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Tuesday, November 14, 2006

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Lafayette

NE: "he finds that international outsourcing, when narrowly defined, has "a marked impact on individual employment security"

Oh, wow. He found the obvious ... which is not difficult when you go looking for it.

But, did he investigate the cost of products (of German outsourcing manufacturers) that (1) either came back to Germany at cheaper prices thereby enhancing purchasing-power-parity for all (both consumers and companies) or (2) earn export revenues for the company thereby contributing to corporate profits?

The fact that this happens means that workers should be freed from manufacturing jobs that produce products at prices that are not competitive in order to build products that are competitive.

Why doesn't this happen? Because German labor laws prevent easily firing people to free them onto the labor market for the substitution to take place. So, companies keep them on hoping to obtain more productivity from the work force (by lengthening the work week) and therefore at least breaking even on domestic production.

In France, 80% of French companies this year had obtained their profit because of operations abroad. Meaning, on French operations they made little or no profit whatsoever. But, they did manage to keep 90% of the working population employed. This means that stockholders paid the cost in foregone dividends to maintain French employment levels.

(This idiocy is called the unique and exclusive French Social Model. The Germans do the same, but they refrain from calling it pompously a great social achievement.)

Now, the wonder of all this is: Why does the European EuroStoxx index keep straining to new heights? What on earth can possibly be propelling it if domestic profits are non existent?

My answer: Petrodollars and other earned foreign income (namely Chinese) is coming into the Euro (via equities), which has earned the reputation of a bona fide reserve currency. It is presently at a handsome premium to the dollar.

What does this mean? Heaven help the dollar when the Chinese decide that they've had enough of it.

Why wont this happen any time soon? If the Chinese do not buy T-notes, then it cannot finance America's binge on Chinese products. Selling the dollar would be shooting themselves in the foot. So, they are squirreling their reserves into both currencies and, as may please them, they will transfer from one to the other, thereby manipulating the exchange rate between the Euro and the dollar.

The Chinese (central bank) authorities know this, thier American counterparts know this and the Europeans know it as well. We live in a knowledgeable world.

Lafayette

NE: "The paper shows that French unions who flex their muscles in the face of greater trade competition make things worse, by encouraging firms to oursource more jobs."

Ah, ha! Yet another paper that demonstrates the obvious! But, this time in French, so maybe the lesson will sink in?

Maybe, maybe not. With the "belle au bois dormant" elected yesterday as Socialist candidate for the presidency, anything can happen ...

Still, there is some hope. Meaning this: The mammoths of the Socialist Party (including her husband who runs it) have taken a clanging. Segolen Royale is one of "them", meaning she is a graduate of the political trampoline Ecole Nationale d'Administration (which teaches people how to administrate but not necessarily how to think).

Where's the hope? Segolene actually said that she "admired" Tony Blair. Cherie must have swooned ...

If this is the case, then Segolene, if disastrously elected to the post, will likely not adhere religiously to the Socialist line that has divided the world into black and white. (NB: Those who wear white hats are the evil capitalists and those who wear black hats are do-good socialists. That way, the masses understand better the difference between good and evil.)

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