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The other day I was talking with a colleague about marketing, social media and time. She was marveling at all that I have on my plate and wondering out loud about how I manage to get it all done. I told her that I actually created a social media calendar. Let's face it. There are multitudes of opportunities to participate online – and I'm not just talking about social networks. There are article submission websites, industry-specific communities, blogs, video, e-newsletters and more. When you choose to interact in a variety of ways, how do you maintain a consistent level of participation? Like any business system, you have to create a structure and live within it. In my own case, I found that I was not as consistent as I should be. It happens to many of us. We get busy and end up doing the minimum – Facebook, LinkedIn, Twitter. However, that is insufficient. While it can be challenging, it is crucial to have consistent participation so that you continue to establish your brand.
There are some basic steps to establishing the system you are going to use. 1. Decide what you want to accomplish.
This is true with all business systems. Before you launch a program, determine what result you want. This helps you figure out where and how to play. You don't want to spend time with activities that aren't going to help you gain exposure, credibility and brand awareness. I say this because it can be easy to get involved with a site simply because someone you know tells you about it or invites you to join them there. Think before you dive in. Is it someplace that makes sense for your business? Here's a gauge you can use: Ask yourself, “Will I help grow my business if I spend five hours per week actively participating on this site?” Now, I'm not suggesting that you are going to spend five hours per week on any single website or platform. The question has the strength to provide you with a clear answer. And it is that answer that will help you determine if it's a place you should be–a website you should invest energy and time into. When you have a clear vision of what you hope to accomplish, you will have a clear view of where you should be. 2. Determine how you will play there.
Now that you know what you hope to accomplish and where you should be spending time, it is critical that you identify how you will participate. There are two aspects to this step. a. What should you be doing and saying?
Many sites have multiple opportunities. LinkedIn is a prime example. You can update your status, participate in group discussions, answer questions and connect with people. You need to decide, “Which areas will I work on, and when will I commit to do that?” Remember, structure makes it work. Some people should be using all aspects of the LinkedIn site, while others might not need to answer questions. Knowing your business and what you want to accomplish gives you the clarity to know what you should be doing and how. b. How often?
Once you know what you want to do and where, decide how often you should be there. Should you blog every day, twice a week, Monday, Wednesday, Friday? Should you schedule tweets throughout the day, or in the morning and evening? When do you send organic tweets? How often should you answer questions on LinkedIn? When should you submit articles to your article submission websites? How will you make sure you are posting your events in all the places they should be, including local media sites? When will you write and send your e-newsletter? This is the step that prevents you from letting things fall through the cracks. And be honest – haven't you let things drop because your schedule is busy? I know I have. 3. Get it on a calendar.
Now, take a blank calendar and plot each activity on the days of the week when you plan to participate in the specific places you should be. I find that if you leave it to memory or chance, it won't happen consistently. And if you put it on your regular weekly calendar, it is too easy to pass over for something else. However, when you plot the plan on its own calendar, you have something separate and specific that you can quickly refer to. For example, I found that I was not getting my press release for my Internet radio show out in a timely fashion. I know I have to do it. However, as the days would pass and things would come up, I'd push it to the side (if I remembered it at all). And putting it on a to-do list didn't help either. When I put it on my social media calendar, all I had to do was look at today, see what needed to be done, do it and move on. Liberating! I added Toodledo to the process so in addition to the calendar, I get an email reminder. This is also connected to my iGoogle page so I see it a lot. That really is the key with a calendar. You have to look at it! I set up Toodledo to ensure that I see the social media tasks I need to accomplish each day. With everything we have going on in our businesses on a daily basis, staying on course can be a challenge. Challenges are opportunities for solutions and systems. Developing a separate social media calendar can be a simple, yet effective solution to the challenge of consistently participating on the various social media platforms that are of value for your business growth. From Small Business TrendsThe Secret to Making Social Media Work: Get It on a Calendar Read more posts on Small Business Trends » Please follow War Room on Twitter and Facebook. Join the conversation about this story »
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Google's social network is off to a somewhat successful launch. The early looks at the site have been generally positive, and demand to join appears to be strong. Vic Gundotra, VP of Social at Google, posted on Plus, "We've shut down invite mechanism for the night. Insane demand. We need to do this carefully, and in a controlled way. Thank you all for your interest!" Of course, this a controlled rollout, so who knows how many people are joining. And who knows if it will catch on with a larger audience. Right now it reminds us of Quora. Lots of hip tech folks talking to each other, but lacking in the normals. 
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Update: 428K is slightly worse than expectations at 428K. However it's 1K down from last week. Markets remain slightly higher. Nobody is going to care too much about this number. Original post: You know the drill... this number has been consistently mediocre lately. Analysts are looking for 420K, down from 429K, last week. Unless it's a radical departure from that, it would be surprising if this number had a huge impact, but who knows. The number is out at 8:30. Please follow Money Game on Twitter and Facebook. Join the conversation about this story »
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You know the drill... this number has been consistently mediocre lately. Analysts are looking for 420K, down from 429K, last week. Unless it's a radical departure from that, it would be surprising if this number had a huge impact, but who knows. The number is out at 8:30. Please follow Money Game on Twitter and Facebook. Join the conversation about this story »
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If you think we're beginning to see the light at the end of this recent equity downturn, you're not alone. Citi analysts write that while a slowdown in leading indicators and the crisis in Europe are currently frightening investors, this sort of slowdown in the middle of an economic cycle is normal, and we should come out of it. Further, EPS growth is going to continue, and that's good news for stocks. Investors may be underestimating two factors that should ensure solid EPS growth for the next few years. First, the corporate revenue leverage to a growing economy has risen. This means companies can now generate faster revenue growth per unit of GDP growth than they did a decade ago. Second, companies are still successfully containing costs. This has been an outstanding feature of the current earnings cycle and has meant profit margins are now approaching previous highs. There is little to suggest margins will retrace anytime soon. Our view is that global stock markets should Grind Higher with EPS, which is typical for the third year of recovery. Our MSCI ACWI 2011 year-end target is 380 (currently 333). The strategy during the Grind Higher phase is not to chase rallies too hard but be prepared to buy into dips. We think the recent pullback provides a buying opportunity (Figure 3). So while we've drifted a bit lower, now is the time to buy into "The Grind Higher," according to Citi. Of course, if something else goes wrong with Greece or the debt ceiling situation blows up, there might be an even lower buy in point to come. 
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Oakland Institute just completed the most thorough investigative report on who's buying land in Africa we've seen yet: "Hedge Funds Grabbing Land in Africa," as BBC called it. As commodities prices rise and inflation picks up, the OI made the report public, they say, because the number of investors buying up land in Africa is concerning. For obvious reasons, there isn't much out there about who's buying what and how much in Africa. But what OI has discovered is a small number of investors paying sometimes nothing for large plots of land in some African countries. The lease deals are arranged between seemingly corrupt African leaders, reportedly without disclosing the details to the members of the communities that will be displaced because of the land development, and investors such as hedge fund managers. The end result -- beating villagers, digging up their cemeteries, and taking over land that villagers have lived on for centuries -- looks a lot like what history tells us colonizing Americans did when they ousted the Indians. Bruce Rastetter and his various companies are accused of breaking promises to hire locals  Who's buying: Bruce Rastetter (CEO of Pharos Ag, co-founder of AgriSol Energy, CEO of Summit Farms, and a donor to the Iowa State University), the Iowa-based Summit Group and Global Agriculture Fund of the Pharos Financial Group, in partnership with AgriSol Energy LLC and the College of Agriculture and Life Sciences at Iowa State University, and Serengeti Advisers Limited, a Tanzanian investment and consulting firm led by Iddi Simba (non-executive director and the former Tanzanian Trade and Industry minister) and Bertram Eyakuze (partner and co-founder) The land they're buying: Three “abandoned refugee camps”– Lugufu in Kigoma province (25,000 ha), Katumba (80,317 ha), and Mishamo (219,800 ha), both in Rukwa province in Tanzania. The future development: Large-scale crop cultivation, beef, and poultry production, and biofuel production. The Tanzanian government is expected to approve the title of occupancy within 3 months, which will result in the evacuation of the current inhabitants: refugees. Also, the Tanzanian government is expected to create a regulatory framework for the use of genetically modified crops. The scandal: Some refugees apparently received citizenship in 2010, but were told that their certificates were being withheld until they re-located to other areas of Tanzania. AgriSol claims that it's looking to hire local farm project managers to work on the project, however AgriSol told the Oakland Institute that they were bringing in white South African farm managers. Source: Oakland Institute (PDF)
Leonard Henry Thatcher, David Neiman and other investors acquired land through a secret cooperative behind the backs of locals  Who's buying: Nile Trading and Development (NTD is an affiliate of Kinyeti Development); Mukaya Payam Cooperative; NTD's Chairman, Leonard Henry Thatcher; Howard Eugene Douglas, Kinyeti's Managing Director, a former United States Ambassador at Large and Coordinator for Refugee Affairs and a Director at Orbis Associates; Kinyeti's Secretary, Christopher Weikert Douglas, who in 2008 worked at the United States Consulate in Dusseldorf, Germany and is a Director at Orbis Associates; and NTD's president, David Neiman. The land they're buying: 600,000 hectares (with a possibility of 400,000 additional hectares) for 75,000 Sudanese Pounds (equivalent to approximately USD 25,000) in South Sudan. The future development: NTD's plans are unknown, according to the Oakland Institute. But they have the rights to do whatever they want. Two clues: 1. A letter NTD's president, David Neiman, wrote to the governor of the Central Equatoria State says that he intends to develop the land's timber resources. 2. Neimann entered into a “contractual alliance” with Tony Paris of Paris Broadcasting Cable 7 in June 2008 for algal agrofuel production in South Sudan. The scandal: The company that leased the land to NTD is described as an influential group of natives who leased the land out behind the backs of the entire community by Sudan’s Agency for Independent Media (AIM). AIM also says "In reality, the cooperative does not exist on the ground... [Some communities are in favor of the deal but] what is common among all of them is that they are not all well informed about the advantages and disadvantages of the deal." Source: Oakland Institute (PDF)
Jean Claude Gandur's company reportedly promised that the community's rice-growing land wouldn't be used, then it dug large deep channels to drain them  Who's buying: Addax Bioenergy and its Chairman, billionaire Jean Claude Gandur The land they're buying: 20,000 hectares of sugarcane plantations in Sierra Leone. The future development: Sugarcane farming for ethanol production for export to Europe The scandal: To convince local communities to accept the project, the company promised community members that their loland rice-growing areas would not be used. Addaz has reneged on their pledges. The land has been dried out, large and deep channels were dug to drain them, and Addax is cultivating the lower lying swamp land previously used for rice production. Addax also promised land development in the form of schools, health facilities, a community center, and water wells. But to date, none of those promises have been fulfilled. Source: Oakland Institute (PDF)
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Regarding this week's big putback settlement, Oppenheimer's Chris Kotowski notes that while this goes some way towards resolving the issues hanging over Bank of America's head, the bank is still in the penalty box. Here's why: ■ Based on settlement trends BAC now looks adequately capitalized. Based on our analysis we think the company could see as much as $10.1B of future settlement/payments against it's existing exposure. The positive is that it now has $11.7B of reserves to deal with the issue.
■ Despite being properly reserved, BAC is significantly less capitalized than peers. We estimate that it will take until 1Q16 to get to a 9.5% Basel III Tier 1 common ratio, whereas peers should get there by 2013. Thus, we think BAC remains in the "penalty box" with both regulators and the market.
■ The dilution risk will probably cap any upside in shares. We estimate that if the company wanted to get to a 9% Basel III Tier 1 common ratio by YE2012 an equity raise could be as much as 19.7% dilutive to current shareholders. Please follow Clusterstock on Twitter and Facebook. Join the conversation about this story » See Also:
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Welcome to Tech Thursday – Smallbiztechnology.com’s weekly round up of news from the world of small business technology.
- Yottaa Introduces Google Analytics Integration to Expose the Business Impact of Website Speed
- eVoice – Record Your Telephone Calls
- Innovative Hybrid Cloud Design Enables Intel Partners to Offer Small Businesses Catalog of Pay-As-You-Use Software with Onsite Server that’s Managed Remotely
- SugarSync Extends the Mobile Cloud with Introduction of Mobile Device Management and Improved BlackBerry App
Yottaa Introduces Google Analytics Integration to Expose the Business Impact of Website Speed Yottaa, Inc., (http://www.yottaa.com) announced today support for Google Analytics within Yottaa Insight™, its cloud-based Web Performance assessment and monitoring service that helps businesses measure their website's speed and benchmark it against competing websites. Now, with Yottaa’s new Google Analytics integration, website owners can assess the impact of their website's speed on key performance indicators like bounce rates and conversions. Yottaa Insight is available as a free online service at http://www.yottaa.com. Simply enter a website URL to get an instant site speed test report with interactive visualizations of the business impact of website speed. Yottaa's integration builds off Google's recent introduction of a Site Speed report within Google Analytics. Yottaa's implementation expands this concept with additional data insights, metrics and automation. It uses standard “OAuth authentication” to pair a Yottaa Insight account with a Google Analytics account and extracts key business metrics via the Data Export API. Interactive charts provide unprecedented insight into how website speed affects business metrics, including: Get the full details here eVoice – Record Your Telephone Calls eVoice®, a “Radically Better Phone Number” and brand of technology leader j2 Global Communications, Inc. (NASDAQ: JCOM), today announced Call Recording for eVoice® customers who have the need to record and replay business or personal telephone calls. Phone-centric professionals can now benefit from having the ability to record, store and review any call made from their personal, business, or mobile phone using an eVoice virtual phone number. eVoice is online at www.eVoice.com. “Call Recording is yet another reason why small business owners are choosing eVoice as their virtual phone system,” said Mike Pugh, vice president, marketing of j2 Global. “This new feature — along with a toll-free phone number, a professionally recorded greeting, customized menus, and call routing — makes it easier to turn phone calls into satisfied customers and increased sales.” To use Call Recording, simply press “star 2″ on the telephone keypad. A pre-recorded prompt informs callers that the call is being recorded. The conversation is then captured and saved as an mp3 or .wav file for easy reference at a later time. Get more information at http://www.evoice.com Innovative Hybrid Cloud Design Enables Partners to Offer Small Businesses Catalog of Pay-As-You-Use Software with Onsite Server that’s ManagedRemotely Intel® Corporation today launched the Intel AppUpSM Small Business Service, an innovative service running on the Intel® Hybrid Cloud platform that enables server manufacturers, software vendors, and service providers to offer small businesses key advantages of cloud computing with applications and data running on their own premises. Intel’s AppUp Small Business Service, enabled by the Intel Hybrid Cloud platform, represents a new business model for Intel. The solution consists of a server, a catalog of prepackaged small business applications from a broad range of software providers, and Intel-developed software to securely manage and track use of the application software. Small business customers access the solution through service providers, paying on a monthly basis for the software they use, just like in the cloud, but getting the responsiveness and control of running their applications and data onsite. “We developed the Intel AppUp Small Business Service to build a foundation on which the industry can innovate and provide small business customers with a more convenient, secure, and high-performance experience,” said Bridget Karlin, general manager, Intel Hybrid Cloud. “Small businesses are the ultimate beneficiaries because this service gives them a compelling new option for improving their business results through IT.This Intel-based solution comes ready to use, and doesn’t require their own IT staff or the capital cost of a server.” SugarSync Extends the Mobile Cloud with Introduction of Mobile Device Management and Improved BlackBerry App SugarSync Inc., makers of the award-winning SugarSync online file backup, access and sharing service, today announced its new Mobile Device Management capabilities for iOS devices – the easiest way to get files from your computer to your iPhone or iPad. In addition, SugarSync also introduced its improved and updated BlackBerry app, featuring significant usability and performance upgrades. "With the new Mobile Device Management features and the updated BlackBerry app, we are extending our leadership in mobile cloud services," said Laura Yecies, CEO of SugarSync. "SugarSync has always supported the most mobile platforms in the industry, utilizing the Cloud to give users freedom from their computers by giving them access to all of their data, anytime, and on any device. With this latest release, we make it even easier for users to leave their laptops at home and work exclusively from their mobile devices – whether online or off." Mobile Device Management Makes it a Snap to Get Data to Your Devices In this release, SugarSync's new Mobile Device Management feature gives users the ability to view and control their data on their iOS mobile devices from within the Web console, making it the easiest way to get files from your computer to your iPhone or iPad. SugarSync will be rolling Mobile Device Management out to the other mobile platforms in the future as well. Today, users with iOS devices can: - Transfer files or entire folders to your iPhone or iPad from the Web. No wires needed.
- Simply view all the synced data on your iPhone or iPad from the Web.
- Easily refresh files or entire folders on your iPhone or iPad with a single click.
- This is the simplest way to keep your iPhone/iPad in sync with the files on your computer.
You've always been able to access and manage your data on the Cloud from your mobile devices with SugarSync. Now you can access and manage your devices from the Cloud.
Read more posts on Ramon Ray & the Smallbiztechnology.com Team » Please follow SAI: Tools on Twitter and Facebook. Join the conversation about this story »
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There's one question that should be at the top of every small business site owner's list: How can I get more traffic flowing to my site, and how can I turn that traffic into profit? A few tips and tricks are presented in this guest post from Vinny Lingham, the CEO of free website builder Yola.com. It's as true for your site as it is for a storefront: increased traffic equals growth equals profit. There are plenty of free, very effective, tools you can use to grow your site traffic without spending a penny. Let's take a look at a few things you can start doing right now. 1. Make Your Site SEO-Friendly From the Start
Plan and build your site with SEO in mind. If you're just beginning, check out these helpful tips. Keep your page topics focused, add keywords to your content, and tag your images, too. If you've already built your site, go back and revamp. (Another reason it's great to be able to update your own site!) 2. Help Your Customers Find You
Before your future customers can visit your site, they'll need to find it, which means that first, search engines need to find your site. Make your site more attractive to search engines so they can index it by strengthening your site's SEO (search engine optimization). Start here for some helpful hints, and read on for even more ideas. 3. Help Your Neighbors Find You
Optimize your site for local searches (keywords plus a location) with these helpful ideas. 4. Create Great Content and Keep It Fresh
Keep your content lively and current. Start with good, informative content and update it regularly. Include seasonal messages and offers, change images, add current products. Your site should look and feel open for business every day, with new information that keeps customers coming back. 5. Key Up Your Keywords
Use the most-searched keywords to raise your chances of being found. Google's Wonder Wheel keyword research tool is one great, free way to find the top search terms for your business. 6. Set Your Site Apart with Metadata
Add unique title, description, and keywords to each of your site's pages. Search bots pay close attention to this metadata. Also, make sure subheads on each page contain a keyword or two, and don't forget to tag your images. 7. Build Your Own Buzz - Start a blog to share your expertise, connect with new customers, and build your network.
- Reach out to bloggers, local news sites, and online journalists who write about your area of business. Promoting yourself online takes some initiative – but with a little work and these tips, you can give your site a higher profile.
- Add social media to your site to expand your reach and get the word out. Place Twitter and Facebook buttons on your site. Share your site through Digg or StumbleUpon. And take a look at this post for more great ideas.
8. Research, Analyze, Measure
It's also important to measure and to analyze your growing traffic to see how you're doing and where you could improve. Check out our top 20 free SEO tools to help you achieve your goals. Your site is a work in progress, and you can always keep improving it. Reach Out to Your Customers with Paid Tools
Once you've amped up your SEO and search engines begin to index your site, it's time to get more a little more serious about increasing your traffic. After all, your business is worth it, right?
But, before you start paying for ways to grow your site traffic, make sure you know: - Who your customer is
- Where your customers are
- What they need
- How they're currently connecting with the type of service or product you offer.
Then, you make the most of every cent you spend by reaching out to new customers where they are. Make A Name for Yourself - Invest in a custom domain name. Some SEO research suggests that sites with their own domains rank better than sites published to subdomains. A shorter web address stands out in search engine results. And a custom domain is essential if you – and your business – are going to be taken seriously.
Launch A Paid SEM Campaign - Start a "pay-per-click" online advertising program, also known as search engine marketing, or SEM. Think Google Adwords or Facebook Ads. Google will even set Adwords up for you, so it's hassle free. When you become a Yola Silver member, Yola gives you $100 worth of ad credits so you can try out either, or both, for yourself.
Get Back to Basics - Close the loop between your site and your storefront with good old-fashioned personal touches. These days you can order great-looking custom business cards, postcards, printed flyers, and brochures online for just a few dollars.
Yola is the premier website builder for small businesses. Yola makes it easy for anyone to build, publish, and promote a site – no special technical knowledge needed. With Yola's free tools, anyone can get a web site started and Yola's professional, premium options help create success as a business grows. Read more posts on Ramon Ray & the Smallbiztechnology.com Team » Please follow SAI: Tools on Twitter and Facebook. Join the conversation about this story »
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Toshiba can’t be named world’s leading computer manufacturer, but this time the company created something really amazing. How do you like the new Toshiba DX1215 that is the company's first all-in-one PC released in the U.S. market?! The following gadget promises a lot and even more. To put it short, it is basically a high-performance touchscreen entertainment hub that boasts exceptionally sleek design, 2nd generation Intel Core processor, and amazing sound system. What is more, the device looks really pretty cool. The stylish entertainment hub comes with a bright 21.5-inch diagonal touchscreen display that ensures unsurpassed video and photo quality. The DX1215 ensures amazing productivity and offers all the needed tools and functions to manage your digital content and all the opportunities for making movies and music. The new gadget also boasts the software that will keep you organized all through the day. Visit Amazon and find out about availability and pricing. Read more posts on Awaregeek » Please follow SAI: Tools on Twitter and Facebook. Join the conversation about this story »
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by Mike Kimel
A few questions about Obama and Next Year's Presidential Election
Assume that Michelle Bachmann wins the Republican nomination next year and Obama wins re-election. Given Obama's governing style (i.e., fold early, fold often), in what way will the outcome of Obama's final five years in office (i.e., next year plus the second term) differ from the outcome GW would produce were he President? And how would the outcome be different if Michelle Bachmann wins the Presidential election?
Assume that Mitt Romney wins the Republican nomination next year and Obama wins re-election. Given Obama's governing style (i.e., fold early, fold often), in what way will the outcome of Obama's final five years in office (i.e., next year plus the second term) differ from the outcome GW would produce were he President? And how would the outcome be different if Mitt Romney wins the Presidential election?
Assume that Mitt Romney of the year 2000 wins the Republican nomination next year and Obama wins re-election. Given Obama's governing style (i.e., fold early, fold often), in what way will the outcome of Obama's final five years in office (i.e., next year plus the second term) differ from the outcome GW would produce were he President? And how would the outcome be different if Mitt Romney of the year 2000 wins the Presidential election? Read more posts on Angry Bear » Please follow Money Game on Twitter and Facebook. Join the conversation about this story »
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President Barack Obama yesterday framed the ongoing deficit reduction talks as a David and Goliath battle between kids and corporate jet owners — his strongest attack yet on claims of Republican intransigence on reaching a debt ceiling deal. But Obama appears to have supported tax subsidies for the jets before he opposed them, National Journal reports, and many Republicans are quickly accuse him of flip-flopping on the issue. Obama signed onto a subsidy for private planes and other capital purchases in his much-touted stimulus bill, allowing them to depreciate faster than normal in order to spur economic growth. “Nine months ago, this president extolled the virtues of shortening depreciation schedules to stimulate jobs,” said National Business Aviation Association President and CEO Ed Bolen in a statement. “Now he seems to want to reverse course and push ahead with punitive treatment for general aviation, an industry that creates jobs, helps companies succeed, and serves communities all around America." Please follow Politics on Twitter and Facebook. Join the conversation about this story » See Also:
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 States across the country mark the end of their fiscal years today — with some going up against the clock to pass budgets for their governments to continue to operate tomorrow.
Minnesota is heading for a shutdown, while other agreements simply await a signature. Here's the status of negotiations in the eight states without budgets this morning: Minnesota: Shutdown likely. Budget talks between Gov. Mark Dayton (DFL) and the Republican-controlled legislature fell apart last night, and no new talks are scheduled today as the state prepares for a government shutdown. The two sides have been unable to reach an agreement on cutting the state's $5 billion deficit, disagreeing over the size of spending cuts and tax increases. Dayton's office has been drawing up plans for a shutdown all week — with a state judge ruling Wednesday that all but the most essential services must cease to operate beginning at midnight if the sides can't agree on a deal. Iowa: Still in negotiations. Lawmakers are "miles apart" on two budget items, the Des Moines Register reports including a plan introduced by Gov. Terry Branstad (R) to cut commercial property taxes. The other sticking point is Medicaid funding for abortions, which Republican lawmakers seek to limit by requiring "informed consent" in cases of rape, incest and threats to the mother's life. Democrats, who control a slim majority in the State Senate want to keep existing abortion regulations on the books. Neither side expects these disagreements to prevent a final spending plan from passing today. Massachusetts: 10-Day Extension. On Tuesday Gov. Deval Patrick signed a temporary extension to the current budget, as the state legislature hammers out an agreement on a final spending plan. Leaders from the state Senate and House of Representatives are in conference committee negotiating the final budget, which Patrick expects to sign next week. Connecticut: Special session to vote on new budget. The Nutmeg State's budget fell apart last week after unions rejected $1.6 billion in concessions. Lawmakers will meet in a special session in Hartford today to vote on Gov. Dan Malloy's revised budget, which includes 5,500 layoffs. With majorities in both houses of the legislature, Malloy is expected to have a deal signed by tonight. Oregon: Awaiting final legislative action. Lawmakers in Oregon have a budget deal, but left votes on public safety budgets and Medicaid until today. They are expected to pass the final components of the state budget today in time for Gov. John Kitzhaber to sign it before the midnight deadline. Delaware: Budget awaiting Governor's signature. The Delaware legislature approved a final budget late Wednesday night, which is now waiting on Gov. Jack Markell's signature. The state's $3.5 billion budget is the state's largest in history and one of the few in the nation that shows an increase in spending over fiscal year 2011. Pennsylvania: Budget awaiting Governor's signature State legislators voted to approve a $27.15 billion budget Wednesday night that includes deep spending cuts and no new tax increases. Gov. Tom Corbett is expected to sign the budget later today. Rhode Island: Budget awaiting Governor's signature The Rhode Island State Senate approved a $7.7 billion budget Wednesday including modest spending cuts and tax increases. Gov. Lincoln Chaffee has until July 6 to sign the budget. Please follow Politics on Twitter and Facebook. Join the conversation about this story » See Also:
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While all the drama of yesterday's Greek austerity plan vote may have led you to believe we're well and truly done here, and all is in the hands of Europe's leaders, we're not out of this yet. There's one more vote to come, on the issue of implementation. And there's a risk it won't pass properly, according to Societe Generale's Michel Martinez. Against a backdrop of violent demonstrations, George Papandreou’s PASOK government won a first vote on Medium-Term Fiscal Strategy (MTFS) on Wednesday 29. The vote brought a sign of relief but the focus now shifts to the second hurdle: the associated implementation law which is expected today at midday local time (11 CET). If all goes well, the Eurogroup will then meet on July 3 to finalise a new 3-year programme for Greece involving the private sector. Continued... IMF/EU will only disburse if the implementation law does not lose its inner significance. The Parliaments agreed yesterday on the package as a whole. The risk is now that it modifies substantially some implementation measures, as a result of which the modified MTFS could not meet IMF/EU requirements. The IMF made it clear that the July tranche to Greece can only be disbursed if 1) Greece adopts the austerity package 2) the EU provides concrete assurances that it will continue to provide funding to Greece as stipulated under the EU/IMF adjustment programme. In other words, only after the MTFS is approved can the Troika officially put forward a medium-term funding plan for Greece involving private creditors, through to 2014. So this next vote is a little more tricky to monitor. It's not so much of a yes, or no, but rather the detail about the legislation itself. If it's not changed, then the IMF/EU are likely to be pleased, and we'll get real progress by the end of the weekend on this second bailout. If they are not, then the whole process could blow up. SocGen's Martinez rates this probability as "non-negligible." The vote, which was originally supposed to be today, may now be tomorrow. Or it could be in 30 minutes. Uncertainty reigns, but this is surely a situation to keep your eye on, at least for a few more hours. Don't miss: The institutions most exposed to a Greek default > Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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Good morning. Here's what you need to know: 1. Standard & Poor's managing director John Chambers told Reuters yesterday that the United States would immediately have its top-notch credit rating slashed to "selective default" if it misses a debt payment on August 4th. "If the U.S. government misses a payment, it goes to D," Chambers said. "That would happen right after August 4, when the bills mature, because they don't have a grace period." 2. The Financial Times reports: "The International Monetary Fund has warned of a “severe shock” to global financial markets if the US does not move quickly to increase its borrowing authority, adding pressure on Congress and the White House to clinch a deal on fiscal policy." 3. President Obama said yesterday that Republican leaders would have to agree to tax increases to help pare down the massive federal budget deficit. Budget cuts alone, he said, would not be sufficient. 4. Republican Congressional leaders say that they will not agree to tax increases to help reduce the federal budget deficit. Meanwhile, The Washington Post reports that Senate Republicans began a push to amend the Constitution to require a balanced budget, insisting that the government cannot get out from under crushing debt without one. The deadline on raising the debt ceiling is now 35 days away. 5. President Obama's performance at yesterday's press conference received generally favorable reviews from the national political press corps. They liked the new combative tone and the "Trumanesque" pose. 6. Al Qaeda remains "the preeminent security threat" to the United States of America, according to the President's annual report on counter-terrorism strategy, which was released yesterday. 7. The IMF is increasingly concerned about the integrity of at least two of Afghanistan's leading banks. The Wall Street Journal reports: "...the IMF has refused to renew its assistance program to the Afghan government nearly a year after it was suspended. That, in turn, threatens billions of dollars in international donor money, as many countries can't individually donate funds without an IMF program." Afghanistan is in danger of regressing into a failed state. 8. The Greek Parliament narrowly approved a stringent austerity plan, calming financial markets. No one thinks the crisis of the eurozone is over by any means. One headline said: "Reckoning Postponed." 9. Americans remain gloomy about the direction of the country and are sharply more pessimistic about the country's economic future, according to a new New York Times/CBS News poll. Nearly two-thirds of all Americans think that the country is on the wrong track. Nearly forty percent think that the country's economic decline is "permanent." 10. Karl Rove thinks that the only way that the Republicans can lose the 2012 presidential election is if they beat themselves. Which they are more than capable of doing. Rove says that the race must always be framed as a referendum on President Obama's stewardship. 11. "Flight to safety" GOP presidential candidate Mitt Romney is raising money at a furious pace. His fund-raisers say they expect to report as much as $35 million in contributions at the end of the second quarter, further cementing Mr. Romney's status as the GOP front-runner. 12. The fiscal year in many states and municipalities ends today. Connecticut serves as a kind of metaphor for state and municipal finances. It's cut spending, raised taxes and it's still deep in the hole. Please follow Politics on Twitter and Facebook. Join the conversation about this story » See Also:
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Good morning. Here's what you need to know. - Asian markets were up in overnight trading with the Shanghai Composite up 1.23%. Major European indices are in the green and U.S. futures indicate a positive open.
- Eurozone inflation rose 2.7% in the year to June, but below market estimates of 2.8%. European Central Bank president Jean-Claude Trichet hinted at a rate hike next week by saying the monetary policy was "accommodative" and that they maintained "strong vigilance."
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More than 200 Texan counties have been designated drought disasters by the U.S. Department of Agriculture and all remaining counties now qualify for federal aid. KCBD in Lubbock reports that 213 counties have lost at least 30 percent of their pasture or crops to wildfires and drought. The natural disaster designation allows farmers and ranchers to qualify for low-rate emergency loans. South Plains farmer Scott Harmon told KCBD, "This is a disaster. This is a train wreck. We've never seen anything like this before. People are scared, they don't know what to do and what's going to happen to them next." Harmon's family have been farming their small piece of Texas since the 1920's. Texas Agricultural Commissioner Todd Staples told 103.5 things are bad and they will probably get worse: “We are currently ranked as the third-worst drought on record in Texas. But each passing day moves us closer to the number one year. It is a true calamity. The impact is heartbreaking,” says Staples. “We’ve had over two million acres of dry land cotton being declared 100% abandoned. We have livestock producers that are liquidating their herds, something they’ve spent their entire lifetime building up. It’s just a dreadful set of circumstances.” Agricultural losses may exceed the 2006 record of $4.1 billion. More than 70 percent of the state is in a full blown drought and three million acres have been burned by wildfires. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story »
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[In an excerpt from his newsletter, Michael Pettis comments on the Austrian village being ripped off in Guangdong.]
That this sort of building project seems a tad over the top is not why I bring up the article. Those of us who live here are quite used to the many sometimes-bizarre projects aimed at attracting new wealth and signaling status. If it makes the residents of Hallstatt feel any better, by the way, I am certain that the Guangdong replica will not be a perfect copy of Hallstatt. I have no doubt that there will be hundreds of architectural and cultural “improvements” that will ensure that no one confuses the shiny replica with its dowdy original. Excessive restraint typically isn’t one of the sins afflicting local real estate developers that cater to the rich. What interested me about the article was something else altogether. According to the article, the project is being developed by “Minmetals Land, the real estate development arm of China Minmetals, China's largest metals trader.” MinMetals might be very successful at trading metals, but it wouldn’t have occurred to me that a metals trading background would have made anyone particularly good at real estate development, and especially at developing “premium” projects like this one. This might seem like a strange bit of business diversification. But this is actually not an anomaly in China. In fact a lot of Chinese SOEs are involved in a very wide variety of business activities, and are especially fond of activities in which cheap capital is the comparative advantage, or in which there is political advantage to be gained. That makes real estate development and “high tech” two of the most popular ancillary businesses. Incentives affect behavior Does it matter? Perhaps. This type of business diversification is not new and it doesn’t have a very encouraging history. For example in the 1960s the US saw an explosion in the growth of what were then called “conglomerates”. There seemed at the time to be plausible reasons for their growth: good managers are good managers, and can generate growth from many types of companies, and their ability to generate growth is magnified by the lower cost of capital associated with substantial diversification. But after the initial enthusiasm, conglomerates performed awfully, and in the 1970s a consensus developed that large conglomerates involved in very different lines of business tended to be value destroying. The reason often given was that managers who might be successful in one line of business – say coal extraction – might not necessarily be especially good in another line of business – say children’s retailing, or movie production. By forcing senior managers to disperse their expertise across a wide range of very different businesses, conglomerates were very good at mismanaging many if not all of the businesses they controlled. I am not sure if I am totally satisfied with this explanation, although there is probably some truth to it. To me the main reason why conglomerates tend to be weak at creating value has to do with the distorted incentive structures involved in their creation. Unless skeptical investors are monitoring them and threatening to punish them when they fail, senior managers have no great incentive to manage shareholder money very carefully. They do, however, have strong incentives to build their assets and to diversify – the former because the larger the company the more important and more highly remunerated the managers, and the latter because highly diversified businesses are less likely to fail and more likely to be involved in whatever business is hot today. In that case, as long as there are no constraints to managers’ ability to raise money and invest in other businesses, managers naturally do just that. The problem is that what is in the best interests of the shareholder – creating economic value to be captured by shareholders – is not necessarily in the best interest of managers, who might find it totally rational to overpay for assets and to pile into “hot” markets. This distorted incentive structure ends up encouraging capital misallocation. After a few exciting years in the late 1960s, we saw the consequence: the profitability of American conglomerates plummeted. Incentive structures, in other words, determine behavior in the aggregate, and if the incentive is to ignore value creation in favor of some other objective, value creation tends not to occur. In fact the opposite occurs. Value tends to be destroyed if those other objectives can be met by deploying capital. It is hard to imagine that in China today the incentive structure for top managers of SOEs is aligned with that of creating economic value. Shareholders, where they exist, have few rights and almost no say in choosing or disciplining top managers. Obviously enough the bigger the company, the more important the CEO tends to be, the more preciously his bankers and investment bankers will treat him, the more time he will spend with senior political leaders, and the more highly remunerated he, his family and his friends will be. What’s more, as Beijing tries to consolidate smaller companies into larger ones, the bigger the company are the more likely the CEO is to head of the surviving company. In that case companies of course will want to grow no matter the cost. There is an additional and very important distortion that compounds the problem in China. The most important comparative advantage that large Chinese companies have is access to cheap credit, and so from a P&L point of view the best policy is always to borrow as much as possible, and buy or build assets. Even if the borrower overpays, or if the projects are value destroying, it doesn’t matter too much because artificially low interest rates are the equivalent of debt forgiveness, and after several years of hidden debt forgiveness, even the worst investments start to seem profitable. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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By Michael Pettis
Much of last week's newsletter was on the data that was released on inflation, new loans, investment, etc. One thing worth noting in the current environment is that small and medium enterprises (SMEs) are hurting, and last week's minimum reserve hike – which came out the same day as the CPI number – will undoubtedly make things worse since any withdrawal of credit is unlikely to affect the top customers (SOEs and local governments) and will fall disproportionately on marginal borrowers.
In early May I wrote that the very uneven process of rebalancing in China was likely to have adverse consequences on the SME sector.
Rebalancing in the context of China means, for the most part, a significant increase in the consumption share of GDP from its astonishingly low level of 35% in 2009 (and perhaps lower last year). As regular readers know, I do not believe that China's high savings and low consumption rates are a function of any remarkable preference on the part of Chinese households for savings over consumption.
They are simply the automatic consequence of a system in which increases in GDP growth are subsidized by transfers from the household sector, which effectively constrains the relative growth of household income and, with it, household consumption. In that case the only way for China to rebalance would be for Chinese household income to grow faster than GDP.
This requires three things above all. It requires that wages grow faster than productivity, that the currency appreciates, and that real interest rates rise. This does not seem to be happening in China, as I discussed in a blog entry last month. Wages have been rising quickly in the past year, but the currency is barely appreciating in real terms against the dollar (and is probably depreciating on a trade weighted basis), and of course real interest rates are declining sharply.
In the aggregate the impact on the growth of the household income share of GDP is probably negative, at least if the World Bank is correct in saying that consumption growth has been actually declining since early last year (and as Tuesday's retail sales data seem to confirm). But this uneven rebalancing has another impact, I argued. If wages are rising and the cost of capital is declining, we should be seeing a shift internally in favor of capital-intensive industries, the SOE sector, for example, and away from labor-intensive industries, which includes SMEs for the most part.
I had anecdotal evidence corroborating the theory. Since last year several of my students who come from manufacturing families had told me that their parents were finding it increasingly difficult to retain workers and were getting squeezed out of business. Two months ago my central-bank-seminar student Huang Haidong, who comes form a prominent Wenzhou family (Wenzhou is often considered the cradle of the SME industry in China), sent me an email saying that according to his research a very large number of Wenzhou SMEs were facing bankruptcy.
Wages and Capital
The evidence has since become more than just anecdotal. Last week I saw the following article in the current issue of Caixing:
China's small- and medium-sized enterprises are looking at an increasingly difficult business environment amid financing difficulties and rising production and labor costs, the Ministry of Industry and Information Technology (MIIT) said in a report released on June 2.
To rein in excess liquidity, the central government has tightened its monetary policy and raised interest rates twice so far this year, but the measures also add to the difficulty for SMEs to obtain bank lending and have driven up financing costs, according to the report, which was jointly conducted by MIIT and the Chinese Academy of Social Sciences.
…The official Xinhua News Agency reported on June 2 that three "relatively big" private companies went bankrupt in Wenzhou of Zhejiang Province. Wenzhou is known as one of the largest centers of private enterprise growth in China. But a local official responded by saying they are isolated cases.The article argued that high wages and rising borrowing costs are the key challenges facing SMEs. The latter may seem surprising given what I said about the declining real cost of capital, but remember that SMEs get little of their financing from the banking sector and have to pay very high borrowing costs for off-balance sheet and informal lending. As cheap capital has been sucked up by SOEs, real estate developers (those who can access bank lending), infrastructure investors and local and municipal governments, little has been left for less-favored entities and the result has been that their cost of capital has risen even as wages have too.
The point was picked up Friday in a very interesting article in the Financial Times. According to the article:
Small Chinese businesses are feeling the effects the government's monetary tightening and face a cash squeeze that may be worse than during the global financial crisis in 2008, according to an official warning.
From tile manufacturers in Shanghai to shoe factories near Hong Kong, smaller businesses have driven Chinese growth over the past two decades, accounting for about 60 per cent of gross domestic product. So, a sharp slowdown in their activity would weigh heavily on the Chinese, and by extension, world economy.The article goes on the make comparisons with the last squeeze of SMEs:
In late 2008, during the financial crisis, a collapse in global export markets and aggressive monetary tightening drove the Chinese economy to a near standstill. Beijing estimated that 20m migrant workers, many of whom were employed by the same kinds of small firms that are now short on cash, lost their jobs.
Dong Tao, a Credit Suisse economist, said China could now face trouble again, as companies delay bill payments and factory owners abscond without paying wages.
"If this continues, and these smaller companies start to fail in large numbers, then the economy will slow more than the market anticipated and the government bargained for," he said.
Most of the focus in the press has been on the effect of rising borrowing costs for SMEs, although many of these are not heavily leveraged and in my discussions with friends who own, or who are related to owners of, SMEs, wages has been at least as much of a problem. But the attempts by the PBoC to tighten credit (relative to the enormous demand from credit from infrastructure and real estate developers and local governments) have certainly made conditions tougher for those SMEs who do rely on credit. The FT article goes on to say:
The cash crunch has come despite repeated prodding by the government to help private businesses. Chinese banks have traditionally preferred to lend to state-owned groups, judging that they pose negligible credit risk due to their government backing.
This bias is especially pronounced when the government restricts credit, as it has done over the past year. China has raised benchmark lending rates by 100 basis points to 6.31 per cent, but small businesses have seen much steeper increases.
Monthly lending rates at credit unions and informal lending institutions in the entrepreneurial cities of Wenzhou and Xiamen have reached 5 per cent in the past few weeks, up from 1.5 per cent just nine months ago, according to Credit Suisse.
Earlier this week, in an effort to boost access credit, the Chinese banking regulator said it would ease tough capital rules on bank lending to smaller businesses. In one measure, loans of less than Rmb5m ($770,000) need not be counted towards banks' loan-to-deposit ratios.Credit Quantity
This last point is interesting. Last week a CBRC circular went out that suggested a different way of accounting for small loans to SMEs which should, in principle, increase banking incentives to fund SMEs by reducing the capital requirement.
This seems to me a very complicated way of alleviating the cash crunch among SMEs. The proper way would be to reduce the demand for credit from real estate developers and infrastructure investors, but of course Beijing loves its administrative measures. Anyway the only efficient way of reducing demand from real estate developers and infrastructure investors would be to have them pay a fair cost for their capital – and remove the implicit credit support. This however would threaten to throw a huge number of essentially insolvent projects and companies into bankruptcy, so the preferred solution is to keep the cost of capital low and to keep their borrowings growing.
Will the attempt to on increase incentives to lend to SMEs work? I am not sure. It would depend on too many factors and squeezing out liquidity through hikes in the minimum reserve ratio will almost certainly fall disproportionately on SMEs. Of course if the regulators simply imposed a formal or informal quota on the banks (e.g. by the end of the year a minimum of X% of your loan portfolio must be in the form of small loans to SMEs),
I suspect that they will comply, but then we run into the automobile loans problem of a few years ago. When the regulators demanded that Chinese banks increase the number of auto loans, they duly did, and within a very short time a remarkable share of those loans went non-performing. It turns out that it is very easy to meet aggressive loan target numbers, but it is a lot less easy to make good loans.
Moreover in China credit is not controlled through price, but rather through quantity. In other words we don't use the cost of capital to decide the quantity of credit since the cost of capital is artificially set at extremely low levels – at which level the demand for loans is almost infinite.
Instead we use loan quotas. This means that if banks lend materially more to SMEs either they will also be forced to lend less to other borrowers or they will have to allow credit growth to exceed whatever target they would have otherwise set. Already there is some concern about the flow of capital into low-income housing projects. Last week's Beijing-based Global Times had this article:
At least 40 percent of public housing projects may not start as scheduled this year, with the loan bottleneck resulting from monetary tightening policy mainly to blame for the delay, analysts said on Monday. Construction of affordable housing in cities nationwide is far behind schedule, according to data cited in a Xinhua report.
In Shanghai, only 25 percent of scheduled affordable housing projects had started by the end of May, Xinhua reported. In Jiangsu Province, work on about 30 percent of a total of 450,000 affordable housing projects had started, while in Zhejiang Province, work on about 61,600 affordable housing units, 33.2 percent of the total, was underway.
The government plans to build 10 million units of affordable housing this year as alternatives for homebuyers in cities where average property prices have almost doubled during the past two years. Under the plan, construction of all these affordable housing projects must begin by the end of October.
Hui Jianqiang, a senior analyst with the E-House R&D Institute, said work on at least 40 percent of affordable housing projects will not begin this year unless the central government links local officials' performance to public housing construction. "Housing activity is anemic partly due to stricter approval procedures but mainly because of tight lending standards under current monetary tightening policy," Hui said.More lending to SME is undoubtedly a good thing, but if it is achieved by diverting loans from local governments, for example, it will come at the cost of lower growth and rising financial distress in the short term. And as we have seen in the past, short-term growth concerns always trump long-term sustainability issues.
Whatever the outcome I think we need to keep a close eye on the behavior of SMEs. They are by far the most efficient part of the Chinese economy and the only part creating real value. My experience in other developing countries suggest that SME owners tend to be the most sensitive to and aware of changes in risk, and if we start to see rising bankruptcies among SMEs, coupled with disinvestment and increasing capital outflows, that is almost always a very worrying sign. When SME owners start to worry, so should we.
MIT on Environmental Degradation
To turn to a completely different issue, lat week a friend sent me an interesting article that came out in one of the MIT magazines. According to MIT News:
A recent study released by the MIT Joint Program on the Science and Policy of Global Change quantifies the damage to the Chinese economy caused by a lack of air-quality control measures between 1975 and 2005. Not surprisingly, the MIT researchers found that air pollutants produced a substantial socio-economic cost to China over the past three decades.
…To observe how changes in pollutants, and their associated health impacts, have historically affected the Chinese economy, the MIT researchers modeled the number of cases of health incidences caused by air pollution — such as restricted-activity days, respiratory hospital admissions and asthma attacks, to name a few examples — given a pollution level and the number of people exposed. Then the model calculated the summed costs of these incidences — i.e., payments for health services and medicine, loss of labor and productivity from time off work, loss of leisure time needed for healing — to estimate the total change in available labor supply.
Similar studies conducted by the World Bank have found that air pollution in China caused damages equal to 4-5 percent of the Chinese GDP between 1995 and 2005. However, these estimates are based on static measurements that do not measure the cumulative, long-term impacts of health damages. The MIT study found a significantly higher level of damage, equaling 6-9 percent of the Chinese GDP. The dynamic, cumulative method used in the MIT study may be particularly applicable to developing countries that are experiencing rapid growth.I mention this because I have often argued that Chinese GDP growth has been substantially overstated during much of the past thirty years. Part of the reason for the overstatement is that the future costs of environmental degradation should in principle be included as a deduction to current growth.
After all if environmental degradation reduces future economic output because of health problems, not to mention because destroying rivers, farm land, and so on is the economic equivalent of selling assets and calling the proceeds income, then the growth in economic value it generates today should be reduced by the destruction in economic value.
So What Is China's Real GDP?
This is hard to do, of course, but it eventually gets accounted for in the form of lower growth in the future. If farmers produce less tomorrow because water is polluted, then future economic value added is lower. If workers spend additional money on health care tomorrow, this money is transferred from other, more productive spending.
This happens everywhere, of course, but I would argue that in many countries, where environmental degradation has been less and has occurred over a much longer period, it is already showing up in lower GDP growth today, so it probably results in a much lower overstatement of growth. In fact in rich countries where environmental degradation has slowed sharply, or even reversed, it may be causing GDP growth to be understated.
The other source of GDP overstatement in China is misallocated investment. One way of thinking about it is that if NPLs were correctly identified, the annual accumulation of the non-collectible portion of NPLs should be deducted from current GDP growth numbers to arrive at a more accurate estimate of GDP. After all growth "created" by wasting money is not really growth, and NPLs represent the amount of money that has been wasted.
In order correctly to identify NPLs we would need to include loans that might not technically be NPLs at current interest rates, but would be if interest rates were raised (by at least 400-600 basis points) to their "correct" level. Why? Because these loans are benefitting from the implicit annual debt forgiveness granted to them by household depositors – and the fact that they can pretend to be performing with the help of massive debt forgiveness should not change the fact that they are nonetheless un-repayable.
The combination of these two sources of GDP overstatement – uncounted environmental degradation and ignored NPLs – is pretty substantial. To show how substantial, assume that GDP has been overstated by anywhere from 2 to 4 percentage points over the past ten to fifteen years. This would imply that China's GDP today is actually about 55% to 85% of its stated size – or to put it another way, that China's economy is anywhere from 15% to 45% smaller than we think.
This is a pretty big haircut. I have no idea what the correct deduction is (none of my numbers seem especially implausible), but even very rough ballpark numbers suggest that China's GDP may be sharply overstated. At the very least they also suggest that all those breathless predictions about when China will have the world's largest GDP may turn out to be as simple-minded as the same predictions made about the USSR in the 1960s or, perhaps a little more plausibly, about Japan in the 1980s.
And for the same reasons: in each case we start from the assumption that the country's real GDP, inflated as it is by misallocated environmental costs and overstated investment numbers, is much larger than it really is. Much, much larger.
By the way notice that if we discount GDP by 20-40%, the astonishingly low household consumption share of China's GDP – 35% in 2009 – rises to 44-59% – still very low by global standards, but not quite as surreal. Could it be that much of China's GDP really is overstated, and with it total savings too?
About The Author - Michael Pettis is a Senior Associate at the Carnegie Endowment for International Peace and a finance professor at Peking University. He received an MBA in Finance, and an MIA in Development Economics, both from Columbia University. Michael's blog - china financial markets.
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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