Sunday Economic Shorts

Well, George Bush certainly went out with a bang, perhaps the most complete failure ever to hold public office in a major democracy: two lost wars, a savaged constitution, a major city wiped out, and an exit crowned with national economic collapse and global depression. Not since Japan's political elites attempted to plunge it into war with four of the most powerful nations in the world, all at the same time, has a nation been so completely used and betrayed by its political classes. Thanks George.

Unfortunately the madness of King George has left its mark even here in Taiwan, where the global mess is ravaging the island. In Tainan word has it that chemical and LCD giant Chimei is tottering on the brink. Several of my acquaintances here whose primary business is with companies that do business with Chimei have lost their jobs. My wife went up to Taipei to meet her old classmates from primary school 40 years ago, and in addition to the usual tales of divorce and cancer, a new sadness overthrew them all: people getting laid off left and right, families reduced to one underemployed bread-winner.

As always, dislocation creates new opportunities. At 6:00 am at the Youth Park, (青年公園), Gate 3 (三號門) in Taipei, the bus companies who used to do a rousing tourist business come by one after another. There they display the month's schedule offering impromptu day trips to tourists who pay $100 or $200 to take a day trip to some place within a couple of hours of Taipei. As soon as the bus is full of day-trippers, off it goes. My aunt says she's been to Lukang ($300) several times to shop and eat oyster scrambled eggs...weekends offer 2-3 day trips...

Leaving the micro for the macro, Taiwan and South Korea are the only countries that make DRAM chips and Taiwan's DRAM firms are US$11.6 billion in the red and demanding a bailout. Since the South Korean won has plummeted, competition is fierce. Speaking of debt, Kaohsiung city wants the central government to forgive its debt, since the government holds so much land in the city, hampering its development. Kaohsiung's debt currently stands at over US$1 billion and climbing. The government's chief economic planner says he'll resign if voucher plan doesn't work at least 50% as well as he predicts. Will he pay the extra useless debt too? The local stock market regulatory chair does not expect the stock market to recover until the end of 2009. Chinese firms are to be permitted to invest in the local market, but not to trade on the margin or sit on boards of local firms. Of course, originally slated for over US$1 billion, the expected investment is just US$200 million. Good news as last week China Petroleum handed out the largest gasoline price cut in its history, nearly 40%. Ah, but despite the fact that it has lost tons of money this year, all employees are getting their bonuses and then some. In Hsinchu last week the Science Park director was saying that there was no clear trend of layoffs, but with the news of massive layoffs in the US, layoffs here will probably follow. Several major companies are forcing employees to take unpaid days off, or work only a few days a month, will salary suitably reduced. It is going to be a grim New Year's for many next year.....

[Taiwan]