Blog - Page 60

China today announced a large $102 billion trade surplus for 2005, triple last year’s total. But wait. Excluding its $114.7 billion trade deficit with the United States alone, China actually ran a modest trade deficit of almost $13 billion with the rest of the world. We’ve been predicting this development all year. China’s consumption of consumer and capital goods is growing fast. According to a recent “economic census,” the nation’s first ever, its domestic services economy is one-third larger than previously thought and accounts for over 40 percent of GDP. These numbers are just one more factor showing that China has not been “manipulating” its currency, the yuan, to gain unfair advantage in international markets via a singular focus on Read More ›

The Wall Street Journal this morning updates the evolving story of how bandwidth pricing might change as more content and applications move from the traditional phone and cable TV networks onto the Net. The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don’t pay the fee would find their transactions with Internet users — for games, movies and software downloads, for example — moving across networks at the normal but comparatively slower pace. Consumers could benefit through faster access to content from companies that agree to pay the fees. The size and structure of the fee systems remain Read More ›

Good news from here in my home state of Indiana: State Sen. Brandt Hershman has introduced bold and far-reaching telecom reform legislation that would, among other things, (1) remove telecommunications from its historically defined role as a “utility” and block the state utility commission from regulating all but the most basic telephone services; (2) block any regulation of broadband services or technologies and limit IURC authority over wholesale matters so as not to go beyond FCC rules; and (3) provide for a statewide video service franchise, enabling major new fiber-optic (or wireless or powerline) bandwidth providers to enter the market almost immediately instead of wrangling with several hundred local boards and councils over franchise fees and restrictions. As far as Read More ›

Of the many good books I read this year, here are a few of the standouts: The Silicon Eye – by George Gilder Our Discovery colleague tells the 40-year story of how four eclectic geniuses and two Silicon Valley legends combined to create a technology revolution in digital imaging and cameras. The Bottomless Well – by Peter Huber and Mark Mills A true genius of our time, Huber and his colleague Mills transcend the energy debate with lots of data, even more big thinking, and quick writing. A Different Universe – by Robert Laughlin A fun, contrarian, and courageous twist on conventional physics by the winner of the 1998 physics Nobel. Mao: The Unknown Story – by Jung Chang and Read More ›

China will completely eliminate agricultural taxes on its famers over the next 5 years, even though 28 of 31 provinces have already done so. Deng Xiaoping first cut taxes on peasants in 1979, instituting a small quota that went to the government but allowing peasants to keep all additional output. Under this “household responsibility system,” the marginal tax rate on farming was thus zero, and after decades of chronic “famine,” Chinese agriculture boomed. Over the last decade, however, many local officials across the country had begun charging fees and taxes on farmers, leading to widespread rural unrest or at least frustration. Now Beijing will continue Deng’s tradition of low tax rates that has been fundamental to the nation’s 27-year boom. Read More ›

China recently published data from its “first economic census,” and the findings, as rough as they must be in a nation so large and dynamic, are interesting and encouraging, though I can’t say I’m surprised: 1) China’s economy in 2004 was almost 17 percent larger than previously thought, larger, in fact, than Italy’s, putting China in fifth place globally. Growth over the last 10 years was more like 10.5 percent than the previous estimate of 9.5 percent; 2) the service sector is far larger than previously thought, accounting for almost 41 percent of the economy, up from the previous estimate of 32 percent; 3) manufacturing accounts for 46.2 percent of the economy and agriculture for 13.1 percent, both lower than Read More ›

As we approach a new year, many economic commentators are spreading fear about the flat, or even inverted, yield curve. They claim it’s a sign of recession just ahead. The yield curve is a graphical depiction of interest rates on bonds of different maturities. Normally, longer-term bonds have higher yields than short-term debt instruments because of inflationary expectations and because more risk and uncertainty are to be found over longer periods of time. It’s true, an inverted yield curve often is a warning sign of recession. But only when other real-time market indicators, like commodity prices, confirm it. In the late 1990s and early 00s, the yield curve was for long stretches inverted — higher short term rates than long Read More ›

Last Friday the Indiana Utility Regulatory Commission issued a ruling, following more than two years of study, describing the competitive landscape of telecom in the state and modifying rules for both incumbent and competitive service providers. The Commission’s broad stated goal for the ruling was “regulatory parity.” But the kind of parity it delivered serves the interests of only one group: the regulators themselves. After mildly lowering some of the price floors currently imposed on Indiana’s incumbent telecom companies, the Commission then inexplicably imposed those same price floors and cost reporting requirements on the previously unregulated competitive carriers, the CLECs. Clearly imposing price floors across the entire industry does not help consumers. Isn’t the theory that competition is supposed to Read More ›

My colleague Hance Haney mentions below a new IRS regulation that kicks in this month that will subject small start-up companies to specific accounting rules for stock options that could reduce the use of these important employee incentives. We should also call attention to new SEC regulations, initially meant for hedge funds, that could impose new reporting requirements and potentially even onerous investment clamps on venture capital and private equity. John Berlau of CEI has the story here… -Bret Swanson

Senator James DeMint (R-SC) has introduced the Digital Age Communications Act which was developed by a group of scholars led by the Progress & Freedom Foundation’s Randolph J. May and Professor James B. Speta of the Northwestern University School of Law. PFF’s Adam Thierer identified the basic problem best when he observed that “although the communications / broadband marketplace is becoming one giant fruit salad of services and providers, regulators are still separating out the apples, oranges, and bananas and regulating them differently.” The proposal introduced by Senator DeMint would solve this problem by regulating services which are alike from a consumer perspective similarly. A second problem is that the FCC has been governed by a completely vague “public interest” Read More ›