Education Bubble and Jobs: European Countries Going their Own Way; China’s Militarization

August 30, 2012


“Books are the training weights of the mind.” ~ Farnam Street

  • Warren Buffet said he doesn’t know anyone successful that doesn’t read a lot.
  • Of course, Buffet also thinks the economy can grow just fine with 70% tax rates.


GMO identified 34 bubbles in a study; 32 are back to the trend from before the bubble, the UK and Australian housing markets are exceptions ~ Variant Perceptions

Historical Oil Shocks ~ James D. Hamilton (2011) – (PDF)

  • Exhausting production, new markets, and new use cases create booms, discoveries and innovation precede busts.

The tone of analysts can help predict whether a company will beat earnings expectations ~ @themoneygame

Nomura runs a correlation between currencies and commodity prices ~ FT Alphavillenot always as strong as one would think



James Grant on Markets, Fed Policy, Gold Standard ~ @BloombergTV

Fed on using 5y/5y breakevens for inflation expectations – FRBSF 

No mention why @federalreserve does not use Gold to gauge inflation expectations – too frightening perhaps

“A bunch of economic relationships are not behaving the way a lot of influential people say they should.”~ White House Economic Advisor, @econjared

If you recall, Jared Bernstein sold the public that the near $1 trillion in corporate welfare stimulus would cap unemployment at 8%, thanks to government’s ability to achieve a “56%” return on investment.

It’s possible central planning does not work as well as these “influential people” think.

Another Example of Cronyism and Corporate Welfare from the Stimulus program ~ National Review Online

Income on U.S. farms estimated to climb to 40 year highs. 

Still, the government pledges to er – buy votes,  er – provide more corporate welfare, er, help with drought. 

"About 1.5 million, or 53.6 percent, of bachelor’s degree-holders under the age of 25 last year were jobless or underemployed" ~ AP

Only 3 of the 30 occupations with the largest projected number of job openings by 2020 will require a bachelor’s degree or higher ~ Mauldin Economics

Yet, many want to blow this bubble bigger with more government subsidies ~ chart from ZeroHedge


Between 2007 and 2011, 98.3% of the job gains went to advanced degree holders, according to the Economic Policy Institute.

Math skills at kindergarten age are a stronger predictor of later school achievement than reading or ability to pay attention – WSJ –


Draghi’s sales pitch to the German people ~ ECB

Six German States Say August Inflation Quickened on Oil ~ @BloombergNews

Going their own way: foreign investors dump sovereign bonds, domestic banks pick them up, ~ FT Alphaville

If the domestication of sovereign bonds into regional banks continues, a Euro breakup would be easier.

Chart from Reuters, Data Artists Vincent Flasseur and Kirsten Donovan


"The British economy has apparently contracted faster than the Spanish economy over the last three quarters" ~ Lombard Street

Euro calendar ~ FT Alphaville

Japan: Tokyo faces fiscal cliff of its own as PM Yoda and Upper House battle ~ WSJ

Argentina: Investors are piling into floating rate notes with inflation at 24%, deposit rates at 12%, and expected devaluation of 12%. "This reduces bank liquidity and pressures interest rates to go up"


The Ultimate Visualization Of Australia’s Housing Bubble ~ ZeroHedge

The Combined total assets of Australia’s big 4 banks is 183% of GDP ~ Variant Perceptions

Australia: Swaps rates show no cut is expected by the RBA on Sept 4, Bloomberg



Notes from the July issue of China Economic Review

China ranks among the worst for bribery, 27th of 28th on "The Bribe Payer’s Index." Russia is 28th

"Western companies are at risk of prosecution under anti-corruption rules"

"Each of China’s 31 provinces and municipalities individually approve new drugs," palm greasing is common

“In China, companies keep multiple sets of books, they operate through shell companies, and the accounting is simply much looser " ~ Wedeman

China Economic Stats:

"Debt among Chinese enterprises is equivalent to 105.4% of GDP higher than in many countries, including the US and Japan."

China’s total debt to GDP ratio is roughly 170% ~ Li Yang, Chinese Academy of Social Sciences

China’s incremental capital output ratio – how much investment is needed to produce an additional unit of production – has risen since 2003.

"Consumption in China has been increasing at 8% already"

There is now more money in circulation in China (about US$10 trillion) than in the US (about US $8 trillion)~ Ruchir Sharma, Morgan Stanley.

China Life:

Robot chefs taking over China’s noodle bars – 2000/machine supplants 4600/yr workers ~ youtube

‘China SOE investments in Mongolian mining assets has fueled concern in Mongolia’

Bridges falling apart in China ~ Wall Street Examiner

China’s Military:

China: Overall approximately 13% of all social media posts were censored.

The Militarization of China’s Civilian Leaders ~ The Diplomat

China steelmakers see profits down 96%, but commits to expanding production, similar in cement and coal industries ~ Bloomberg

The state of China’s nuclear capabilities (pdf) ~ Union of Concerned Scientists

  • Of China’s estimated 155 nuclear warheads, 50 are long-range and can reach the United States
  • China has conducted 45 nuclear tests. The United States has conducted 1,054 and the Soviet Union/Russia has conducted 715 ~ Gregory Kulacki
  • China is experimenting with submarine-launched ballistic missiles (that could be made nuclear i presume), but has been unsuccessful so far
  • "China’s leadership operates under the assumption that nuclear weapons cannot be used successfully to fight and win an armed conflict."

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