Cafe in Chile

very interesting and attractive...I love the cafe though I don't drink coffee

Working hour flexibility

Many suggestions has been thrown out how to tracke the global warming problem: tax on gasoline, biofuel, tax through insurance on driving, etc.

I have another suggestion. I think a large portion of driving are devoted to work commute. In many cases, people do not drive as much as during the weekend. Unlike work commute, people has more flexibility in their driving decision in the weekend. If we can reduce our working day from 5 days a week to 4 days a week. Think about a typical hours of work in a typical weekday: 8-5pm from Monday to Friday. If we can squeeze it into 4 days from 7am to 6pm, the total number of hours will increase from 45 hours per week to 44 hours. We can cut lunch time for the new scheme from 1 hour to 45 minutes to make the 1 hour up.

I think many workers will like to have this new arrangement. If government worries that people may drive even more in the "long" weekend, the government can make it Wednesday break instead of Monday or Friday.

I think indeed some international institution has this practice, probably for a different resaon. IMF for example, employees there can take every other Friday off. We do not see there is any significant problem for the fund's operation. Of course we can also be more flexible in this new scheme, instead of everyone off on Wednesday, some take Wed, some take Thur, and so on. The company can continue to funcation 5 days a week.

This is probably be good for the earth and for the employees. Is that a win win situation?

Yen

Shall we buy yen? Yes

The reason, in additional to the Japanese domestic economy, is that the govt/central bank is also debating the delink between US and the rest of the world/ asia I particular. Evidence is it is possible. If we have a delink, weaken or moderating US economy will discourage money flow into the US markets. Those extra money has to go somewhere. From currency prospective, Yen is the only outlier in the developed world. From geographical prospective, the delink is beneficial to Japan as its trade with Asia is highly connected. Both encourage the capital inflow to Japan. From the rest of the world prospective, reserve accumulation is slowing down. The major buyers in the past are either diversifiying or slowing down its rate of accumulation. I don't know how the global inflation and domestic US economy will play out in the US interest rate dynamic, but the long end of the US treasury will eventually feel the pressure from external.

The only problem is the Japanese policy makers are not 100% certain that delink will be the case. At this point, they are conservative because if delink has not yet be confirmed, earlier rate hike will be harmful to the economy. It will not materialize until the day it comes. Given the current oil price is highly uncertain, It looks like the bank wants to confirm the delink hypothesis before acting (which of course the mirror image of domestic economy pick-up).

Yes. It is expensive today. It will become cheap once the delink hypothesis is confirmed.

Housing market

A while ago I mentioned that I am not as bullish as the market regarding the housing stabilization. I argued that in most market, price and quantity are both needed to adjust when there is a drop in demand. In some sense, the short run supply of house is relatively inelastic. Price adjustment will follow the sales adjustment.

Here is a bit of thought on the economy as a whole. So far, the weak housing market did not (yet) spilled over into other components of the economy. Private consumption remains high. One explanation is that housing market is quite localized. The collapse in sales in Florida will not cause much private consumption impact in the Bay Area. But when the government measures private consumption for the country, it looks at both Florida and the Bay Area. The impact of housing market collapse will not be one to one to the overall private consumption.

Now, the problem seems different. Thanks to our financial engineering technology, the securitization of mortgage loan makes every part of the country exposes to the housing market. Investors everywhere in the country are now able to expose to the risk of the local housing market through the exposure of stock market. Our private consumption is fine as long as stock markets hold up.

I would guess this is the reason why Greenspan mentioned that spill over is possible until recently.

Remittance and housing

From 2003 Jan to 2007 Jan, year over year growth between US housing starts and Mexico remittance has some unsurprising relationship:

Mexico Remittance: Only 7 out of the past 49 months are below or at 10%yoy growth. 5 out of those 7 happened since August 2006.

US housing starts: 20 out of the past 49 moths are below or at 0% yoy growth. 11 out of those 20 happened since 2006.

In terms of overlapping, 6 out of the 7months below 10% yoy remittance growth are associated with below 0% yoy growth of housing starts. The remaining 1 months was on Jan 2004 when Housing starts was also low at 3.13%yoy (Jan 2003 housing starts was 9.1%yoy, Jan 2005 housing starts was 11.8%.)

So, what will be the remittance going forward, what what will be the impact on the Mexican families live in Mexico?

HMO Coordination

I did a surgery last Wednesday. My spine disc was displaced and pressed the nerves. I could not stand and walk in the past weeks. Laying on the bed is the only way to make my pain away.

I joined the Healthnet HMO. I have my family doctor. Here is the procedure from the time my leg was really hurt to the day of surgery.

Day 1: I need to see the family doctor. He briefly examined my leg. and referred me to took an X-ray on my leg and back. In the mean time, he gave me some pain reliever pills.

Day 2: I did the X-ray and took the medicine. Well...the medication was not working. The pain was there without any imporvement. The X-ray result could not detect anything abnormal.

Day 3: I came back to my family doctor and told him the situation. He decided to write a report to the insurance that I need an MRI (another advance type of X-ray that can see through your nerves). Another strong set of pain killer as well.

Day 4: The insurance approved the MRI. I did the MRI in that evening.

Day 5: The MRI result was out showing that my disc in my spine was displaced. I came back to the family doctor to get his referral to the specialist.

Day 6: I went to the specialist with the MRI films. I was lucky that at the time when I brought my film to the specialist. The doctor just arrived the office and read the films. (usually I need another appointment which will be a nother day or two). He was nice enough to handle my situation immediately. (I guess my situation is already too worst to wait...). He said I need an surgery, but need to get the insurance approval.

Day 7: I eventually got the insurance approval for the surgery. However, I still need to get confirmation from the hospital for room availability.

Day 8: eventaully, the hospital confirmed as well.

Day 9: Surgery in the afternoon

Day 10: rest at home

Day 11: back to work.

This is the coordination problem...I suffer from miserable pain for more than 2 weeks. Remember from day 1 to day 11, there are two weekends in between, and one of the weekend was the President days - a long weekend...

Is there any way to may that more efficient? for example, can the insurance, hospital, family doctor, specialist netowrk connect together? rather than waiting for an verbal confirmation form one another?

Can the drug prescription service available at the family doctor or specialist office? rather than go to Walgreen or Longs Drug? All these should not cost much extra. Are we protecting the drug company or are we protecting the one who needs the care?

Central bank’s job

The more I study the job of a central bank, the more thought I have. In most central bank nowadays, the main responsibility of the central bank is to maintain price stability. The policy is inflation targeting. There are many different form of inflation targeting. From a strict targeting like UK and New Zealand, to a more flexible inflation targeting like Mexico and Brazil. The whole point for this policy is to make sure that inflation is in the target range.

Investors often project the central bank’s policy stance, by looking at the latest inflation/cpi number. When it is above the market expectation or when it is close to the upper bound, the market expects a rate hike and vice versa. This sounds to me a very wrong interpretation.

Here is why: we all know that from interest rate hike to money supply to investment to domestic demand takes time. Or from interest rate hike to credit contraction to less money in the market to less liquidity takes time. We also know that the latest inflation/CPI number is mostly a month old. So, from the inflation number released to the interest rate hike, and from the interest rate hike to the real effect on inflation will probably take more than 2 months, not to mention that a lot of economies do not have a smooth monetary transmission. So, this time lag will basically make the monetary policy ineffective.

So, what is the point to have a monetary policy? Because of this time lag, the only propose of the monetary policy is to stabilize inflation expectation. Nowadays, inflation survey has been released in many of the countries. The expectation is mostly available a few weeks before the realized figure. Does that make sense for the central bank to put more weigh on the deviation between inflation expectation and the inflation target, rather than the deviation between realized headline inflation and the inflation target.

So, what is the point on that? We are having inflation hyper in Mexico these days. Latest bi-weekly Inflation is downtrend, same as the core cpi. Inflation expectation in 2007 and 2008 (also implied by the wage negotiation settlement) are not out of line from the central bank. So, why need hike rate? May it better for the bank to talk more aggressively to stabilize inflation expectation and act only when the expectation is against the bank’s view? I would guess this is what the bank did this morning. It states:

“the Board will remain attentive that core inflation is complying with its own forecasted trajectory (both monthly and annual) consistent with a decline by March. If not, the Board will tighten monetary policy."