FT.com / Asia-Pacific / China – Weak dollar troubles Beijing

Inflation, with its erosive effects on wealth and income, has plagued China at increasing rates since mid-2007. In February it reached an annualized rate of 8.7%, threatening to undermine China's GDP growth rate, which has been predicted in the 8% range for this year.

As we have discussed in our our AP Econ class here in Shanghai, China's inflation is caused by a combination of demand and supply-side factors. On the demand-side, a growing middle class has driven consumer spending to record levels recently, surpassing investment as the largest component of China's GDP in 2007. Of course, as always, high inflation (thus low real interest rates), optimism about rising consumption in the future, and a comparative advantage in labor-intensive manufacturing (albeit a diminishing one as wages continue to rise) all combine to keep investment extremely high. Furthermore, cheap exports have helped keep demand for China's output from abroad strong. The combination of increasing consumption, strong investment, and its trade surplus have resulted in demand-pull inflation.

On the supply-side, China has encountered additional inflationary pressures of late. Rising energy prices (mostly due to coal and oil shortages) combined with record rises in food prices (24% increase in the last year), have driven costs to firms up, shifting the aggregate supply curve leftward, further fueling inflation.

Knowing the damaging effects inflation has on income and wealth, it might be assumed that Beijing would place the utmost emphasis on taming the country's rising prices. This, however,is not at the top of the government's macroeconomic goals, according to premier Wen Jiabao:

On the issue of whether he would sacrifice economic output to bring down inflation, at the risk of increasing unemployment, Mr Wen indicated that growth re­mained the overarching priority. “We must ensure that our economy will grow…in order to ensure employment,” he said. “China is a developing country with 1.3bn people. We have to maintain a certain degree of fast economic growth to provide enough jobs.

”He said China needed to add about 10m jobs a year for the next five years, a lower figure than in the past when the aim was growth of 15m-20m jobs a year.

The tradeoff between inflation and unemployment to which Mr. Wen refers is a text book example of the challenges faced by macroeconomic policymakers everywhere. This trade-off is illustrated in the Phillips Curve model, which shows that in the short-run, there exists an inverse relationship between the price level and the unemployment rate.

In his words above, Mr. Wen demonstrates Beijing's preference in the trade-off between inflation and unemployment: He'll take inflation… Here's why.

In case you haven't heard, China is not a democracy. Nor is it a, ehem, “free” country. According to Alan Greenspan in his book “The Age of Turbulence”, democracy and freedom of speech act as “safety valves” in Western countries; in other words, in times of economic or political unrest, the right to gather in the streets, the right to vent frustrations through a free press and the opportunity to advocate political and economic change through the various media, all combine to prevent violent and revolutionary uprisings when times get tough economically.

Take the US for example. Times are certainly tough right now. Inflation's approaching 4-5%, while nominal growth has nearly stagnated. Unemployment, while it has technically fallen recently, in reality has risen as hundreds of thousands of workers have given up searching for work. The bursting of the housing bubble represents one of the most massive losses of wealth in recent history. A weak dollar has meant that even cheap imports don't seem so cheap anymore. Throw in the desperate war in Iraq, the nuclear threat from Iran, rising food prices, $110 oil and an incredibly unpopular national leader, and by some measures the country would appear ripe for revolution. However, a revolution is about the least likely thing to occur in America, because it enjoys the “safety valve” of democracy. Rather than overthrowing their government, Americans have the right to go to the pole and vote for a new one, which in all likelihood will occur this November when it seems either Barrack or Hillary stand the greatest chance and winning the White House.

Now let's look at China. The picture's not quite so gloomy for the Chinese right now. Yes, inflation is high, as in the US. But unlike America, China is still growing at a very healthy pace, unemployment is probably still below its natural level, the real estate markets in China's cities are still booming, meaning the middle class residents there are experiencing leaps and bounds in terms of personal wealth. Demand for its exports remains strong, and ever more poor Chinese are finding jobs in high paying factories across the country. Investments in capital, infrastructure and education point towards a bright future of continued growth for the foreseeable future.

But wait, 8.4% is something to worry about, especially when we take into account the 24% increase in food prices. Shouldn't Wen and Beijing be taking drastic steps to reign in this high rate of inflation? In short, NO, they shouldn't. Because as can be seen in the Phillips Curve, to reduce inflation could result in another, far more serious problem for Beijing; rising unemployment.

It appears that Beijing's greatest fear is a population out of work. Its goal of creating 10 million new jobs is ambitious, but in the eye's of the government, necessary. The Chinese people do not enjoy the “safety valve” of democracy through which economic frustrations and hardships can be channeled were the country to experience a slowdown in growth and an increase in unemployment. The last time the economy faced high inflation AND high unemployment, students, workers, soldiers and tanks all gathered for an afternoon of urban warfare under Mao's somber gaze in Beijing. To avoid such massive revolutionary movements in the future, Beijing must do all it can to insure job creation continues and growth remains strong, even if the trade-off is record high inflation.

This one passage spoken by Wen Jiabao, China's premier, tells a vivid story about the reality of Communist dictatorship in China. Sound economic policy may go on the back burner in times of political uncertainty. Price controls, such as those on petrol in Shanghai (speaking of, the long lines at gas stations are back!), were a microeconomic example of bad economics; Beijings hesitance to seriously tackle inflation is a macroeconomic example. Holding on to power seems to be more important than stabilizing prices, at least for now.

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March, April, May: this is crunch time for students of IB and AP Economics. Exams are just around the corner, we're wrapping up a long year (or two) of studies, and all the excitement of the end of the year is upon us. Just when we need it most, spring break is here!

I'll be in Malaysia for the week diving, visiting old high school friends, and enjoying the country I lived in as a kid. Some of you may be here in Shanghai wishing you were someplace cool, looking for something useful to do. If this is you, then you should check out the “AP/IB Exam Prep” page on this blog, where you can find downloadable study guides for every unit in the AP courseup to this point and links to the wiki pages you've created throughout the year. Between these two resources, you probably don't even need to open your textbook when reviewing for the AP and IB exams in May.

Have a great spring break. If you're feeling like me right now, then this break has arrived at just the right time! Don't expect much from me for the next 9 days, I'm not even bringing my computer to Malaysia with me, so this should be the last post until March 31!

OECD Cuts Growth Forecast to Below 2% – Bloomberg.com

The Organization for Economic Cooperation and Development predicts a global slowdown in growth. Among its 30 member nations, the OECD predicts growth of below 2% for 2008.

The [OECD] cut its forecast for expansion this year in its 30 member nations to “less than” 2 percent, the weakest since 2003. This “will be a difficult year of lower growth and some more unpleasant surprises,” OECD Secretary General Angel Gurria said in an interview in Oslo. “We have revised downwards a number of our projections.”

Okay, 2% isn't that bad, right? I mean, it's still growth. In fact, the OECD believes the strongest growth will be in emerging economies such as China and India, which it predicts will grow at 6.9%. The US and Europe may not enjoy such comfortable rates of expansion in this time of restricted credit, low consumption and investment and dwindling optimism among households and firms.

Jean-Luc Schneider, deputy director of the OECD's economics department, said the agency is “not yet completely convinced there will be a recession” in the U.S., though it will be “flirting” with contraction. That will affect other OECD economies, especially those in Europe, said Gurria.

While European growth won't be as “uncomfortable” as in the U.S., it'll “probably be worse than we know today…”

In times of macroeconomic weakness as described above, an active role for government may be required in order to stimulate consumption and investment, increase aggregate demand and restore a healthy rate of economic growth.

Keynesian economists advocate an active role for government and central banks in times of recession. The Keynesian school of economics rests on the theory of downwardly inflexible wages and prices, the implication being that in times of declining demand (low investment and consumption), the economy slides into recession characterized by rising unemployment and slow or negative growth. (as illustrated in the graph here)

The classical view of recession, however, holds that as employment and output decline, the price level will fall due to weak aggregate demand. This “flexible price” theory leads classical economists to argue that if left alone, the economy will self-correct because workers will eventually accept lower wages, leading firms to hire more workers, increase output, and restore full-employment (as shown in the graph on the left). No government intervention is needed in such a scenario.

Keynesians argue that “flexible prices” are a myth, that in times of recession prices may remain high or even rise (in the case of a supply-shock as illustrated in the graph below). Due to the “sticky prices”, workers are not willing to work for lower wages, thus firms are not able to increase their employment in a time of weak aggregate demand. Without downwardly flexible wages, aggregate supply will not adjust outwards to restore full employment output.

Keynesian economists therefore support action by the government and central banks in times of slow or negative growth. In America today, the mainstream view adopted by most macroeconomic policy makers is still rooted in Keynesian theory, which explains the government's recent fiscal stimulus package and expansionary monetary policies undertaken by the Fed.

Expansionary policies like a tax rebate, the Fed's buying of bonds on the open market, and the lowering of the discount rate are aimed at shifting Aggregate Demand outward to restore full employment. The problem is that in addition to weak demand, the world economy is simultaneously experiencing rising costs of production as a result of record energy and food prices.

Cost-push inflation and rising unemployment pose a whole new policy challenge for central bankers and politicians. To combat recession in the face of rising prices is tricky, as the trade-off between unemployment and inflation is tenuous. The Phillips Curve illustrates the inverse relationship between the inflation rate and the unemployment rate. To understand the logic of this model it is useful to examine the current challenge face by the Fed.

Both unemployment and inflation are rising in the US right now. The reason for this is the rising costs faced by firms due to a weak dollar combined with high energy and food prices. Normally, a Keynesian approach to recession alleviation would be in order to restore full employment. Stimulating spending through expansionary policies, however, will only worsen the inflation problem.

The “supply shock” faced by America today has caused both unemployment and inflation to increase, which is illustrated by an outward shift in the Phillips Curve. The best policy action in this scenario may, in fact, be to allow the US to enter a recession; in other words, no policy, or laissez faire.

If the US and European economies are allowed to experience a significant slowd0wn or contraction in growth, the global demand for commodities such as fossil fuels, minerals, and other raw materials for production should decline, putting downward pressure on these commodity prices. In addition, rising unemployment should eventually result in workers accepting lower wages. The combination of falling commodity prices and wages should encourage firms to increase output, shifting aggregate supply outward and the Phillips Curve inward, restoring full-employment and price level stability.

In all likelihood we will not see the above scenario transpire. Governments and central bankers are already making moves to maintain growth and low unemployment, even in the face of rising prices. The Keynesian/classical debate, however, will continue. For now, at least, it seems as if the Keynesians are still winning the battle of the hearts and minds of political and economic leaders today.

Beyond the Noise on Free Trade – New York Times

Ever wondered which presidential candidate had the most “economistic” views on economic issues? In other words, which candidate supports economic policies most in line with the mainstream economic theories of our day: Obama, Clinton or McCain?

First question is what, exactly, are the mainstream economic views at issue? In Harvard Professor Gregory Mankiw's article above, he talks about the issue of free trade:

Economists are, overwhelmingly, free traders. A 2006 poll of Ph.D. members of the American Economic Association found that 87.5 percent agreed that “the U.S. should eliminate remaining tariffs and other barriers to trade.”

The benefits from an open world trading system are standard fare in introductory economics courses. In my freshman course at Harvard, we start studying the topic in the second week, and we return to issues of globalization throughout the year. The basic lessons can be traced back to Adam Smith of the 18th century and David Ricardo of the 19th century: Trade between two countries creates winners and losers, but it leaves both nations with greater overall prosperity.

Indeed, all principles of economics courses (including our AP and IB courses here at SAS) teach in the first units the concepts of comparative advantage and trade based on specialization by nations in the production of the goods for which they have a lower opportunity cost than others. This basic tenet, illustrated so clearly with a simple productions possiblity curve, has proven to be the source of endless political turmoil in America, a country whose market economy is built on the principles of free trade, but whose citizens seem to increasingly oppose it today:

In December, an NBC News/Wall Street Journal poll asked Americans, “Do you think the fact that the American economy has become increasingly global is good because it has opened up new markets for American products and resulted in more jobs, or bad because it has subjected American companies and employees to unfair competition and cheap labor?”

When this question was asked a decade ago, the public was almost evenly split. In the recent poll, however, only 28 percent endorsed globalization, while 58 percent opposed it.

The protectionist tide seems to be rising in America in the face of rising unemployment, falling output, inflation and all-around insecurity among households and firms. So the question arises, where do the leading candidates fall on issues of free trade? Is it a threat to Americans' well-being or the source of our vast wealth and power? Mankiw examines the candidates' stances on a few major trade issues in the last few years. 

Here's what he finds: Overwhelmingly, John McCain has shown support for policies aimed at expanding free trade, while Clinton and Obama have taken stances oposing open markets. From opposing tariffs on Chinese imports to advocating a reduction of subsidies to American farmers to supporting the Central American Free Trade Agreement (FTA) and the US/South Korea FTA, McCain has consistently fallen on the side of the mainstream economists on the issue of globalization, while his Democratic counterparts have taken stances opposing trade liberalization and the opening of new markets to competition between American and foreign producers.

What conclusions can be drawn from Mankiw's observation? Are Democrats economically illitereate? Do Obama and Clinton need to sit through Econ 101 to learn that trade and specialization benefit society through expansion of output and lower prices? Probably not. Mankiw suggests that the rhetoric coming from the “Hillbama” campaigns is probably just populism aimed at gaining support of voters who fear the threat they perceive trade to pose to their livelihoods.

Maybe the candidates’ records as legislators are not good indicators of what their policies might be as president. Maybe campaign rhetoric… is nothing more than that. But counting on it requires, one might say, the audacity of hope.

Personally, I hope Mankiw is right, and that the Democrats prove to be a bit more ”economistic” in their policies should one of them end up in office. What do you think? Should American voters believe everything candidates say in their campaigns? If Hillary and Barack appear to be anti-trade and protectionist now does that mean America will be put on a path of isolation should one of them win the White House? Should we, as economists, be afraid, or hopeful, in this time of “change” and “hope” in America?

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More Bold Moves from the Fed: Business Week online ediction

Here we are, the night before our test on Monetary Policy, and good ol' Mr. Bernanke throws me a perfect blogworthy bit of news!

The Federal Reserve announced a series of steps Mar. 16 to help provide relief to a spreading credit crisis that threatens to plunge the economy into recession: The central bank approved a cut to its lending rate to financial institutions, from 3.5% to 3.25%, and created another lending facility for big investment banks to secure short-term loans.

Global financial markets appeared to react with alarm on Sunday evening. In overseas trading, the euro made new highs vs. the dollar, U.S. Treasury futures fell, and gold futures posted new record highs at $1,009.50 per ounce.

Discussion Questions:

1. Describe briefly what the article means by “a spreading credit-crisis”. How does less lending threaten to “plunge the economy into recession”?
2. Which tool of monetary policy does the term in bold refer to? Why would financial institutions ever need to borrow from the Fed?
3. Why did the euro reach “new highs vs. the dollar” on news of the US lowering interest rates? Why did gold shoot to its highest price in history on the news?

Inflation Reality Check(The Korea Times)

Harvard Economist Kenneth Rogoff points out that inflation is a major problem in many of the world's largest economies today:

Inflation in Russia, Vietnam, Argentina, and Venezuela is solidly in double digits, to name just a few possibilities.

Indeed, except for deflation-ridden Japan, central bankers could meet just about anywhere and see high and rising inflation. Chinese authorities are so worried by their country's 7 percent inflation they are copying India and imposing price controls on food.

Even the United States had inflation at 4 percent last year, though the Federal Reserve is somehow convinced that most people won't notice.

Usually, inflation can be combatted with restrictive monetary policy, or the selling of bonds on the open market, which reduces the money supply, raises interest rates and slows down consumption and investment, and thus the pressure on prices in the economy. Today, however, the US Fed is in the process of expanding money supply and lowering interest rates, in an attempt to avoid a recession at home.

In a world of isolated economies, the US monetary policy would only affect the US economy; however, today the US economy finds itself intertwined in complex ways with other economies of the world.

America's inflation would be contained but for the fact that so many countries, from the Middle East to Asia, effectively tie their currencies to the dollar. Others, such as Russia and Argentina, do not literally peg to the dollar but nevertheless try to smooth movements.

As a result, whenever the Fed cuts interest rates, it puts pressure on the whole “dollar bloc” to follow suit, lest their currencies appreciate as investors seek higher yields.

Looser U.S. monetary policy has thus set the tempo for inflation in a significant chunk ? perhaps as much as 60 percent ? of the global economy.

The reason other countries must mimic US monetary policies has to do with exchange rates, which many countries try to peg to varying degrees to the value of the dollar. One of the determinants of exchange rates is relative interest rates between countries. If the US lowers interest rates, and a country like Argentina keep rates high, global investors looking for a return on their savings will take their money out of US savings accounts and deposit it in Argentinian savings accounts, where they can earn a greater interest rate. In order to save in Argentina, investors need to convert their dollars to Argentinian pesos, driving up demand for pesos and the dollar/peso exchange rate. A stronger peso could have negative impacts on demand for Argentina's exports as they become more expensive to foreign consumers. In order to avoid appreciation of its currency and declining demand for its exports, Argentina is thus forced to lower its own interest rates as the Fed cuts those in the US.

When you consider that much of the world adjusts its currency in relation to the dollar, you can see how an easy money policy in the US could lead to falling interest rates worldwide, triggering all sorts of new consumption and investment, driving price levels ever higher.

There is hope for curing the inflation problem. Relief may come at a price for Americans, however:

If the U.S. tips from mild recession into deep recession, the global deflationary implications will cancel out some of the inflationary pressures the world is facing.

Global commodity prices will collapse, and prices for many goods and services will stop rising so quickly as unemployment and excess capacity grow.

Of course, a U.S. recession will also bring further Fed interest-rate cuts, which will exacerbate problems later. But inflation pressures will be even worse if the U.S. recession remains mild and global growth remains solid.

Once again the Fed's challenge of balancing unemployment, inflation, growth and recession is made clear. The choice of several major world economies to affix their currencies' values to that of the dollar makes the challenge ever more dire for Mr. Bernanke.

Discussion Questions:

1. If a US interest rate cut is not matched by countries that tie their currency to the dollar, what would happen to the value of those countries' currencies?
2. Why are lower world interest rates inflationary?
3. What will happen to the value of the Euro if the ECB does not start cutting interest rates soon?
4. Why might a US recession counter the inflationary pressure caused by rising food and energy prices and loose monetary policy in the US and other nations?

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Much hoopla is made over the US Federal Reserve's power to affect markets through its injections of liquidity into the economy. These days, the Fed appears to have some new tricks up its sleeve, but still uses its traditionally dominant tool of Open Market Operations to affect the Federal Funds rate, and thus the interest rates that commercial banks charge borrowers financing consumption and investment.

The power of monetary policy lies in the fact that spending stimulus can be achieved without running the risk of crowding-out, wherein expansionary fiscal policy drives up interest rates, potentially off-setting any increases in aggregate demand by triggering declines in consumption and investment due to increased borrowing costs.The whole aim of expansionary monetary policy, on the other hand, is to drive interest down by increasing the reserves held by commercial banks.

The cartoon above illustrates the process that leads to lower interest rates and greater spending when the Fed undertakes expansionary open market operations. Government bonds (the blue bills above) are held as assets by both commercial banks and the public. These are illiquid, meaning they cannot be spent. In order to stimulate new spending, the Fed can take some of its reserves of money (the green bills), and buy bonds from the public and banks.

Banks receive cash from the Fed, which increases their excess reserves. Further, the public will deposit the checks they receive from the Fed into their banks, increasing checkable deposits, which add to both the banks' required reserves and excess reserves. The result is banks now have new liquidity that they want desperately to lend out in order to earn interest (remember, banks rarely want to hold onto their excess reserves, because inflation will erode the value of any money that's not earning interest!).

When banks' reserves increase, due to their growing checkable deposits and the inflow of cash from the Fed's purchase of bonds, the supply of “federal funds” shifts down, lowering the interest rates that banks charge one another for overnight loans. These are loans that banks often give and receive in order to meet their reserve requirements at the end of a business day.

For example: If Bank A has finds at the end of the day that it has received more deposits than withdrawals, and it now has $1m more in its reserves than it is required to have, it wants to lend that money out as soon as possible to earn interest on it. Bank B, it just so happens, received more withdrawals than it did deposits during the day, and is $1m short of its required reserves at day's end. Bank B can borrow Bank A's excess reserves in order to meet its reserve requirement. Bank A will not lend it for free, however, and the rate it charges is called the “federal funds” rate, since banks' reserves are held predominantly by their district's Federal Reserve Bank.

When the Fed buys bonds, all banks experience an increase in their reserves, meaning the supply of federal funds shifts out (or down in the graph above), lowering the “price” of federal funds, i.e. the federal funds rate. Lower interest rates on overnight loans will encourage banks to be more generous in their lending activity, allowing them to lower the prime interest rate (the rate they charge their most credit-worthy borrowers), which in turn should have a downward effect on all other interest rates.

Expansionary monetary policy involves the buying of government bonds on from the public and commercial banks by the Federal Reserve Bank. The result of this buying of bonds is an increase in the money supply, a decrease in real interest rates, and hopefully the stimulus of aggregate demand through new consumption and investment. Unlike expansionary fiscal policy (such as the stimulus package announced by Congress last month), crowding-out should not occur. Ideally, lowering the federal funds rate will lead to lower interest rates across the economy as a whole.

This, however, does not always transpire. In a future post, we'll discuss why, and look at what the Fed is experimenting with today to stimulate investment and consumption, in response to the apparent failure of open market operations at providing the needed stimulus.

Utah lawmakers, fearing UN conspiracy, kill funds for International Baccalaureate program – Salt Lake Tribune

In Utah, law-makers fear the IB program, which they believe is a United Nations conspiracy to take over the minds of young, patriotic Americans and corrupt them with a global-perspective of the world.

Lawmakers decided against helping Utah schools pay for International Baccalaureate (IB) programs after one legislator called IB's philosophy “anti-American” today.

“I'm not opposed to understanding the world,” Sen. Margaret Dayton, R-Orem, told members of the Senate Education Committee. “I'm opposed to the anti-American philosophy that's somehow woven into all the classes as they promote the U.N. [United Nations] agenda.”

Remind me never to go teach in Utah. This is an absurd and frightening statement about America. I understand these legislators' views don't by any means represent any sort of consensus among Americans; in fact, the US graduates more IB Diploma students each year than any other country. That any law-maker would vote against a modest proposal to fund this program on the grounds that it “anti-American” puts on stark display for the world the insecurity, fear, and close-mindedness a certain, right-wing section of the American population.

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Welker’s Wikinomics – the Universe

AP/IB Exam Prep – Smartboard Study Guides

Exciting things are happening here at Welker's Wikinomics. In February the blog and wiki had their first birthday; it was one year ago that I launched the wiki as a tool for extending the AP Economics program beyond the classroom and into the world of Web 2.0. What started as a small experiment in learning the wiki way has expanded into an online learning environment encompassing multiple Web 2.0 technologies.

Between the wiki and the blog Welker's Wikinomics has welcomed over 70,000 visitors since June of 2007! Besides SAS students, the wiki and blog are visited by readers interested in economics from every continent!

Since September, two new exciting features have been added to the online learning environment here. First, the SAS Economists Blog, written by AP Econ students, which has seen dozens of posts, had thousands of readers, and enjoyed comments and feedback from people around the world.

Most recently, Welker’s Wikinomics Universe was launched using the Netvibes platform. This website, linked from the home page and in the menu bar above, is a resource for anyone who wants to read economics news and blogs, listen to econ podcasts, follow the progress of our student wiki and blogs, or find links to valuable resources for teaching economics. The page integrates RSS feeds to keep readers posted on the latest news stories, blog posts, and podcasts from leading media sources and economics bloggers. The site serves as an excellent research tool for students needing articles for their classes, or those simply interested in understanding how economics relates to the real world.

Finally, another technology I've been lucky to use here at SAS over the last year is the digital Smartboard, which has enabled me to save every lesson and lecture from each unit of the AP syllabus all year. Lately I've been refining these pages, and have created .pdf files for each unit from the AP syllabus, assembled them as a study guide, and uploaded them to make them available for all AP Econ students to use as review for the upcoming exams (2 months away!). These documents can be found in the “AP/IB Exam Prep” page, linked from the menu bar above. They are not intended as a stand-alone study guide, rather are meant to accompany the class wiki, which contains far more comprehensive information on the details of the AP Econ course.

I sincerely hope that the resources here in Welker's Wikinomics World have proven useful for Econ students and teachers. I sense that students here at SAS seem to benefit from these tools, although I suppose we'll know for sure when their exam results come back at the end of the summer! Good luck, students, in these final few weeks before your AP exams!

What McCain Could Do About Taxes – New York Times

McFlation?

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John McCain admits that economics is not his strongest suit. He recently claimed that he  wished “interest rates were zero.” Perhaps the fallacy of this policy position is over his head, but I think there are at least 74 AP Econ students here in Shanghai who could explain to Mr. McCain the inflationary impact zero percent interest rates would have.

Regardless, the article above is not about interest rates (thankfully, interest rate and monetary policy decisions will never be his to make even if he does end up in the White House, granted Fed independence remains intact!), rather, tax policy, which would be within McCain's powers as the designer of the US federal budget. Ben Stein, economist, actor, and humorist, writes a letter to Mr McCain offering his advice on tax policy. Continue Reading »