Of bankers and boring: Sources of Canadian pride

There is quite a list that Canadian rightly feel proud about such as having better beer than the Americans; adding colour to color and bestowing honour to honor with the extra “u”; and saying the last letter in the alphabet the way the Queen wants us too.

Now we can add one more thing we Canadians will brag about endlessly… having notoriously boring (but solvent) banks.

We are in a new era indeed when bankers become a source of national pride!

What Toronto can teach New York and London

Good and Boring

China and inflation

Paul Krugman again weighs in on China and inflation.

Basically, he says that an increase in the price of Chinese goods is not sufficient to cause US inflation. The actual China cost is just a small percentage of a US price; transportation, overhead and so on form a greater percentage of the total cost of a good.

True. I think China's impact on US inflation is more indirect.

1) China has a huge demand for commodities. It's additional demand is causing the price of the supply to rise.

2) Commodities are priced in US dollars. With the dollar tanking, the price of dollar denominated goods will rise.

This combination will continue to be a nasty one-two punch on the US economy until either demand dries up (not likely) or the dollar strengthens, but it is hard to see how that will happen with interest rates so low and probably going lower.

China exports inflation

I guess I'm in the mood to read and write about inflation this evening...

Here's a piece in the NYT about China's inflation being exported to the US.

Krigman, however, thinks the piece overstates the case.

You know, it wasn't that long ago that I'd spend my Saturday nights out partying rather than blogging about economic issues that, in all truth, I really don't know a whole lot about.

Deconstructing Krugman

It seems that few economists can raise the ire of other economists the way Paul Krugman can. In his latest column on trade, Krugman begins to discuss the increasing downward pressure being exerted on US wages by increased trade with developing nations.

As Krugman lays out the basic framework of his argument, he takes pains to state (twice) that he is not a protectionist. He does state in his final thought, however, that we should be wary of knee-jerk acceptance of trade and that we should listen to those who question trade.

This final thought has lead to two interpretations by Dani Rodrik and Greg Mankiw.

For his part, Mankiw seems intrigued by Krugman's thoughts(although would like to see the data backing them up) but wonders if we should take trade-questioners seriously if they are really just closeted protectionists.

Rodrik jumps on Mankiw's statement and asserts that people who question trade should not all by labeled as protectionists.

In fairness, I don't think that is what Mankiw was saying, that everyone who questions trade is necessarily a "protectionist" (which seems to be a bad word in economist circles.) What Mankiw (I think) was asking was if we know someone is a protectionist, should we listen to their views on trade? (presumably because their views will be highly skewed against trade).

My answer to Mankiw is yes, we should list to different (intelligent) views on trade, even if they are posited by a protectionist. Trade is crucially important to the economic growth of humanity and needs to be discussed, examined and deconstructed from many different angles. The purpose of this IMO is not to try to find a way to stop trade, but to continually try to find ways to make it better.

And to Rodrik I would agree that applying blanket terms to describe people's views is not helpful, but that is not what Mankiw was doing in this instance.