A Return to Princples?

Today's news provides some clarifying examples of principle in practice:

Economic Development Drives Political Development

Last year 3,786 people died in Chinese mining accidents. As a result of the public outcry over mine safety, the government has shut down some smaller, more dangerous mines and begun to focus on mine safety. As the Chinese people become wealthier they seem to be putting a higher price on human life.

The side effect is that the Chinese are also asking why these mines were allowed to operate for as long as they have. So far the answer seems to be corruption at the local level and a system that has limited checks and balances at the national level. According to the Washington Post there are now calls inside China for an independent judiciary and a more powerful legislature.

As an aside, a focus on safety in all areas of business benefits many of the US firms that manufacture more modern industrial equipment, in mining this means Joy Global and Bucyrus.

Democrats Don't Support Free Trade

In an attempt to woo former Edwards voters and earn the endorsements from key unions, both Clinton and Obama have recently disavowed support for free trade. Their public statements have centered around "fixing" NAFTA to "protect" workers, what that means exactly is unclear.

That promise helped Obama secure the endorsement of the SEIU. Clinton ramped up her rhetoric pledging to eliminate any tax benefits for companies that outsource even a single job.

Investors Are Running, Not Walking, Away From Financial "Innovations"

Today bond insured FGIC began working to split off the firm's business insuring mortgages and other instruments except for municipal bonds.

This is just the most recent example of how structured finance has become radioactive toxic waste of finance. It will be interesting to see how recent volatility in these businesses impacts investment banking, insurance, and academic finance in the near future.

The Weaker Dollar Is Working

In December import prices (even excluding fuel) rose enough to shrink the trade deficit from $63 billion to $58 billion. A weak currency makes it more expensive to buy imports while making our exports more affordable, shrinking the trade deficit. Maybe this is the beginning of the trade balance moving towards, well, balance.

Timothy Burger
E-mail: at Gmail.com