China is now learning why it unwise to subsidize your exporters with an artificially weak currency. Sure it makes your exports more competitive on the global market. But it also makes your imports more expensive.

As it happens, one of China’s most important imports is food. This from Macro Man….

As is generally the case, China marches to a somewhat different drumbeat to the rest of the world. So while the West has been snoozing, it’s been all action in China with the release of a (yet another) higher-than-expected CPI report and a 4.5% decline in equities. While the latter is but a blip, the former has now reached its highest level in more than ten years, and thus merits some attention.

As has been the case throughout the year, food prices account for the bulk of the rise in CPI. Non-food-price inflation remains fairly steady at around 1%, which has encouraged many China watchers to presume that the current bout of inflation need not be met with aggressive policy tightening. Just as Clara Peller asked “Where’s the beef?” in the 1980’s, the question here appears to be “Where’s the pass-though?”

Is that the right question, though? After all, a number of non-food items (energy, most conspicuously) fall under the aegis of price controls and thus should not be expected to show a price rise. And given the number of Chinese citizens living on a subsistence or quasi-subsistence basis, it is surely not in the best interests of a regime focused on stability to see food inflation (which has now hit 18.2%!) foment unrest in the hinterland.

Macro Man’s whole post is well worth reading.

This week at Acme I totally neglected the program to reduce shipping errors. I didn’t have any time for it. I was busy doing nothing.
Through no fault of my own, I got conscripted into a project to do nothing. The goal of the project was to see what kind of information transactions occurred during the Click Here to continue reading.

I always have mixed feeling when I read Martin Hutchinson. He is neither a starry eyed free marketer nor a bleeding heart liberal. Rather, he is a conservative in the original sense of the word. He does not like change.

Thus, you can usually count on him to argue that things were better in the good old days. Were markets more regulated 50 years ago? That was better then now according Mr. Hutchinson. Was there less welfare 50 years ago? That was better then now according Mr. Hutchinson.

I don’t have the same kind of uncritical appreciation for the past that Mr. Hutchinson has. But my biggest problem with him is his apparent belief that we can just change the laws back to what they use to be and society will follow meekly along back to the good old days. In reality though, culture changes law, law does not change culture.

All that is just to say that I fully support the central point of Mr. Hutchinson rant against Fannie Mae and Freddie Mac. But I have to disagree with his assertion that the modern day financial elites are just rent seekers who add no value.

Value is in the eye of the beholder. In the good old days, a community would save enough for its own mortgage needs through local financial institutions. That made capital cheaper in absolute terms. But that also required disciplinal and sacrifice on the part of the culture.

The value the current day financial elite provide is that they get the money for mortgage without anyone in this country needing to save. But for such magic to occur you need highly paid magicians. Plus, you have to make a deal with the devil.

But that is what the baby boomers wanted so no one should pretend that they are the unfortunate victims of the evil elites.

This week’s essay is something that everyone who is an adult (or thinking of becoming an adult) should read. Even if you read through Mortgage Origination Channels for UberNerds without understanding anything in it you will still benefit. At least you will have an idea of what it is that you do not understand about how mortgages work in this country.

I am not saying that every adult should read this essay because of the all the problems that mortgages are currently causing in the economy as whole. Rather, it is the way that all this complexity can personally effect you that makes this a must read. Indeed, the one flaw of this essay is that it does not spell out clearly how this can all go wrong for the consumer.

For example, let us say that you take out a loan with bank a. Now let us say that bank a sells the servicing rights to your mortgage (and if you don’t know what servicing rights are that is why you need to read the essay) to outfit c.

Now remember that most mortgages require you to pay your property taxes in with your monthly mortgage payments. This is to protect the people who loaned you the money from having the house get sold for back taxes. If that happened they would losses their money without having any recourse.

With that in mind, let us say that outfit c neglects to put the money you are paying towards your property taxes in the escrow account like they are suppose to. When the tax bill comes due, it is not going to be paid by outfit c. You will most likely be unaware of this until you receive notice that unless you pay the back taxes and penalties, your house is going to be put up to auction by the tax man.

All this because of the actions of a company that you never even signed a contract with.

I seem to have survived another end of month. Month ending is alway a busy time because we try to ship as much as possible so that our monthly financial statement looks as good as possible. This practice is deeply engrained in Acme, deeply enough so that all our suppliers realize that we don’t really Click Here to continue reading.

Read this….

The job cuts are part of a restructuring plan by EarthLink to reduce operating costs and boost efficiency. As part of the plan, EarthLink will also close offices Florida, Tennessee, Pennsylvania, and California. The company will move its remaining operations to its Atlanta, Ga. facility.

Now read this from later on in the same article…

The company also announced Tuesday its board of directors voted to authorize the purchase of an additional $200 million of its outstanding shares of common stock. EarthLink now has $270 million available to repurchase its stock.

This is rewarding sellers of Earthlink stock at the expense of those who hang on to their Earthlink stock. Given that Earthlink is already having a tough time of it, it would make more sense for them to hang on to the money. When credit gets tight, you want to have cash on hand.

Look at this chart over at Calculated Risk. The ARM are really going to hit hard next year.

Pennsylvania Income Tax rate is this….

Pennsylvania has a flat tax rate of 3.07 percent on individual income, with no personal exemptions.

County, municipal and school district taxes also are collected. Those rates can be found at the Department of Community and Economic Development Web site.

Pennsylvanians who live on a modest income may qualify for the state’s Tax Forgiveness Credit.

New York State Income Tax is this….

New York collects state income taxes using a progressive, five-bracket system.

For single taxpayers:
— 4% on the first $8,000 of taxable income
— 4.5% on taxable income between $8,001 and $11,000
— 5.25% on taxable income between $11,001 and $13,000
— 5.9% on taxable income between $13,001 and $20,000
— 6.85% on taxable income of $20,001 and above.

For married persons filing joint returns, the rates remain the same but the income brackets are doubled.

New York City has its own tax rates and brackets. The state’s earned income credit has increased to 30 percent of the federal credit. The credit helps taxpayers offset increases in living expenses and Social Security taxes, reduces taxes owed and in some cases can even provide a refund to filers who do not owe any tax. File Form IT-215, Claim for Earned Income Credit.

Obviously, Pennsylvanian income taxes are far lower then they are in New York. But the really disgusting thing is how ridicules the income brackets are in New York State. I mean, I can see making below 20, 000 a different tax bracket. But making between $8 grand and 11 grand a separate tax bracket? Simply absurd.

Information taken from this site.

According to this comment over at Calculated Risk, they were charging $17,500 just for the permits to build a house out in an unnamed small city in California. If a new home sold for $200,000 the permit costs would still make up almost 10% of the cost. And that does not count the cost of the labor necessary to obtain those permits (I don’t mean building to code, I mean filling out all the paperwork). Nor does this count all the other tax’s that the builders pay, including a capital gains tax if applicable.

It must be admitted that most new houses in California sell for far more then $200,000. In fact, I would be surprised to hear of new house in California that did not sell for at least $400,000. So permit costs are a far smaller as percentage of total cost then the above example makes it seem.

But the fact that the government puts up such high barriers to entry means that you will never see a builder make a cheap house.

I have my share of disagreements with Martin Hutchinson. For one thing, I don’t share his fondness for the gold standard. But I do share his convection that the recent fed action was fundamentally unjust.