Hypothesis Testing

Some thoughts about GSEs

The government-sponsored enterprises (GSEs) are a group of financial services corporations created by the US congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the captial market more efficient and transparent. (defined by Wiki, but it explains most of it. lol ^-^ )

Somehow GSEs become a large issue recently, actually the argument of the existence of the GSEs has never stopped ever since they were created.

I just wanna list some of my opinions:

Personally, I think the U.S government formatted the GSEs with its best wish, government hopes the GSEs can be used to enhance the flow of credit to certain economy sectors. And the GSEs did contribute a lot at certain level. However, I think the GSEs should not be continued existence for the sake of the whole economy and society since their existence are not neccessary.

The GSEs are seemed to be necessary at one point because the market sectors are not efficient enough. However, I believe only free economy can bring us the true blossom, while the government intervenes can only bring unfair competition. My assumption is even the GSEs enhance some market sectors in short term, but it is harmful at long term of view. Free market can enhance those sectors too, even it is much slower, but it brings true competition and it is less risky for the economy even though they have the capability to perform better than normal enterprises.Nevertheless, although the functions of GSEs cannot be achieved by wholly private or wholly government enterprises respectively, but they are achievable by the combination of wholly private and wholly government enterprises.

Financail Crisis

A colleague who is doing research about the financial crisis asked me some questions about the crisis, since he read about my article that published on "Contemporary China Pictorial".

I thought it might be interesting to post some of the questions & answers here to share our thoughts. : )

What were the major factors that led to the financial crisis?  

The financial supervision system and the deficit spending consumption model should pay the major responsibility to the global economic crisis. However, I believe both of them are just superficial reasons, since Greenspan, the former chairman of the Federal Reserve has claimed that the government supervision is not an effective way to control the whole credit system, since it is always slower than the real market. The financial crisis has happened several times during the past decade, there must be some deeper reasons that we have not found yet, or reasons that we cannot do anything about it, such as the imbalanced distribution of the capital interest.

Who is responsible - greedy CEO's, Congress, credit rating agencies, Fannie Mae and Freddie Mac, individual borrowers, etc.?  

In my opinion, none of those should be fully responsible for the financial crisis. If I have to choose one, congress should take more responsibility than others. The huge economic bubble was there before the financial crisis happened, ever since the broken of network technology bubble in 2000 and the 911 terrorist attacks in 2001, the Bush government was forced to change the economic policy to the expansionist policy. The new policy led to a huge budget deficit, the US government had to issue a large amount of national debt which caused the weakness of the US dollar. This laid the basis of the 2008 financial crisis. 

To what degree do you believe the financial crisis was brought on by greed versus mistakes of well-intentioned individuals?

I believed that greed assumption way more than the opinion of “ mistakes of well-intentioned individuals”. As we all know, capital and all financial workers are tend to seek the maximum of the profit. It is hard for me to believe that the CEOs did not realize the high risk of the housing mortgage and subordinated debt obligation, in my opinion, they just choose to ignore the risks since the possible benefits are too attractive to resist. The so called “mistakes of well-intentioned individuals” is just a better expression instead of their eager to profit.

Found two interesting but very thoughtful sentences

1. There is always a little truth behind every "JUST KIDDING",
    a little knowledge behind every "I DON'T KNOW",
    a little emotion behind every "I DON'T CARE",
    and a little pain behind every "IT'S OK".

2. When faced with two choices, simply toss a coin.
    It works not because it settles the question for you，
    but because in that brief moment when the coin is in the air，
    you suddenly know what you are hoping for.

Economic in real life

Why milk is in a square box to sell, while coke is installed in round bottle?
Almost all soft drinks, whether glass bottles or aluminum cans, are all in cylindrical containers. But milk box seem to be all square. Quadrate vessel can use shelf space more effective than cylindrical vessel. Why, then, soft drinks manufacturers insist to use cylindrical vessel?
One reason might be, soft drinks are mostly directly drink, so it is easier to hold them in hands with the cylindrical vessel even it brings extra storage cost. And milk is not so, most people will not directly drink milk with box . If milk containers is cylindrical, we need more big refrigerator.
But even if most people directly with box to drink milk, cost-benefit principle also shows that they are unlikely to pack in cylindrical container trafficking. Quadrate containers (no matter what) containers indeed can save shelf space, but milk case saving space, obviously more cost-effective than soft drinks. The most soft drinks is on the open shelves in supermarket, the open shelves are cheap, usually do not bring operating costs. But milk is required in freezer, which are very expensive, and the operation cost is high. Hence, freezer storage space is invaluable, thereby improving the  benefits of use square containers.

HOW TO: Use Wikis for Business Projects

HOW TO: Use Wikis for Business Projects

Chinese Currency Policy

China's currency is a "real problem" President Barack Obama said last week before meeting with a top Chinese official in New York.

Is it a real problem? Actually, the Chinese currency has kept a increase trend in the past few years. And just reached history highest point last week. Well, it sure benefit the Chinese students who are studying in US just like me, but all Chinese export factories are now facing huge problems and some of them have bankrupted, Chinese government are making great efforts to save those factories and the unemployeed people who used to work in those companies.

However, US government still claim that Yuan is under valued. In my point of view, the Chinese currency has increase more than 20% in the past few years, but US economy situation did not have a dramatic improvement, can we suggest that the US economy does not related to Chinese currency policy? or at least does not related as much as President Obama has claimed?

US government said the "talking time" has past, they are going to use much stronger political and economic weapons to force China change the currency policy.

Let us see what will happen in the future.