they believe they can counteract the economic forces from their currency peg. The global economic force is simply too overwhelming. It is not a black market, it is simply THE MARKET.
The Fed (will eventually) force the government to unwind the fixed exchange rate policy by exporting inflation. In reality, we want inflation in the U.S. markets to get us out of the recession, but because China has such a strong stance on keeping their exchanged rate fixed, the inflation is bought by the Chinese government in the form of U.S. dollars.
The government can attempt to keep the exchanged rate fixed, but there is a tipping point that will result in rampant inflation of core prices, resulting in the same scenarios they were trying to avoid (political instability and protest). The authoritarian government is too stubborn to realize that they do not have unlimited access to capital.
The end game: China will eventually have to let their currency appreciate, or continue to soak up the inflation that should theoretically be occurring at home.
China keeps their currency exchange rate fixed in a narrow band because:
-they are scared of losing manufacturing jobs to other lower wage economies
- this would result in less jobs, protests and instability
By keeping the currency rate fixed at an artificial level, they are risking rampant inflation as traders and currency speculators will flock to buy the yuan in anticipation of China attempting to crack down on inflation in food/energy/real estate/core goods. Because they are so poor, a disproportionate share of income is spent on food. The 11% increase in food prices will also result in protests, riots and instability if the government allows that to continue.
Monday, December 27, 2010
black markets and the NCAA
OPEC controls supply in order to manipulate price of oil. OPEC profits off the resources of set of countries. The US created ExxonMobil and Chevron in order to compete globally.
BCS (NCAA) controls supply to manipulate and profit off of student athletes. NCAA profits off the resources of educational institutions and operates as a cartel.
The 'BCS' conferences are equivalent to the government bureaucrats who profit from their countries resources. The rest of the population (conferences) represent the bourgeoisie or the havenots. The government redistributes the profits within the system to select aristocrats.
Black Markets are created when there is a misalignment between goods and services. They are frequently derived from government intervention or in this case a poorly run monopoly. Because of the demand for services from athletes a black market is created to fill the void left in the market by the NCAA. The NCAA has determined that it is 'illegal' to pay athletes for their services, the same way a drug such as marijuana or cocaine is determined to be illegal. The black market exists because of demand within the system, in this case for the talents of high school football players.
The problem now is that there is so much demand for college football, the talent has spread so deeply and evenly within the system to division 1-AA and division II.
The BCS has turned college football into an ice skating competition in 3 out of every 4 years, because of the inability to play games that are demanded by the public.
I will argue that the BCS leaves billions of dollars on the table ever year (until they receive a new contract with a playoff system where people actually care about multiple games). I would also argue that because they are so satisfied with the current revenues, that when they do realize there are billions of dollars lying on the table, they should be donated to scholarships and families of athletes in need.
The BCS is probably the most inefficient monopoly on the planet. Can you imagine how many additional viewers would be tuned in to games in a playoff system? I am an avid fan, but once the regular season is done, there is no more than two games worth watching. Nobody wants to see a dust bowl match up between Oklahoma and Connecticut.
Keywords:
Economic Incentives
Money
Houses
Cars
Jersey Sales
Ticket Sales
Advertising Sales
Naming Rights
These are the reasons why college athletes would take money.
Monday, December 6, 2010
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