavy norwegian sales in march, sales that were reversed in large part in april. and we know that only a small part of China's known q1 reserve increase (roughly $50b, and in reality a bit more when adjustments are made for valuation changes from the euro/ $) shows up in the US reserve data.

no doubt private inflows have picked up -- but i personally doubt central bank inflows have fallen by quite as much as the official data suggests. there is a growing gap between reported inflows and the known increase in reserve holdings -- particularly for china. maybe more diversification that we know is happening, but maybe some central bank purchases are not being picked up in the data. that, and purchases of us assets done through the offshore accounts of saudi princes count as private inflows ...

relatively speaking, private flows clearly have become more important, but i doubt the dropoff is quite as large as the official q1 data suggests

I suspect --do but not yet have the data to prove --that much of the money flowing into US bonds in past two months (and driving down rates) was money moving out of Euro investments following the rejection of the EU Constitution by French voters. Imagine the financial turmoil if our voters voted for a Constitutional amendment dissolving the Federal government and putting us back under the Articles of Confederation with power largely resting in the state governments.

Actually, I could make a strong argument that that would be a good thing --especially given the huge federal debt, Congresses past behavior, and recent Supreme Court decisions. But there's no denying that it would make the CEOs wet their pants.

China has plenty of free speech, just not about sacred cows. Like being a reporter for the old SFO Chron: you could write anything you damn pleased as long as you didn't step on the (actually rather few) management toes. As Thomas Friedman said, in China you can do/say what you want as long as you don't (a) have more than one baby; or (b) diss the party. And they're softening on (a).

Eh, the excerpt states a $195 billion current account deficit is equivalent to 6.4% iof the U.S. GDP. But our GDP is in the neighborhood of $12 trillion, meaning the 6.4% figure is waaaaay off. A dollar amount representing that particular percentage would be around $770 billion, so either the current account deficit is far better than we had believed relative to the GDP, or someone simply didn't do the math correctly and the dollar figure is far worse.

Ben,

$195 billion is the deficit for first three months and it should be compared with the GDP for first three months (not the entire year). GDP for first three months is roughly a quarter of annual GDP and would be in the neighborhood of $3 trillion (one quarter of $12 trillion).

"As Thomas Friedman said, in China you can do/say what you want as long as you don't (a) have more than one baby; or (b) diss the party. And they're softening on (a)."

Already have-- in fact, they did long ago, back when the One child policy was first initated (1979). People, even educated people who (for good reasons) oppose the policy massively screw up in their understanding of how the policy is actually implemented. It's never, even been implemented to limit all families to having one child (although some overzealous apparatchiks did interpret this rigidly enough to become genuine intrusive a**holes toward families with multiple kids).

The one-child policy has never applied to rural China, and in fact you'll still regularly find 7, 8, 9 kids in those families. An old buddy of mine who traveled to China quipped that in China's agricultural regions, it's more of a "6-child policy." As for urban Chinese there is indeed more promotion of smaller families, but 1. urban Chinese tend to opt for smaller families anyway, and 2. there about 101 ways to get around the policy besides paying a fine to the Chinese authorities. Chinese couples just send their kids (especially daughters) to friends or relatives temporarily, as the official bureaucrats come traipsing by. Others take well-timed "vacations" into other cities. Others make sure to have a nice gift, maybe with a tad of alcohol, ready to bribe the census-takers (who are usually happy to comply). The bean-counters are blessed with enough corruption that many actually encourage multiple kids to pocket some fine money for themselves. Members of the CCP, military, wealthy merchants-- all of them have outright exceptions to the policy.

The result is that official Chinese statistics massively and embarrassingly underestimate the actual number of kids that Chinese have, in fact at Chinese demographic conferences, they regularly use a different data set from the official stats. Vaccine makers always order 25-30% more vaccine than would be expected from the official numbers, since they know that the published numbers are a product of systematic underestimation across the board. China actually has closer to 1.4 billion rather than 1.3 billion people, and its birth rate is around 2.2 per couple, according to the most exhaustive statistics. Happily, many of the "missing kids" who don't appear in the official statistics are girls, which means that the gender imbalance isn't nearly as bad as official stats make it out to be. The imbalance is still there, but it seems to be largely remedied by brides from North Korea, Vietnam and the Philippines. (China is already a massive net immigration country.)

All this being said, the one-child policy is still a corrupt, stupid and intrusive policy that's allowed many officials to act with inexcusable brutality to Chinese people, and it should be roundly opposed. But it hasn't had anything remotely like the effects that people often think, something that both its supporters and opponents fail to appreciate. In fact, all of China's reduction in fertility since the 1960s occurred in the 1970s before the one-child policy came into effect, when the government began to smartly emphasize better education, freely available contraception and social safety nets. The government likes to claim that the one-child policy reduced China's population by hundreds of millions, when in fact the numbers show that it had absolutely no effect at all-- the entire trendline can be linearly extrapolated from the demographic transition of the early 1970s, before the policy came into effect. In fact, the enactment of the one-child policy has paradoxically caused a small bump in China's population over what it would have been, since the government became distracted from the voluntary measures and social safety nets that actually work.

China needs to democratize, period, but this seems to be happening by force of sheer economic weight. The growing middle class doesn't give two figs about CCP rhetoric, and they don't depend on the central government for their own success-- they're self-made. Even the CCP has publicly acknowledged that some form of limited democracy is in the near future, probably within a decade, and they're seeking some sort of Japan- or Mexico-style (or, for that matter, Taiwan-style) transition republic initially dominated by one powerful party, but with opposition parties increasingly asserting themselves. Interestingly, Chinese scholars are looking particularly to India for a template in running such a large democracy, expanding out from local elections to national ones. One of the many things that India has contributed to civilization-- helping to inspire enough confidence that even the largest nations, despite the inevitable corruption and flaws, can pull of a reasonable semblance of democratic government.

"As Thomas Friedman said, in China you can do/say what you want as long as you don't (a) have more than one baby; or (b) diss the party. And they're softening on (a)."

Already have-- in fact, they did long ago, back when the One child policy was first initated (1979). People, even educated people who (for good reasons) oppose the policy massively screw up in their understanding of how the policy is actually implemented. It's never, even been implemented to limit all families to having one child (although some overzealous apparatchiks did interpret this rigidly enough to become genuine intrusive a**holes toward families with multiple kids).

The one-child policy has never applied to rural China, and in fact you'll still regularly find 7, 8, 9 kids in those families. An old buddy of mine who traveled to China quipped that in China's agricultural regions, it's more of a "6-child policy." As for urban Chinese there is indeed more promotion of smaller families, but 1. urban Chinese tend to opt for smaller families anyway, and 2. there about 101 ways to get around the policy besides paying a fine to the Chinese authorities. Chinese couples just send their kids (especially daughters) to friends or relatives temporarily, as the official bureaucrats come traipsing by. Others take well-timed "vacations" into other cities. Others make sure to have a nice gift, maybe with a tad of alcohol, ready to bribe the census-takers (who are usually happy to comply). The bean-counters are blessed with enough corruption that many actually encourage multiple kids to pocket some fine money for themselves. Members of the CCP, military, wealthy merchants-- all of them have outright exceptions to the policy.

The result is that official Chinese statistics massively and embarrassingly underestimate the actual number of kids that Chinese have, in fact at Chinese demographic conferences, they regularly use a different data set from the official stats. Vaccine makers always order 25-30% more vaccine than would be expected from the official numbers, since they know that the published numbers are a product of systematic underestimation across the board. China actually has closer to 1.4 billion rather than 1.3 billion people, and its birth rate is around 2.2 per couple, according to the most exhaustive statistics. Happily, many of the "missing kids" who don't appear in the official statistics are girls, which means that the gender imbalance isn't nearly as bad as official stats make it out to be. The imbalance is still there, but it seems to be largely remedied by brides from North Korea, Vietnam and the Philippines. (China is already a massive net immigration country.)

All this being said, the one-child policy is still a corrupt, stupid and intrusive policy that's allowed many officials to act with inexcusable brutality to Chinese people, and it should be roundly opposed. But it hasn't had anything remotely like the effects that people often think, something that both its supporters and opponents fail to appreciate. In fact, all of China's reduction in fertility since the 1960s occurred in the 1970s before the one-child policy came into effect, when the government began to smartly emphasize better education, freely available contraception and social safety nets. The government likes to claim that the one-child policy reduced China's population by hundreds of millions, when in fact the numbers show that it had absolutely no effect at all-- the entire trendline can be linearly extrapolated from the demographic transition of the early 1970s, before the policy came into effect. In fact, the enactment of the one-child policy has paradoxically caused a small bump in China's population over what it would have been, since the government became distracted from the voluntary measures and social safety nets that actually work.

China needs to democratize, period, but this seems to be happening by force of sheer economic weight. The growing middle class doesn't give two figs about CCP rhetoric, and they don't depend on the central government for their own success-- they're self-made. Even the CCP has publicly acknowledged that some form of limited democracy is in the near future, probably within a decade, and they're seeking some sort of Japan- or Mexico-style (or, for that matter, Taiwan-style) transition republic initially dominated by one powerful party, but with opposition parties increasingly asserting themselves. Interestingly, Chinese scholars are looking particularly to India for a template in running such a large democracy, expanding out from local elections to national ones. One of the many things that India has contributed to civilization-- helping to inspire enough confidence that even the largest nations, despite the inevitable corruption and flaws, can pull of a reasonable semblance of democratic government.

"As Thomas Friedman said, in China you can do/say what you want as long as you don't (a) have more than one baby; or (b) diss the party. And they're softening on (a)."

Already have-- in fact, they did long ago, back when the One child policy was first initated (1979). People, even educated people who (for good reasons) oppose the policy massively screw up in their understanding of how the policy is actually implemented. It's never, even been implemented to limit all families to having one child (although some overzealous apparatchiks did interpret this rigidly enough to become genuine intrusive a**holes toward families with multiple kids).

The one-child policy has never applied to rural China, and in fact you'll still regularly find 7, 8, 9 kids in those families. An old buddy of mine who traveled to China quipped that in China's agricultural regions, it's more of a "6-child policy." As for urban Chinese there is indeed more promotion of smaller families, but 1. urban Chinese tend to opt for smaller families anyway, and 2. there about 101 ways to get around the policy besides paying a fine to the Chinese authorities. Chinese couples just send their kids (especially daughters) to friends or relatives temporarily, as the official bureaucrats come traipsing by. Others take well-timed "vacations" into other cities. Others make sure to have a nice gift, maybe with a tad of alcohol, ready to bribe the census-takers (who are usually happy to comply). The bean-counters are blessed with enough corruption that many actually encourage multiple kids to pocket some fine money for themselves. Members of the CCP, military, wealthy merchants-- all of them have outright exceptions to the policy.

The result is that official Chinese statistics massively and embarrassingly underestimate the actual number of kids that Chinese have, in fact at Chinese demographic conferences, they regularly use a different data set from the official stats. Vaccine makers always order 25-30% more vaccine than would be expected from the official numbers, since they know that the published numbers are a product of systematic underestimation across the board. China actually has closer to 1.4 billion rather than 1.3 billion people, and its birth rate is around 2.2 per couple, according to the most exhaustive statistics. Happily, many of the "missing kids" who don't appear in the official statistics are girls, which means that the gender imbalance isn't nearly as bad as official stats make it out to be. The imbalance is still there, but it seems to be largely remedied by brides from North Korea, Vietnam and the Philippines. (China is already a massive net immigration country.)

All this being said, the one-child policy is still a corrupt, stupid and intrusive policy that's allowed many officials to act with inexcusable brutality to Chinese people, and it should be roundly opposed. But it hasn't had anything remotely like the effects that people often think, something that both its supporters and opponents fail to appreciate. In fact, all of China's reduction in fertility since the 1960s occurred in the 1970s before the one-child policy came into effect, when the government began to smartly emphasize better education, freely available contraception and social safety nets. The government likes to claim that the one-child policy reduced China's population by hundreds of millions, when in fact the numbers show that it had absolutely no effect at all-- the entire trendline can be linearly extrapolated from the demographic transition of the early 1970s, before the policy came into effect. In fact, the enactment of the one-child policy has paradoxically caused a small bump in China's population over what it would have been, since the government became distracted from the voluntary measures and social safety nets that actually work.

China needs to democratize, period, but this seems to be happening by force of sheer economic weight. The growing middle class doesn't give two figs about CCP rhetoric, and they don't depend on the central government for their own success-- they're self-made. Even the CCP has publicly acknowledged that some form of limited democracy is in the near future, probably within a decade, and they're seeking some sort of Japan- or Mexico-style (or, for that matter, Taiwan-style) transition republic initially dominated by one powerful party, but with opposition parties increasingly asserting themselves. Interestingly, Chinese scholars are looking particularly to India for a template in running such a large democracy, expanding out from local elections to national ones. One of the many things that India has contributed to civilization-- helping to inspire enough confidence that even the largest nations, despite the inevitable corruption and flaws, can pull of a reasonable semblance of democratic government.

Ugh-- sorry for the triple post. Got this internal server error message and then it resent the post a couple times. Grr... just like on Haloscan.

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