China Details Missing Billions

From the Wall Street Journal:

In a report that underscores the depth of official corruption in China, auditors discovered that 234.7 billion yuan ($34.3 billion) disappeared from public funds in the first 11 months of this year, state media reported.

Cases involving 67 senior officials and 164 others were handed over to judicial authorities.

Premier Wen Jiabao has called on state auditors to review public-investment projects to help avoid embezzlement and waste, Xinhua news agency reported.

The auditors said that in addition to the money that government officials embezzled, 16.3 billion yuan was wasted during the same period, Xinhua reported.

The Best Christmas Card This Year

From Clusterstock:

Quote of the Day

“The free market punishes irresponsibility. Government rewards it.”

~ Harry Browne

Russia Bans Jailing of Tax Offenders

According to the Wall Street Journal:

Russian President Dmitry Medvedev has signed a bill banning the jailing of people suspected of tax crimes and has fired another senior prison official following the jail death of a tax lawyer in November.

Mr. Medvedev, who has advocated more lenient punishment for economic crimes, signed a law banning the jailing of people under suspicion of tax crimes and allowing those convicted of a first tax offense to be fined without being held criminally liable, the Kremlin said in a statement Tuesday.

Inflation Worries and M2

I hold the opinion that a period of dangerously high inflation could be on the horizon. Collectivist governments (and I would certainly put our current administration in that category) have historically tended towards inflationary policies – oftentimes to a disastrous extent. The Federal Reserve’s current lack of independence and the massive amount of debt being incurred by the federal government worrying me.

Mark Perry, however, points out a possible ray of light – at least for the short term. Annual M2 money growth is at its lowest point in 14 years.

Investopedia defines M2 as:

A category within the money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds.

A decrease in the growth of savings will reduce the amount of money banks and other financial institutions are able to lend, thus reducing the money supply. So these numbers could lead to the conclusion that, at least in the short term, inflation may not be a problem. Though this decline in M2 growth could also be looked at as evidence that inflation is very likely. As inflation severely impacts savings and investments, a likely move by anyone predicting inflation would be to save less. So while a lower M2 growth is not what one would expect in an inflationary environment, it could actually be an early warning sign from the financial markets.

Inflation vs. Stock Market Gains

With stock prices rising, many commentators bandy Wall Street’s performance as an indicator of economic recovery. But these heralded returns may not live up to the hype. Unlike other economic indicators, stock market returns are not adjusted for inflation, as E.S. Browning writes in The Wall Street Journal.

Controlling for inflation takes extra work and makes stock gains look punier, so it is easy to see why stock analysts almost never do it. The media almost never do it either. But other things do get measured in real dollars. When economists report whether the economy is growing, they account for inflation. When analysts judge long-term gains in commodities such as gold or oil, they often adjust for inflation.

Because analysts almost never do the same with stocks, it leaves investors with an exaggerated view of their portfolios’ performance over time.

HT: Freakonomics

The Role of Expectations and Gender in Altruism

University of Michigan professors Mary L. Rigdon and Adam Seth Levine have a new paper that studies whether there is a systematic gender difference in giving behavior:

Most experimental economics research has found that women are more generous than men. Evidence also suggests that gender differences depend upon the price of giving: males are more altruistic when the price of giving is low, while females are more altruistic when the price of giving is high. However, in the modified dictator game, a key variable in one’s decision to give is what one expects to receive. Systematic differences in those expectations may well contribute to systematic differences in altruistic behavior. We show that these expectations drive an important and widely reported result. When these expectations are homegrown, we replicate the finding. When expectations of receiving are uniform rather than homegrown, gender differences in price sensitivity disappear: males and females give equal amounts. This suggests that it is gender differences in expectations about others’ giving — not differences in tastes for fairness — that explains the previous results.

A little perspective

From ReflectonOf.Me:

HT: Chris Blattman

Crime rates are down!

Andrew Sullivan attacks conservatives

Giving thoughts on what he has called the Iranian intifada, Andrew Sullivan writes:

Conservatism’s current priorities: using any terror attack to hurt the president? Check. Watching freedom-fighters risk their lives for regime change in the most critical country for US foreign policy in the Middle East? Zzzzz. Imagine what Reagan would have thought. And weep.