Category Archives: political economy

An Illustration

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A businessman in the People’s Republic of China, Ren Zhiqiang—who also is a member of the Communist Party of China—has been for some time an outspoken critic of PRC President Xi Jinping’s handling of the nation’s COVID-19 epidemic, a mishandling that allowed an early infection to blow out of control within the PRC and to become a global pandemic.

Outspoken critic: among other things, Ren wrote a widely disseminated essay that took issue with a 23 Feb speech by Xi. He wrote of a

“crisis of governance” within China’s Communist Party and blamed restrictions on freedom of speech and the press for slowing down the response to combat the novel coronavirus, thereby worsening the outbreak.

And

…after analyzing the President’s [Xi’s] speech he “saw not an emperor standing there exhibiting his ‘new clothes,’ but a clown stripped naked who insisted on continuing being emperor[.]”

Then Ren posted on Weibo

When does the people’s government turn into the party’s government? … Don’t waste taxpayers’ money on things that do not provide them with services.

Then his post was deleted, his Weibo account blocked. Ren also has been put on “probation” from the CPC.

And now he’s gone missing, making his point beautifully.

Some Coronavirus Perspective

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To put some perspective on national coronavirus infection levels, I’ve picked out some nations that have been in the news lately.  Coronavirus cases are drawn from Johns Hopkins University as of 14 March, and the population data are from Wikipedia. The per capita normalization is from third grade arithmetic.

I’ve emphasized one nation of particular interest.

Population Coronavirus Cases Per Capita Cases (per 10,000) Deaths Per Cent Deaths per Case
People’s Republic of China 1,427,647,786 80,976 0.56720 3,189 3.93820%
Germany 83,149,300 3,758 0.45196 8 0.21288%
US  328,239,523 2,175 0.06626 47 2.16092%
Japan 126,150,000 725 0.05747 21 2.89655%
Republic of Korea 51,709,098 8,086 1.56375 72 0.89043%
Italy 60,317,546 17,660 2.92784 1,266 7.16874%
Republic of China 23,780,452 53 0.02229 1 1.88679%
Iran 83,183,741 12,729 1.53023 611 4.80006%

Biden and the Sanders Supporters

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In the end game of the Progressive-Democratic Party’s Presidential primary contest—and, yes, at this stage, Party is down to three contestants, with Party’s elite choosing to freeze Congresswoman Tulsi Gabbard (D, HI) out of the contest, she being too willing to speak freely and honestly and too far behind for her axis of approach to counter Senator Bernie Sanders’ (I, VT), the end game is on us—the question arises whether Joe Biden, front runner, can win over Sanders’ supporters, who are every bit as ardent and critically large in number as the NLMSM makes them out to be. Those supporters, after all, will be critical in the general election if Biden is to be electable in the general election.

Here are a couple of critical considerations for that question.

Mr Biden’s agenda is indistinguishable from Mrs Clinton’s and thus anathema to the left Democratic base.

And

he [Biden] has to…persuade them that he’ll bring them to the table and push for a substantial part of their agenda.

This explicit promise, especially, illustrates how strongly Biden stands foursquare against everything that Sanders and his supporters stand for:

Mr Biden recently told MSNBC that he would veto a Medicare for All bill if it crossed his desk.

He can’t, though, move to bring Sanders’ supporters across that gaping chasm. If he makes a credible push for the Left’s agenda, for Sanders’ agenda, he’ll betray his own supporters. That betrayal will demonstrate to both his own supporters and Sanders’ that he cannot be trusted. More broadly, that betrayal will demonstrate to all voters in the general election that he cannot be trusted: he’ll just change his policy positions according to what benefits him personally in the moment.

That stands in sharp contrast with Sanders who, regardless of what anyone might think of his positions and policies, has remained steadfast in those positions and policies, regardless of any fickle political winds.

We’ll get a clue, maybe, in tomorrow’s Progressive-Democratic Party debate in DC.

Currency Swaps and the Federal Reserve’s Role

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The currency swaps, the foreign exchange swaps, discussed here are a lifeline our Federal Reserve Bank system extended to other nations during the Panic of 2008.  The arrangements let foreign central banks exchange their domestic currencies for US dollars in order to increase their domestic liquidity in addition to merely printing more domestic currency units.

The Wall Street Journal thinks the Fed should extend such swaps to more national entities than the few with which we still have such arrangements, under the guise of “that’s what the Fed’s role is.”

I have a couple thoughts on this.

…some folks to forget that financial panics happen, and that’s one reason the Federal Reserve exists.

No, it isn’t. The Fed exists to maintain price stability and full employment. Full stop.

Pricing instabilities might lead into financial panics, and vice versa, but if the Fed sticks to its role—working to maintain/restore price stability rather than reacting to panic itself—the panic will subside in result.

It [the Fed] could extend these swap lines to other countries with markets in tumult like Australia, South Korea, China, Taiwan, and Hong Kong.

It might—even likely would—be beneficial to extend swap lines to the Republic of China, along with most of the others named. It will do us little good at all to help out an enemy, the People’s Republic of China, for all that we’re presently (too much) entangled with the PRC’s economy. On the contrary, the drag the PRC’s economy represents on our own and those of other nations around the world illustrates clearly the utility of reducing that entanglement and increasing the flexibility of business’ supply chains.

A Speculation on Oil

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I have one of my own, against the backdrop of the oil production and price war just begun between Saudi Arabia and Russia.

The Saudis, dismayed over Russia’s refusal to go along with a proposal to further reduce oil production in the face of declining economic demand that’s potentiated by the coronavirus affair, have announced an increase in oil production.  Russia has responded with a “we can do that, too” threat.

The increase by the one (to begin 1 April) and the threat to match by the other have sent oil prices into the low $30s per barrel with projections into the mid-$20s.  Both nations claim they can afford these prices for the next few years before they exhaust their financial reserves.

Those reserves would be tapped heavily because the Saudis need $80 per barrel to balance its budget, although its debt-to-GDP ratio is in the neighborhood of 25%, so they can borrow for some time on reasonable terms.  Russia needs $50 per barrel to balance its budget, and its debt-to-GDP ratio is in the neighborhood of 15%.

On the other hand, Russia’s currency has fallen about 10% since the oil crisis began, while the Saudi riyal is pegged to the dollar.  Those combine to reduce the strain on Saudi Arabia’s overall economic moves relative to Russia’s.  Russia also faces reduced economic flexibility relative to the Saudis due to the broad reach of sanctions applied to it over its military and cyber adventurism.

The snapshot and short-term future would seem to favor Russia in this pricing and production contest, but the longer term not so much as currency fluctuations and sanctions will continue to accumulate in their relative effects.

If this contest gets to the longer-term, one other factor could come into play that would support Russia against Saudi Arabia: the People’s Republic of China greatly increasing its purchases of Russian oil.  This would favor the PRC, too, as it would give it a nearby source of cheap oil along with a distribution network that would be less vulnerable to international disruption.

It would also deepen Russia’s dependence on the PRC—possibly good for the PRC, but definitely dangerous for Russia.

Note, though, that I’m ignoring the impact of this contest on our own oil (and gas) industry; the contest will not do us any good at all.