China Watching

“If you think of the Chinese as yellow-skinned people of a totally different race from us, you probably will never get to know them” –The Pocket Guide to China

In 1943, the US Army handed out military pamphlets to the GIs stationed in China. Fighting side by side with the Chinese, the government promoted cultural exchange to strengthen its alliance. At the time, China was a military strategic partner and not much more. 70 years later, the need to understand China has increased far beyond just to the GIs. As the most populous nation, the second biggest economy, and the fourth largest country, China now demands the U.S.’s attention.

Though much has changed about the views toward China, the increased attention did not necessarily translate to increased understanding. As if staring at a piece of abstract art, Americans are watching, but most do not know what to watch for. They struggle to understand its complex political economy, dense language, and seemingly insulated society. Despite the increased media coverage, language studies, and travel opportunities, not much seems to make sense. Yet, as most Americans just scratch their head and stare at the piece, the American China watchers have been making the most out of it.

Ever since China became a global interest after its leader, Deng Xiao Ping, decreed “to get rich is glorious,” marking the shift to capitalism, the world has been eager to enter China. Since then, the newfound attention has created a need for bridges to connect the East and West. The West wanted to access the cheap labor, navigate the government, and more recently, break into the market; the East wanted to attract the foreign technology, management, and capital. As for these experts, they sought an adventure and have reinvented their careers as China insiders. With backgrounds in international affairs, economics, or journalism, American expats use their academic training to analyze evidences and recommend actions. Through reading dense academic research papers, conducting insider interviews, and visiting firms and agencies in on-site due diligence trips , they figure out the specific ins and outs of China and present their findings to clients, news outlets, conferences, and publishers.  Ranging from topics such as the financial system, business law and practices, government structure, to foreign relations, their detailed research has helped firms and governments vie for economic and political interests.  Adept at turning muddled data and into clear cut action plans, they have excelled at institutions, think-tanks, consulting firms, or investment research firms.

As experts, they fulfill useful, if not expensive, roles. Given China’s presence, clients are willing to go to great lengths for the insider economic, political, and cultural developments since each detail bears great significance to foreign relations, businesses, and investments. As a result, the high demand from clients and the low supply of experts have allowed them to capitalize on the first mover advantage and monopolize the market. They have the knowledge and the world is willing to pay for it. With fees up to $13,000 per newsletter subscription annually and opportunities at TV networks, conferences, and publishers, these savvy, entrepreneurial expats have been able to make a good living out of their roles.

Yet before such opportunities, they were just like any other American who stared idly at the abstract art piece of China. It all began with their challenge to explore the unknown. For many, the journey began with study abroad, English teaching, or company assignments. Throughout the years, while their American peers trickled back to the U.S. for home, for the better living standards, or the comfortable familiarity, the China watchers stayed behind. Driven by their curiosity, zest, and hard work, they caught up on their lack of cultural and language understanding and created a life for themselves abroad. Undaunted by the media portrayal, the language barrier, and the inherent career risks, they took the risk and sought the adventure.

For instance, Bill Bishop, the blogger of Sinocism, has reinvented his career as an online journalist. Having starting out his career as a business executive, Bishop gave up on climbing the corporate ladder and pursued his undergraduate Chinese studies interest. Decades later, he has blossomed as an online Journalist with his blog. Sinocism is a newsletter that compiles important China news stories to more than 12,000 investors, policy makers, and diplomats. By providing timely economic and political insights, Bishop has gained credibility and followers. His growing influence has allowed him to write for the New York Times as well as being named one of the top 100 foreign policy “Twitterati” by the Foreign Policy Magazine. Having the foresight to anticipate for his 12,000 subscribers’ demand, he is now one of the preeminent western bloggers in China. Now, as Bishop writes from his apartment in Beijing, his words influence companies, investors, and policy makers worldwide.

Nicholas Consonery from Eurasia Group, a political risk consultant firm, also seized opportunities based on his Chinese interest. Complementing his Asian studies degree from George Washing University and Furman University with a language program in China, Consonery expanded his horizons. Pouring through hours of classes, rote memorization, and uncomfortable practices, he mastered Mandarin. Since then, he has worked as a private equity analyst in Tianjin, a US consulate member in Shanghai, a security risk analyst in Washington D.C, and now as a top senior analyst at Eurasia Group. As a regular expert commentator on networks such as Bloomberg, CNBC, and Fox and contributor on the New York Times and the Wall Street Journal, he has capitalized on China’s growing prominence. More than just an interest, Consonery has developed a career all during his 20s and 30s.

In addition to natural China enthusiasts, Michael Pettis, an established Wall Street trader also joined in on the ride. Sparked by an interest in emerging markets, Pettis gave up his Wall Street Managing Director position for opportunities in China. Though he had little expertise in China, Pettis capitalized on his education, transferred his skillsets, and became the University of Peking finance professor and an influential blogger. On a day to day basis, he teaches finance, observes economic patterns, theorizes future developments, and provide commentaries on the future. Frequently quoted by finance magazines and praised by the Wall Street Journal as a “brilliant economic thinker,” he leads the pact of the China watching community with his timely insights. Furthermore, as a punk rock enthusiast, he has also taken on the challenge to support and develop the local music scene. As the owner of the Beijing’s punk night club, D22, he creates opportunities for local bands, as well as his sponsored Chinese band, Carsick Cars, to play. Though he is still known for his finance, his passion and involvement in the local music scene is notable. Taking risks and living large in China, Pettis carved out a new life in China.

While most China watching community members are a fan of China, such is not the requirement. Carson Block, the founder of Muddy Waters, is far from a China enthusiast. As a lawyer by training, Block is wary of China’s “too good to be true” economic stories. As a result, he founded Muddy Waters, a due diligence investment research company aimed at detecting fraudulent accounting practices at Chinese companies. Having assembled a team in China to track the company’s deliveries, accuracy of its inventory, store sales number, among other numbers, Block seeks to catch the cheaters for the investors. Furthermore, using his own research to make trades himself, Block has achieved solid returns on his short selling. With each report capable of dropping a stock drop down to 50%, investors have rushed to sign up for what he has to say and conflicting Chinese business owners have supposedly issued death threats. Block’s innovative idea instantly made himself a finance household name and redefined his career.

China’s economic boom has shifted the world’s attention and enabled these experts’ careers. Having the foresight to recognize China’s growing importance and the courage to take the risk, they have reinvented their careers.  Though so far they have been successful bridges to the East and West, this all may become ephemeral. As time goes on, more and more will join in the China watching community and their time being the world’s China consultant is limited. Within decades, their roles may be replaced or eliminated as China becomes more outward looking and the world becomes more globalized. Furthermore, time will also test the validity of their insights as the future unfolds. However, these expats’ lives are not wasted and bear greater meanings. Beyond the service they provide and the bridge they built across the east and west, what may be most valuable is their success story in China. More than their acquired, learned ability to navigate within the complexity of the Chinese government, language, and culture, it is their drive, risk-taking, and entrepreneurship that allowed them to create new lives abroad. Inheriting early pioneers’ sense for adventures, they have set out a good example for the future to follow. Tearing down national borders, cultural differences, and xenophobic tensions, they showed that it is still possible today to break out for adventures. For this generation of China watchers, they have fulfilled their needs of improving China’s transparency and connecting the East and West, but their most important contribution is the reminder that the world is still full of unknowns and adventures and rewards await those who have the drive, risk-taking, and entrepreneurship to follow.   

PIIGS or Not?

         Each proud in their great accomplishments, Portugal first globalized the world through its trades, Ireland gave the world some of its greatest poets, Italy shined as the center of the Roman Empire, Greece gave birth to democracy , and Spain conquered half of the world. Yet, during the past few years, they have been known as the “PIIGs.” This simple acronym is not merely a coincidence and reflected to some degree, people’s pejorative attitudes toward these countries’ governments.

         Protested by the government and press of these countries, many media groups and firms have either banned or phased out on this phrase. But before we completely toss the word out of our dictionary, let us take a look at why someone came up with this term and whether the reason deserves merit.  

         Since this is not a trivia game, we will not spend any time guessing why these countries belong in the same group. All of these countries, Portugal, Ireland, Italy, Greece, and Spain are the trouble makers in the sovereign debt crisis. To simplify the term, it basically means that these countries have spent more than they could make or borrow and are now asking for help.  As we went over in “Greek Tragedy,” it is common for countries to borrow money to spend, but it is less common for countries to either make so little, or borrow so much, or a combination of both, that they cannot sustain their spending. Let us also think about it this way. It is good when a person chooses to spend within a budget. Some call it frugality, financial responsibility, or simply, being an adult. On the contrary, it is bad when a person spends more than the budget and asks for more money. Therefore, it is easy to understand why investors would want to call them “PIIGS” when these countries overspend so much that they need help.

         While all of these countries are in trouble and are in need of bailout funds from the European Commission, do they deserve to be known as the “PIIGS?” Let us take a look at each country individually and give them a chance to speak for themselves.

         Portugal, like the rest of the countries, not only spends more than she makes, but also spends so much that she is unable to properly find investors to lend her money. So what did she spend all that money on anyways? For Portugal, the bloated government spending in public works and services was one of the root causes. Portugal is essentially a restaurant owner who owes a great amount of debt when customers stop coming because he or she pays heftily to the chefs and constantly renovates. The Portuguese owner claims that customers love the restaurant and for some reason (ie: the financial crisis of 2008), people just stopped coming. As a result, now the Portuguese owner has to go around and ask for more money.

         Going back to the restaurant owner example with Ireland, now the Irish owner has to ask for more money because the owner promised to take care of the chefs and six chefs have lost nearly their livelihoods gambling on housing prices. In bailing out the six main banks in Ireland who financed and lost money in the property bubble, the Irish government put itself in financial danger. As a result, regardless of how good the restaurant is, the Irish owner has to go and ask for money.

         As for Italy, the Italian owner simply owns a bad restaurant. For years, the restaurant has become dated and less competitive. Times are changing and people just do not want to go to the restaurant anymore. Especially with the overall decline in the restaurant businesses in the area, as with Europe, the Italian owner faces tough choices. Yet stubbornly refusing to adapt the restaurant or cut down on spending, the owner sees the restaurant going the way it is. As a result, Italy, just like the Italian owner is struggling. The restaurant is losing money and the owner may need to go ask for money soon.

         The Greece owner also has it pretty tough. Having a restaurant in the beautiful Mediterranean Sea, the Greek owner used to be able to cash in on all the tourists. During the heydays, the generous Greek owner paid the chefs and workers handsomely and promised riches. But with the declining number of tourists due to the bad economy (ie: the financial crisis of 2008), the Greek owner is struggling to come up with ways to continue to pay the employees like kings. As Greece’s tourism driven economy suffered hard blows in the economic downturn, it finds itself in trouble having to fulfill its obligations. As a result, the Greek owner has asked for money, and plenty of it.

         Lastly, the Spain owner has woes similar to the Portugal owner. While both of them had their fair share of good businesses and took on renovations and high paying chefs, their declining earning has different reasons. For Spain, the owner used to be able to make a lot off of tips. When the tips are good, there was no problem paying all the wages and expenses. But when the tips go bad because people are overall poorer, the Spanish owner will start to have sleepless nights. Similarly, when the housing bubble was brewing in Spain, the government enjoyed strong revenues from the property taxes. Yet, when the bubble burst and home prices went down, the government lost its luxury of the high property tax revenues. As a result, the Spain owner has also asked for money.

         After understanding each country’s individual predicament, one may ask an interesting question, “why cannot these countries just borrow more from its normal lenders? Are there no investors that are willing to lend to them?” This is another topic that is essential in understanding the sovereign debt crisis. The quick answer is that there almost always will be investors willing to lend to them, but these investors will also ask for much more in return. As a result, it may be a bad idea for these countries to continue to borrow from these investors. As for the long answer, keep on reading.

         When a friend borrows money, a lot of times you will lend the money based on your own financial situation, your friend’s reason for the money, and your relationship with the friend. When a country borrows money through government bonds (see “Greek Tragedy”), the investor goes through similar considerations. One, when the economy is good and the investor is rich, there may be more people to borrow money from. (One thing to note is that when the economy is good and the investor is rich, it is not necessarily cheaper to borrow money because of financial policies and the characteristics of interest rates. That is a topic for another time.) Similarly, when the economy is good and your friends are rich, it may be easier to borrow money from your friend. Two, while people do care about what they money is for when the friend borrows the money, most investors do not care as long as the country will repay the amount based on the terms. Three, when a friend asks for money, your level of friendship and your understanding of his character and background play a factor. Furthermore, the public perception of the friend may also affect your willingness to lend the money. As for countries, investors get to know the country’s character and background through debt ratings. Rating companies such as S&P and Moody’s rate a country’s credit as if rating a friend’s trustworthiness. Instead of spending time on these countries, investors believe in these ratings and make decisions off of these ratings. A higher rating means a country is more likely to pay back and vice versa. This became a key factor in the sovereign debt crisis.   

         During the crisis, rating companies downgraded many PIIGS countries’ debt ratings. As their ratings dropped, investors become more cautious about their lending to these countries. Some back off completely and those willing to stay will ask for more in return. For example, countries used to be able to borrow from investors through bonds paying a low rate, yet after the rating downgrade, they could only borrow with bonds paying a high rate. Furthermore, the self-fulfilling prophecy of risk also plays a factor. Similar to vicious rumors about a friend, concerns about a country makes it more expensive for countries to borrow, which put them in even more financial ruin. As a result, in a world inundated by information, these concerns turn into self-fulfilling prophecies in the markets and make it harder for these restaurant owners to make a comeback.

         Fortunately, there is still hope for these countries. Turning the disadvantage of these rating influenced and rumor prone investors into advantages, governments have been able to pacify these antsy investors with strong political and economic figures. Putting the Milgram experiment on obedience to authority figures into good use, European Central Bank’s Mario Draghi, Federal Reserve Bank’s Bernanke, and Germany’s Angela Merkel have been authority figures for the world. While the extent of their influence is arguable, we need and rely on their impact. It may worth your time to listen to what they said the next time they speak and how the market reacts. 

Well Paid or Overpaid?

         “Ugh, now I have to go find a husband in finance,” says Kaylie Hooper, the character by Chloe Grace Moretz in the finale of the hit show, 30 Rock. After losing to her arch nemesis, Jack Donaghy, in the final show down for the control of Kable town’s NBC, she says the line to poke fun at her own misfortune. Outwitted by Jack’s clever and ingenious plot, she now has to find a new way to make money rather than take over NBC as Hank Hooper’s favorite granddaughter. This may seem like a tangent, but behind the witty line that gave all of us this light chuckle, there lies a truth about the financial industry. People think and know that financial professionals are well paid.

         Out of all the jobs in the world though, why do the financial professionals get paid more?

         Well, for the people in the financial industry, some think they are paid well because they work hard. From the preparation and degrees required, the skills and knowledge preferred, and the long hours demanded, a career in the finance does seem like it takes a lot. It takes years of hard work in High School to do well on exams, get good grades, and gain valuable extracurricular experiences for a shot at a good business school. After that, the process is repeated again in college for a chance at a good internship. Then, after a summer (or summers) of going into work early, leaving late, picking up projects, and networking with everyone, they may be able to land a full time offer after graduation. Yet, even then, the hard work continues. People are not only expected to increase their value at work, but also expected to further themselves in different degrees, certifications, and licenses as time goes on. In such a rigorous career path exacerbated by the cut throat environment, financial professionals see their salary as the fruits of their labor, and why shouldn’t they? Factoring into all the preparation done for their career in finance, it is not unreasonable to see why finance people see their pay as a justified reward to their long term trade off. While this is a big generalization, it does capture some sentiment of the people on the inside. A major flaw with this explanation is this disclaimer: working hard does not necessitate better pay. I am sure all people work hard in their job to make a living and it is important not to discredit the work of others. Just like my professor once said, “while great investors like Warren Buffet do work really hard to get to where they are today, I am sure the factory worker who has labored himself all his life diligently did not have it any easier.”

         For people on the outside, they think financial professionals “make bank” because they are smart. While finance is really not “rocket science” and anyone with commitment and education can do it, they do have a point. What they are saying is that by supply and demand, finance pays well. Since the finance industry provides many important functions in society such as bank deposits, mortgages, insurance, and investments, there will be a demand for finance. As a result, the finance industry’s pay depends on the supply of the people who can perform these roles. When there are not a lot of people who can do these jobs, naturally, they will have more bargaining power with the employer to get more money. While there are a lot of aspiring investment bankers running around every college, if we look at the entire population as a whole, these people are definitely still a small segment. If the picture is not clear enough, let’s look at it this way, if we look at the number of people who are able to value Facebook’s growth potential and cash flow versus the number of people who are qualified to be the store greeter Wal-Mart, then we can see how supply and demand is at work here.

         While supply and demand makes sense and can also be used to justify the sky high pay of professional athletes, I believe there is more to the reason behind finance’s high pay. To me, financial professionals are paid well and will always be paid well because their business directly deals with money.

         From the early subsistence economy where goods and services are merely exchanged to the complex global economy we are in today, people continue to build wealth through the exchange and use of goods and services. One thing that differentiates these two different forms of economies though, is money. Money provides a store of value and a universal medium of exchange. Back then, farmers plant crops and trade with fisherman who fishes. One party receives protein and one party receives grains. Yet, they traded for just the amount they needed. Since the raw fish will go bad in a few hours, the farmer will not trade for more fish than he needs despite how much the fisherman needs his grains.  He would rather trade for something else no matter how many fish the fisherman is offering. Yet with the advent of money, everything changes. The farmer can now “sell” his grains to the fisherman for as much as the fisherman wants and use that money to “buy” some fish and save the rest. The saving, a newly generated value that was previously wasted, can now go on to help the farmer buy more goods and services. This allowed the economy to grow and developed into the world as we know it today.

         Fast forward to centuries later, the financial industries have evolved into the biggest beneficiary of the invention of money. The financial industry has been able to maximize money’s durable, divisible, transportable, and non-counterfeitable characteristics. For example, banks deal directly with money by collecting money from customers’ deposits and investments and lending them out as mortgages and loans. For their business, they earn interest from lending out and borrowing money from others. By taking advantage of money’s inherent characteristics, they save cost effectively and sustainably. For instance, banks’ assets, its reserve of money, do not rot due to heat, do not go out of fashion, and do not become obsolete in any shape or form. They also can be divided into smaller bills, coins, and fractions of pennies as well as wired and transported over a split of a second. Lastly, the government protects the value of the money and forbids counterfeits. While other industries need to refrigerate its supplies, have massive sales to clear out unwanted inventory, pay hefty sums for cargo transportations, and fight in lawsuits against counterfeits, banks are completely free of such concern. As a result, the financial industry can effortlessly pay its employees in money without the time and value loss other industries go through in converting their goods or services into money.

         I understand that this idea may cause some confusion, let’s also look at it this way. As we know, the sun indirectly provides us the energy we need. The sun’s power goes through several rounds of conversion, decreasing the level of energy in reach round, until it reaches us. From grass’s photosynthesis, cattle’s grass grazing, to the food in our stomach, energy is lost on each level. Similarly, a company loses value to its middle men in each round of good and services’ conversion money. On the other hand, the financial industry is the equivalent of absorbing solar energy directly without the loss in value or energy. This is why the financial industry is able to pay out such big salaries. This analogy may help, but readers have to take note of one thing. While the sun generates its own energy as a star, the financial industry relies on the activities of other industries. This is a big reason why the bankers’ pay have come down and a story for another time.

         For many, the financial industry is paid more than its social value, arguing how many financial services are merely mirroring the overall market activities. Some go even further to criticize financial professionals as overpaid and irresponsible bet takers. Regardless of the merit of the financial industry, it is interesting to always ask and answer the question of “why are financial professionals paid so well?” Especially resonated in the public in the Occupy Wall Street Movement and the recent European decision to cap bankers’ bonuses, this debate will continue to go on. 

Greek Tragedy?

         At least one word has stood out to you in the financial gibberish section on the newspaper, “Greece.” A beautiful, scenic Mediterranean country, often evoking images Greek Mythology characters and historical monuments, now dominates headlines for its so called debt crisis.

         The debt crisis simply describes Greece’s inability to repay what it borrowed. Some may ask, “Why is Greece, a country, borrowing money in the first place?” The questioned could be answered if we think of it this way. I would like to draw an analogy to a student club. If you have been part of the board of a student club, perfect. If you have not, well, try to think like one, just for the sake of all the free pizza you got from the club anyways.

         A country, like a student club, needs revenue or funding to run. A country needs to pay its government employees, services, and unemployment,disability, or other types of social payments. A club needs to rent out event space, buy equipment, hire performer, and buy food, the one thing that probably drew you to most of the events. Also, both a club and a country have two primary ways to get their revenue and funding. A club earns its revenue through selling t-shirts, show tickets, and perhaps collecting membership fees. A government makes its revenue from tax and service fee collections. A club and a country’s source of revenue are easy to understand, but their source of funding requires a bit more of thinking.

         A student club applies to the university for funds.Depending on the content of its event, the university may fund the club for its positive influence or social contribution. This could range from promoting world peace and diversity to hosting a breast cancer fund raising dance. In short, monetary support from the university is exchanged for the club’s promise to host an event. Similarly, a government receives money and in exchange promises something, the promise to pay back the money borrowed and more. While a college student may ask his or her buddies to spot for a movie,  borrowing money at zero interest, a government pays a yield, the additional amount, to whoever it borrowed from. This yield rate is determined by the market and determines how much more a government has to pay back. Also, instead of just taking a mental note or jotting down Mike owes me ten buck on the iPhone, a government borrows money by issuing bonds. When a person buys bonds, he or she is lending the government money. The person who buys the bond, also known as the bond holder, helps finances the government’s activities and agrees to the government paying back at the end of the maturity date.

         Just like it would be hard for a club to keep on feeding its members boxes of pizzas and throwing concerts based on t-shirt sales and ticket sales, a country also cannot rely on its revenue to finance all its activities.As a result, a country often relies on its bonds to cover its budget deficits.This holds true for most of countries and during good times, this is not a problem since government bonds, believe it or not, sell pretty well. While people bought bonds out of patriotism during WWII, as seen in Captain America, people usually buy bonds because of what is in it for them. Well, what is in it for them is bond’s low risk and steady return. People now understand the importance of investment because it seems like the quickest way to get rich, but they all have their own investment philosophies and strategies. For expert stock pickers or gamblers, some will put their money in the stock market. For people who just want their money to grow steadily, many will look into bonds. As a result, bond market has grown quite a lot especially since the 2008 financial crisis. Some may now ask, “If bonds are so popular and it is so easy for governments to borrow money, why does Greece have trouble borrowing money to pay back its old debt?”

         This question takes us back to 2009. Countries usually do not have trouble borrowing money, but in 2009 Greece did. What happened is that people started to realize that Greece’s economy is not doing well, the government is spending handsomely, and Greece owes others, well, a lot. Before,Greece could borrow money with a low yield rate, but after the market panic,people began to demand a higher yield rate. Almost overnight, Greece has become that grimy friend who always pays you back late or rounds down on the amount owed. Like that friend, it is a lot more difficult now for Greece to convince people to buy its bonds. As a result, the yield rate soared. People now are only willing to buy its bonds only if Greece is willing to pay them a lot more in yield. Greece could continue to borrow money to pay back its owed debt, but continuous borrowing at such high cost only delays and worsens the problem, similar to procrastinating on a difficult problem set till the day its due. Greece is indeed in a difficult predicament.

         Does Greece’s problem sound far removed from you and is unreletable? Well, let’s go back to the student club comparison. First, imagine a student club who loves to feed people with overdoses of pizza, but is not very good at fund raising, evident in its large leftover t-shirt inventory from four years ago. Though the club spends more it earns, the club  stays afloat because the university funding.  Then imagine the club,despite the lack of funding, has booked a big time performer and worst of all, the performer already completed the travel arrangements and is coming next week. You can imagine the panic at the next club meeting then. The club is faced with two options. It has to either come up with a genius plan, such as a ridiculously successful bikini car wash, to fund raise, or to beg the university for money.  

         This was essentially Greece. It spends more than it earns and similar to the performer contract, old legislation has promised to spend money on different things and people. Unlike the student club though, Greece cannot raise taxes to boost its revenue nor should it keep on borrowing expensively through bonds. What’s is left for Greece to do is to find other places to borrow money from and try to cut down on its spending. Three years since 2009, Greece has done exactly that.

         Greece has found the International Monetary Fund (IMF) to lend them money. Even more similar to the way a club receives funding from the university,Greece is now subjected to listen to IMF. IMF has lent Greece money on the conditions of Greece cutting down on its spending. Similar to the university’s reaction to the club’s mishap, the university may fund the event but expect them to cut down on future event expenses or reach a certain membership quota.In short, both Greece and the club are able to secure the funding, but are now subjected to stricter standards in comparison to before.

         One difference is that the Greek bond holders have also agreed to a pay cut in what they are owed. Considering Greece was on the brink of bankruptcy, many bond holders accepted to receive less money back than potentially nothing back at all. Perhaps in the student analogy, the performer has also agreed to give the club a break by giving a discount. Also, since Greece used bonds to borrow money to repay its old debts, periodically Greece runs into trouble again and again on having to pay back bond holders. As a result, IMF and other organizations have bailed out Greece time and time again. While Greece still spends more than it earns, the crisis has died down somewhat in Greece. Mainly due to the increase bail out support from different organizations, Greece now is able to borrow money from more than just the bond market. It now has the backing of the International Monetary Fund, the European Central Bank, and the European Commission in case of a resurgent crisis.

         Greece is out of the news headlines for now, but it is still a relevant question because European Union countries are still struggling with their economies and debt issues. 

Please find the links below for key definitions

http://www.investopedia.com/terms/b/bond.asp

http://www.investopedia.com/terms/y/yieldcurve.asp#axzz2A8venHfN

Well, here we go

         Welcome to No Lexicon Econ for College Students. I would like to use this space to explain different economic news and its implications in layman terms, hence no lexicon. Whether we like it or not, economic news tend to dominate the headlines of our newspapers a lot these days, and maybe it will encroach on our Facebook news feed sometime soon too. Though a lot of this news may seem far and distant, they do affect our lives and I believe it is in the best interest of everyone to at least understand, “what is going on.”

         As a college student studying Finance and Econ, I have a good perspective to explain economic events to college students. This is not an Econ 101 blog where I explain the different terms, nor am I swapping terms like GDP with aggregate output; I will explain current econ events with experiences college students could relate to.

         These similarities will help college students understand what is going on conceptually. Gradually, these conceptions will start to click with one another and the seemingly gibberish economic news will start to make a lot more sense. Before you know it, any former econ illiterates, will be able to chatter about economics with others and sound semi-smart. Who knows, maybe someday people will start to like Economics like me and spread the good word too.

Well, here we go.