Joking about bankers? Not really.

Blackstone co-founder Stephen Schwarzman joked about Brian Moynihan, CEO of Bank of America, by drawing a parallel between Mr. Moynihan and his brother, Patrick:

"Patrick runs a Catholic boarding school in Haiti,...,so their parents must be so proud to see two of their boys each running an underfunded, nonprofit, organization."

Of course, it's not just one banker - Brian Moynihan alone - who is facing tough times, they all are, apparently.

China currency debate

Two voices on China's currency issue appeared in Wednesday's US republican presidential debate.

Jon Huntsman - "I don't subscribe to the Donald Trump school or the Mitt Romney school of international trade. I don't want to find ourselves in a trade war. With respect to China, if you start slapping penalties on them, based on countervailing duties, you are going to get the same thing in return because they are going to say 'because of Quantitative Easing part I and part II, you are doing a similar thing to your currency'. And you are going to find yourselves in a trade war very very quickly."

Mitt Romney - "I am afraid that people who've looked at this [China's currency issue] in the past have been played like a fiddle by the Chinese. And the Chinese are smiling all the way to the bank, taking our currency and taking our jobs and taking a lot of our future...You people say, well, we might have a trade war with China, and think about that, we buy this much stuff from China, they buy that much stuff from us. You think they want to have a trade war?...I mean, this is a time when we are being hollowed out by China, that is artificially holding down their prices, and that's having a MASSIVE impact on jobs here."

Romney's view is clearly not shared by Economists Nouriel Roubini and Richard McGregor.

Tribute? Anger?

Usually, those two don't mingle. But,

A tribute to Steve Jobs

Charlie Rose gave a tribute to Steve Jobs last week with Google chairman Eric Schmidt, Netscape co-founder Marc Andreessen, WSJ columnist Walter Mossberg, writer Walter Isaacson, CEOs Lawrence Ellison and Bob Iger, Apple co-founder Steve Wozniak and journalists Ken Auletta and David Carr.

iFans, you can watch the entire program here.

Be it resolved...

...North America faces a Japan-style era of economic stagnation.

This is an upcoming event from the Munk Debate. The pro side of the debate: Paul Krugman and David Rosenberg. The con side: Larry Summers and Ian Bremmer.

Previous debates on the Munk Debate include topics like whether the 21st century belongs to China, is foreign aid to the developing countries doing more harm than good, whether the climate change is mankind's defining crisis, and more.

Battle against yuan

US Senate just passed a bill that would lead to trade sanctions against countries whose currencies are manipulated. One currency on the legislators' minds is, of course, the yuan. The past two weeks has witnessed China's currency moving in exact the opposite directions in the onshore and offshore markets. During such a bumpy ride, we already saw that Beijing has sent its goodwill to the US to avoid future diplomatic and trade conflicts, but the passing of such a bill could only make things worse - for both countries. The question here is that, is yuan being manipulated?

 

The chart in today's The Economist speaks far louder than politics does. It suggests, "the recent relationship between China's currency and America's trade deficit with China is not what China hawks in the Senate think it is. Rather than a cheap yuan leading to a flood of Chinese imports, the yuan has actually strengthened as the deficit has widened. There are many things American companies dislike about the way business is done in China: intellectual-property theft, the impossibility of winning government contracts, baffling rules on corporate ownership and so on. However the place for fixing these things is the World Trade Organisation, not Congress."

Will this bill alter anything in a significant way? No, says Wall Street Journal columnist Tom Orlik. He further suggests that neither US politics nor China's "narrower self interest" could derail the fundamental strategy on the yuan.

The Nobel goes to...

Thomas Sargent and Christopher Sims for "their empirical research on cause and effect in the macroeconomy".

I have only very limited knowledge on them, but surely Sargent is the most renowned scholar in the "rational expectation school" after Robert Lucas, and Sims has developed and promoted some important and widely used empirical methods in modern macroeconometrics, such as VAR (vector autoregression).

For those on the promising list but didn't get a phone call from Adam Smith or someone with a typical Swedish accent, nevermind, your chance is getting bigger.

update: Robert Lucas discusses both of the laureates here. He says while Sargent has put a lot of emphasis on policy analysis and the economics to build models, Sims is focusing exclusively on using econometric methods to do "economic forecasting without much economics".

Few can...

...be remembered like this:

a "visionary leader", an "iconic legend", a "creative genius", "an original", the "most innovative entrepreneur", "a historical figure on the scale of a Thomas Edison or Henry Ford", "the greatest computer innovator in history", and simply, a "hero".

RIP, Steve Jobs (1955-2011).

A talk on democracy and economic growth

A nice talk of the subject from MIT Sloan professor Yasheng Huang. In it, he mainly argues that 1) better infrastructure and stronger government are not necessary for higher economic growth; 2) human capital (literacy rate, life expectancy, gender equality, etc.) is way more important in explaining China's economic miracle; and 3) it is the change/improvement in democracy that explains economic growth, not the mere dichotomy of a totalitarian or a democratic nation.

In the comments section, many have pointed out that Prof. Huang is in fact defending the Chinese authoritarian regime by using biased data and pictures (like showing pics of Shanghai's skyscrapers and Mumbai's slums at the same time). Not at all. On the contrary, he has questioned the contribution of infrastructure to economic growth in the first place. By doing so, he actually challenged the view that a strong government is a necessary condition for high economic growth. Later, he tries to establish his own argument that human capital is a more important factor in explaining China's economic miracle. In the end, he again became clear that it is the change/improvement in democracy that explains economic growth, not the mere dichotomy of a totalitarian or a democratic nation. He believes India will eventually benefit from its democratic momentum, and for China, he is hoping for a faster and more radical political reform because that's the "right direction".

Of course, he may have done these arguments in much greater detail instead of some two-country one-way comparisons, but given that talk's limited time frame, I think he has done a fairly good job in explaining himself.

Cash for clunkers architect named CEA Chairman

Princeton labor economist Alan Krueger was named as the new Chairman of the Council of Economic Advisors for President Obama. But some of his empirical studies don't quite go along with Mr. Obama's economic plans, particularly with respect to jobless benefits. It seems that Mr. Krueger is more of a "regular economist" in thinking about labor policies, but the real problem for him now is how to reconcile the difference.

Would stimulus work?

Since the publication of the General Theory by John Maynard Keynes, modern macroeconomics has long been criticized for a lack of strong micro-foundations. Chicago and Austrian school economists, for instance, claimed that there is too much aggregation in the Keynesian perspective which unfortunately ignores the basic drivers behind all economic activities, i.e., human incentives. Without a clear understanding of incentives behind human action and how these incentives interact and properly "aggregate", economic facts could be misinterpreted and wrongly theorized, and policy based on its prescription could be dangerous and disastrous.

In his WSJ op-ed today, Harvard economist Robert Barro revisits this decades-old topic. He firmly supports the view of what he calls "regular economics", where incentives play a central role in shaping overall economic activities.

Professor Barro, once a follower of Keynes, argues in this short essay that Keynesian stimulus transfer programs, such as food stamps, will not lead to an expansion of the overall economy - that one could get back more than one puts in - as Keynesian economists have long believed. The reason why stimulus transfer won't work is two folds. One, these transfers to the people with earnings below designated levels would motivate less work effort by reducing their reward from working; and two, more taxes are needed to finance these transfers. And these added tax burdens may not only reduce the work effort of taxpayers, but also lower overall investment levels since returns after taxes could be diminished. The consequence? The overall GDP pie would be reduced, rather than enlarged.

Although little empirical evidence exists in favor of either school, some scattered evidence could well support the view of "regular economics": an increase in unemployment insurance eligibility to 99 weeks in 2009 would have an adverse effects on unemployment - the fraction of the long-term unemployed (more than 26 weeks) has jumped since 2009 - to over 44% today, whereas the previous peak had been only 26% during the 1982-83 recession. However, as Barro suggests, more empirical evidence of this type is needed to get more reliable conclusions.

Debate could heat up, again (see here).

I, pencil

...modern version:

Here to (re-)read the famous essay by Leonard Read.

CNBC classroom

Even for the savviest among the financial professionals, it is challenging to be well versed in each and every complexity contained. CNBC Explains, a new section within CNBC.com, gives users the opportunity to learn more about key economic topics and concepts through original, three-minute videos and text-based transcripts and information pages.

Female employees benefit if the boss has a daughter

Empirical studies abound regarding the existence of gender gap in the workplace all over the world, but we still have fairly limited understandings about the possible origins of this wage gap and other gender-related workplace discrimination, and under what circumstances will the gap be widened or reduced. A recent study of Danish workforce suggests an interesting but intuitive answer to fill the void: whether the boss has a daughter.

Using a 12-year panel of Danish workforce data, they found that "conditional on the number of children a CEO already has, the birth of a daughter to a male CEO resulted in an approximately 0.5% reduction of the gender wage gap. The effect was significantly stronger for the first daughter, resulting in a 0.8% reduction of the gender wage gap, compared to a statistically insignificant 0.4% reduction after the birth of a second daughter. In addition, if the first daughter was also the first child, the effect was stronger still, with the gender wage gap decreasing by roughly 2.8%."

Here is the entire abstract:

Drawing on research in sociology and economics suggesting that fathers' gender-related attitudes and behaviors are shaped by the gender of their children, we hypothesize that having daughters prompts male CEOs to implement wage policies that are more equitable to female employees. To test this hypothesis, we use a 12-year panel of Danish workforce data and an empirical specification with CEO-employee fixed effects, creating a quasi-experimental setting whereby the gender of a CEO's child is effectively exogenous. We observe that when a daughter was born to a male CEO, wages paid to the CEO's female employees rose relative to the wages paid to male employees. The effect was stronger for the first daughter, and stronger still if the first daughter was also the first child. The birth of a daughter to a male CEO particularly benefited women who were more educated or who worked for smaller firms. These results have implications for our understanding not only of the origins of discrimination and the gender gap in wages but also of social preferences and the influence of managerial style on firm policies.

Celebrating 20 years of Linux

Here (20 years in 4 minutes), here (South Park version) and here (12 things that wouldn't exist without Linux).