GDP stats
Hi, I have a query/problem about China's stats and with all the stats that come out during Bull/"expansionary" phases of any economy. This was one of the phenomenons explained by John Kenneth Galbraith using the US as an example. It goes as follows. If I give you a loan /invest which you dont intend to repay/service at all but I dont know yet and you consume those funds (loot it, spend it on foolish schemes a la dot coms or whatever the prevailing madness is), the GDP calculation loyally records the consumption arising from the spend/loot but not the fact that I am going to lose all my money. If both get recorded the GDP of the country wouldnt budge an inch as it would be tantamount to a transfer of spending power from one person to another. In th example given above, my loss is only recorded in subsequent periods, if at all ( I am not too convinced that GDP measures the capital loss to investors at a later date for example for example do current US GDP calculation is measuring the invesment losses of households ! ). This loss which goes unrecorded in the economy was called the "bezzle" by Galbraith. "Bezzle" is usually at its peak during great expansionary runs when people who have put money in the hottest industries and new era ventures of that era and consider those as "investments" when actually a few years it turns out that money was consumed by the promoters/firms in one way or another and their investments were more in the nature of "transfers" ( as US citizens are now belatedly discovering for themselves). Thus the bezzle is finally revealed and the loss booked at least in the Investors books or mind ! This is true of a country with proper accounting systems like US. In the case of China, they are showing thw world a 8% or whatever GDP growth. Such a GDP growth, implies the big firms such as SOEs are making good profits ( profits are one component of GDP calculations) despite selling their stuff at throw away prices. If that were so, can some explain how there is a 45% NPA in their banking system. In a normal world, companies that make profits should be able to repay their debts and hence there should be no NPAs in the banking systems. Intuitively it appears therefore that China too has has a huge "bezzle" which is now revealing itself! In simple terms it means the SOEs and/or Banks books were cooked so that their accounts did not show this "bezzle". Either the SOEs didn't show all these debts on their books or they didnt recongize interest on their books or the banks dont show loan loss provisions on their books. Which then begs the question " What was the China's GDP growth rate of the past ? " To run some numbers if we decided that these 45% NPAs were built up in last 10 years that's a loss of almost 4-5% of the Banking systems every year. if we then take the $ amount of this 4-5% loss of Banking system every year and deduct it from from the GDP growth and retate the past GDP wont the numbers look suitably abbreviated ? Koushik > > > Opinion> > > -> > > Leader Page Articles> > > > > >> > > The economy: is China ahead?> > >> > >> > >> > > By Subramanian Swamy> > >> > >> > >> > > THERE IS no dearth of articles and opinions in the Indian media about> > > how well China is doing compared to India, and how much ahead the> > > Chinese economy is of India's. From effusive business delegations to> > > pontificating visiting Nobel Laureates, India has been lectured on how> > > to copy China for our own good.> > >> > > For the suffering Indians, further there is no accountability for such> > > opinion and advice. When after three decades of planning, it appeared in> > > retrospect that by not adopting the Chinese way, India was better off,> > > there was no way we could bring the intellectual freebooters to book and> > > ask for an explanation. For example, for years in the 1960s and 1970s,> > > Amartya Sen lectured to Indians during his short annual winter migration> > > to India on how well and how much better the Chinese authoritarian> > > socialist system was doing compared to India. There was no poverty,> > > inflation or unemployment in China, he informed us. China was growing at> > > 8 per cent per year while we were stuck with the Hindu rate of 3.5 per> > > cent. He pontificated that it was because we were not socialist the way> > > China was. When as a professor I challenged this view with statistics> > > and calculated that China was not doing better than India in every> > > respect, and that there was poverty, shortages and unemployment there!> > > too, the Left intellectual establishment was enraged. It became even> > > more horrified that I had held India's failure to adopt the market> > > system as the cause for us not overtaking the Chinese in economic> > > performance.> > >> > > Then, in 1980, came the Deng Xiaoping revolution in China. All that I> > > had estimated rigo
Re: Bubblemania
Should markets be priced assuming that nothing will go wrong ("random
shocks") or should markets be priced assuming that something will go wrong ?
If the answer is the latter, then shouldn't some margin of error provided
for the consequences of these "random shocks" ?
Are these events truly random. While each one of them seems random, over a
period none of them are really as random as they seem because country keep
going through assassinations, wars, currency crises, oil price shocks,
political crises, floods, droughts, hurricances, the "incompetents" reaching
the highest office etc etc. In the last 100 years hasn't each country seen
enough of these kind of "random shocks" so that we can no longer see them as
random.
IF that be so, shouldnt markets factor this in their pricing ?
Koushik
- Original Message -
From: "Bryan D Caplan" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Thursday, January 23, 2003 12:19 PM
Subject: Bubblemania
> Another annoying thing about the "I told you there was a bubble" people
> is that a good chunk of the stock market crash can be attributed to the
> 9/11 attacks (more specifically, indirect effects via policy changes).
> If ever there were a random shock, it was 9/11.
> --
> Prof. Bryan Caplan
>Department of Economics George Mason University
> http://www.bcaplan.com [EMAIL PROTECTED]
>
>
> Mr. Banks: Will you be good enough to explain all this?!
>
> Mary Poppins: First of all I would like to make one thing
>perfectly clear.
>
> Banks: Yes?
>
> Poppins: I never explain *anything*.
>
> *Mary Poppins*
>
>
Tax cuts and US citizen responses
Can anyone explain why ordinary Americans are not objecting to tax cuts (such as dividend tax cuts) that will only favour the top percentiles of the wealthy ? Koushik
Negative "wealth effect"
Has anybody seen any work done on negative wealth effect ie effect on consumption as wealth/networth goes down? Do positive and negative changes in wealth have the same magnitude effect on consumption ? Do these effects kick in with same lag i.e. does a drop in wealth lead to a lower consumption, (if any !) after a longer period than an increase in wealth would increase consumption? Koushik - Original Message - From: "Fred Foldvary" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Friday, January 10, 2003 8:51 AM Subject: Re: FW: History shows paths to market crashes, but lessons seem forgotten > > In a few years, this movement of baby boomer money into safe havens > should drive down both the price of stocks and the yield on bonds. > > ~Alypius Skinner > > No, for two reasons: > > 1) Many who retire will not sell all their stocks. > If they get an annuity, the stocks are just transferred to the insurance > company. The reality of p=r/i will in the long run prevail. > > 2) Stock markets are increasingly global, and if there is good value in US > stocks, Asians and Europeans will buy them. > > Fred Foldvary > > = > [EMAIL PROTECTED] > >
What is predatrory lending ?
What is predatory lending ? What are sub-prime rate loans ? What is the problem with lenders lending at low rates ? Koushik
Re: efficient markets ...
How many of you (of those in thes US) who believe in efficient markets are investing in US equities now and have invested in them in the last 2 years ? If your answer is NO then why are you not investing in US equities because if markets are efficient all bad news must be priced into the stock prices .. right ? Koushik > > If the markets are efficient, does it mean that you can buy at any time, > > using any methods and you will still make the same returns as somebody else > > who is smarter ? > > Koushik > > No. Because some assets and asset groups are riskier than others, and higher > risks get higher returns. Also, a diversified porfolio gets a higher return > relative to risk. > > Modern Portfolio Theory is a method by which one first selects a level or > risk or volatility, then allocates assets into categories to obtain the > highest return relative to that risk. The asset vehicles are index mutual > funds, since these have the lowest costs, and active picking seldom performs > better. > > Fred Foldvary > > = > [EMAIL PROTECTED] > >
efficient markets ...
If the markets are efficient, does it mean that you can buy at any time, using any methods and you will still make the same returns as somebody else who is smarter ? Koushik
Price elasticity of telecom demand
Has anyone come across any study on the price elasticity of telecom demand ? What has been the experience in countries where telecom rates dropped by as much as 70-80% in a short span ? __ Koushik Sekhar 91-22-3643451 [EMAIL PROTECTED] 5th floor Baug-e-Sara 16 Nepean Sea Road Mumbai 36 India
Re: Gandhi
Gandhi was a very good game theorist. Analysing only one statement is not enough to conclude that he was a bad game theorist. A lot of game theory is devoted to playing strong hands... hence it may be difficult to appreciate Gandhi's strategy (one for a weak hand). The British were very strong militarily so he worked on their mind and their finances and chose the right time to take them and get rid of them. His strategies to control the Congress party were also very effective and subtle. Many a time Gandhi is seen as a peaceful revolutionary but there are also many counterpoints to say that he was one of the most violent ones becasuse he set out to wreck the mind and the conscience of the opponent without touching him physically. One needs to define violence correctly before labelling Gandhi as being non violent ! A very good analysis of his strategies have been done by John Kenneth Galbraith in his book Anatomy of Power. Koushik - Original Message - From: jsamples To: [EMAIL PROTECTED] Sent: Thursday, December 13, 2001 8:19 PM Subject: RE: books "An eye for an eye and the whole world is blind" -Gandhi It strikes me that Gandhi was not a very good game theorist. John Samples Cato Institute
