Sunday, June 3, 2012

Hongbao (Red Envelope) in China and America

The Hongbao (red envelope) is the name for bribing someone in China. It isn't just companies that need to bribe officials in the middle kingdom. I've worked with Chinese professors who had to pay off the reviewers in order to get a grant to do research in the United States. China, a country I really like a lot, is about as corrupt as possible.
By saying this I'm not demeaning the incredible work ethic of the Chinese people, or the fact that I've come to know Chinese with incredible integrity. These people have made my life richer and more fulfilled because of the opportunity I've had to work with them and know them as friends.
I always find it funny that we've passed international bribery laws, when the only way to get a foothold in China is to pay someone off. It's a universal truth.
I also don't want to sound holier than thou about my country. Many of my friends, who are well read and knowledgeable, believe that America, although not at the Chinese level, is becoming more corrupt. I grew up in a time when the average CEO made 40 times the amount  a man on the factory floor received. Now the average CEO makes 430 times what the factory worker does.
It seems more and more clear that our Congress is bought and paid for. Bankers own the Republican Party and Democratic senators like Chuck Schumer. Under Clinton they got rid of the Glass-Steagle act which separated investment banks from commercial, deposit accepting banks.
Under George Bush banks were allowed to be irresponsible and take incredible risks, which in turn ruined many of the retirement funds held by individuals.
The war between those who want this situation fixed, so we will never have to bail out banks again, and the bankers who think they'll make less of a profit with regulation, is an intense one with the bankers' lobbyists going all out. The fact that we save these banks from bankruptcy with taxpayer dollars seems never to be a bone of contention as they pay these lobbyists.
Because our history of anti-communism means the envelope will never be red, I wonder what color we will eventually use.

Saturday, June 2, 2012

Why People are Running from Stocks

Yesterday I was watching Bloomberg television to escape the novel I was writing. Things were bad, with the unemployment rate rising and new job creation absurdly low. I listened to two different experts interpret the data:
One man said that you had to realize that the winter was warm and therefore the data is distorted because a lot of new employment was created in earlier months.
 The next man pointed out that not only was job creation in May very poor, but March and April had both been revised downwards. In other words the results for  labor creation in the two months before May were lower than the government had originally said they were.
It is this kind of manipulation by individual analysts which so distorts the true economic picture. People are running away from stocks in droves. The interest rate on the 10 year treasury is the lowest in history.
People are scared because they don't trust Wall Street. Given what these experts opined it seems like a perfectly rational response to me.