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What are the chances that a new Dell commits hara-kiri in two weeks? Today, typing away on it, the screen goes white, a small dark spot develops and grows. I touch that part of the screen and it nearly burns me. Two days of installing all different sorts of programs go wasted. Time to call Dell to return or replace this one before it self destructs and set off the sprinklers.

Video of the cursed screen

To be fair, in a house with 4 Dells, this is the first to have any sort of major problem. It's remarkable that we don't expect something to go wrong more often. There are billions of circuits in RAM, CPU, video card, and all the rest. One short circuit in a few billion connections will cause major problems for our computers, yet it rarely happens. Although, it's more likely that something outside the printed circuit broke down; probably just a short in the LCD screen. Too bad.

update (5-11-2005):
A new 700m arrived yesterday to replace the old one. I swapped the harddrives and everything is running fine. It's easier to swap components in this laptop than most desktops. Dell called yesterday and emailed to make sure everything was acceptable. Now all I have to do is re-register the MAC address for the campus wireless network and everything will be back to before. Also, sticking the Kingston KVR333 1GB SODIMM in this computer was less of a headache. It works fine with the 256mb that it shipped with unlike the last 700m so I didn't have to poke around underneath the keyboard this time. The build quality is definitely variable. For example, the Fujitsu 80gb hard drive is super silent, a bit quieter than the 80gb Hitachi one that came in the first one, although both are good. Also, the touchpad keys don't rattle as you type like the last one.

I've been thinking about how economically unbalanced the world is with the US spending much more than it earns and with China and other countries supplying the credit that the U.S. takes for granted. It's producing a lot of unsustainable and dangerous results like the housing bubble in California, New York, D.C., and overinvestment in export industries in China, for example. In addition, this imbalance will eventually show up in the political sphere. This article is a good backgrounder on the situation in China.

Does the Future Belong to China?
A new power is emerging in the East. How America should handle unprecedented new challenges, threats—and opportunities.
By Fareed Zakaria
Newsweek

May 9 issue - Americans admire beauty, but they are truly dazzled by bigness. Think of the Grand Canyon, the California redwoods, Grand Central Terminal, Disney World, SUVs, the American armed forces, General Electric, the Double Quarter Pounder (With Cheese) and the Venti Latte. Europeans prefer complexity and nuance, the Japanese revere minuteness and minimalism. But Americans like size, preferably supersize.

That's why China hits the American imagination so hard. It is a country whose scale dwarfs the United States—1.3 billion people, four times America's population. For more than a hundred years it was dreams of this magnitude that fascinated small groups of American missionaries and businessmen—1 billion souls to save; 2 billion armpits to deodorize—but it never amounted to anything. China was very big, but very poor. All that is changing. But now the very size and scale that seemed so alluring is beginning to look ominous. And Americans are wondering whether the "China threat" is nightmarishly real.

Every businessman these days has a dazzling statistic about China, meant to stun the listener into silence. And they are an impressive set of numbers. China is now the world's largest producer of coal, steel and cement, the second largest consumer of energy and the third largest importer of oil, which is why gas prices are soaring. China's exports to the United States have grown by 1,600 percent over the past 15 years, and U.S. exports to China have grown by 415 percent.

The most astonishing example of growth is surely Shanghai. Fifteen years ago, Pudong, in east Shanghai, was undeveloped countryside. Today it is Shanghai's financial district, eight times the size of London's new financial district, Canary Wharf, in fact only slightly smaller than the city of Chicago. And speaking of Venti Lattes, last week Starbucks CEO Howard Shultz noted on CNBC that in three years the company would probably have more cafes in China than in the United States.

Today, the Treasury Department issued a report stating that China's currency peg is close to what it would classify as manipulation of foreign exchange. The currency peg has been around since 1994, but the growing trade deficit and political pressures in the U.S., especially from the manufacturing (export-competing) industries, is bringing the issue to a head. There are two trends that created this problem. First, China is growing and exporting more as they become more efficient at manufacturing. Second, the U.S. is spending much more than it earns. When you spend more than you earn, your currency tends to devalue. China is pegged to the dollar so it also devalues. And since Chinese goods get cheaper as a result, especially to non-pegged currencies such as Euros, its exports increase.

It's important to see that the U.S. is partly to blame by becoming the biggest debtor nation in the world, but there's not a mention of this anywhere in the Treasury Department report nor in the general U.S. media. Yes, China should move off of the peg, but the U.S. has to balance its budgets and increase national savings. Those Bush tax cuts and ballooning war costs are partly responsible. Hearing the U.S. Treasury Department simply talk about the Renminbi Peg is like watching two drunk drivers crash into each other and one yelling to the other, "Hey, you're drunk!"

On a side note, if China adjusts its peg expect to see a lower demand for American Treasury Bills and thus a rise in the interest rate here in the U.S. When your line of credit gets cancelled, you have to spend what you earn, and invest less in non-productive assets like housing and cars. This happens at a macro level too. It will probably mean the end of the housing bubble in the U.S. and a slow shift of investment into productive assets like industrial equipment and education that will allow the U.S. to produce tradable goods in the future in order to pay off some of its debts. If it doesn't, it will mean a large negative real adjustment in U.S. consumption -- recession.

So, is the Bush Administration for bashing China or against it? Brad Setzer

Today, depending on how you want to look at it, the Bush Administration either upped the heat on China by signaling that it will declare China a manipulator the next time, or wimped out. Setting the clock ticking might buy the Administration the ability to push the Congressional vote on Schumer-Graham off until after October. But splitting the difference also risks pleasing no one.

On one hand, it is pretty clear that China's commitment to its current peg is "preventing effective balance of payments adjustment" -- the key technical criteria for currency manipulation.

On the other hand, it is not entirely obvious the US really wants "effective balance of payments adjustment." Debtor countries usually quite like getting the financing needed to keep running up their debts. Apart from the manufacturing sector, most of the US seems to quite like not paying enough taxes to finance the current level of government spending, cheap imports that keep down inflation and low interest rates that push up housing prices. Real adjustment means shifting resources out of real estate and into the production of tradable goods and services. Right now, not adjusting seems a lot more fun.

It's nice to have the most read economist opine on the most important issue in international trade, development and economic stablity.

The Chinese Connection By PAUL KRUGMAN Published: May 20, 2005

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Dollar purchases by China and other foreign governments have temporarily insulated the U.S. economy from the effects of huge budget deficits. This money flowing in from abroad has kept U.S. interest rates low despite the enormous government borrowing required to cover the budget deficit.

Low interest rates, in turn, have been crucial to America's housing boom. And soaring house prices don't just create construction jobs; they also support consumer spending because many homeowners have converted rising house values into cash by refinancing their mortgages.

So why is the U.S. government complaining? The Treasury report says nothing at all about how China's currency policy affects the United States - all it offers on the domestic side is the usual sycophantic praise for administration policy. Instead, it focuses on the disadvantages of Chinese policy for the Chinese themselves. Since when is that a major U.S. concern?

In reality, of course, the administration doesn't care about the Chinese economy. It's complaining about the yuan because of political pressure from U.S. manufacturers, which are angry about those Chinese trade surpluses. So it's all politics. And that's the problem: when policy decisions are made on purely political grounds, nobody thinks through their real-world consequences.

Here's what I think will happen if and when China changes its currency policy, and those cheap loans are no longer available. U.S. interest rates will rise; the housing bubble will probably burst; construction employment and consumer spending will both fall; falling home prices may lead to a wave of bankruptcies. And we'll suddenly wonder why anyone thought financing the budget deficit was easy.
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