Holy GDP!

Straying far from my beat, I went and wrote a foreign policy piece about the Knights Templar.

Which, naturally, got me thinking about the Vatican's economy. Here are some facts I stumbled upon:

Land use: arable land: 0%

Population: 821

Industries: printing; production of coins, medals, postage stamps; a small amount of mosaics and staff uniforms; worldwide banking and financial activities

So, how much money is the Vatican making off of all those medals and mosaics it produces? About $247 million a year in total revenues. That's about 1/10,000 the revenues of the United States, but places above quite a few countries and territories, including Burundi, which has over 10,000 times the Vatican's population and 63,250 times as much land, over a third of which is arable.

Giving Back

I came across this article in the Daily Star reporting that remittances accounted for a quarter of Lebanon's 2006 GDP. I was curious for a little historical context so I looked up which countries have the highest remittances as a percentage of GDP, and how this has changed in recent years. See the chart below, which is from 2001 IMF data (note Lebanon doesn't crack the top fifteen, though its 2006 levels would have ranked it second in 2001):

Country	Total remittances ( millions)1	GDP (millions)2	Total population3	Total remittances as % GDP
Lesotho	209.0	796.7	1,852,808	26.2
Vanuatu	53.3	212.8	192,910	25.0
Jordan	2,011.0	8,829.1	5,153,378	22.8
Bosnia and Herzegovina	860.1	4,769.1	3,922,205	18.0
Albania	699.0	4,113.7	3,510,484	17.0
Nicaragua	335.7	2,067.8	4,918,393	16.2
Yemen	1,436.9	9,177.2	17,479,206	15.7
Moldova (Republic of)	223.1	1,479.4	4,431,570	15.1
El Salvador	1,925.2	13,738.9	6,237,662	14.0
Jamaica	1,058.7	7,784.1	2,665,636	13.6
Dominican Republic	1,982.0	21,211.0	8,475,396	9.3
Philippines	6,366.0	71,437.7	81,369,751	8.9
Uganda	483.0	5,675.3	24,170,422	8.5
Honduras	541.0	6,385.8	6,357,941	8.5
Ecuador	1,420.0	17,982.4	13,183,978	7.9

Now, from a graphic in the Economist, here's the data from 2006.

I find it interesting both that the list has shifted so substantially--only one country from the 2001 top-ten, Moldova, remains in the top ten of the 2006 list. Also, note that every country in the 2006 top ten has a higher level of remittances/GDP than the country with the highest ratio in 2001. I'm curious to determine whether this is because GDPs have fallen or remittance levels have risen.

(Footnotes to Chart 1)

¹The remittance data presented in the above table are from IMF (International Monetary Fund), 2003, Balance of Payments Statistics Yearbook 2002International Migration Statistics: Guidelines for Improving Data Collection Systems (Geneva: International Labour Office).
²The source for the gross domestic product for each country is the World Bank website at devdata.worldbank.org/data-query. The GDP data presented for all countries is for 2001 except the data for Nicaragua which is for 1998 and for Yemen which is for 2000.
³The source of the total population data for each country are estimates generated by the US Census Bureau (see www.census.gov/ipc/www/idbrank.html). The total population figures presented for all countries are for 2001, except Yemen which is for 2000. (Washington, DC, IMF Publications Services). "Total remittances" refers to the sum of the 1) workers' remittances, 2) compensation to employees, and 3) migrant transfers reported by each country. The remittance data presented for all countries are for 2001, except the data for Yemen which are for 2000. For additional information on how remittances are defined and measured, see Chapter Seven in Bilsborrow et. al., 1997.

Where Populism Ends

Robert Reich, Bill Clinton's labor secretary, blogged this week for the Economist. In this post, he looks at why Democrats don't create more of a stink about private equity tax rates:

You might think that Democrats would do something about the anomaly in the tax code that treats the earnings of private-equity and hedge-fund managers as capital gains rather than ordinary income, and thereby taxes them at 15%—lower than the tax rate faced by many middle-class Americans. But Senate Democrats recently backed off a proposal to do just that. Why? It turns out that Dems are getting more campaign contributions these days from hedge-fund and private-equity partners than Republicans are getting. They don't want to bite the hands that feed.

Babylon and Beyond

The L.A. Times has a new blog from its Middle East correspondents. It's not particularly political--more about the peculiarities of life on the ground in the different places they have reporters posted. I found it pretty good reading.

Is a 'SuperFund' a Bailout?

A few days ago, Hank Paulson unveiled plans for a $75 billion "superfund," a reserve formed among big banks. This stoked controversy. Some analysts called the fund a massive bailout. Paulson's predecessor, Alan Greenspan, expressed doubts whether the "benefits exceed the risks." Paulson responded to concerns over a bailout: "The concept is not to buy bad assets," he told the FT. "The concept is for the end investors working with the banks to buy assets that are not credit impaired."

The best piece I've seen explaining this issue is an op-ed in the Wall Street Journal by Peter Wallison. The main point of the fund, Wallison says, is price discovery, and when banks wander into murky financial waters, as they did in advance of the subprime blowup:

With a substantial wad of cash, the contributing banks can help to discover the price at which trading will take place.

All of which, Wallison notes, is very much in banks interests. Nor should this be considered a bailout, he says:

Despite the Treasury Department's involvement, this is not a bailout. The Treasury does not have the powerful regulatory authority that made the Fed's involvement in the Long-Term Capital Management hedge fund look like a government-mandated financial rescue. Moreover, Treasury has no funds with which to effect a bailout or to make good on a guarantee.

Discovering Not Much (Two)

For more in the same vein as the last post, see the piece I just wrote for CFR.org. Particularly, note the asterisk. My boss added that, and I'm really happy he did. It's a terrific statistic.

Discovering Not Much

A graph I came across today:



The bar graph maps the discovery of crude oil reserves since the 1930s. The black line maps oil production/consumption. Now, the fact of declining oil discovery and rising production doesn't in itself mean the world is running out of oil. A lot has already been discovered. But it does make for a potentially interesting shakeout between the parties with a natural or sovereign right to natural resources--countries--and the parties seeking access to them--oil companies. Of course, this is already well underway, with the kind of energy industry nationalizations that have taken place in Russia and Venezuela. But for the United States, this trend is now moving a lot closer to home.

Thirsty Albanians

The Economist has a graphic examining the world's leading beer markets. It makes note that China consumes the most beer (every year, Chinese consume 306.2 million hectoliters of beer, whatever those are), followed by the United States (234.6 million hectoliters). Of course, it's not per capita, and China has more than four times as many people as the United States (1.3 billion to 300 million, as of July 2007), so really Americans are by far the greater booze hounds. Anyway, all this prompted me to look up which country's people are the greatest per capita booze hounds. Trusty Wikipedia has the data. And the answer is... Albania. As of 2004, the average Albanian apparently drinks 195.4 liters of beer. Americans drink 81.6 liters on average and place fourteenth. As for the Chinese, Wiki lists 37 countries and they don't even crack the list.

The (Negative) Value of a Good Education

The Financial Times says one of the biggest obstacles in the way of the U.K. Conservative Party's wunderkind David Cameron, as he works to win British parliament back for the Tories and unseat Gordon Brown as prime minister, may be Cameron's primo education. Cameron attended Eton, an old-line British boarding school with a storied, and somewhat stodgy, reputation. Given his schooling, the article says, Cameron carries all kinds of cultural baggage, particularly considering Britain's "enduring and complex obsession with class."

It would be easy to take the United States as a cultural counterpoint--especially given that the 2004 U.S. presidential race pitted two members of the same Yale social club against one another. But the New York Times points out that in 2008, America too has produced candidates with more populist educational upbringings. Only two of the 2008 primary candidates attended an Ivy League school for their undergraduate education (Barack Obama and Mike Gravel, each of whom studied at Columbia University).

So, just how crippling is the posh-factor? And to the extent that the same kind of anti-elitist thinking enters the job market more generally, at what point should students start considering the "friendliness" of a school's image before registering?

Feldstein to Place, Barro to Show?

Greg Mankiw speculates on who will win the Nobel Prize in economics (his best guess is that Martin Felstein, Eugene Fama, or Robert Barro will take the honors). If you feel particularly confident in your own prediction, you can wager $1 on it--the Bank of Sweden is running a pool (PDF).

Myanmar and ASEAN

I'm a bit worried for the Economist that they jumped the gun with their new cover. I'm no fortune-teller, but it sure seems like there's at least some chance the whole "Saffron Revolution" could fizzle pretty quickly, given the scale of the government clampdown (or what we're hearing of it, anyway, following the government-imposed communications blackout).

The one article I've seen pushing news of the episode forward in any kind of concrete way is this one, from the Financial Times, saying that Myanmar's revolt is stirring the first major internal crisis at ASEAN, the Southeast Asian trade economic bloc.

To make a long story short, Myanmar's government wouldn't be possible without substantial support from its neighbors. Japan and China are both major economic allies of Myanmar's junta, though Japan has been gradually unwinding some of its investments. India too is busy at work trying to shore up access to Myanmar's natural gas reserves.

This all presents quite a monkey wrench for ASEAN, which was actively seeking to increase economic integration among its ten member states.

The "R" Word

U.S. markets tanked again on Friday. Asian markets caught the same bug on Monday. The gazillion dollar question--the one that nobody seems to be able to agree upon--is to what extent the debt-market messiness will affect, or has already affected, the "underlying" global economy. The FT's lead editorial this weekend argues that it hasn't--yet--but spotlights some ominous signs, including a recent OECD report and troubling data on the U.S. job market. The economist Nouriel Roubini says on his blog that the "utterly ugly" employment stats confirm the worst: "the U.S. is headed towards a hard landing."

The FT's piece says that "if calm returns to the money markets within a few weeks, little harm is likely to be done," adding that the "more substantial threat to the real economy is not from money markets at all" but "from the continued weakness of the U.S. housing market." Housing prices are falling at nearly 4 percent, annualized--a sharper decline than at any point since the Great Depression--and some experts are starting to throw around the "R" word.

There are all sorts of reasons to be cautious right now. But let's also take a good, hard, contrarian look at the silver linings. Goldman Sachs is dipping into distressed debt markets right now. Berkshire Hathaway may be doing the same thing. And, of course, we're still riding half a decade of banner growth, the past six months notwithstanding. Again, there are all sorts of reasons to be cautious--just so long as one keeps clear-headed.

White Gold

Marginal Revolution has a blog entry on soaring global milk prices and the peculiar trade patterns of the milk industry (traditionally milk has rarely been traded across national borders, though Chinese imports are now rapidly rising). The post is interesting at face value, but deserves a closer look. Click on the links for:

"5. Parts of New Zealand are booming."

I think that's blog humor?!

Emerging Market Liquidity

At least thus far, investors worried over the prospects of a global credit squeeze have afforded emerging market funds a bit more leeway than their developed-market counterparts. Things may be getting a bit frothy, says FT's Alphaville, citing data from Standard & Poor's new "Liquidity Vulnerability Index." The measure rates Latvia, Iceland, and Bulgaria as the emerging market countries most susceptible to a broad evaporation of liquidity. Most "sheltered" is Russia, followed by Egypt, the Ukraine, and the Czech Republic.

Should an emerging debt-market shakeout come along, the Economist isolates Turkey as particularly vulnerable, given its large current account deficit, but also notes that today's emerging markets don't much resemble the markets that got whacked during the financial crises of the '90s, given that many have restructured their borrowing and built up large foreign currency reserves.

Before Gawker Beats Me to the Punch

BusinessWeek, Apr. 9, 2007. And the Economist, Sept. 1-7, 2007:



Just sayin'

Harvardistan

Harvard's endowment jumped 23 percent this year, up to $34.9 billion.

Just for kicks I compared that $5.7 billion rise to the nominal GDPs of IMF-member countries (not really a fair comparison, I admit, though if anything it would be Harvard getting handicapped -- the "goods and services" it creates yearly would actually exceed its endowment increase, factoring in what it produces via Harvard University Press, the sale of all manner of other Harvardiana, etc.).

At any rate, factoring out all that extra money and looking just at the endowment increase, Harvard did better last year than 50 of the 181 members of the IMF.

War Chest

Following up on my last post: If all this turmoil is, in fact, a buying opportunity, looks like Warren Buffett is well poised to swoop in.

Parsing the Debt Markets

I interviewed Sebastian Mallaby about the credit crunch (see here).

Sure seems investment banks and ratings agencies both played a not-totally-savory role propping up the debt markets, even after it was clear that there were some fundamental weaknesses there.

I have no idea if the market dip is close to over--though I would guess quite a few funds are still hiding some major problems from the markets. Nonetheless, I'm impressed by how many people are focusing on the silver lining of all the current turmoil (Mallaby's latest from the Washington Post; the Economist's Matthew Bishop, podcasting last week with my boss, Mike Moran; and the leader from the current Economist).

Maybe there are some buying opportunities out there?

The Abe Economy

I recently wrote an article on the LDP's thumping in Japan's July 29 upper-house elections.

I didn't get into the economic side of things, but it's worth a look. Bloomberg said market analysts faced "paralysis" following the vote, worrying that a lame-duck Abe might prove unable to press through the economic reforms he has targeted since taking helm.

Abe described his ambitious economic priorities in an interview with Lally Weymouth, published this April in the Washington Post:

We have expounded two basic pillars to enable Japan to grow in the future. We will deregulate to promote innovation, and we plan on establishing free trade arrangements and economic partnership arrangements with various countries.

We'd also like to facilitate foreign direct investment in Japan. Our plan is to double FDI over a five-year period. We will start implementing rules in May that will enable triangular mergers to be implemented in Japan. It's been said that the government in general has been active in impeding economic activity. My administration -- the [previous] administration also worked on this -- will present to the parliament a bill for reform of the civil service.

Needless to say, this kind of talk is music to the ears of international investors. As Abe himself notes, it's the same economic scheme implemented by his LDP predecessor, Junichiro Koizumi. A couple years ago, the Economist published a survey arguing that Japan's economic outlook was looking fairly bright under Koizumi's LDP leadership. This optimism was "not based on any notion that Mr Koizumi's victory represents the start of radical change...[but] the view that Mr Koizumi's victory is the culmination of a long period of incremental change, bringing welcome confirmation that that change is not likely to be reversed."

Now Abe's shaky start appears to have had precisely the opposite effect, spooking the bulls.

Degree Pricing

The New York Times examines sliding-scale degree pricing schemes and the Economist scoffs at the idea:

It seems that institutions of higher learning have begun to adopt differential tuition schemes in which more is charged to students majoring in business or engineering—degrees which tend to confer high salaries after college. . . . One of the main problems with this approach seems to be that it can hardly be efficient. By entering one of the fields subject to the increases, students are in all probability increasing their future wages, but the increase in tuition acts to reduce current income—hardly compatible with consumption smoothing.

Obviously, this is already happening among graduate programs. Nobody's forking over $70k a year for a masters in art history. MBA programs are a different story.

This is all well and good, in theory. In an efficient world, students should be willing to borrow against future earnings to pay for the education that gets them those earnings.

My question is: What about the folks who would like to attend a specialized-degree program yet whose future earnings, even with the degree, aren't looking so hot. Like, say, somebody who wants to learn about business management theory so they can write about it from an informed perspective. Where do they factor into this marketplace?

The FT's Futures Game

The Financial Times is hosting a free futures-trading game called FT Predict on its website. It's fairly easy to get the hang of, and I have to admit I found it interesting to see how this limited market assesses the likelihood of different events--from whether the U.S. will launch air strikes on Iran by a certain date, to whether Fred Thompson stands much of a chance at winning the GOP nomination.

An Introduction

Clearly there are far too many blogs in the world. Say what you will about Web 2.0, it strikes me as more than a little narcissistic to presume that we can shoot our views off into the ether and that anybody other than immediate family will care to read them, let alone engage them.

I'm putting together this blog, then, not as a place for me to spout off -- because nobody wants that, really -- but as a resource. Ideally, this space can evolve into a useful forum for collecting good tidbits of information and analysis on the intersection of business and foreign policy, both for my own personal use and for the benefit of anyone else who cares to check it out.

If you have recommendations, or can point me in the direction of good resources, by all means please do.