Globalization Factor
Nothing is wrong with economic theory.
Everything is wrong with our implementation of it.
I. Background:
II. Economic premises:
III. Time Lags and What we should do:
IV. Warning and My proposal:
I. Background:
Although everybody is aware of a movement of globalization, it seems to me that majority of our activities are not to the point at globalization point of view.
Therefore, I would like to point out fundamental issues with respect to current economic situations influenced by globalization factor as follows:
II. Economic premises:
As everybody is aware of it, there are fundamental premises in economic theory.
As Dr. Auerbach explained to me in Macro Economic class at UCR, economic theory only works under certain conditions.
In other words, economic theory only works as long as we keep those fundamental premises.
Since most economic theory is mathematically proven, it must work like mathematical formula on the condition that we keep the following economic premises.
Put it in different words, current mal-functioning economy is being caused by our mistakes such as violating the followings:
1. Perfect Information Flow:
2. Free Movement of Labor Force:
3. Free Movement of Exchange Rate:
4. Avoid Monopoly:
１． Perfect Information Flow:
This is the most famous one in economic theory, I guess.
Although it is not possible to have perfect information flow, we will have a serious trouble when violating it substantially.
Good example of it is Lehman Shock.
Critical information for judging value of securities got intentionally and technically hidden in a way of so-called securities science or something like that,
I am sorry for forgetting the right word for it.
It took many years until we found out what was going on and thus majority of us got mislead by the disguised information.
2. Free Movement of Labor Force:
Because of globalization factor, almost everything moves globally except labor force these days.
Since many factories moved globally, labor force is supposed to move globally too, that is not happening right now.
This is one of the reasons we have high employment rate in industrialized countries.
Young people should be able to find a job freely in global market without any restrictions such as working visa, etc.
This is also one of the reasons we have an issue for population over-growth.
In developing countries more jobs have been created without any inflow of labor force from outside, this situation creates enough room for having many babies.
On the other hand, in developed countries we have high unemployment rate because labor force are staying at home while lots of factories=jobs are moving out.
3. Free Movement of Exchange Rate:
China is controlling exchange rate.
Nobody tries to control exchange rate unfavorably to him/her.
Everybody tries to control exchange rate favorably to him/her.
Since China has the second biggest economic power, it is not acceptable to fix or control exchange rate for its favor.
4 .Avoid Monopoly:
In the past ten years or so, I tend to believe that we have increased concern for monopolistic conditions in the market.
As everybody is aware of it, when monopolistic condition exists, market does not function properly since we cannot keep fair competition due mainly to inadequate governmental regulations such as inability of forcing global anti-monopolistic regulations.
- Monopolistic Power of Fund Money:
- Since fund money is so huge, it is no longer fair for individual investors to compete against fund money in the same financial market.
- This is one of the reasons that I quit investing in financial market anymore and also money inflow into financial market is shrinking, I guess.
- I rather play at casino than investing in financial market since it is not a fair competition.
- Monopolistic power of global companies.
- Since we do not have global government yet, nobody effectively controls monopolistic situation in global market.
III. Time Lags and what we should do about it:
In addition, we have some time lags or misconception as follows:
1. Concept of EC is already obsolete:
2. Concept of TPP is even dangerous:
1. Concept of EC is already obsolete:
Concept of EC is one step backward from concept of globalization and thus it is already obsolete.
Actually from globalization point of view, concept of EC is working as a blockage against globalization.
One of the reasons that EC’s economy is not doing very well is that it failed to fully benefit from economic boom of Asia especially China in the past several years by forming EC, which in a sense works as a blockage against the rest of the world.
2. Concept of TPP is even dangerous:
This reminds me of the condition before WWII before 1939, when protectionism prevailed.
TPP is dangerous in two-folds.
First, TPP works like protectionism for the rest of the world.
Second, TPP will become monopolistic power since it could represent almost 40% of economic power depending on contents of members, though.
In other words, the rest of the world will suffer at the gains of TPP members, which may lead to bankruptcy of Greece, for example, and may cause world depression.
In my opinion, Greece got one-time gains when becoming a member of EC such as appreciation of its currency as much as by three-folds due mainly to increased credibility backed up by EC.
However, in true economic sense, currency appreciation should occur based on increased competitiveness of the country, for example, which is sustainable, which is not the case for Greece.
Since competitive edge of Greece has not been increased while only living standards got raised up because of one-time wind fall gains, situation of Greece will get worse until Greece people start being aware of it and start working longer and harder.
Because of globalization factor, people of developed countries need to work harder and longer in order to compete against workers in developing countries those who work hard and long hours under less paid conditions.
IV. Warning and My Proposal:
Do not implement TPP for a while.
In other words, freeze TPP for 5 to ten years, and go directly to globalization or global government, or global society.
Although, movement of TPP is an inevitable or a reasonable step toward globalization, it should be best for us to skip this stage since it is a one step backward from globalization and will work as protectionism for the rest of the world.
I hope that my intention of trying to prevent unnecessary sufferings or financial pains is well acknowledged and implemented by the leaders of the world accordingly.
Hiroshi Morita, a citizen of global world.
December 28th, 2011.
2011年12月28日水曜日
2010年8月25日水曜日
Chinese trap – Dangerous Protectionism
Why global economy is not functioning well?
A. Purpose:
- Purpose of this memo is to inform you of my conclusions about one of culprits, which are disturbing invisible hands and causing financial crisis in global market.
B. Background:
- Violation of fundamental premises of Economic Theory:
As you know, Economic theory only works under the certain premises such as no restrictions of money flow (free movement), etc.
China is violating a couple of fundamental economic premises as follows:
1. 2 way tactics of holding Money flow in China. (Protectionism)
A. Chinese GEN’s Exchange rate fixation. (violation of free trade)
B. Restrictions of taking out money from China. (violation of free movement)
A. Chinese GEN’s Exchange rate fixation. (violation of free trade)
By setting Chinese Gen at exceptionally low rate and making labor costs as cheap as possible, China gained lots of factory type jobs and succeeded to increase sales as a nation. (Increase of Money in-flow into China)
B. Restrictions of taking out money from China. (violation of free movement)
By placing upper limit of taking out money from China (20,000 GEN), China is trying to hold money flow within Chinese market.
When the above two practices combined, it becomes protectionism of Chinese market.
In other words, China is trying to grow and prosper Chinese economy at the expense of global economy in my opinion.
Chinese economy used to be weak and insignificant in the past.
Now Chinese economy is very strong and significant in global economy having the second highest GNP in the world next to the U.S.
2. Function of global currency:
Of course number one global currency is U.S. dollars, followed by Euro and YEN.
What happened about Chinese GEN?
Chinese GEN is not qualified as global currency due to the following reasons:
3. Restrictions and fixation of Chinese GEN.
Since Chinese GEN is not free flow currency and we do not trust Chinese GEN, Chinese GEN is not functioning as a global currency.
In other words, we do not wish to keep Chinese GEN as reserve money since we cannot globally move it as free as we wish.
This is one of the reasons why Japanese YEN is so strong these days.
The U.S., Europe, and Japan lost lots of factory type jobs while keeping out of job workers at home. (Decreased sales with the same O/H. => bad economy and financial trouble)
The U.S. and Europe has spent lots of money to stimulate its economy before fixing Chinese trap as mentioned above.
Once money goes into China, it is hard to come back and thus money is gradually accumulated in China.
China prospers and economy of the U.S. and Europe gradually shrink since money will not come back from China very easily.
Since Japan has not spent as much money for economic stimulation nor extend money supply as much as the U.S. and Europe, Japan still has some room to take some actions, I guess.
Although China has the second biggest impact to global economy as a single nation, Chinese GEN is useless as a global currency and thus people reluctantly keep YEN as relatively safe reserve money.
4. Conclusion:
China is creating lots of current issues in a way of protectionism.
We should fix this issue of China’s protectionism first; otherwise, most of our efforts will be soaked up by China.
The U.S. government tried to fix it once in the past alone.
Since this is a global issue, please raise this issue at either G20 or United nations and try to solve it altogether once more.
A. Purpose:
- Purpose of this memo is to inform you of my conclusions about one of culprits, which are disturbing invisible hands and causing financial crisis in global market.
B. Background:
- Violation of fundamental premises of Economic Theory:
As you know, Economic theory only works under the certain premises such as no restrictions of money flow (free movement), etc.
China is violating a couple of fundamental economic premises as follows:
1. 2 way tactics of holding Money flow in China. (Protectionism)
A. Chinese GEN’s Exchange rate fixation. (violation of free trade)
B. Restrictions of taking out money from China. (violation of free movement)
A. Chinese GEN’s Exchange rate fixation. (violation of free trade)
By setting Chinese Gen at exceptionally low rate and making labor costs as cheap as possible, China gained lots of factory type jobs and succeeded to increase sales as a nation. (Increase of Money in-flow into China)
B. Restrictions of taking out money from China. (violation of free movement)
By placing upper limit of taking out money from China (20,000 GEN), China is trying to hold money flow within Chinese market.
When the above two practices combined, it becomes protectionism of Chinese market.
In other words, China is trying to grow and prosper Chinese economy at the expense of global economy in my opinion.
Chinese economy used to be weak and insignificant in the past.
Now Chinese economy is very strong and significant in global economy having the second highest GNP in the world next to the U.S.
2. Function of global currency:
Of course number one global currency is U.S. dollars, followed by Euro and YEN.
What happened about Chinese GEN?
Chinese GEN is not qualified as global currency due to the following reasons:
3. Restrictions and fixation of Chinese GEN.
Since Chinese GEN is not free flow currency and we do not trust Chinese GEN, Chinese GEN is not functioning as a global currency.
In other words, we do not wish to keep Chinese GEN as reserve money since we cannot globally move it as free as we wish.
This is one of the reasons why Japanese YEN is so strong these days.
The U.S., Europe, and Japan lost lots of factory type jobs while keeping out of job workers at home. (Decreased sales with the same O/H. => bad economy and financial trouble)
The U.S. and Europe has spent lots of money to stimulate its economy before fixing Chinese trap as mentioned above.
Once money goes into China, it is hard to come back and thus money is gradually accumulated in China.
China prospers and economy of the U.S. and Europe gradually shrink since money will not come back from China very easily.
Since Japan has not spent as much money for economic stimulation nor extend money supply as much as the U.S. and Europe, Japan still has some room to take some actions, I guess.
Although China has the second biggest impact to global economy as a single nation, Chinese GEN is useless as a global currency and thus people reluctantly keep YEN as relatively safe reserve money.
4. Conclusion:
China is creating lots of current issues in a way of protectionism.
We should fix this issue of China’s protectionism first; otherwise, most of our efforts will be soaked up by China.
The U.S. government tried to fix it once in the past alone.
Since this is a global issue, please raise this issue at either G20 or United nations and try to solve it altogether once more.
2010年8月6日金曜日
Three Culprits and a Shadow in global economy
Three Culprits and a Shadow in global economy
.
What is wrong and what to do about it?
A. Purpose:
- Purpose of this memo is to macro-economically identify culprits, which are disturbing invisible hands and causing financial crisis in global market.
B. Background:
- Violation of fundamental premises of Economic Theory:
As you know, Economic theory only works under the certain premises such as abundant resources, perfect information flow, no restrictions of flow (free movement), etc.
I learned it from macro-economic Prof., Dr. Auerbach at UCR.
The followings are major factors which violate fundamental economic premises:
1. Oil Money
2. Fund Money
3. Chinese Money
1. Oil Money (violation of abundant resources):
Since oil is no longer abundant; in other words, oil resources are limited, demand-supply function does not work correctly.
Oil price will keep going up endlessly unless substitution energy or replacement of oil shows up.
This is not economically healthy situation but we do not have a solution for it so far.
I would say that establishment of a global government will help solve this issue somewhat.
2. Fund Money ( monopoly):
As economics major students know, where there exists monopolistic condition, healthy competitions are restricted and thus this is the violation of fundamental economic premise.
Right now Fund Money has too much bargaining power, price- influencing power, and economy of scale, there will be no-fair game in financial market any more.
Fund Money always wins.
Fund Money should be divided into smaller pieces, which is the same case as monopolistic companies in business world under the Anti-Monopoly laws.
By the way, Anti-Monopoly laws are not working well globally since global anti-monopoly laws do not exist.
We should create global Anti-Monopoly laws ASAP and apply them to both fund money and global companies.
3. Chinese Money (violation of free economy or laissez fair.):
Exchange rate fixation by Chinese government is hindering healthy cycles of free economy.
What is happening right now is as follows:
China has become a factory site for global companies.
Many global companies moved out factories from domestic site to China.
1. As a result, lots of factory jobs have been created in China.
In China, employment goes up, Chinese people get richer, Government’s Tax income goes up, and etc.
2. On the other hand, in industrialized countries, many factory jobs have gone.
Accordingly, unemployment goes up, total income earned by residence goes down, and Government’s tax income goes down and thus country itself gets poorer, and starts having financial difficulties.
Since labor forces do not move globally as opposed to domestic cases, invisible hands do not work and thus situation will not get better.
A. Job lost deflation.
This is opposite to wage-push inflation.
In Japan many factory type jobs have been lost to China, Japanese income and buying power went down, Japanese demand cheaper goods.
Since Japanese buying power got weakened and never recovered due to lost jobs, even prices of goods go down, sales still go down.
Job lost deflation begins and it gets worse every day.
First of all, exchange rate literally decides costs or prices of labor forces in global market.
Since China fixes exchange rate, invisible hands do not work.
In other words, in order to make Japan’s situations better globally, Japan should lower its prices, which can be done through devaluation of Japanese YEN against Chinese GEN.
According to recent newspapers in Japan, both U.S. and EU have a sign of deflation, which is similar to that of Japan.
China’s exchange rate fixation is not only violation of free economy but also very dangerous knock-out pricing strategy.
China should bear global responsibility as a member of global free economy.
Please imagine caterpillar of a tractor.
If one joint of caterpillar got fixated, it could stop movement of entire caterpillar.
The same thing is happening now in global economy, major countries such as U.S., EU, and even Japan try to ignite engine of global economy, and it always ends in China because of its currency fixation practice, in my opinion.
China should be ashamed of it because everybody suffers including China in the end.
4. Overpopulation – a shadow:
According to U.S. Census Bureau, we have more than 6.8 billion population in the world as of 2010.
More population means more competition.
Due mainly to increased competition and getting scarce resources, we have issues of oil money and fund money, I guess.
We should try to stop increasing trend of world population now.
How can we do that?
When China and India combined, they have 2.5 billion people (1,330,141,295+ 1,173,108,018 = 2,503,249,313), which is about 36% of world population, oh my GOD.
My proposal is to establish a global government and do something about it ASAP.
.
What is wrong and what to do about it?
A. Purpose:
- Purpose of this memo is to macro-economically identify culprits, which are disturbing invisible hands and causing financial crisis in global market.
B. Background:
- Violation of fundamental premises of Economic Theory:
As you know, Economic theory only works under the certain premises such as abundant resources, perfect information flow, no restrictions of flow (free movement), etc.
I learned it from macro-economic Prof., Dr. Auerbach at UCR.
The followings are major factors which violate fundamental economic premises:
1. Oil Money
2. Fund Money
3. Chinese Money
1. Oil Money (violation of abundant resources):
Since oil is no longer abundant; in other words, oil resources are limited, demand-supply function does not work correctly.
Oil price will keep going up endlessly unless substitution energy or replacement of oil shows up.
This is not economically healthy situation but we do not have a solution for it so far.
I would say that establishment of a global government will help solve this issue somewhat.
2. Fund Money ( monopoly):
As economics major students know, where there exists monopolistic condition, healthy competitions are restricted and thus this is the violation of fundamental economic premise.
Right now Fund Money has too much bargaining power, price- influencing power, and economy of scale, there will be no-fair game in financial market any more.
Fund Money always wins.
Fund Money should be divided into smaller pieces, which is the same case as monopolistic companies in business world under the Anti-Monopoly laws.
By the way, Anti-Monopoly laws are not working well globally since global anti-monopoly laws do not exist.
We should create global Anti-Monopoly laws ASAP and apply them to both fund money and global companies.
3. Chinese Money (violation of free economy or laissez fair.):
Exchange rate fixation by Chinese government is hindering healthy cycles of free economy.
What is happening right now is as follows:
China has become a factory site for global companies.
Many global companies moved out factories from domestic site to China.
1. As a result, lots of factory jobs have been created in China.
In China, employment goes up, Chinese people get richer, Government’s Tax income goes up, and etc.
2. On the other hand, in industrialized countries, many factory jobs have gone.
Accordingly, unemployment goes up, total income earned by residence goes down, and Government’s tax income goes down and thus country itself gets poorer, and starts having financial difficulties.
Since labor forces do not move globally as opposed to domestic cases, invisible hands do not work and thus situation will not get better.
A. Job lost deflation.
This is opposite to wage-push inflation.
In Japan many factory type jobs have been lost to China, Japanese income and buying power went down, Japanese demand cheaper goods.
Since Japanese buying power got weakened and never recovered due to lost jobs, even prices of goods go down, sales still go down.
Job lost deflation begins and it gets worse every day.
First of all, exchange rate literally decides costs or prices of labor forces in global market.
Since China fixes exchange rate, invisible hands do not work.
In other words, in order to make Japan’s situations better globally, Japan should lower its prices, which can be done through devaluation of Japanese YEN against Chinese GEN.
According to recent newspapers in Japan, both U.S. and EU have a sign of deflation, which is similar to that of Japan.
China’s exchange rate fixation is not only violation of free economy but also very dangerous knock-out pricing strategy.
China should bear global responsibility as a member of global free economy.
Please imagine caterpillar of a tractor.
If one joint of caterpillar got fixated, it could stop movement of entire caterpillar.
The same thing is happening now in global economy, major countries such as U.S., EU, and even Japan try to ignite engine of global economy, and it always ends in China because of its currency fixation practice, in my opinion.
China should be ashamed of it because everybody suffers including China in the end.
4. Overpopulation – a shadow:
According to U.S. Census Bureau, we have more than 6.8 billion population in the world as of 2010.
More population means more competition.
Due mainly to increased competition and getting scarce resources, we have issues of oil money and fund money, I guess.
We should try to stop increasing trend of world population now.
How can we do that?
When China and India combined, they have 2.5 billion people (1,330,141,295+ 1,173,108,018 = 2,503,249,313), which is about 36% of world population, oh my GOD.
My proposal is to establish a global government and do something about it ASAP.
2010年1月5日火曜日
Prescription for the current situation
Hello, I am Hiroshi Morita living in Tokyo, Japan.
I would like to say something since I tend to believe that I came up with simple solutions for the current situation as follows:
A. Purpose:
- Purpose of this memo is to try to improve current situation for everyone on the earth.
B. Background:
I wondered why world economy started dysfunctioning these days? Why invisible hands do not work well?
I came up with the following several reasons/causes.
In other words, we just need to handle a couple of real causes to improve current situation in my opinion as follows:
1. Assumption of Economic Theory has been changed:
One of assumption of Adam Smith’s economic theory is abundant resources while oil resources are no longer abundant.
This factor contributes dysfunctioning of invisible hands.
a. We need substitution energy as everyone is aware of.
b. Although substantial amount of money flow goes into oil producing countries, money is not re-invested in an ideal way in my opinion.
2. Issue of Overpopulation:
Issue of global warming is mainly caused by overpopulation in my opinion.
Since majority of CO2 is created by activities of human beings, if # of population is reduced, CO2 emission will be reduced accordingly.
3. Globalization:
Anti-trust, anti-monopoly laws are not functioning well globally, since we do not have global regulations for it.
4. Monopoly:
Both fund money and oil money has too much influential power in the market.
As economic students know, where there exists monopolistic condition, invisible hands do not work well.
C. My prescription for the current situation:
As you can see from the above stated, one very important thing is missing, which is a global government.
Unless we establish a global government, we will not be able to solve the current issues since those are all global issues.
1. Issue of overpopulation:
China once conducted one kid policy but it did not succeed because China did it alone.
If we try to implement 2 kids policy globally, it should work.
In other words, we should keep birth rate less than one in order to control population, in my opinion.
2. Issue of monopoly:
We can control monopolistic conditions if we establish a global government and enforce global anti-trust anti-monopoly regulations.
3. Issue of oil money:
Some percentage of Oil money should be spent on R&D of substitution energy in my opinion. Somebody should work together with oil producing countries.
With respect to Dubai’s case, I do not believe that Dubai went through Business procedures such SWOT analysis, pilot marketing research, and test marketing, etc.
As you can tell, this is theoretically very simple but extremely difficult to implement but we have to do it anyway if we want to improve our life.
I hope that this message reaches to Mr. President Obama because he is the only hope we have got in my opinion who can implement the above stated.
To be realistic, since we do not have a global government yet, the above stated issues should be handled at G20 in my opinion.
What do you think?
Thank you very much for reading this far and we need your help.
Please pass this memo to those who can help us in your opinion.
Best regards,
Hiroshi Morita
Jan. 5th, 2010
p.s. I hope that this message will reach to Mr. President Obama.
Please help me, God.
I would like to say something since I tend to believe that I came up with simple solutions for the current situation as follows:
A. Purpose:
- Purpose of this memo is to try to improve current situation for everyone on the earth.
B. Background:
I wondered why world economy started dysfunctioning these days? Why invisible hands do not work well?
I came up with the following several reasons/causes.
In other words, we just need to handle a couple of real causes to improve current situation in my opinion as follows:
1. Assumption of Economic Theory has been changed:
One of assumption of Adam Smith’s economic theory is abundant resources while oil resources are no longer abundant.
This factor contributes dysfunctioning of invisible hands.
a. We need substitution energy as everyone is aware of.
b. Although substantial amount of money flow goes into oil producing countries, money is not re-invested in an ideal way in my opinion.
2. Issue of Overpopulation:
Issue of global warming is mainly caused by overpopulation in my opinion.
Since majority of CO2 is created by activities of human beings, if # of population is reduced, CO2 emission will be reduced accordingly.
3. Globalization:
Anti-trust, anti-monopoly laws are not functioning well globally, since we do not have global regulations for it.
4. Monopoly:
Both fund money and oil money has too much influential power in the market.
As economic students know, where there exists monopolistic condition, invisible hands do not work well.
C. My prescription for the current situation:
As you can see from the above stated, one very important thing is missing, which is a global government.
Unless we establish a global government, we will not be able to solve the current issues since those are all global issues.
1. Issue of overpopulation:
China once conducted one kid policy but it did not succeed because China did it alone.
If we try to implement 2 kids policy globally, it should work.
In other words, we should keep birth rate less than one in order to control population, in my opinion.
2. Issue of monopoly:
We can control monopolistic conditions if we establish a global government and enforce global anti-trust anti-monopoly regulations.
3. Issue of oil money:
Some percentage of Oil money should be spent on R&D of substitution energy in my opinion. Somebody should work together with oil producing countries.
With respect to Dubai’s case, I do not believe that Dubai went through Business procedures such SWOT analysis, pilot marketing research, and test marketing, etc.
As you can tell, this is theoretically very simple but extremely difficult to implement but we have to do it anyway if we want to improve our life.
I hope that this message reaches to Mr. President Obama because he is the only hope we have got in my opinion who can implement the above stated.
To be realistic, since we do not have a global government yet, the above stated issues should be handled at G20 in my opinion.
What do you think?
Thank you very much for reading this far and we need your help.
Please pass this memo to those who can help us in your opinion.
Best regards,
Hiroshi Morita
Jan. 5th, 2010
p.s. I hope that this message will reach to Mr. President Obama.
Please help me, God.
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