Novica.com

I was searching for a poncho for my wife when I found this website. Novica works with artisans around the world in developing countries to bring their products directly to the consumers. There is a network of people employed in each country Novica works, which helps connect and find these skilled individuals which adds to the cost of the products. But when you look at most products on this website, you'd see that the items are very unique and difficult to find else where and are very reasonably priced when you consider the fact how much work is done into bringing these products to the market. They'll look even cheaper when you compare them with what you'd pay at Nordstrom or Von Maur. Yes, that's the kind of quality products you get at Novica.

The site also works with people in developed countries to help the artists and artisans get loans at zero percent which can help these people grow their business. If you already don't know about it, I highly recommend you check their website.

What Amazon can do with Wish List

I think wish list is one of amazon's great feature. Most of the time, people use this feature to add items they intend to buy. While this helps increase sales, amazon has not done much to use this list.

Pricing is one of my favorite subjects and I think a lot about prices. In case of amazon's wish list, I think amazon should add an attribute in a user's wish list that says notify me when the item is price x or lower. And then amazon can analyze the list of all users for each item and find the price point where it can make the best profit. Then if it makes good business sense, then lower the price on that item for 24 to 48 hours and send an email to users notifying them of the new price on the product in their wish list for a limited period of time.

Calculation of the price point may be more complex. People will likely report lower prices than they are willing to pay so amazon might want to notify people when the price is x percent higher than they said they would buy an item for. But the idea remains the same. Amazon can use the wish list to increase its profits and its currently not doing so.

How China Undervalues its currency

Congress in last couple of years has stressed more and more to pressure China to ease restrictions on its currency. In my post about currency exchange, I explained how the value of currency affects exports and imports of a country. Based on that discussion, we know that when a currency is devalued, its exports increase. So when China undervalues its currency, it helps keeps Chinese products cheap and helps its exports.

In my post about currency exchange I explained how foreign exchange market determines the price of a currency. So how is it that the price of Chinese Yuan is not determined by the foreign exchange market. The answer is because Chinese government through People's bank of China controls how much Yuan is going to flow into the market, effectively controlling the price of Yuan.

Let's see this through an example. Assume there is a factory in China that supplies some product X which is sold to the US. Now the US buyer will make its payments in USD to this factory for the product X. But this factory needs Yuan to pay its employees, to buy raw material (if its not imported), pay for factory bills, taxes and other similar expenses. So the factory will go to People's bank of China and exchange its USD for Yuan. This is where Chinese government control comes in and it decides the price of Yuan. This USD, and similar hundreds of millions (billions per year) end up in Chinese reserves  and significant portion of this USD is used to buys US government bonds, making Chinese government the biggest, US lender.

Now that we know how Chinese government controls the price of Yuan, how does it affect (hurt/benefits) US. First of all, for no change in  income of American consumer they can buy more Chinese goods because they are getting more Yuan than they would in a freely traded Yuan in a foreign exchange market. So American consumer is better off. Then why does Congress and White house has an  issue? Because Congress or White house are not there to help american people. They are there to help those who fund their campaigns. While American people are better off when Chinese government undervalues its Yuan, the American business which is competing against a Chinese business is worse off. So these businesses combine together lobby the government and push for pressure on Chinese government to reevaluate its currency against dollar. This will hurt American consumer because Chinese goods will increase in price but will help American businesses as it would be easier for them to compete now.

This in a nut shell is how Chinese government undervalues its currency and how it affects its trading partners, the biggest of which is US. If you ask me, I'd say let them undervalue their currency as it helps me get cheap products from China.