Twofish's Blog

April 12, 2008

About media bias or non-bias

Filed under: china, economics, politics, wikipedia — twofish @ 5:08 pm

I don’t think that the Western media is particular biased against China per se. It’s just that media is looking for a “good” and “exciting” story, and “good stories” are usually about “EVIL OPPRESSOR” against “INNOCENT VICTIM” and China sometimes falls into the “EVIL OPPRESSOR” role. It’s not necessarily anti-China since any big government or corporation is going to sometimes fall into the “EVIL OPPRESSOR” mode, and one part of any media strategy is to try not to get hit with the EVIL OPPRESSOR label too much.

Part of the reason is that China is getting more and more powerful and rich, and the more powerful and rich you are, the more likely it is that you will be an “EVIL OPPRESSOR” and less likely that you will be “INNOCENT VICTIM.” Note that in the 1980’s Japan and Russia were “EVIL OPPRESSORS” but today no one cares about them any more.

Part of the reason I’ve started the “LET’S BASH CHINA COLUMN…” is that one has to get used to it and laugh at it rather than get too angry because anger destroys you (something that I learned from the Dalai Lama).

The other problem is that Chinese students tend to go into fields that make money (computer science, law, and finance). I really don’t know that many Chinese students that come to the US to study journalism. Part of the reason this is that skills in finance and CS are transferable. People can easily move from Goldman-Sachs to Bank of China and vice-versa, from Huawei to Cisco and back, and no one I know has moved from the New York Times and back.

One issue here is that the “Western media” claims lack of bias. If you go to People’s Daily or Xinhua and ask, are you fair and objective. They’d say “of course not, we speak for the Communist Party.” The trouble with CNN, Washington Post, and New York Times is that they claim to be objective and unbiased, when it’s pretty clear that they are not. (Read anything that Howard W. French writes.) Interestingly not all media claim non-bias, the Economist, one of my favorite magazines, makes it very clear that they are biased for free-markets and free-minds. The Wall Street Journal also doesn’t claim objectivity.

The problem with claiming non-bias is that then you can’t talk about them and thing rationally about how your biases affect your reporting. Also by claiming non-bias, you are implicitly saying that people who disagree with you are biased, and that means that you have no reason to take their views seriously.

This brings up the question of whether the notion of non-bias works at all in the internet age.

The groups that overseas Chinese groups should learn from are groups conservative groups like “Accuracy in Media” and conservative bloggers that killed CBS News and made Dan Rather a laughing stock. Another thing to study is the Tailwind scandal.

One reason to not get too overexcited about media portrayal about China is that people in the US are “immunized” to media bias in much the same way that people in China don’t really trust the People’s Daily. People in the US *don’t* get all or even most of their information about China from the newspapers but rather from Chinese that they live and work with.

Finally, one reason that is important in that during the 1970’s and 1980’s, the United States was seen has “heaven” and “savior” by most Chinese. CNN gets a *lot* of anger now, because of its role in 1989 when it was seen as “savior” during the Tiananmen demonstrations. Chinese are finding out the truth which is that the United States is run by ordinary people not super-humans. One thing that greatly concerns me is that Tibetans in Tibet who have much less exposure to the West than Han Chinese in Shanghai may see the United States as a savior, and this may lead them to do things which they wouldn’t do if they knew the reality.

So you have monks demonstrate and pictures end up in the front page of the New York Times. *WE ARE SAVED, TIBET IS FREE, THE NEW YORK TIMES AND NANCY PELOSI WILL SAVE US*. Except that in three months, the New York Times is gone, people in the West have forgot about you, and the Chinese government is still there. People are still dying in Darfur and Burma. Remember them?

Two, under what situations would it cease to be biased against China?

If China falls apart and gets invaded then it becomes an *INNOCENT VICTIM*. Personally, I think we should just get used to the media trying to portray China as an *EVIL OPPRESSOR* and learn to manage it.

Also don’t think of the Western media is an monolith. There are lots and lots of different groups in the West. As with all political activism, you need to find the groups that agree with your views and work with them. has a nice section on anti-anti-China bashing.

And three, if Westerners are receiving a distorted image of China, their valuation of the Chinese economy must be distorted. How do I make money off it?

Not really. Business people don’t get their news from the newspapers, they see for themselves. One reason I like people in business is that it is interesting how people who are good at making money are very good at trying to figure out what is *REAL* going on since they want to make money off it.

Right now the CEO of every major corporate sponsor is hoping that the Olympic protests dissipate and if they can think of a quiet way that they can reduce the protests they’ll do it. They are limited by the fact that if they do anything obvious then the headlines will read *EVIL BIG CORPORATION SILENCES INNOCENT VICTIM PROTESTERS!!!!!* so I think what they are doing is to not say anything stupid and just wait for things to blow over, and if there is no news, then they can start running the Olympic commercials in June or July. Looking at the list of cities, the only two that I can see where you could have a repeat of Paris are Canberra and Delhi.

BTW, no major corporate sponsor will *DARE* pull out at this point. Anyone that does will be looking at losing the China market for the next decade. One thing that’s nice about multi-national corporations is that while 1.2 billion Chinese can’t vote for President of China, they can vote as to whether or not the want to drink Coca-Cola or wear Nike. This gives Chinese quite a bit of control over multi-national corporations, and the protesters can have the streets if we take the board rooms.

February 21, 2008

Response to Why China should not fear open debate

Filed under: china, economics, human rights, politics — twofish @ 5:25 am

This is a very ironic piece.  The message of the piece seems to be let’s have a free and open debate in China so that I can prove to Chinese nationalists that I’m right and they are wrong.  Different viewpoints are good, and when you express different viewpoints, you’ll naturally find that mine are absolutely objectively correct and their’s are totally completely wrong.

I think the post wildly underestimates the degree to which people view the world in different ways, and how hard it is to be tolerant of other people’s beliefs once you find out what they really are.  The assumption seems to be that when different people are exposed to the “correct view of the world” that naturally they will see the world in the way that he does, and my experience suggests that this is not going to happen.  People’s beliefs about how the world works and how it should work are formed at a very early age, and they don’t change without enormous personal trauma.  Usually people take new facts and try to fit them into the picture of the world that they already have, and if you don’t share those beliefs, it can be quite shocking what those beliefs actually are.

Being exposed to wildly different beliefs usually doesn’t result in tolerance, it results in even more screaming.  What does cause tolerance is the knowledge that you have to deal with someone despite how much you disagree with them, and this is why e-mail produces so much flameage.  You scream at someone over e-mail and never see them again.  If it turns out that you actually have to live with someone, the dynamics changes.

Just letting opinions out in the open doesn’t necessarily produce better policy, it could easily lead to paralysis, people screaming at each other, or worse shooting at each other.  Good governance is at the thin line between anarchy and tyranny, and having things move into anarchy can produce as much suffering as having things move to tyranny.

December 5, 2007

Plato’s disease

Filed under: economics — twofish @ 4:25 am

I have on order “How Economics Forgot History” by Hodgson.

It seems that social science disciplines suffer from “Plato’s disease.” There is the belief that behind all of the noise there are same basic abstract principles that unify the discipline, and the goal of research is to discover those grand principles.

The trouble is that by looking at more and more abstract principles, one becomes more and more detached from messing and complex reality, which may be a problem if unifying abstract principles do not exist and all that is “real” is messy reality.

November 16, 2007

Comments on economic education

Filed under: austrian economics, economics — twofish @ 5:29 am

One thing that often surprises people is the degree to which people working in Wall Street investment banks tend to not be “economic conservatives.” Investment banks are huge bureaucracies, and the people in them are generally not allergic to working in large bureaucracies. Also people who work on the raw edge of markets everyday see some of the limitations of said markets. Lots of Rubin Democrats in the banks.

People like George Soros and Warren Buffet have warned against market fundamentalism, and I don’t recall anyone out of a major Wall Street investment bank that has recently called for unfettered capitalism. (Hedge funds are different.)

One of the funny ironies involves sitting at a trading desk at the center of global capitalism, and going through a maddening socialist central-planning bureaucracy trying to get a phone installed.

November 12, 2007

A brief history of recent US finance

Filed under: austrian economics, economics, finance — twofish @ 4:16 pm

50 Cent: Really? Explain how US banks were able to offer fixed rate mortgages before the 1980s without a liquid market for derivatives.

Simple. Between 1933 and 1980, the Federal Reserve set interest rates. Under regulation Q, all retail savings rates in the United States were set at 5.25% and checking account interest was set at zero. Once retail savings were fixed, then the government through FHA set the lending rates at below market rates, making it easy for people to finance home purchases.

It was a massive successful system that worked for about 50 years, but ended up being unsustainable. One thing that killed it was the inflation of the 1970’s. Once you had inflation, people were no longer willing to save at 5.25% when inflation was at 10%, and people invented clever things like money market accounts and certificate of deposits to circumvent Regulation Q. Another thing the fact that the government couldn’t increase interest rates meant that it didn’t have a way of controlling the inflation of the 1970’s. Also, the US government could pretty easily set interest rates and do whatever it wanted domestically in 1933 to 1965 when US markets were the only game in town. In 1948, if you didn’t like the lousy interest that the US government was setting for you, you pretty much were stuck since there was no where else in the world you could move your money to. This stopped being true in the 1960’s which was one reason the system broke done. Another was Vietnam and the Great Society. Have a major war and not increasing taxes means that the wealth has got to come from somewhere………..

So finally in 1980. the US government gave up, deregulated interest rates. This quickly lead to a huge set of banks making stupid loans creating an early savings and loan crisis in the US. It also very quickly lead to the formation of a derivatives market in the mid-1980’s. By the early-1990’s, there was a demand for people who could calculate the value of those derivatives, which led to lots of physics Ph.D.’s being hired on Wall Street.

The Chinese financial system looks in some ways like the US financial system of 1965, but there are lots of pressures for floating interest and currency rates. It’s not that floating interest or currency rates are morally better or worse, it’s that like the US in the late-1970’s, China is finding that it *must* to certain things in order to avoid chaos. What I find fascinating about the history of US finance from 1970 to 1990 is that pretty much *none* of it was planned.

The other thing is that among the financial innovations that people found scary in the late 1970’s were money market funds and certificate of deposits. Money market funds turn out to be a great thing since it means that you can basically have a checking account that pays interest, which is a hellishly difficult thing to create.

Also, one curious thing is that the US retail derivatives market is not nearly as well developed as the Asian or European markets. In the US, you can’t go into a bank, and buy a complex structured note, and there are dozens of legal, cultural,. and regulatory reasons why not. In the UK, you can.

November 8, 2007

Non story – Chen Siwei and the sky falling

Filed under: china, economics, finance — twofish @ 4:02 am

The sky is falling. China is going to dump dollars for Euros. The sky is falling!!!

After googling a bit, I found what Chen Siwei really said, and it wasn’t quite what was reported

Translating the third paragraphs….

Chen Siwei said that improving liquidity could allow for the adjustment of foreign exchange reserves. He proposed that from a strategic and tactical viewpoint it would be appropriate to relax restrictions controls on individuals and enterprises, and so “save the reserves among the people.” In this currency system, stronger currencies would rise and balance the fall in weaker currencies.

Thanks to the magic of sensationalist journalism, this became CHINESE GOVERNMENT ABOUT TO DUMP DOLLARS!!!!!

Also it seems to be a big conference with lots of papers with lots of different points of view, and it seems that the reporters just went through the dozens and dozens of speakers and papers to find the bits that would make nice headlines.

What annoys me is the shoddy journalism in the internet age. Not one newspaper that I’ve seen gave a hyperlink to the talk, nor did anyone think of just translating the whole speech or even a paragraph versions. What’s more, once one newspaper came up with a quote, every other newspaper, did a “me too” and repeated exactly the same set of quotes with some extra exclamation marks to it.

It wasn’t a huge amount of effort for me to find out what Chen Siwei actually said. I just googled for financial conferences in Beijing in November 2007 and looked for Chen Siwei.

October 9, 2007

Not short sighted at all….

Filed under: china, economics, globalization — twofish @ 4:24 am
No one I know in business is being short-sighted at all here. Everyone is doing what they are doing with full knowledge of the consequences. If low end manufacturing is moving toward China and India then why lose money by fighting the flow rather than make money encouraging it? The only two reasons that come up are sentimental national loyalties and fears of a protectionist backlash.

The trouble with national loyalties is that while a Swede can reasonably be expected to site factories in Sweden over China, there’s no reason why a Swede would want to site a factory in the United States over China or any reason why an American would want to site a factory in Germany over China. Multi-national corporations are increasingly multi-national which makes arguing for political siting difficult. The Americans on the board of directors might want the company to do things that especially benefit the American economy or American national interest, but that’s not going to convince the Swedes, Italians or Brazilians in the room, and over time you are going to find more and more Chinese and Indians in the board rooms.

The trouble with protectionist backlash is that the fundamental driving forces behind globalization don’t have much to do with trade law. They have to do with the fact that I can instant message someone in Hong Kong at no cost. As long as you can have people talk between Hong Kong and New York City, people will find ways around the barriers.

People in finance and business have seen the writing on the wall, perhaps a bit earlier than people in politics or main street. If world economic and political power is moving from Western Europe and the United States to China and India, then you have lots of people who have seen the writing on the way, and figuring out how to get in good graces with the new people with power.

That’s being realistic and far-sighted, not blind and short sighted……..

October 8, 2007

Difficult decisions postponed — Good

Filed under: china, economics, history, politics — twofish @ 10:54 pm

First of all, I don’t think that who is or is not in the Politburo will make a huge amount of difference as far as economic policy goes. The driving factors for PRC decision making are mostly institutional rather than personal.

Second, when dealing with complex systems like economies, I think it is almost always a bad idea to implement decisive political changes without a lot of discussion and consensus. The reason for this is that arguing about an issue gives you some broader perspective and also makes more much more subtle and sophisticated policy. The need to preserve employment is a valid policy goal, and I’ve found that in arguing about an issue that you often end up with creative solutions. The thing that makes policy tricky is that you never will know what happened if you didn’t undertake a policy. Yes, maybe by boosting unemployment, you end up avoiding the disaster. Then again maybe not. it’s possible that one’s economic principles were wrong in the first place, and by boosting unemployment you just made the problem worse.

Something that is important is that Chinese decision making leaves under the shadow of the Great Leap Forward and the Cultural Revolution. Saying that some massive pain is necessary in order to avoid disaster insure a great future is something people heard before, and are really skeptical of now. Sure your theory says that we might do X to avoid disaster Y, but maybe your theory is wrong.

Finally, in a situation where you have real economic growth, it makes sense to delay difficult decisions until later, because the longer you delay the decision, the more economic growth you have, and the more economic growth you have, and the more options you have for fixing the problem. Also making a difficult decision generally leads to new problems and new difficult decisions.

The entire history of Chinese economic reform since 1978 has been the history of political compromises and delaying difficult decisions for as long as possible. In hindsight, I think that this has been a wise move since there are things we now know about the Chinese economy that we simply did not and could now have known in the past. For one to argue that this time “bold decisive action” is necessary, one has to explain how “this time is different.” And since 1978, there has been no shortage of people arguing that “this time things are different.” I don’t think they are, and the key thing that makes things the same is that we don’t know what is going on.

Reading back since 1978 there have been a whole slew of papers that have argued “China is doomed unless they give this incremental approach to reform, and take bold action now” and in hindsight these papers have been wrong and the course of action suggested by these papers would have been sub-optimal for reasons that were unknown at the time the papers were written. One thing that is humbling is to go back in time, and read papers that describe policy suggestions at a point in time pretending that you know only what people knew them. It’s amazing what people just got wrong, and there is no reason to think that we are going to be less incorrect with our own predictions of the future.

If you go and ask most people in the Chinese bureaucracy what the key to Chinese success has been, I think that the answer is not in particular decisions, but rather in a philosophy and a mode of decision making.

“Seek truth from fact” (which by the way was a phrase used first not by Deng Xiaoping but rather a 17th century Chinese philosopher) means “don’t seek truth from theory” whether the theory was written by Karl Marx, John Maynard Keynes, or Milton Friedman.

Notes on the 17th Party Congress – A 1.5 party system

Filed under: china, economics — twofish @ 5:59 am 

Title is China’s leaders deadlocked over succession.  There is one important aspect of the Chinese Communist Party politics that the article doesn’t mention and that is that the two major factions within the Communist Party have different power bases.  Here is a nice paper on the topic

The papers argues that there are two factions within the party.  The “populist” faction which consists of people from the inner provinces, and the “elitist” faction which consists of people from the coastal provinces.  One point that the paper makes is that neither faction has the will or ability to gain absolute power over the other, and both have expertise that the other does not have.   The paper also makes the point that high offices are allocated to these factions with almost mathematical precision.

This puts the latest reports of “deadlock” in another light.  First of all, the infighting really isn’t between Hu and Jiang, its between two different factions with different regional bases of support.  Second, it was probably agreed early one that one of the next generation of leaders would be a “populist” and the other would be an “elitist” and what all of the screaming about is for each side to get some points.

October 2, 2007

Dark matter – What the trade data doesn’t show

Filed under: economics, globalization, international law, internet, new york city — twofish @ 12:35 am 

Someone is typing in NYC. The computer that they are typing into is located in Hong Kong (or quite possibly in some data center in India). While they are typing, they are instant messaging and on the phone with people in London This is all happening real time, and I’d be curious how this gets reflected in the trade data.

My guess is that it doesn’t, and where is where “dark matter” comes in. This also explains a lot about why I don’t think that there is such a anti-globalization backlash. When you get to work, and you start e-mailing and IM’ing people around the world as part of your daily routine, the idea of anti-globalization seems rather quaint…….

As far as fear of job losses…… Well you can move an individual programmer from NYC to India. You can’t easily move Columbia University, NYU, about a hundred skyscrapers in midtown, all of the computers, all of the support staff, all of the headhunters, etc. etc. to India. It’s easier and a lot cheaper to move someone from India to NYC. A tree you can move easily. An entire ecosystem is hard to move. Even convincing people to move thirty blocks from midtown Manhattan to downtown Manhattan is proving to be a challenge.

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