China

I was reading today a great article about China. The economic growth that this country has seen over the past two decades is amazing.
The labor force from 1980 to 2010 grew at 1.7% a year. This productivity growth was coupled with rapid urbanization.
Annualy, the number of undergraduates rose 25% from 1998 to 2004.
All of these growths were coupled with sustained 10% yearly economic growth.
The article, "What if chines econommic expansion is a about to slow?" raises some interesting points.
Birth rates, linked directly to productivity growth, has slowed significantly.
The number of jobs for all of these undergraduate students has also slowed, this may indicate economic mismatch.
The article goes on further to compare the growth in China to the growth in Japan from 1950 to 1990.

I encourage you all to read the article. I dont think a lot of what is in the article will happen, but its a different take on the growth of China.

http://www.washingtonpost.com/opinions/what-if-chinas-economic-expansion-is-about-to-slow/2011/04/12/AF8BN6eD_story.html

Bold First Step For A Balanced Budget

The spending by the federal government is growing at an uncontrollable pace. Both parties agree that something needs to be done about this. I don't see the democratic party proposing a solution to the problem. Federal spending has grown to be around 25% of economy, this is a level above the average rate that we have seen in this country. 20% has historically been the average size of the federal budget compared to the economy.
Today I saw a by House Budget Committee Chairman Paul Ryan which proposed to slash $6 trillion from federal spending over the next 10 years. Some have went as far as to say that this is not enough cutting because http://www.blogger.com/img/blank.gifunder this proposal the budget is not balanced for many years. Many people from the tea party have expressed the desire to balance the budget in as few as five years. This is not an attainable goal because so many austerity measure would need to be taken.
There is a fun game on the NYT website where you have to balance the budget. The link to this game is below.
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

Paul Ryan also released a video on youtube talking about his plan to balance the budget.


This is the most important issue that is going on currently and not that many people my age are seemingly paying attention to this battle. We will be paying the price in a good way or bad way in the future based on what decisions we make as a country going forward. I want government spending controlled and reduced to typical levels in history and not grow.
I do not care which party does this but I just want it done.

Foreign Banks and the Fed

Two years ago the fed created a program to allow borrowing to help banks have liquidity during the financial crisis. This program turned out to have been a big hit for foreign banks to take advantage of the extremely low rates of the funds.
The Bank of China was also involved in the borrowing. The country's oldest bank was the second largest borrower during the period of Aug 2007.
In support of this lending it could be said that the Fed is the global central bank. If a global liquidity freeze occurs, like it did in 07-08, the Fed must extend into this role of a major market lender.

http://www.bloomberg.com/news/2011-04-01/foreign-banks-tapped-fed-s-lifeline-most-as-bernanke-kept-borrowers-secret.html

Buffet, Sokol and Lubrizol

Warren Buffet, the most successful investor ever and his high ethical standards have hit a tough spot with the dealings of his alleged successor David Sokol. Sokol, who just announced his retirement from Berkshire Hathaway on Wednesday, purchased $10 million in shares of Lubrizol in January. Sokol, long rumored to be the top candidate to succeed Buffet when he leaves the company. This was during the period when Berkshire Hathaway was in discussions to purchase the company. Sokol is estimated to have made about $2.98 million in three months from the purchase to sale of the shares.
The timing of his resignation, sale of the shares of Lubrizol and the SEC filings of the transactions seems very suspicious. Sokol claims that the retirement is for family reasons but I think there is more to the story.
An article that I read on SmartMoney written by, James B. Stewart, does a great job explaining the entire process of the knowledge of possibly buying the company, when Buffet found out that he owned shares, and to approval by the Berkshire board.
This clearly demonstrates a lack of transparency and conflict of interest within Sokol. Sokol clearly has a conflict of interest with his personal finances and the well being of Berkshire.
I do not know the rules of insider trading to make a decisions on whether or not this would fall under that category. This is clearly something that any company should not accept and Buffet should make it clear to all current employees that this is not something that should exist in Berkshire.

http://www.smartmoney.com/investing/stocks/why-is-buffett-whitewashing-sokols-exit-1301690748602/