The People's Bank of China today raised its one-year benchmark lending rate by 0.18 percentage point and its one-year deposit rate by 0.27 percentage point.

Why 18 or 27 basis points instead of the increments of 25 used by most other central banks?

...``In China, interest rates are always set to be multiples of nine,'' said Fan Wenzhong, deputy director at the Research Department of the China Banking Regulatory Commission in Beijing.

Because the financial year in China has 360 days, it's easier to compute monthly and daily rates if yearly rates are evenly divisible by nine, as are the current lending and deposit rates...

The rule also simplifies interest computation on an abacus, the calculating tool that came into use more than 2,000 years ago during the Han Dynasty and is still used today.

``Rates divisible by nine avoid rounding of interest and allow easier calculation by abacus,'' said Wang Qing, chief China economist at Morgan Stanley in Hong Kong. In addition, the number nine in Chinese shares a pronunciation with the word ``longevity'' and has long been considered a lucky number. Chinese wedding feasts have nine dishes; Beijing's Forbidden City has 9,999 rooms.

The shine is off corn ethanol, and oh, what a comedown it has been... the government's decision to play energy market God and forcibly divert huge amounts of corn stocks into ethanol has played havoc with key sectors of the economy. Corn prices have nearly doubled, which means livestock owners can't afford to feed their animals, and food and drink manufacturers are struggling to buy corn and corn syrup. Environmentalists are sour over new stresses on farmland; international aid groups are moaning that the U.S. is cutting back its charitable food giving, and many of these folks are taking out their anger on Congress...

All this pressure is beginning to hit home. Ethanol isn't going away anytime soon; you can't unring a bill. But senators are said to be readying amendments to offer to the new ethanol bill that would use triggers or waivers to further water down the corn element. Turns out there are huge economic consequences to Congress micromanaging energy policy, and all to aid its campaign donors in agribusiness. A lesson the U.S. is now learning the hard way.

The US may "learn," but Congress -- a discordant band of 535 -- doesn't "learn." It adjusts policy, typically by making a move in a contrary direction without ever going back to fix what it broke. So, if one Congress micro-managed to overdo it on corn-based fuel subsidies and tariff protections, don't bet it has learned or that this is "hard" on Congress because of negative impacts on the Americans forced to pay the consequences.

Watch them swing into action and micro-manage something else when the wind shifts. The next thing for subsidyhungry farm lobbies? "Biological Carbon Sequestration" -- an idea to allow farmers to sell carbon credits if they adopt yet-to-be-determined land practices. Coming soon to a bloated Farm Bill near you.

Vote now: Will Congress will "learn," or just micro-manage that one?

Washington Government Economist Hunting Regulations And Bag Limits

GENERAL

1. Any person with a valid Washington DC hunting license or a Federal Income Tax Return may harvest government economists.
2. Taking of economists with traps or deadfalls is permitted. The use of currency as bait is prohibited.
3. Killing of economists with a vehicle is prohibited. If one is accidentally struck, remove the dead economist to side of the road and proceed to the nearest car wash.
4. It is unlawful to chase, herd, or harvest economists from limousines, Mercedes Benz's, the Metro, or Porsches.
5. It shall be unlawful to shout "research contract" or "I need a policy consultant" for the purpose of trapping economists.
6. It shall be unlawful to hunt economists within 100 feet of government buildings.
7. It shall be unlawful to use decision memos, draft legislation, conference reports, or RFP's to attract economists.
8. It shall be unlawful to hunt economists within 200 feet of Senate or House hearing rooms, libraries, whorehouses, massage parlors, special interest group offices, bars, or strip joints.
9. If an economist is elected to government office, it shall be a felony to hunt, trap, or possess it. It will also be a shame.
10. Stuffed or mounted economists must have a DC Health Department inspection certificate for rabies and vermin.
11. It shall be illegal for a hunter to disguise as a reporter, drug dealer, pimp, female congressional aid, sheep, legislator, policy maker, bookie, lobbyist, or tax accountant for the purpose of hunting economists.

BAG LIMITS

1. Econometrician: 2
2. Two-faced Policy Analyst: 1
3. Macro Policy Wonk: 4
4. Big-mouthed Populist: 2
5. Relevant Economist: EXTINCT
6. Cut-throat Administration Seeker: 2
7. Back-stabbing Senior Author: 2
8. Brown-nosed Deputy Kisser: 2
9. Silver-tongued Congressional Consultant:; $100 BOUNTY
10. Wise-assed Civil Libertarian: 7
11. Staff economist: NO LIMIT

Update... A lot of reader reaction to this, mostly negative. The twin urges to "do something" after 9-11, and the revulsion again admitting defeat, make it very hard for many decent people to even consider letting go in Iraq (which is why Rudy scored points with his roughing-up of Paul on the issue). First, on a more positive note, reader Tim Daniel points to a Ron Paul archive,

sayingI found this site to be a treasure-trove of brilliant thought from a man that I now respect more than ever after reading his varying opinions on a variety of topics. Read on and enjoy.

Like ex-smokers I guess, reformed Libertarians are especially sensitive to Libertarian, well, smoke and other bilge. Ron Paul is emblematic of what ails the Libertarian Party: A firm belief that everyone else in the world wants what we want and would only leave us alone if we left them to their own devices.

Ignore, for a minute, the utter stupidity of his analysis of the Vietnam conflict. (I'm a Vietnam vet myself, so I was there.) How does the murder of at least 1/3 of the population of Cambodia; the imprisonment and torture of hundreds of thousands of anti-Communists in South Vietnam; the forced removal of 2 million ethnic Chinese who's families had lived in Vietnam for generations; how does that square with his picture of the aftermath of the Vietnam War? And how about those Islamofanatics whose stated goal is to kill or convert us? I'm sure they'd be most happy if we just left them alone to wipe Israel off the map; kill the few Christians that are left in the Middle East; and make sharia the law of the land throughout the whole of the Levant. Once they've killed all the Jews, Christians, and Moslem heretics it's within their power to kill, they'll be glad to turn their attention toward us, armed with nukes from Iran.

I used to be a card-carrying Libertarian. I voted for Mr. Paul for president when he was on the ticket. But now the party is fading into the irrelevance of the Knownothings and the Whigs. And it's because of foreign policy nutbags like Ron Paul; constitutional purists that demand that the good be the enemy of the perfect. The Libertarian Party will wind up on the trash heap of history. And deserve it.

Ron Paul puts forth an interesting view of history. We should return to days of our founders and not engage in foreign wars...like the Quasi war vs France, or the war against the Barbary Pirates. How does he justify the western expansion against sovereign states such as the Indian nations (in violation of supreme court decisions), France, England, Spain, and Mexico.

No offense, this is the ugly side of liberalism and makes me question my previous support for Ron. The problem in the Middle East are tyrannical theocracies. They breed hatred and resentment against the US. After 200 years of Capitalism, people in the US still resent wealth and consider money dirty. I have a hard time believing that a purely non interventionist strategy will be effective. The history of the world has been one of peace and wealth breeding complacency. I have faith in a long term strategy of freedom but there will always be bad men and at times they must be dealt with. In a global society their will still be thieves and murderers. I am always reminded of this Winston Churchill quote,

"If you will not fight for right when you can easily win without blood shed; if you will not fight when your victory is sure and not too costly; you may come to the moment when you will have to fight with all the odds against you and only a precarious chance of survival. There may even be a worse case. You may have to fight when there is no hope of victory, because it is better to perish than to live as slaves."

Compared to 2004, the 2006 electorate was higher in income and whiter, and more religious, male, married and rural.

The median voter was 13.4% wealthier than in 2004; the share of the electorate with household incomes greater than $75,000 increased from 32.3% to 38.3%. The share of whites grew from 77.0% to 79.0%, while the share of African-Americans and Hispanics fell by 1.9-points and 0.3-points respectively. The share of males went from 46.3% to 48.3%, and the share of married voters stepped up from 63.3% to 68.1%. Turn out among regular churchgoers (up 2.7-points), Evangelicals (up 0.5-points), and rural voters (up 2.8-points) all increased.

One would expect that these demographic shifts would have helped congressional Republicans. Yet not only did Democrats win, they picked up nearly all of their new votes among those who fall into the typical Republican profile of voters.

Millions of voters from constituencies that had given up on Democrats in the past—whites, men, couples, those with higher incomes, rural Americans, and yes, even the middle class—switched sides in 2006. And relative to the rest of the electorate, Democrats received fewer votes from among much of their traditional base—African- Americans, unmarried people, and the poor.

Between 2004 and 2006, Democrats actually received fewer votes from those who felt negative about the economy and gained 6.1 million votes from those who felt good about the economy. By contrast, Democrats gained 7.6 million votes from voters who went from approval to disapproval of the war in Iraq and gained 6.7 million votes from voters who newly disapproved of President Bush.

At the Novmeber 2001 meeting then-NY Fed President William McDonough was transparent about his zoologically-themed methodology for determining the cost of credit:

"Somewhat symbolically I have a pond behind my house in Westchester County and there are a lot of fish in the pond. Therefore, I have two hawks, and the hawks enjoy fishing in the pond. This is a true story, though what will follow is not true. This past weekend--now we get into mythology--one of the hawks miraculously turned into a beautiful white dove. I was very confused until I realized that what was even more miraculous was that the dove spoke with a southern accent! And that convinced me even more that the 50 basis point move was appropriate."

...suppose you were faced with a choice between the following hypothetical worlds:

World A: You earn $110,000 per year, others earn $200,000

World B: You earn $100,000 per year, others earn $85,000...

Much of neoclassical economic theory rests on the premise that World A is the uniquely correct choice. This theory assumes that people derive satisfaction primarily from the absolute quantity of goods and services they consume. On that measure, World A is better because it offers higher absolute consumption for every citizen. That fact notwithstanding, however, a substantial proportion of people confronted with this choice say they would opt for World B... On what ground might we argue that inequality’s toll on individuals...is unimportant because it occurs in psychological rather than explicit monetary terms?

It is now five days since a handful of senior Democrats joined with the Bush administration to announce a new “deal” on free trade, while refusing to release the actual legislative language of the deal. Today, environmental and health advocates have come out slamming the deal, noting like other grassroots groups that what the deal doesn’t cover says as much about its potential problems as does the secrecy the deal is shrouded in.

China will crack down on profiteering in the nation's booming markets for funerals and burial plots, state media reported Tuesday, amid a growing outcry over the soaring costs of a proper burial.

New draft regulations will rein in speculative trade in burial plots, which are now typically about 14 times more expensive than 10 years ago, Xinhua news agency reported.

"Cemeteries will only be allowed to sell tombs or urns for ashes to customers with death certificates of relatives or friends," it quoted the draft regulations as saying.

Violators face fines of up to three times the profit they make.

Similar penalties will be imposed on those who build graveyards without approval or who sub-lease burial plots to others, it said...

If you’d prefer to be cool rather than suffer in the heat, what you need to do, according to the environmental movement, is smash your air conditioner, refrigerator, and freezer. That will help to cool the planet—someday. If you want to be secure from hurricanes, floods, tornadoes, and other natural (according to it, manmade) disasters, what you need to do is destroy the energy base required to produce and operate modern construction equipment and means of transportation. In that case you may end up living in a thatched hut and have only a donkey to go from one place to another, but the absence of man-made power and its carbon emissions will make the world such a tame and happy place that you won’t need anything more. After all, natural disasters are not caused by nature, which is wonderful, pure, and benign, but by us! Remember that as you listen to the sound of one hand clapping.

Do a Google search on "D'oh" (without the quote marks), and take a look at the second-last entry on the first page.

Rally Resumes on Outlook for Rates

Wall Street resumed its advance yesterday as investors interpreted a government report of milder inflation as a signal that the Federal Reserve might consider cutting interest rates later this year...

Treasury investors did not appear to believe the producer price data significantly raised the possibility of a rate cut. The 10-year Treasury note fell 9/32, to 98 20/32. The note’s yield, which moves in the opposite direction from the price, rose to 4.67 percent from 4.64 percent on Thursday.