“Enforcement [environmental, but also anything from food safety to securities] implies clean, fair, efficient bureaucracies and judicial systems, and clean, fair, efficient bureaucracies and judicial systems require money, which requires taxes, which requires a tax base, which requires a good economy.”

cheers!

but to be clear, adjustment involves:

a) higher prices for chinese and other goods (see rodrik tho on whether this leads to more inflation — it isn’t obvious)
b) lower prices on things we now export to china in exchange for those goods, and since most us exports = financial assets/ pieces of paper/ ious, that likely means higher rates
c) less consumption v. income growth

on the whole, going from spending more than you earn to spending what you earn isn’t necessarily fun/ pleasant. but it is something that is easier to do now than later, and it something that the us will eventually have to do — so in my view, get on with it.

the pros and cons of different adjustment paths = a subject well suited to earlier threads (i.e. the one on my testimony/ the one on my conversation with a PM)

“…Organised by text messages and internet chats, China’s middle classes are daring to protest, and giving the government a fright…” http://www.economist.com/world/asia/displaystory.cfm?story_id=9367055

“… Users rage against China’s ‘Great Firewall’…” http://www.cnn.com/2007/TECH/internet/06/19/china.great.firewall.reut/index.html

“…Most large banks in China, both international and domestic, are able to get around the country’s capital controls by taking foreign exchange deposits offshore and lending a corresponding amount in renminbi through their domestic operations, Mr Anderson said. “There is even a vibrant trade in bringing physical cash across the border from Hong Kong and Macao,”…” http://www.ft.com/cms/s/91b4a3b0-24d6-11dc-bf47-000b5df10621.html

“…The environmental activists behind the messages might have exaggerated the danger with their florid language… But their passionate opposition to the chemical plant generated an explosion of public anger that forced a halt in construction, pending further environmental impact studies by authorities in Beijing, and produced large demonstrations… It was a dramatic illustration of the potential of technology - particularly cellphones and the Internet - to challenge the rigorous censorship and political controls through which the party maintains its monopoly on power over China’s 1.4 billion people…” http://www.washingtonpost.com/wp-dyn/content/article/2007/06/27/AR2007062702962.html?hpid=topnews

to the point that they seem to be turning to ‘Westerners’ for help.

“…The News Corporation also entered an alliance with China Mobile, the state-owned company that is the world’s largest mobile communications operator. Mr. Liu of Phoenix said the move “could open a new, lucrative highway” to provide media content to China’s 480 million mobile-phone users. Wendi Murdoch has stepped up her role in China. She plotted a strategy for the News Corporation’s social networking site, MySpace, to enter the Chinese market, people involved with the company said. The News Corporation decided to license the MySpace name to a local consortium of investors organized by Ms. Murdoch. As a local venture, MySpace China, which began operations in the spring, abides by domestic censorship laws and the “self discipline” regime that governs proprietors of Chinese Web sites. Every page on the site has a link allowing users or monitors to “report inappropriate information” to the authorities. Microsoft, Google and Yahoo have made similar accommodations for their Web sites in China…” http://www.nytimes.com/2007/06/26/world/asia/26murdoch.html?pagewanted=4&_r=1&hp

Unionized labour is getting the credit for the turnaround in metals markets: “…Strike action and threats of more industrial action in Latin America underpinned sentiment…” http://www.ft.com/cms/s/7bd43b48-2493-11dc-bf47-000b5df10621.html

Jerome a Paris (from DailyKos.com, TheOilDrum.com and Eurotrib.com).

He deserves it and much more.

Thanks!

http://www.lemonde.fr/web/article/0,1-0,36-928476,0.html

Top official: without Iraqi oil, we hit the wall in 2015

In a stunning interview for the French (reference) daily Le Monde, Fatih Birol, the chief economist of the International Energy Agency (i.e. the intergovernmental body created after the oil shocks of the 70s to coordinate the West’s reaction to energy crises) effectively says that peak oil is just around the corner, and that without Iraqi oil, we’ll be in deep trouble by 2015:

“If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there’s no need to be an expert”

And as long as the US occupies Iraq, production will not increase… Houston, we have a problem…
The whole interview is amazingly frank and free of diplomatic obfuscation. He blasts biofuels (”not based on any kind of economic rationality”), he notes that Africa is suffering the most already from expensive oil, he points out that even a slowing of China’s growth will not reduce oil demand, and he talks pretty explicitly about production peaks and depletion:

“Within 5 to 10 years, non-OPEP production will reach a peak and begin to decline, as reserves run out. There are new proofs of that fact every day. At the same we’ll see the peak of China’s economic growth. The two events will coincide: the explosion of Chinese growth, and the fall in non-OPEP oil production. Will the oil world manage to face that twin shock is an open question.”

He says it again twice in the interview: the gap between demand and supply will widen, and he blasts our governments for doing so little:
“Unfortunately, there’s a lot of talk, but very little action. I really hope that consuming nations will understand the gravity of the situation and put in place radical and extremely tough policies to curb oil demand growth.”

Of course, we might need to curb more than “demand growth”, and actually move to curb “demand” itself, but his words are at least quite direct and explicit. Even more interestingly, he puts the finger on two important but rarely discussed items: field depletion (he mentions an 8% decline rate for mature fields, but indicates that even a 1% difference in the actual number would mean huge volumes by 2020), and Saudi reserves:
“I understand the Saudi government claims 230 billion barrels of reserves, and I have no official reason not to believe these numbers. Nevertheless, Saudi Arabia - as well as other producing countries and oil companies - should be more transparent in their numbers. Oil is a crucial good for all of us and we have the right to know how much oil, as per international standards, is left.”
While not a direct attack on Saudi numbers, this is by far the most explicit voicing of doubt about their reserves from any official of a major organisation that I have ever read. “No official reason to doubt”??? That’s a pretty gaping hole there to sneak other kinds of doubts… He notes that he believes Saudi Arabian promises to be able to bring its capacity from 12mb/d today to 15mb/d in 2015, but notes at the same time that (i) it’s the only place in the world (other, potentially, than Iraq) where production can grow and (ii) it’s less than the expected demand growth by then from China alone.
While none of these facts should be surprising to my regular readers, it’s quite something else to see them explicitly stated by one of the top officials of one of the major energy watchdogs of the Western world.
The only question left is - will our governments listen, now?

Brazil banks’ bets against dollar hit record high

SAO PAULO, June 27 (Reuters) - Banks in Brazil raised bets that the country’s currency will gain versus the U.S. dollar to a record high in May, central bank data showed on Wednesday.

Banks more than doubled short dollar positions to $15.79 billion at the end of May, compared with $7.52 billion at the end of April. The short positions were the biggest since the central bank began compiling the data in 1994.

A short position on the dollar is a bet that the currency will weaken.

Brazil’s currency, the real , gained nearly 9.4 percent in 2007 as exporters repatriated more dollars from overseas sales and as foreign investors poured cash in the equity and bond markets…

Overseas Shifts in Treasury Piles May Help Fed: As Fed officials meet to discuss the direction of interest rates, they ought to consider again how foreign central banks are influencing the markets.