Enter your email address:

Delivered by FeedBurner

Search Me


Blog Archive

IMF Special Drawing Rights, a key to making Chinese Renmibi a global reserve currency

The IMF special drawing rights basket is currently under review for changes, to be finished with their review in 2015.  John McCormick, Chairman of RBS APAC seems to think that China will push hard for the Renminbi to be placed within that basket, instantly, giving almost all countries, even those that don't trade directly with China, a strong incentive to increase their international reserves in the Chinese currency.  Via RBS:
the International Monetary Fund is reviewing its special drawing rights basket, which uses four key international currencies to supplement member countries’ official reserves and bolster liquidity.

The deadline for completing that review is 2015. Based on where we see the G7 countries today, we believe there’s a very strong chance that China can get the onshore version of RMB, CNY, into that basket – a real boost to the currency on the world stage.


Protest ignite across Brazil, the radicals demand: lower the bus fare by ten cents.

From the Guardian:

An 18-year-old man was killed in Sao Paolo state after a car drove through barricades.

The country's president Dilma Rousseff called off a visit to Japan to deal with the crisis.

Official estimates suggest that there were more than a million protesters out across the country in total.
As Brazil, the emerging giant of South America, throws up in hands at protests, I can't help but think of Turkey.  In Turkey, a demonstration about an old tree in a public square caused a riot.  A country with a history of repression and political prisoners, bordering Iraq and Syria decides to riot over a tree.  In Brazil, almost a million people take to the street and the only demands they mention is to reduce the bus fare by 10 cents.  Laughable. 

The difficulty of Dilma Roussef, the current president of Brazil, is that she wants to be seen as silently encouraging the protestors.  Like Bill Clinton in Seattle, she will realize, that once you have crossed the line from liberal radical to entrenched political cog, the new liberal radicals won't like you no matter how much you pretend to like them. 

EconomyPolitics 4th annual Index of Economic Efficiency of the World

The top ten countries in terms of economic efficiency for 2013:  

This is the first in a three part series where we identify the most attractive international investment opportunities for the next ten years. We start out by looking at economic efficiency, i.e. the fundamental freedoms and legal framework, which facilitates successful investing.

In doing country analysis for international investments, it is often a first step to look at sovereign bond ratings from Moody's, Fitch or S&P. However, many smaller developing countries get very little if any play at the agencies. CDS spreads, another measure of investor risk only covers 80 countries. Our index covers 127 countries.  To do so, we have looked at business and freedom indexes which assign values to sovereign attributes to gauge risk and assess opportunity. These indices attempt to measure economic freedom and a legal clarity.

There are plenty of indices by many different sources, each one looks at important factors which could influence returns and hurdle rates. But which index do you use? We have looked into four of such indices and compiled an index of indices to measure efficiency.

I have included information on five of such indices and compiled our own index of economic efficiency.  The indices include: 
  • Heritage Foundation: Index of Economic Freedom
  • Fraser Institute: Economic Freedom of the World
  • World Economic Forum: Global Competitiveness Report
  • World Bank:  Doing Business
  • Euromoney Country Risk
Please download our white paper:

Correlation between Right to Work laws and Republican Voting

With Michigan passing right to work laws, I ask Interesting on many levels.

There is a high correlation between right to work laws and voting patterns.  This is a real blow to unions, even a greater blow than Scott Walker's taking away collective bargaining for government employee unions. One thing I was noticing was the high correlation between the two maps.  Almost all the North East, Great Lakes area and the left coast are all forced unionism states.

The correlation is not perfect, but there are weird patterns, such as Indiana.  India is the only great lakes state that is right to work.  It is also the only great lakes state to vote Republican in the last election.  Also, New Mexico and Colorado are the only states in the last election to vote Democrat.  They are both forced unionism states surrounded by right to work states.

Correlation is not causation however, so making Michigan a right to work state will not make it Republican.  If there is any causation, it is probably the Republican voting patterns that allow the state legislatures to pass right to work legislation.  In this case, Michigan could likely be an anomaly.

Another, more likely explanation is that right-to-work legislation is a sensible legislation which is being pushed by conservative voters, but is catching on slowly throughout the country.  In that case, the leglislation is likely to pass in other states too.  Map via NRTW:

Right to work States vs. Forced Unionism States
Blue = Democrat, Red = Republican

A Model for determining the Purpose of Governemnt

What is government?  Why are they formed?  What should the limits of government be? These are questions that run through my head often as I develop inside myself a political philosophy.  Why? So that I can compete in the great debate of ideas and so I can help share why I think my ideas are sound (I say my ideas as though they have never been thought before, but I am not that naive).  

I am going to share how I determine the roleof government.  It isn't something I've perfected, but maybe you can add your two cents in the comments.  

I start with 4 families who live on 4 plots of land with room for a road between them.  They live on the corners of an intersection of two crossing paths.  From there I think...what would cause these families feel the need to form a government.  

Try it yourself...allow that community to grow.  What are the basics needs that will bring the community together to see to common needs?   The first thing I think of is the two roads.  What about resolution to commerce disputes between the families? What about domestic disputes as the families intermarry? What about the rights of the four original families and their offspring vs. other families that seek to move in or who simply seek to do commerce with the four families?  

I start here because it simplifies things for me.  I put in different variables to see if they fit.  Stop lights...that might make sense if the intersection were to get busy.  Marriage...what if you had one man decide that the children he bore with a woman were not his (clearly they are his as he lived with the woman)?  What is the woman is unable to support herself and the kids?  What happens when the townsfolk are called upon to take care of this woman?  I guess that they wouldn't be to happy with that idea knowing that she had a mate that should be supporting her.  Maybe they create the institution of marriage as a way to bind that man legally to his family and assure that he will be responsible for them despite leaving the family home. Now, I'm not say that that is what happened...this is just my way of coming up with possible reasons for political and legal traditions we have today.  

I imagine these four families want to live in peace and freedom.  They only create government to take care of those things that no one family can deal with which I suspect is a government that starts out as a mere family council.  

I'm going to stop the example there.  But as you think about the role of government.  I suggest you use something similar to my model.  I sometimes like to use a town in the Old West for variety and because those towns sprang up just as organically as my four family example.  

Here is a modern example I have been contemplating recently.  The city where I live seems to have a lot of toll roads.  I have a problem with this.  Toll roads come about when government officials tell us that there isn't enough money to keep up the roads.  But using my example above, I think isn't building roads one of the essential purpose of government?  Where does the money go if it is not there for purpose number one (or at lease one of the top 10 reasons for government) of government?  

How about this?  Is it the government's role to start or own a business?  How does that fit into the model?  Why would those families have a need of a government owned business?  I'm not making any conclusions here.  I'm just running these things through my mind.  I go back to this model constantly when deciding whether any particular policy is the role of government.    

Another topic would be entitlement programs. How might the families feel about taking care of one of the four families?  Short term...long term.  What about paying for the education of the children of that one family AND the education of their own.  What if that one family did not contribute anything in the common fund that was used to keep up the roads and the other services of the government? 

It is a work in process for me...just thought I'd share.  I'd love to hear everyone's thoughts.