Good morning

The headlines:

  1. Obama is confident.

    Link: well that’s very comforting.

    As he jetted off to Bangkok/Myanmar to aggravate the Chinese by visiting Buddhist temples, Mr Obama announced his confidence that the fiscal cliff situation can be “dealt with”. Then this:

    Democracy is a little messier than alternative systems of government but that’s because democracy allows everybody to have a voice. And that system of government lasts. And it’s legitimate. And when agreements are finally struck, you know that nobody is being left out of the conversation and that’s the reason for our stability.

    Which is an argument with holes in it. And some liberal interpretation of the one-dollar-one-vote principle.

  2. Farewell, Twinkie.

    Link: the strike struck out.

    Hostess Brands Inc. has announced a proper bankruptcy this time. Which means Chapter 7 Bankruptcy (Liquidation) rather than Chapter 11 Bankruptcy (which is basically a moratorium on debt payments in order to “reorganise oneself”).

    The decision comes after a week of strikes by the 18,500 workers employed by Hostess. Their original complaint was wage cuts and the cessation of pension fund contributions.

    That awkward moment when you realise that you pushed too far?

  3. Zhou talks conversion of the yuan.

    Link: is that really what the US wants, though?

    China’s Central Bank governor Zhou Xiaochuan has suggested that the next economic move by China will be to improve the convertibility of the yuan. Which sounds like something that the US has been desperate for China to do for some time.

    The reason given by the US is that the artificially weakened Yuan gives China an unfair competitive advantage because it makes its exports relatively cheaper compared to those of, say, the USA. If the yuan were allowed to strengthen, its exports would be more expensive, which would give the US manufacturing industry a chance to continue competing with China globally.

    I think this view is myopic. It’s true – better convertibility of the Yuan might help what’s left of the manufacturing industry in the USA – but at what cost? The dollar has the inertia advantage, or what the French have called “the exorbitant privilege”, of being the global currency of reserve. This means that it can get away with printing money and running large deficits without a major disruption in its exchange rate; because the world operates in dollars and has no viable alternative.

    But let’s say that China opens up and provides an alternative global currency of reserve in the yuan?


    I think that there should be a little more US concern about China’s apparent willingness to reform. Because why now?

That’s all for now.

Have a good day.