Wednesday, January 30, 2008

Capital flow

Pepys Diary The Deputy-Master of the Mint on capital flow:

To another question of mine he made me fully understand that the old law of prohibiting bullion to be exported, is, and ever was a folly and an injury, rather than good. Arguing thus, that if the exportations exceed importations, then the balance must be brought home in money, which, when our merchants know cannot be carried out again, they will forbear to bring home in money, but let it lie abroad for trade, or keepe in foreign banks: or if our importations exceed our exportations, then, to keepe credit, the merchants will and must find ways of carrying out money by stealth, which is a most easy thing to do, and is every where done; and therefore the law against it signifies nothing in the world. Besides, that it is seen, that where money is free, there is great plenty; where it is restrained, as here, there is a great want, as in Spayne. These and many other fine discourses I had from him

Sunday, January 20, 2008

Lease or own?

On the advantage that hotel chains have when they lease rather than own.

"The property-light model has lower fixed costs, permits rapid expansion and provides some cushion against the cycle because franchisees pay a fixed service fee in addition to a share of room revenues. UBS estimates that a 1 per cent drop in average room rates for a notional operator with fully owned hotels would knock 6 per cent of pre-tax earnings. A fully franchised operator would see profits drop by just 1 per cent."

Sunday, January 13, 2008


Kahneman talks about changing his mind.

To compound the irony, recent findings from the Gallup World Poll raise doubts about the puzzle itself. The most dramatic result is that when the entire range of human living standards is considered, the effects of income on a measure of life satisfaction (the "ladder of life") are not small at all. We had thought income effects are small because we were looking within countries. The GDP differences between countries are enormous, and highly predictive of differences in life satisfaction. In a sample of over 130,000 people from 126 countries, the correlation between the life satisfaction of individuals and the GDP of the country in which they live was over .40 – an exceptionally high value in social science. Humans everywhere, from Norway to Sierra Leone, apparently evaluate their life by a common standard of material prosperity, which changes as GDP increases. The implied conclusion, that citizens of different countries do not adapt to their level of prosperity, flies against everything we thought we knew ten years ago. We have been wrong and now we know it. I suppose this means that there is a science of well-being, even if we are not doing it very well.

Food, glorious food

There was something uncomfortable about watching Fearnley-Whittingstall, a gentleman farmer, trying to guilt-trip people on low incomes over what they eat. There's no doubting his commitment. And yes, in an ideal world, we would all eat locally sourced meat raised in the most glorious of conditions. Millions of people with the available cash spend their extra money to ensure they do just that. I am one of them. I am willing to spend a significant proportion of my income on ingredients, because I am a greedy man who has the luxury of being able to support an overly developed interest in his dinner.

But there are much bigger issues at play here and to understand them we need to take the long view. The reality is that the downside to human health from the factory farming of chicken - a certain amount of salmonella and campylobacter, both of which can be eliminated by proper handling in the kitchen - are vastly outweighed by the upside. However much the animal welfare lobby may disagree, it is arguable that the upside also outweighs the significant negatives for those intensively reared chickens.

'Prior to the 1950s, large numbers of people died because of tuberculosis due to a simple lack of nourishment,' says Hugh Pennington, emeritus professor of bacteriology at Aberdeen University and an expert on food contamination and nutritional issues. 'The wide availability of cheap animal proteins, both chicken and fish, has put an end to that.' The availability of those intensively reared chickens that go from egg to slaughter in just 39 days without ever seeing daylight is, therefore, not merely a question of taste to be pursued doggedly by a lovable TV chef. It's a question of basic human health.

Jay Rayner

Thursday, January 03, 2008

RMB appreciation

RMB has apreciated an annualised 20% in the last month. It looks as if there may be a change in policy from the Chinese authorities. The big question is whether this pace of appreciation will be maintained or whether there will be a conclusive revaluation to a higher level. The problem with the current strategy is that it will only increase speculative flow into the RMB and may make the job of the Chinese monetary authorities even more difficult. The picture and the information comes from Macro Man.