Something to Learn From Warren Buffet

Here are some very interesting aspects of his life :

1. He bought his first share at age 11 and he now regrets that hestarted too late!

2. He bought a small farm at age 14 with savings from delivering newspapers.

3. He still lives in the same small 3-bedroom house in mid-town Omaha,that he bought after he got married 50 years ago . He says that he has everything he needs in that house.His house does not have a wall or a fence.

4. He drives his own car everywhere and does not have a driver orsecurity people around him.

5. He never travels by private jet , although he owns the world'slargest private jet company.

6. His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goalsfor th e year. He never holds meetings or calls them on a regular basis .He has given his CEO's only two rules .
Rule number 1 : do not lose any of your share holder's money .
Rule number 2 : Do not forget rule number 1.

7. He does not socialize with the high society crowd . His past timeafter he gets home is to make himself some pop corn and watchTelevision .

8. Bill Gates, the world's richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common withWarren Buffet. So he had scheduled his meeting only for half hour. Butwhen Gates met him, the meeting lasted for ten hours and Bill Gatesbecame a devotee of Warren Buffet.

9. Warren Buffet does not carry a cell phone, nor has a computer on his desk.

His advice to young people:'
Stay away from credit cards and invest in yourself and Remember:
A. Money doesn't create man but it is the man who created money.
B. Live your life as simple as you are.
C. Don't do what others say, just listen them, bu t do what you feel good.
D. Don't go on brand name ; just wear those things in which u feel comfortable.
E. Don't waste your money on unnecessary things; just spend on themwho really in need rather.
F. After all it's your life then why give chance to others to rule our life .

China's Deflationary Effect On Western Prices and Inflation

The Bank of England recently released a paper examining the effect trade with China has had on UK inflation which draws important conclusions on regional wage inflation in China and how increasing trade with China affects Western inflation in general. Also of note are two further papers, one examining the effect on the US economy (written in 2004) and one more general paper looking at the effects on OECD countries (2008).

Paper: Conclusions were mixed. Increased trade with China has meant UK consumers and producers switching to lower prices goods and intermediate-goods, a deflationary impact (estimated at around 0.2pp of CPI for each 1% of GDP increase in trade with China, reaching a -1pp effect in 2004). Yet this switching effect may be off-set by Chinese domestic inflation, as wages and China in general grown has, and is likely to continue, experienced an appreciating exchange rate and appreciating wages, appreciation which is more rapid than inflation in the more developed economies where production was switched from, resulting in higher UK (and using the same principal, Western) inflation.

An important economic point is that inflation is primarily affected by inflation expectations and monetary policy. While the inflation rate may be affected by lower or higher costs in the short term, longer terms rates of inflation are not driven through short term effects (unless these effects affect inflation expectations).

Trade with China directly affects economic and monetary policy. A deflationary environment calls for lower short term interest rates - an inflationary environment calls for higher short term interest rates. Trade with China, and globalisation in general, increasing substantially over the past decade, may have led to, and may continue to lead to, a different level of interest rate. Should developing countries such as China experience price shocks the potential effect should be estimated and planned for.

Further, not addresses by the paper, trade with China may have had an effect on wealth expectations. Cheaper goods may lead to expectations of greater long term purchasing power, if future Renminbi and Chinese wage inflation do have an effect on finished product prices, and production is not (or cannot be) switched to another lower cost region, future UK (Western) purchasing power will be dampened.

Going beyond the scope of the paper:
Relocation of production from provinces where wage inflation is high to lower income provinces may be hindered by significantly increased logistics costs - many manufacturers have wage bills of just 10% of production cost - wages would have to increase significantly to justify sharply higher shipping costs,

As China moves up the value chain it may be able to supply increasing amounts of Value Added goods and services. This increase in Value Added may more than offset domestic wage price inflation, at least for a considerable amount of time. Moving up the Value China is both economicly desirable and is accelerated by the One Child Policy - a family's investment, especially more wealthy families in cities (those most affected by the policy), is in just one person,

China's growth is causing a global surge in commodity prices, driving up the price of plastics to phosphorus. While Western countries' dependence on oil, iron, etc, is likely less than at the time of the last oil shock, and many products dependent on commodities are manufactured in China (thus contributing to the above study) the effect of these price rises has likely been positive on Western levels of inflation.

The Paper in More Detail

There are various channels through which the growth in exports from China may have had an impact on prices in its industrialised country trading partners. The channels through which the first round effects of the emergence of a new large low cost exporter on the world trade scene could affect industrialised country inflation are set out below.

The ‘switching effect’ as domestically produced goods and imports from other countries are substituted for cheaper Chinese imports.

The ‘inflation effect’ stemming from lower or higher inflation in Chinese export prices than in export prices from other countries and/or UK domestic prices.

Lower production costs for both domestically produced goods and imported finished goods produced using Chinese inputs.

Given only 6% of UK imports come from China and imports are equivalent to roughly 20% of UK GDP the direct effect of Chinese imports on UK inflation may be small, but the actual effect may be larger depending on the size of the indirect channels which are set out below:

• Increased competition (and the threat of substitution) that will reduce inflation in domestically produced and imported goods that compete against Chinese imports.
  The domestic income effect from the improved terms of trade offered by cheaper imports (and domestic goods) may stimulate domestic demand and prices.
• The global income effect from China’s rapidly growing import demand may stimulate global aggregate demand and prices. This may be particularly true for commodity exporting countries.

Conclusions varied according to methodology used:

• Additive method: "used to calculate the impact on weighted world export price inflation and allow changes to be easily separated into the ‘inflation’ and ‘switching’ effects.
• However, they cannot account for the role of monetary policy or inflation expectations, and assume that the prices of goods and services not specifically modelled remain constant."
• Regression method: "can be used to estimate the impact on domestic import prices, and also the pass through to consumer and manufacturers’ prices. They can pick up the effects from a wider range of channels than additive measures, including indirect ones. Which effects are picked up will be determined by the specification of the regression and the choice of inflation measure as a dependent variable."
• The regression based method is more sophisticated than the additive method, but it's conclusions are dependent upon the specification of the equation. Importantly, no lag effect was used and dummy variables were used to account for changes in output gap, etc which the model found to be significant.
• Others papers (below) used different specifications but arrived at a similar result.
• The results suggest that China had a negative impact on UK weighted world export price inflation from 1997 to 2004, mostly due to the switching of the source of UK imports from other countries to China, and this effect grew to a maximum of -1pp per annum 2004.
• Consistent with this, panel regressions suggest that a 1pp increase in UK imports from China (and Hong Kong) was associated with an instantaneous 0.2pp lower consumer price index inflation in that category from 1997-2005, and 0.3pp lower manufacturers’ input price index inflation from 1999-2005.
• However, whilst panel regressions suggest that the switching of imports to China will lower CPI in that year, they also suggest that the existing import share from China has put upward pressure on CPI inflation due to higher inflation in exports from China than other UK trading partners. Overall, the results suggest that this upward pressure on inflation dominated the downward pressure; hence China had a positive impact on UK CPI inflation over the 1997 to 2005 period.

Source: http://www.chinaindepth.org/

posted by Alex Bowman

Sichuan Earthquake - Something to reflect

In the aftermath of the Sichuan earthquake, China’s image has changed drastically overseas, and sympathy pours in from all corners. The country is re-energized by the tragedy.

If China’s image has been that of a rapidly expanding economic empire, the earthquake in Sichuan has softened that impression, giving the country a vulnerable touch.After the 7.9 magnitude earthquake on May 12, the Chinese government for the first time set up a nation-wide three-day mourning period to commemorate the death of more than 40,000 victims.

Starting 528 at 2:28 p.m., exactly one week after the earthquake, all of China mourned for three minutes. For three days, flags were lowered, public entertainments are restrained, and the Olympic torch relay was stopped.The Asian Times and other media based outside of China extensively covered the “National Mourning Day” initiative. The Asian Times reported that Chinese scholars started an Internet petition pushing for mourning and cutting off Olympics celebrations. The Chinese government embraced the suggestion, and at the same time, keeps its full-gear succoring efforts. The international community and media monitor China’s deeds and comment favorably, although praise from the outside is not the top agenda of the Chinese government and is of little interest to average Chinese people.

The Chinese are still busy trying to save lives, even though the effort becomes more and more futile as time passes. Over 2,000 taxi drivers from Chengdu city volunteered to transport water, quilts, and tents to the epicenter – 62 miles away from their home city – for disaster relief despite skyrocketing gas prices. Beijing’s blood banks were stocked overnight by residents who waited for up to seven hours in lines on Beijing streets to donate their blood. Although they doubt the seriousness of the United States government’s half million USD donation for China’s earthquake relief, the Chinese are no longer angry about CNN’s coverage, which has been negative regarding the Olympics torch run.

Instead, they circulated a CNN Story on Chinese websites and blogs.CNN interviewed a local party secretary in Chenjiaba of Sichuan Province. The party leader had been calm answering questions, but “broke down in tears” when asked how many people had died in his area. He said 500 people have lost their lives, including his parents, wife and two children. Then he rushed back to direct the rescue campaign.An entrepreneur, who survived the 7.8-magnitude Tangshan earthquake in north China 32 years ago as a child, donated 100,000,000 RMB (about $14,300,000 US dollars) to Sichuan. Taiwanese, from politicians to average citizens, got together to support Sichuan.

In a disaster relief TV special that aired across the world, Taiwanese mentioned their earthquake nine years ago, now known as 9.21. They shared their sympathy with Sichuan, who suffered worse than the Taiwanese.The United Morning News based in Singapore said in an op-ed that the title of prime minister in China is much more than the head of government.

When people refer to “prime minister” in China, they have a role model in mind – former Chinese Prime Minister Zhou Enlai. He has been widely recognized as a leader who was close to his people and had their trust. The United Morning News said although China has better equipment and modern technology to rescue people from the earthquake, the standard for its prime minister as a loving father has never changed. The current 66-year-old Chinese Prime Minister Wen Jiabao fulfilled the expectation by flying immediately into the emergency area and sending more than half of the State Department into Sichuan.

Compassion, no longer economic growth, Olympics or protests, have become the main theme in China. The whole nation is swept up by the tragedy of the earthquake. A mother bent her body over her three-month baby to protect him when the earthquake struck.

When rescuers dug her body out, her baby was alive, the mother’s cell phone was beside him. “Dear baby, if you live, remember that I love you,” the screen read.To help kids who lost parents in the earthquake, the city government of Guiyang, not far from Sichuan Province, started a program named “Guiyang Mom.” In two days, over then 10,000 women signed up to adopt.

The Voice of Germany reported Chinese soldiers risked their lives to save foreign tourists. After being rescued by local people, some tourists started helping with the rescue efforts as well.The Hong Kong-based Phoenix TV critic Zhenhai Qiu wrote that the earthquake could have a positive impact on China. Just as hardships could build character, according to an old Chinese saying, “Trials and tribulations serve to revitalize a nation.”

Posted by New America Media, Jun Wang
Source :http://news.newamericamedia.org/news/view_article.html?article_id=4dd4f38bbd6828ebe6528851edd9dc98