Shirtless Obama

I have to wonder if there's some psychological gamesmanship going on between the incoming Obama administration and Russia's Putin regime. You recall that Putin had his shirtless image posted on the Kremlin web site last year. It was a supposed candid shot of him fly-fishing. Now we are supposed to believe a papparazzi got within 200 feet of our president-elect and pointed a camera with a telephoto lens at him without the Secret Service reacting?

So granting that this was an intentional leak, the question is "why?" With Russia's economy hitting the crapper maybe even faster than ours did, perhaps we're sending a message that our younger, trimmer president-elect can be more nimble with our economic problems than the ham-handed thief of state in Russia.

Perhaps that same agility will lend itself to strategic and military planning as well.

posted 11:41:25 on 12/23/08 by blucas - General - comments

"Mixed-Income" Is a Bad Word

In the midst of a depression is not the ideal time to talk about housing developments, especially when the depression was caused by housing speculation. But here goes anyway ...

Detroit has seen numerous attempts to "revitalize" the city since people realized how much tax revenue disappeared after the white flight of the 1960s and 1970s. Many of these attempts have included proposals for mixed-income housing developments in or near downtown or the riverfront. For any of these revitalization efforts to have a chance of success, however, they cannot include mixed-income housing.

Rich people pay a lot more in taxes than poor people. If you want rich people to pay taxes in your city, you have to give them an environment where they do not have to work harder to stay rich just because of where they choose to live. If you tell them that they have to live with poor people in order to live in the shiny new downtown development in your city, they will not choose to live there. They have a fear, right or wrong, that the poor people next door will take their belongings if given a chance.

Affluent housing areas have a way of preserving and breeding other affluent housing areas nearby. Look at the West Village district. While it is not "rich", the preservation of wealth in the adjacent Indian Village neighborhood has stabilized West Village. But because it is not buffered from the poor areas of East Grand Boulevard stretching up to and past Mack, it has not prospered to the degree its excellent housing stock would predict.

The riverfront, the Cultural District, and Brush Park should be valuable and expensive areas to live in. Why have they not developed into a high-cost housing districts? My contention is that every time the powers-that-be in Detroit talk about revitalizing an area, they start talking about how it has to directly benefit all Detroiters (i.e., poor people, too). I'm sorry, but there are square miles upon square miles of available housing in Detroit. The shortage that affects them the most is employment, not housing. If you can successfully create a large high-rent district close to downtown that is buffered from concentrations of poor people, you will create jobs that will benefit all Detroiters.

The next time some community leader mentions "mixed-income" when talking about Detroit development, ask them why the upper-income segment they are targetting as customers would want to participate. And if they have an answer for that, ask them why the development should not cater completely to that upper-income segment in order to maximize the benefit for the backers of the project.

posted 11:05:25 on 12/23/08 by blucas - Economy - comments

A Crack in China's Export Economy

The value of Chinese exports dropped 2.2% in November, the first year-on-year drop since the 2001 and the biggest since 1999. Since we are only at the beginning of what might be a long recession, there are likely further falls in line. As domestic demand is not picking up the slack, China may be in a precarious position internally.

China has moved millions of citizens to urban manufacturing centers in recent years and given them a taste of hard cash and buying power. If foreign demand keeps dropping, many of these are going to be out of work. The great fear of China's leaders is that they will lose control of domestic order. Having millions of people with no money, no jobs, and time on their hands is a recipe for social unrest, especially if the recession continues or worsens into the Summer of 2009. (Summer heat feeds anger.)

What can the leaders do about it? First, they could attempt to stimulate domestic demand in order to keep people working. This may drain a big chunk of their accumulated cash reserves, but this is a huge pile of cash we're talking about. They also have to be careful in how they encourage local consumption, as other nations will be watching for signs of protectionism and may retaliate, which could drop external demand further.

Second, they could "persuade" businesses, including banks that extend credit to those businesses, to run at a loss until the crisis passes. They have done this recently with oil refiners, who had to pay market prices for crude while being restricted to price limits in selling gas and fuel oil domestically. Businesses, however, will quietly cheat on other fronts, like dropping quality or selling into shortages in the gray market. The former will cause problems with exports, and the latter will fan the flames of consumers as it pushes them into higher prices in the gray market to compensate for shortages.

Third, they could pre-emptively crack down now on any signs of domestic unrest. This actually is a given. The country's cash reserves could easily compensate all the military and police needed to preserve order. This runs the risk, though, of strengthening the military's hand in internal politics, which in turn risks shifting the national priorities away from maximum employment and towards military build-up. In the long run, they may take their eye off the root of the domestic order problem.

Then again, this could all be wishful thinking if the presumed strength of the Chinese economy is what the business world says it is.

posted 14:57:55 on 12/11/08 by blucas - Economy - comments

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