China and the US Debt

China and the United States: The Bonds of Debt, by Donald D. Hester
Professor of Economics, Emeritus
The University of Wisconsin – Madison

Abstract
This paper explores the large and growing indebtedness of the United States to the People’s Republic of China. Beginning with the 1971 reestablishment of diplomatic relations between the two countries, international trade between them expanded but was very modest until the mid 1980s. At that point, China under Deng Xiaoping adopted a variation on the successful export strategy that had been pioneered by Japan and the smaller Asian “tigers”. The first section of the paper analyzes the distinctive features of this variation and provides tabular information about trade and foreign exchange balances and the exchange rate between the dollar and yuan. The second section proposes a crude game-theoretic discussion of what each country might gain and lose from their large growing financial entanglement in the short and long run. The third section is a discussion of the limits of the imbalance and how U.S. debts to and Chinese claims on other countries impact the relation between the P.R.C. and the U.S. The concluding section focuses on the paradox of a poor and rapidly growing authoritarian country financing an undisciplined and relatively declining democratic superpower.

Anniversary of Chille's

We are coming up on the 1-year anniversary of the single most commented, most cited, most read, and most downloaded single post in the history of KPC.

It was.... "The Worst Mexican Restaurant on Earth." Enjoy.

Financial Regulation Will Help! Not....

So, now the government is going to fix the financial industry, because markets don't work?

Look, the genesis of the financial crisis was a trap, set by federal government offiicials and regulators.

It was a trap baited with four kinds of tasty cheese:
1. Down payment subsidies, encouraging people to buy houses more expensive than they could actually afford
2. Changes in the definitions of "conforming" loans, with much looser requirements for packaging and reselling by Fannie Mae and Freddy Mac.
3. Artificially low interest rates that served to finance an asset bubble in housing and commercial real estate.
4. An implicit guarantee, made by all of the last four Treasury secretaries, that any decline in housing prices would be treated as a "market failure," prompting government action to prop up prices.

While it is clearly true that private investors behaved both greedily and in some
cases foolishly, these four factors ensured that the financial disaster would be
larger, and last longer, much longer, than would have happened if government had
just left housing markets alone.

Given the temptations to meddle, and given the inability of government officials to
obtain the accurate information that unfettered markets provide through prices,
there is no reason to believe that these new attempts at regulation will turn
out any better than the old ones.

In short, given that government had a substantial role in causing the crisis through
misguided regulation, there is no reason to believe that the new regulatory policies will help.

YYM in Erg Contest

A video of the YYM owning an erg contest. (He's the second from the front, going left to right) He had his best time ever, 6:42 mins for a 2k race. And won his heat.

Information and Portion Size

When Healthy Food Makes You Hungry

Stacey Finkelstein & Ayelet Fishbach
Journal of Consumer Research, forthcoming

Abstract: Do subtle cues for imposed healthy eating make consumers hungry? Imposed healthy eating signals that the health goal was sufficiently met, and thus it increases the strength of the conflicting motive to fulfill one's appetite. Accordingly, consumers asked to sample an item framed as healthy later reported being hungrier and consumed more food than those who sampled the same item framed as tasty or those who did not eat at all. These effects of healthy eating depend on the consumer's perception that healthy eating is mandatory; therefore, only imposed healthy eating made consumers hungrier, whereas freely choosing to eat healthy did not increase hunger.

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The largest Last Supper: Depictions of food portions and plate size
increased over the millennium

B. Wansink & C. S. Wansink
International Journal of Obesity, forthcoming

Abstract: Portion sizes of foods have been noticably increasing in recent years, but when did this trend begin? If art imitates life and if food portions have been generally increasing with time, we might expect this trend to be reflected in paintings that depict food. Perhaps the most commonly painted meal has been that of Jesus Christ's Last Supper, chronicled in the New Testament of the Bible. A CAD-CAM analysis of the relative food-to-head ratio in 52 representative paintings of the Last Supper showed that the relative sizes of the main dish (entree) (r=0.52, P=0.002), bread (r=0.30, P=0.04), and plates (r=0.46, P=0.02) have linearly increased over the past millennium.
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Promoting Healthy Choices: Information versus Convenience

Jessica Wisdom, Julie Downs & George Loewenstein
American Economic Journal: Applied Economics, April 2010, Pages 164-178

Abstract: Success in slowing obesity trends would benefit from policies aimed at reducing calorie consumption. In a field experiment at a fast-food sandwich chain, we address the effects of providing calorie information, mimicking recent legislation, and test an alternative approach that makes ordering healthier slightly more convenient. We find that calorie information reduces calorie intake. Providing a daily calorie target does as well, but only for non-overweight individuals. Making healthy choices convenient reduces intake when the intervention is strong. However, a milder implementation reduces sandwich calories, but does not reduce total calories due to compensatory effects on side orders and drinks.

(Nod to Kevin L, who always has the skinny)

The EYM Gets His Tooth Back!

A year ago, from Germany, I told the story of how the EYM, dancing on a chair, tried to break that chair with his face. An on-looker described the resulting sound of tooth fragments hitting the floor as "like someone was playing Yahtzee."

Here is the EYM recently.
Here is the EYM after the dentist performed the adatoothtome. (Three operations, total).
He looks good! Of course, being the EYM, he then promptly got a haircut, apparently from someone using a weedwhacker.

Appholes

John Stewart on Apple. Heh.

(Nod to Angry Alex)

Tyler Out Front

So, Tyler had been fussing that the hotel doesn't sell the NYTimes. And, it was raining and blowing pretty hard.

But I took a break and walked down to Starbucks, and they had the NYT. I picked him up a copy.

And then came back up here to my room to write about immigration (article in today's NYT, btw).

And THEN I notice that Tyler had already asked the right question. Now I don't have to write that post. Dude, we're even.

Will I be able to play the piano?

Two young boys walked into a pharmacy one day, picked out a box of tampons and
hurried to the checkout counter.

The man at the counter asked the older boy, "Son, how old are you?"

"Eight," the boy replied.

The man continued, "Do you know what these are used for?"

The boy replied, "not exactly, but they aren't for me. They're for him. He's my brother. He's four. We saw on TV that if you use these you can swim and ride a bike. Right now, he can't do either."

Reminds me of the 1940s era joke: GI gets his hands burned in an explosion in battle in Italy. He wakes up, and sees the doctor examining him. "Doc! DOC! Will I be able to play the piano? TELL ME that I will be able to play the piano!"

The doctor looks carefully. The burns aren't that bad, and there is no bone damage. "You will be able to play the piano beautifully, son."

GI: "Oh, you're a genius, Doc. I never could play before."

Durham Bulls

Took two of my friends from the Erlangen exchange program to a Durham Bulls game.

Here are Tim and Linus biting big ones.

Not sure they really "got" baseball, because it is a complicated game. But the bier and wurst were easily recognized.