You may recollect that the Harvard economist Martin Feldstein has been a top adviser to President Reagan. Having been the head of the US's National Bureau of Economic Research, Feldstein is now a member of President Obama's Economic Recovery Advisory Board.
In an interview given to Reuters reporters Jason Subler and Zhang Shengnan in Beijing today, he is reported to have said that President Obama's fiscal stimulus plan, signed last month and worth $787 billion, would offset only a small fraction of the likely fall in consumer spending, exports and residential construction: "The fiscal stimulus is just not large enough to offset the downward pressure that comes from reduced consumer spending. So unless somehow fixing the financial markets is enough to offset that, which I very much doubt, I think there will be a need for another fiscal stimulus package at some point."
He is also reported to have said that the size of a potential future package would depend on how effective the current one is at stimulating the economy. As Feldstein does not believe that fixing the financial markets will restore consumer spending, a future package will probably have to be even larger than the one President Obama has already created.
So here is a curious matter: does Feldstein not believe that "fixing the financial markets" will restore consumer and commercial confidence? If not what is his definition of a financial market that has been "fixed"?
In any case, I am glad that such an eminent person has begun to admit that economic recovery is unlikely any time soon, given the kinds of actions that are being taken - though Feldstein says, at least publicly, that the "problem" is lack of spending by consumers and companies. He doesn't seem to want to analyse WHY consumers and companies are not spending.
That has more to do with the facts that I have rehearsed in earlier blogs regarding the size of the problem that people don't want to name ("toxic assets"), and the fact that such toxic assets (consisting of derivatives and other such exotic financial instruments) have actually increased by probably as much as 20% in the last six months. In view of that, it would seem that the recovery is actually further away that it was six months ago.
Another matter: it is hardly possible that Feldstein was unaware of the just-announced Geithner/ Obama $1 trillion plan to give taxpayers' money to private companies in order to facilitate those private companies buying toxic loans, it is interesting that Feldstein made no comment on that!
Could it be that Feldstein knows that a $1 trillion plan is desperately insufficient? Toxic loans are, according to current best official estimates, actually $2 trillion.
And even the current $1 trillion plan will mean that the US taxpayer will have paid for much or most of the current downside risk involved in the purchases, while private investors (who will of course be exposed to continuing future downside risk) will pocket ALL the potential profit if and when the economy improves. So the problem will not be solved at present, but arrangements have been put in place for private parties to benefit at public expense whenever the economy does improve.
In other words, we have a public private partnership in which the public pays but private parties benefit.
Wasn't that sort of thing partly what got the American public so upset with the previous Republican administration?
Now the American public has reason to be upset with a Democrat administration for the same reason.
But my guess is that most Americans will be afraid to be seen to be negative about a black President, and will simply swallow this.
The more's the pity for the USA. But even more's the pity for the rest of the world.
Sphere: Related Content
Tuesday, March 24, 2009
Saturday, March 21, 2009
Do we have a global failure of leadership? No....
Discussing this matter with a friend earlier today, we concluded that what we are confronted with is not a failure of leadership, rather the exploitation of leadership for personal gain.
A phenomenon that has always been well known in so-called "developing countries" (which I like to call "ever-developing countries" or "non-developing countries").
This phenomenon has now moved to the West because of the decline of the influence of Jesus the Lord in the West. As a consequence, we are now confronted not merely with many "non-developing countries" but even with a whole "regressing world". Sphere: Related Content
A phenomenon that has always been well known in so-called "developing countries" (which I like to call "ever-developing countries" or "non-developing countries").
This phenomenon has now moved to the West because of the decline of the influence of Jesus the Lord in the West. As a consequence, we are now confronted not merely with many "non-developing countries" but even with a whole "regressing world". Sphere: Related Content
How long will it take to get employment back up?
At the following site we have an interesting piece, “A look at postrecession employment trends”: http://www.rgemonitor.com/globalmacromonitor/255969/a_look_at_postrecession_employment_trends
In this piece, M. Melinda Pitts investigates labor market performance during and after previous recessions. She finds that: (a) IF the current recession ended today and (b) IF post-recession employment growth resembled the recovery from the 1981–82 recession, then employment would return to pre-recession levels in approximately 14 months.
But if the pattern of recovery is similar to that of the two most recent recessions, then it would take well over eight years for employment to return to prerecession levels.
The above two forecasts of course only take variable (b) into account.
The much more significant question relates to whether variable (a) is valid, It is clearly not valid. The only calculations of which I am aware show an INCREASE in global gambling of 20% or more even since Autumn last year.
There has already been a 2.7% job decline, but this will get worse (and, so far as I can see, MUCH worse) because no one seems even now to want to attend to the real disease. Sphere: Related Content
In this piece, M. Melinda Pitts investigates labor market performance during and after previous recessions. She finds that: (a) IF the current recession ended today and (b) IF post-recession employment growth resembled the recovery from the 1981–82 recession, then employment would return to pre-recession levels in approximately 14 months.
But if the pattern of recovery is similar to that of the two most recent recessions, then it would take well over eight years for employment to return to prerecession levels.
The above two forecasts of course only take variable (b) into account.
The much more significant question relates to whether variable (a) is valid, It is clearly not valid. The only calculations of which I am aware show an INCREASE in global gambling of 20% or more even since Autumn last year.
There has already been a 2.7% job decline, but this will get worse (and, so far as I can see, MUCH worse) because no one seems even now to want to attend to the real disease. Sphere: Related Content
Friday, March 20, 2009
The Crisis is Caused by "a Culture of Fraudulence" says John K. Galbraith
And "a culture of complicity"....
Even though he thinks in orthodox categories, the interview with him is worth reading: http://www.spiegel.de/international/business/0,1518,614297,00.html#ref=nlint Sphere: Related Content
Even though he thinks in orthodox categories, the interview with him is worth reading: http://www.spiegel.de/international/business/0,1518,614297,00.html#ref=nlint Sphere: Related Content
Does the world need cars at all?
With attention is focused on how much money should or should not be given by which government in order to rescue which car or car-parts producer, the world is avoiding a debate on a much more fundamental question:
Does the world need a car industry at all?
My answer: Yes, we do need a car industry, but only in the thinly-populated parts of the world.
By contast, in densely-populated parts of the world, public transport is a much more rational, efficient, environment-friendly way of moving people about.
So let's take a practical question, such as whether and how much the US government should give to support the car industry. The answer should not be given by considering that question in isolation. It should be considered in the context of a comprehensive approach to the options for allowing people to move inside the country as well as internationally.
If one did so, one would conclude that the priority for the USA should be to build or extend good public transport systems on the West and East Coasts and in all urban centres.
In countries such as in Northern Europe, where there is a good public transport system, environmentally-aware people try to organise their lives in such a way as to use buses, trams and trains rather than cars as far as possible.
Of course in thinly-populated areas, such as the rural Midwest, cars will continue to play an essential role. But the number of people in such areas around the world is declining as more and more people migrate to towns and to the burgeoning megacities. Sphere: Related Content
Does the world need a car industry at all?
My answer: Yes, we do need a car industry, but only in the thinly-populated parts of the world.
By contast, in densely-populated parts of the world, public transport is a much more rational, efficient, environment-friendly way of moving people about.
So let's take a practical question, such as whether and how much the US government should give to support the car industry. The answer should not be given by considering that question in isolation. It should be considered in the context of a comprehensive approach to the options for allowing people to move inside the country as well as internationally.
If one did so, one would conclude that the priority for the USA should be to build or extend good public transport systems on the West and East Coasts and in all urban centres.
In countries such as in Northern Europe, where there is a good public transport system, environmentally-aware people try to organise their lives in such a way as to use buses, trams and trains rather than cars as far as possible.
Of course in thinly-populated areas, such as the rural Midwest, cars will continue to play an essential role. But the number of people in such areas around the world is declining as more and more people migrate to towns and to the burgeoning megacities. Sphere: Related Content
Response to the $5Bn rescue package for Car Parts Makers: The USA decides to "buy American"
Apparently as many as 500 parts-makers are on the brink of collapse. It is clear that, with the $5 billion rescue package announced yesterday, only a few of them will survive.
Which ones? Well, the money is going to be funnelled through GM and Chrysler, which will decide the parts-makers to whom the money will be given as well, as the conditions under which the money will be given.
GM and Chrysler themselves have an important condition imposed on them by the US Government regarding how they are to use the money: they are limited to using it for U.S.-made parts!
I wonder which country is going to cry "Foul!" first, and take the US to the WTO "xourt" for infringement of global competition rules.
In any case, we will now see every country feeling a little more free to subsidise its own industries, from the EU's cars to the computer chip manufacturers of the Far East.
The subsidy-game is suddenly "ON" again: all pork barrellers are welcome, and pork barrelling is fashionable once more! Sphere: Related Content
Which ones? Well, the money is going to be funnelled through GM and Chrysler, which will decide the parts-makers to whom the money will be given as well, as the conditions under which the money will be given.
GM and Chrysler themselves have an important condition imposed on them by the US Government regarding how they are to use the money: they are limited to using it for U.S.-made parts!
I wonder which country is going to cry "Foul!" first, and take the US to the WTO "xourt" for infringement of global competition rules.
In any case, we will now see every country feeling a little more free to subsidise its own industries, from the EU's cars to the computer chip manufacturers of the Far East.
The subsidy-game is suddenly "ON" again: all pork barrellers are welcome, and pork barrelling is fashionable once more! Sphere: Related Content
My statement in 2005 on "Technology and the Future of Humankind", just rediscovered - can't recollect if it was published anywhere!
TECHNOLOGY AND THE FUTURE OF HUMANKIND
Ever since the sixteenth century, when the Protestant Reformers sowed, for the first time in history, the seeds of education, political freedom, science, technology and economic progress, these seeds have sprouted and their flowers have spread far and wide, increasingly bringing blessings everywhere around the globe. Officially, we may be Eastern Orthodox, Roman Catholic, Hindu, Muslim, Buddhist, Confucian, Atheist, and so on, but in practice we are all culturally Protestant now, since we are committed to education, political freedom and all the other cultural fruits of the Reformation.
However, the Darwinist Revolution (which started in the 1860s, became powerful in Europe from the 1880s onwards, and in the USA from the 1930s onwards) has also spread worldwide, resulting in the spread of purposelessness, anomie, individualism, social fragmentation, sensationalism, overwork, over-exploitation of natural resources, and the maximisation of profits for the few who own productive assets worldwide.
The reason that Darwinism became (and remains) popular have nothing to do with science, and everything to do with humankind's desire to evade accountability.
We would rather like to be free to live our own lives, make our own decisions and go our own way without having to consider the consequences for ourselves, for others, for humanity, and for nature.
With the rise of the latest technologies (now known by the macabre acronmy GRIN - Genetics, Robotics, Information and Nanotech), the necessity and identity of humankind is at stake. These technologies form as potent a threat to the future of humankind as nuclear bombs did in the Sixties.
My vision is that we will together be able to find the right ways to harness these technologies, so that they are instruments for good rather than means of evil. But that will only happen if we are willing to look into our own hearts to locate the sources of greed, lust, fear, the hunger for power, and other such negative emotions - and then if we are willing to look clear-headedly at the institutions we have created which embody these negative emotions and amplify their effect - institutions such as the limited company, fiat money, and usury.
Naturally, we also need to find the solution to these negative emotions, and the motivation to work for the continued reformation of institutions and society. As a Hindu, I have found both the solution and the motivation in my relationship with Jesus of Nazareth, the Guru and the Lord, who forgives me, cleans me, energises me and guides me.
Regardless of beliefs (or lack of them), I welcome everyone who wishes to join in the journey to the core of the heart, which is also a quest for the fulfilment of the vision of a humane future.
ENDS Sphere: Related Content
Ever since the sixteenth century, when the Protestant Reformers sowed, for the first time in history, the seeds of education, political freedom, science, technology and economic progress, these seeds have sprouted and their flowers have spread far and wide, increasingly bringing blessings everywhere around the globe. Officially, we may be Eastern Orthodox, Roman Catholic, Hindu, Muslim, Buddhist, Confucian, Atheist, and so on, but in practice we are all culturally Protestant now, since we are committed to education, political freedom and all the other cultural fruits of the Reformation.
However, the Darwinist Revolution (which started in the 1860s, became powerful in Europe from the 1880s onwards, and in the USA from the 1930s onwards) has also spread worldwide, resulting in the spread of purposelessness, anomie, individualism, social fragmentation, sensationalism, overwork, over-exploitation of natural resources, and the maximisation of profits for the few who own productive assets worldwide.
The reason that Darwinism became (and remains) popular have nothing to do with science, and everything to do with humankind's desire to evade accountability.
We would rather like to be free to live our own lives, make our own decisions and go our own way without having to consider the consequences for ourselves, for others, for humanity, and for nature.
With the rise of the latest technologies (now known by the macabre acronmy GRIN - Genetics, Robotics, Information and Nanotech), the necessity and identity of humankind is at stake. These technologies form as potent a threat to the future of humankind as nuclear bombs did in the Sixties.
My vision is that we will together be able to find the right ways to harness these technologies, so that they are instruments for good rather than means of evil. But that will only happen if we are willing to look into our own hearts to locate the sources of greed, lust, fear, the hunger for power, and other such negative emotions - and then if we are willing to look clear-headedly at the institutions we have created which embody these negative emotions and amplify their effect - institutions such as the limited company, fiat money, and usury.
Naturally, we also need to find the solution to these negative emotions, and the motivation to work for the continued reformation of institutions and society. As a Hindu, I have found both the solution and the motivation in my relationship with Jesus of Nazareth, the Guru and the Lord, who forgives me, cleans me, energises me and guides me.
Regardless of beliefs (or lack of them), I welcome everyone who wishes to join in the journey to the core of the heart, which is also a quest for the fulfilment of the vision of a humane future.
ENDS Sphere: Related Content
Reflections on a visit to Odessa and Kiev
Invited to speak at Odessa and Kiev by the IBR Institute of International Business Relations at "Masterclasses" on the current crisis, I found Odessa mostly worn down with age but, where it has been provided with minimum maintenance recently (a few blocks around the new port), quite beautiful. The architecture is mostly imperial Russian/ Mediterranean with a strong whiff of Italian and French influence - bits of the city (e.g. the Potemkin Stairs, when one is looking up from the bottom) are even reminiscent of New Delhi.
Kiev (or Kyiv) is astonishingly well-spruced. About 15 miles across, it takes quite a bit of travel and I was surprised at how much money has been poured into the city (perhaps the lion's share of all the money that the country has received or been able to generate since its independence from Russia in 1991?). It is certainly the most modern of all the cities in Europe and, in spite of that, still remains beautiful and distinctly itself.
Having looked at the situation in the country a little in preparation for my visit, and having had discussions with an interesting range of people while there, here is my summary: the national currency is losing value; the country imports a huge amount as there is practically no industrial production and hardly any internationally-competitive local products; the majority of businesses have taken a hit; the country's main "industries" are construction, real estate and finance - all affected by the current global downturn; panic and aggravation is the dominanat mood, combined with a lingering trace of arrogance on the part of the rich.
What does the country need to do to cope with the current crisis and even use it as a springboard for a breakthrough?
1. Introduce one or more complementary currencies immediately. That will help to provide a floor below the crisis, without providing potential for hyperinflation whenever and as soon as the economy begins to recover. There may be some loss of tax revenue (depending on how the complementary system is designed) but that should be more than offset by avoiding the otherwise-inevitable need to print more and more of the otherwise-monopoly currency.
2. Immediately consider how to support the agricultural sector and make it viable again. This is the single biggest sector with the potential to take the country into the future. The whole of agriculture has not only been shamefully neglected but even abused.
3. Encourage mergers and acquisitions in the IT sector so as to form at least 3 to 5 nationally-important firms: the country has good prospects in IT but needs a national agreement regarding how to encourage this sector without actual subsidy. There may also be other advanced technological sectors that the country can prioritise.
4. The key thing is for the country to create a "brand" for itself. When one thinks of the USA one thinks of size, reach, good value for money and reasonably competent products in almost every field (with a few excellent products in some fields); when one thinks of Germany one thinks of really high-tech but very high-value products; when one thinks of Japan, one thinks of high-tech products that are good value compared to German ones but higher-tech than American ones; when one thinks of China one thinks of cheap and cheerful mass products which may or may not be up to scratch; in the case of Armenia, one thinks of an incredibly rich culture and a beautiful country which has suffered a holocaust of its own and is in a challenging situation; when one thinks of India, one thinks of IT. In each of these cases, the stereotypes may be right or wrong - the point is that one has something to go on and/or challenge. In the case of Ukraine, what does one think of? There is a blank. At best one thinks of the country's dispute with Russia and considers Ukraine in the light of a pipeline of Russian gas to Europe - not exactly flattering.
But the notion of a pipeline is not the worst one to build on for creating an image for the country: considering its size and geographical position, Ukraine could build for itself a reputation as a logistical champion.
So there is an opportunity for the people of Ukraine to take the initiative for a new revolution, that will force its political class, which is mostly focused on enriching itself, to do the minimum necessary for the country. In doing so, the political class will find that it can enrich itself even more - and without forcing the country to move even further back economically and socially. It would be a win-win for everyone. Sphere: Related Content
Kiev (or Kyiv) is astonishingly well-spruced. About 15 miles across, it takes quite a bit of travel and I was surprised at how much money has been poured into the city (perhaps the lion's share of all the money that the country has received or been able to generate since its independence from Russia in 1991?). It is certainly the most modern of all the cities in Europe and, in spite of that, still remains beautiful and distinctly itself.
Having looked at the situation in the country a little in preparation for my visit, and having had discussions with an interesting range of people while there, here is my summary: the national currency is losing value; the country imports a huge amount as there is practically no industrial production and hardly any internationally-competitive local products; the majority of businesses have taken a hit; the country's main "industries" are construction, real estate and finance - all affected by the current global downturn; panic and aggravation is the dominanat mood, combined with a lingering trace of arrogance on the part of the rich.
What does the country need to do to cope with the current crisis and even use it as a springboard for a breakthrough?
1. Introduce one or more complementary currencies immediately. That will help to provide a floor below the crisis, without providing potential for hyperinflation whenever and as soon as the economy begins to recover. There may be some loss of tax revenue (depending on how the complementary system is designed) but that should be more than offset by avoiding the otherwise-inevitable need to print more and more of the otherwise-monopoly currency.
2. Immediately consider how to support the agricultural sector and make it viable again. This is the single biggest sector with the potential to take the country into the future. The whole of agriculture has not only been shamefully neglected but even abused.
3. Encourage mergers and acquisitions in the IT sector so as to form at least 3 to 5 nationally-important firms: the country has good prospects in IT but needs a national agreement regarding how to encourage this sector without actual subsidy. There may also be other advanced technological sectors that the country can prioritise.
4. The key thing is for the country to create a "brand" for itself. When one thinks of the USA one thinks of size, reach, good value for money and reasonably competent products in almost every field (with a few excellent products in some fields); when one thinks of Germany one thinks of really high-tech but very high-value products; when one thinks of Japan, one thinks of high-tech products that are good value compared to German ones but higher-tech than American ones; when one thinks of China one thinks of cheap and cheerful mass products which may or may not be up to scratch; in the case of Armenia, one thinks of an incredibly rich culture and a beautiful country which has suffered a holocaust of its own and is in a challenging situation; when one thinks of India, one thinks of IT. In each of these cases, the stereotypes may be right or wrong - the point is that one has something to go on and/or challenge. In the case of Ukraine, what does one think of? There is a blank. At best one thinks of the country's dispute with Russia and considers Ukraine in the light of a pipeline of Russian gas to Europe - not exactly flattering.
But the notion of a pipeline is not the worst one to build on for creating an image for the country: considering its size and geographical position, Ukraine could build for itself a reputation as a logistical champion.
So there is an opportunity for the people of Ukraine to take the initiative for a new revolution, that will force its political class, which is mostly focused on enriching itself, to do the minimum necessary for the country. In doing so, the political class will find that it can enrich itself even more - and without forcing the country to move even further back economically and socially. It would be a win-win for everyone. Sphere: Related Content
Tuesday, March 17, 2009
The difference between realising that you have done something wrong, and doing something about that
Jack Welch and Alan Greenspan, among others, have now acknowledged that the basic principles on which they operated were wrong.
However, words are cheap....
As far as I know, they not done the obvious decent thing and given away even a major proportion of the money they earned from operating on false principles.
If they did give away a major part of their wealth, it would be some little consolation to the many millions around the world who have been brought to deprivation and even ruin as a result of operating precisely those false principles. Sphere: Related Content
However, words are cheap....
As far as I know, they not done the obvious decent thing and given away even a major proportion of the money they earned from operating on false principles.
If they did give away a major part of their wealth, it would be some little consolation to the many millions around the world who have been brought to deprivation and even ruin as a result of operating precisely those false principles. Sphere: Related Content
Historical insight into stock price movements over a century
Credit Suisse Global Investment Returns Yearbook 2009 draws on 109 years of data for 17 countries that together represent some 90 per cent of world stock market value.
Elroy Dimson, Paul Marsh and Mike Staunton, writing in London Business School's latest issue of "London Voices" provide fascinating insights into some of the Yearbook’s highlights - demonstrating, for example, that: ""the 21st century already has the dubious honor of hosting two of the four worst bear markets in history" and that "over a single year, equities are so volatile that most of an investor's return comes from capital gains or losses, with dividends adding a relatively modest amount".
However, as one of the key influences on equity values is the growth of the real economy, and that is supposed to be influenced by liquidity on one hand and by interest raters on the other, it would have been fascinating to examine whether there is in fact any discernible long-term relationship between the worth of equities, bonds and cash on the one hand, and interest rates and money supply on the other. Sphere: Related Content
Elroy Dimson, Paul Marsh and Mike Staunton, writing in London Business School's latest issue of "London Voices" provide fascinating insights into some of the Yearbook’s highlights - demonstrating, for example, that: ""the 21st century already has the dubious honor of hosting two of the four worst bear markets in history" and that "over a single year, equities are so volatile that most of an investor's return comes from capital gains or losses, with dividends adding a relatively modest amount".
However, as one of the key influences on equity values is the growth of the real economy, and that is supposed to be influenced by liquidity on one hand and by interest raters on the other, it would have been fascinating to examine whether there is in fact any discernible long-term relationship between the worth of equities, bonds and cash on the one hand, and interest rates and money supply on the other. Sphere: Related Content
Freek Vermeulen's analysis of the causes of the crisis
Comparing the current banking crisis with the Enron debacle, with Ahold’s demise or even with the Union Carbide disaster in Bhopal in 1984, London Business School's Freek Vermeulen suggests, in the latest issue of the School's e-newsletter, "London Views", that the common basic causes of these debacles include: over-specialisation, the "myopia of success", social pressure to continue doing what is wrong simply because it is profitable, and what I have called "institutionalised greed" but which Vermeulen explains clearly and at greater length.
He concludes that "More rules and regulations and more quantitative and financial controls are unlikely to solve the problem or prevent similar things from happening in the future. All organizations and people involved in these cases, ranging from top managers to traders and customers, were governed and incentivized by means of quantitative and financial controls. However, today's businesses are too complex to be controlled by rules and financial systems alone".
So what will solve the problem? In his view, "organizations will need to tap into the fundamental human inclination to belong to a community (such as an organization) and the desire to do things for the benefit of that community rather than focus on one's individual, narrow interests. These are alien concepts in the City today, where incentives are geared towards optimizing individual short-term performance. At the same time, company loyalty and a sense of community are all but destroyed by those financial incentives and culture. Yet, when such human desires to contribute to a community are artificially suppressed through narrow financial incentive schemes, weird things can happen".
It is interesting that Vermeulen considers the desire to belong to a community "fundamental". It seems to me that he does not realise the extent to which human motivations in this area have been adapted over the centuries. He regards as "weird" what seem to me to be the natural results of the "narrow financial incentive schemes" as well as what he earlier calls "the structure of the whole corporate system". And he does not ask WHAT has caused the change, whether in "fundamental" motivation or in corporate structures over the last few decades. These are matters which I have addressed elsewhere, in my remarks on the moral makeup of the last three to seven decades, and the reasons for that.
The point to note is that Vermeulen's analysis clearly concurs that such debacles are moral before they are structural, and that such debacles are structural before they are financial. Sphere: Related Content
He concludes that "More rules and regulations and more quantitative and financial controls are unlikely to solve the problem or prevent similar things from happening in the future. All organizations and people involved in these cases, ranging from top managers to traders and customers, were governed and incentivized by means of quantitative and financial controls. However, today's businesses are too complex to be controlled by rules and financial systems alone".
So what will solve the problem? In his view, "organizations will need to tap into the fundamental human inclination to belong to a community (such as an organization) and the desire to do things for the benefit of that community rather than focus on one's individual, narrow interests. These are alien concepts in the City today, where incentives are geared towards optimizing individual short-term performance. At the same time, company loyalty and a sense of community are all but destroyed by those financial incentives and culture. Yet, when such human desires to contribute to a community are artificially suppressed through narrow financial incentive schemes, weird things can happen".
It is interesting that Vermeulen considers the desire to belong to a community "fundamental". It seems to me that he does not realise the extent to which human motivations in this area have been adapted over the centuries. He regards as "weird" what seem to me to be the natural results of the "narrow financial incentive schemes" as well as what he earlier calls "the structure of the whole corporate system". And he does not ask WHAT has caused the change, whether in "fundamental" motivation or in corporate structures over the last few decades. These are matters which I have addressed elsewhere, in my remarks on the moral makeup of the last three to seven decades, and the reasons for that.
The point to note is that Vermeulen's analysis clearly concurs that such debacles are moral before they are structural, and that such debacles are structural before they are financial. Sphere: Related Content
Some proposals formally before the G20
While I was, along with others, speaking in Berlin on Sunday at a public event, a member of the audience asked, during the Q&A, what was the most hopeful thing that we speakers had come across. I replied that I had been depressed a few weeks ago, but that over the last couple of weeks I had come across several small signs that key things that need to be done to solve the crisis may well be taken seriously by the G20 after all.
One of these is a new ebook, available for download free of charge at www.VoxEU.org: MACROECONOMIC STABILITY AND FINANCIAL REGULATION: KEY ISSUES FOR THE G20, is published by Centre for Economic Policy Research, which describes itself as "the leading European research network in economics" and boasts of some 700 economists as members.
The book brings together papers, initial versions of which were discussed at a seminar with G20 Deputies and private sector representatives hosted by HM Treasury and the Bank of England on 31 January 2009.
Some of the policy proposals emerging from the book overlap interestingly with mine. So, on the proposals, here are my comments IN CAPITALS. If you wish to read the detailed arguments used to support the CEPR proposals, you have of course to go to the book.
1. The book continues to argue that one of the key reasons for the crisis is "global imbalances and capital flows". I ARGUE, BY CONTRAST, THAT THE PRINCIPAL REASON FOR THE CRISIS WAS THE DEFLATION OF THE HOUSING BUBBLE, AS A RESULT OF THE BUBBLE IN OIL AND COMMODITY PRICES, WITH KNOCK-ON EFFECTS ON THE UNTHINKABLY LARGE MOUNTAIN OF EXOTIC FINANCIAL INSTRUMENTS (WHICH IS SOMETIMES NOWADAYS REFERRED TO AS "THE SHADOW ECONOMY" AS THAT ECONOMY IS SO MANY TIMES THE SIZE OF THE REAL ECONOMY). The book proposes that "global imbalances and capital flows" be attended to by two principal means:
a. by creating credible insurance mechanisms for countries that forego reserve accumulation and stimulate domestic expansion, along three possible lines: more central bank swap lines; ‘reserve pooling'; and a major expansion of IMF resources, together with IMF emphasis on a large, flexible, fast-disbursing facility that would come with little or no conditionality to countries that are adversely affected by global shocks. IN OTHER WORDS, INSTEAD OF MY PROPOSAL THAT THE INSURANCE RELATE TO THE INSURANCE COMPONENT OF THE ACTUAL DEALS IN THE SHADOW ECONOMY, THE BOOK'S EMPHASIS IS ON RATHER MORE TRADITIONAL MATTERS. IT IS NOT CLEAR TO ME WHETHER THERE ARE ENOUGH RESERVES IN THE WORLD TO INSURE MANY WHOLE COUNTRIES THROUGH OLD-FASHIONED MECHANISMS SUCH AS CENTRAL BANK SWAP LINES AND RESERVE POOLING, OR WHETHER EVEN $500 BILLION IN THE IMF'S KITTY WOULD BE ENOUGH TO STABILISE THE NUMBER OF COUNTRIES THAT ARE LIKELY TO BE HIT BY THE CURRENT CRISIS. THIS IS APART FROM: (i) THE PRACTICAL QUESTION OF WHERE 500 BILLION IS TO COME FROM; (ii) THE FUTURE-ORIENTED QUESTION OF THE INFLATIONARY EFFECTS OF THIS "MONEY"; AND (iii) THE MORAL QUESTION OF WHETHER IT IS RIGHT TO SIMPLY HAND OUT MONEY WITHOUT ANY CONDITIONS TO COUNTRIES THAT MAY BE BANKRUPT OR IN DANGER OF BANKRUPTCY.
B. bY accelerating the development of financial systems in emerging markets, in particular local currency bond markets and foreign currency hedging instruments, and by promoting regional cooperation in the design of common institutional standards for financial market development and working to lift barriers to cross-border asset trade within regions. THIS IS GOOD STUFF AND SHOULD BE DONE IN ANY CASE WITHOUT REGARD TO THE CRISIS, THOUGH I AM NOT PERSUADED THAT THIS SPECIFIC SET OF STEPS WILL MAKE ANY CONTRIBUTION TO ADDRESSING THE CRISIS.
2. The book argues that macroeconomic policy should be used to meet any threat of deflation promptly, before it takes hold, with a zero interest rate policy (ZIRP) and quantitative easing, recommending an inflation target so as help to avoid expectations of deflation. WE ARE ALREADY NEAR ZERO INTEREST RATES, AND GOVERNMENTS ARE DOING ALL THEY CAN TO PRINT MORE AND MORE MONEY - WITH THE CONSEQUENCE THAT WE WILL HAVE HYPERINFLATION AS SOON AS THE ECONOMY DOES GET MOVING. The book acknowledges that a global ZIRP will not benefit all countries, because not all can benefit from the stimulus provided by exchange-rate depreciation. Specifically, it asks any country with large trade surpluses and positive GDP growth (think China) to refrain from intervention to prevent the appreciation of its currency, because that would be a beggar-thy-neighbour policy. WHILE THIS MAY BE MORALLY RIGHT, IT DOES NOT GIVE THE COUNTRY CONCERNED ANY SPECIFICALLY ECONOMIC REASON WHY THAT COUNTRY SHOULD NOT FOLLOW A "BEGGAR-THY-NEIGHBOUR" POLICY. IN FACT SUCH A POLICY MAY QUITE SUIT CERTAIN COUNTRIES' POLITICAL PRIORITIES AT CERTAIN TIMES. The book also argues that fiscal stimuli should be done by international cooperation. AS FAR AS I CAN MAKE OUT, THIS IS ALREADY BEING DONE - AND IT IS HAVING VERY LITTLE EFFECT SO FAR, BEYOND PROVIDING A SORT OF FLOOR TO THE CRISIS (THOUGH THAT IS ITSELF WORTH A LOT OF COURSE).
3. The book argues that pro-cyclicality needs to be countered by adjusting the Basel II capital requirements using a simple multiplier that depends on the deviation of the rate of growth of GDP from its long-term average. THIS IS ENTIRELY IN LINE WITH WHAT I HAVE PROPOSED.
4. The book continues to argue the need for creating a centralised clearing counterparty for CDS trades and encourages requiring CDS to be exchange-traded and consider prohibiting naked CDS (those that do not insure a holder of the underlying asset). THESE ARE ANALYSES IN LINE WITH MINE, EXCEPT THAT I HAVE CONSISTENTLY ARGUED FOR MULTIPLE EXCHANGES SPECIFICALLY DEVOTED TO EXOTIC FINANCIAL INSTRUMENTS. I REPEAT THAT HAVING A SINGLE EXCHANGE IS A RECIPE FOR A SERVICE THAT WILL BECOME MORE AND MORE EXPENSIVE, AS WELL AS LESS AND LESS EFFICIENT, OVER TIME - AS HAPPENS IN ALL MONOPOLY SITUATIONS. WE BELIEVE IN COMPETITION. LET US HAVE COMPETITION HERE TOO, IN ORDER TO ENSURE THAT EFFECIENT AND ECONOMICAL SERVICES ARE PROVIDED. Further, the book argues that credit rating agencies (CRAs) need to be genuinely independent, rather than dependent (as they are at present) on the prospect of future business with issuers. The book also encourages the G20 to require greater disclosure of information about the underlying pool of securities for structured instruments. THESE ARE ALSO IN LINE WITH MY SUBMISSIONS.
5. The book draws attention to the need to establish a harmonised bankruptcy regime for banks, based on US-style 'prompt corrective action', giving an independent, well-staffed supervisor strong powers to limit the freedom of bank managers (and possibly remove them) and shareholders (and possibly expropriate them) before the bank is technically insolvent. THIS IS ALL VERY WELL BUT THE PROBLEM HAS BEEN THAT EVEN IN THE U.S.A., WHICH THE AUTHORS ARE HAPPY TO CONSIDER AS SOME SORT OF MODEL, THE EXISTENCE OF RULES HAS NOT FORCED THE U.S.A. TO ACTUALLY BANKRUPT THE LARGEST OF COMPANIES, WHETHER FINANCIAL OR OTHER. THIS IS BECAUSE THESE "LARGEST" COMPANIES ARE CONSIDERED "TOO BIG TO FAIL". THIS SIMPLE FACT IS DOWNPLAYED BY THE BOOK. IN MY OPINION, NO COMPANY SHOULD BE ALLOWED TO BECOME "TOO BIG TO FAIL" IN THE FIRST PLACE, AND THE SIMPLE MECHANISM TO ACHIEVE THIS IS TO REQUIRE ALL COMPANIES THAT APPROACH SAY 0.5% OF GDP TO SPIN OFF PART(S) OF THEIR ACTIVITIES INTO SEPARATE COMPANIES. The book also argues for the creation of an International Financial Stability Fund that takes equity positions in the financial institutions of participating countries and monitors their activities. THIS WOULD BECOME ENTIRELY UNNECESSARY IF MY PROPOSAL (JUST ABOVE) WERE FOLLOWED INSTEAD.
TO SUM UP: THE BOOK REGRETFULLY CONTINUES TO FOCUS ON THE QUESTION OF BLOCKAGES IN THE SUPPLY OF CREDIT (WHICH *IS* PART OF THE CRISIS), BUT DOES NOT FOCUS ON THE UNDERLYING *FINANCIAL CAUSE* OF THE CRISIS, WHICH WAS NON-TRANSPARENT GAMBLING, NOT ONLY WITH ALL THE MONEY THAT ORGANISATIONS HAD, AND NOT ONLY WITH ALL THE MONEY THAT THEY COULD ENTICE PEOPLE TO LEND THEM, BUT EVEN WITH MONEY THAT THEY HAD NO HOPE OF ENTICING ANYONE TO LEND TO THEM.
NATURALLY, THE BOOK MAKES NO MENTION OF THE SOCIAL AND MORAL CAUSE OF THE CRISIS: THE RISE OF THE BABY-BOOMER GENERATION, WHICH DID NOT WANT ANY RULES (MORAL OR REGULATORY) TO PLACE LIMITS ON THEIR ACTIVITIES, AND WHICH WAS RATHER DEVOTED TO SELF AND SELF-INDULGENCE THAN TO SOCIAL RESPONSIBILITY. Sphere: Related Content
One of these is a new ebook, available for download free of charge at www.VoxEU.org: MACROECONOMIC STABILITY AND FINANCIAL REGULATION: KEY ISSUES FOR THE G20, is published by Centre for Economic Policy Research, which describes itself as "the leading European research network in economics" and boasts of some 700 economists as members.
The book brings together papers, initial versions of which were discussed at a seminar with G20 Deputies and private sector representatives hosted by HM Treasury and the Bank of England on 31 January 2009.
Some of the policy proposals emerging from the book overlap interestingly with mine. So, on the proposals, here are my comments IN CAPITALS. If you wish to read the detailed arguments used to support the CEPR proposals, you have of course to go to the book.
1. The book continues to argue that one of the key reasons for the crisis is "global imbalances and capital flows". I ARGUE, BY CONTRAST, THAT THE PRINCIPAL REASON FOR THE CRISIS WAS THE DEFLATION OF THE HOUSING BUBBLE, AS A RESULT OF THE BUBBLE IN OIL AND COMMODITY PRICES, WITH KNOCK-ON EFFECTS ON THE UNTHINKABLY LARGE MOUNTAIN OF EXOTIC FINANCIAL INSTRUMENTS (WHICH IS SOMETIMES NOWADAYS REFERRED TO AS "THE SHADOW ECONOMY" AS THAT ECONOMY IS SO MANY TIMES THE SIZE OF THE REAL ECONOMY). The book proposes that "global imbalances and capital flows" be attended to by two principal means:
a. by creating credible insurance mechanisms for countries that forego reserve accumulation and stimulate domestic expansion, along three possible lines: more central bank swap lines; ‘reserve pooling'; and a major expansion of IMF resources, together with IMF emphasis on a large, flexible, fast-disbursing facility that would come with little or no conditionality to countries that are adversely affected by global shocks. IN OTHER WORDS, INSTEAD OF MY PROPOSAL THAT THE INSURANCE RELATE TO THE INSURANCE COMPONENT OF THE ACTUAL DEALS IN THE SHADOW ECONOMY, THE BOOK'S EMPHASIS IS ON RATHER MORE TRADITIONAL MATTERS. IT IS NOT CLEAR TO ME WHETHER THERE ARE ENOUGH RESERVES IN THE WORLD TO INSURE MANY WHOLE COUNTRIES THROUGH OLD-FASHIONED MECHANISMS SUCH AS CENTRAL BANK SWAP LINES AND RESERVE POOLING, OR WHETHER EVEN $500 BILLION IN THE IMF'S KITTY WOULD BE ENOUGH TO STABILISE THE NUMBER OF COUNTRIES THAT ARE LIKELY TO BE HIT BY THE CURRENT CRISIS. THIS IS APART FROM: (i) THE PRACTICAL QUESTION OF WHERE 500 BILLION IS TO COME FROM; (ii) THE FUTURE-ORIENTED QUESTION OF THE INFLATIONARY EFFECTS OF THIS "MONEY"; AND (iii) THE MORAL QUESTION OF WHETHER IT IS RIGHT TO SIMPLY HAND OUT MONEY WITHOUT ANY CONDITIONS TO COUNTRIES THAT MAY BE BANKRUPT OR IN DANGER OF BANKRUPTCY.
B. bY accelerating the development of financial systems in emerging markets, in particular local currency bond markets and foreign currency hedging instruments, and by promoting regional cooperation in the design of common institutional standards for financial market development and working to lift barriers to cross-border asset trade within regions. THIS IS GOOD STUFF AND SHOULD BE DONE IN ANY CASE WITHOUT REGARD TO THE CRISIS, THOUGH I AM NOT PERSUADED THAT THIS SPECIFIC SET OF STEPS WILL MAKE ANY CONTRIBUTION TO ADDRESSING THE CRISIS.
2. The book argues that macroeconomic policy should be used to meet any threat of deflation promptly, before it takes hold, with a zero interest rate policy (ZIRP) and quantitative easing, recommending an inflation target so as help to avoid expectations of deflation. WE ARE ALREADY NEAR ZERO INTEREST RATES, AND GOVERNMENTS ARE DOING ALL THEY CAN TO PRINT MORE AND MORE MONEY - WITH THE CONSEQUENCE THAT WE WILL HAVE HYPERINFLATION AS SOON AS THE ECONOMY DOES GET MOVING. The book acknowledges that a global ZIRP will not benefit all countries, because not all can benefit from the stimulus provided by exchange-rate depreciation. Specifically, it asks any country with large trade surpluses and positive GDP growth (think China) to refrain from intervention to prevent the appreciation of its currency, because that would be a beggar-thy-neighbour policy. WHILE THIS MAY BE MORALLY RIGHT, IT DOES NOT GIVE THE COUNTRY CONCERNED ANY SPECIFICALLY ECONOMIC REASON WHY THAT COUNTRY SHOULD NOT FOLLOW A "BEGGAR-THY-NEIGHBOUR" POLICY. IN FACT SUCH A POLICY MAY QUITE SUIT CERTAIN COUNTRIES' POLITICAL PRIORITIES AT CERTAIN TIMES. The book also argues that fiscal stimuli should be done by international cooperation. AS FAR AS I CAN MAKE OUT, THIS IS ALREADY BEING DONE - AND IT IS HAVING VERY LITTLE EFFECT SO FAR, BEYOND PROVIDING A SORT OF FLOOR TO THE CRISIS (THOUGH THAT IS ITSELF WORTH A LOT OF COURSE).
3. The book argues that pro-cyclicality needs to be countered by adjusting the Basel II capital requirements using a simple multiplier that depends on the deviation of the rate of growth of GDP from its long-term average. THIS IS ENTIRELY IN LINE WITH WHAT I HAVE PROPOSED.
4. The book continues to argue the need for creating a centralised clearing counterparty for CDS trades and encourages requiring CDS to be exchange-traded and consider prohibiting naked CDS (those that do not insure a holder of the underlying asset). THESE ARE ANALYSES IN LINE WITH MINE, EXCEPT THAT I HAVE CONSISTENTLY ARGUED FOR MULTIPLE EXCHANGES SPECIFICALLY DEVOTED TO EXOTIC FINANCIAL INSTRUMENTS. I REPEAT THAT HAVING A SINGLE EXCHANGE IS A RECIPE FOR A SERVICE THAT WILL BECOME MORE AND MORE EXPENSIVE, AS WELL AS LESS AND LESS EFFICIENT, OVER TIME - AS HAPPENS IN ALL MONOPOLY SITUATIONS. WE BELIEVE IN COMPETITION. LET US HAVE COMPETITION HERE TOO, IN ORDER TO ENSURE THAT EFFECIENT AND ECONOMICAL SERVICES ARE PROVIDED. Further, the book argues that credit rating agencies (CRAs) need to be genuinely independent, rather than dependent (as they are at present) on the prospect of future business with issuers. The book also encourages the G20 to require greater disclosure of information about the underlying pool of securities for structured instruments. THESE ARE ALSO IN LINE WITH MY SUBMISSIONS.
5. The book draws attention to the need to establish a harmonised bankruptcy regime for banks, based on US-style 'prompt corrective action', giving an independent, well-staffed supervisor strong powers to limit the freedom of bank managers (and possibly remove them) and shareholders (and possibly expropriate them) before the bank is technically insolvent. THIS IS ALL VERY WELL BUT THE PROBLEM HAS BEEN THAT EVEN IN THE U.S.A., WHICH THE AUTHORS ARE HAPPY TO CONSIDER AS SOME SORT OF MODEL, THE EXISTENCE OF RULES HAS NOT FORCED THE U.S.A. TO ACTUALLY BANKRUPT THE LARGEST OF COMPANIES, WHETHER FINANCIAL OR OTHER. THIS IS BECAUSE THESE "LARGEST" COMPANIES ARE CONSIDERED "TOO BIG TO FAIL". THIS SIMPLE FACT IS DOWNPLAYED BY THE BOOK. IN MY OPINION, NO COMPANY SHOULD BE ALLOWED TO BECOME "TOO BIG TO FAIL" IN THE FIRST PLACE, AND THE SIMPLE MECHANISM TO ACHIEVE THIS IS TO REQUIRE ALL COMPANIES THAT APPROACH SAY 0.5% OF GDP TO SPIN OFF PART(S) OF THEIR ACTIVITIES INTO SEPARATE COMPANIES. The book also argues for the creation of an International Financial Stability Fund that takes equity positions in the financial institutions of participating countries and monitors their activities. THIS WOULD BECOME ENTIRELY UNNECESSARY IF MY PROPOSAL (JUST ABOVE) WERE FOLLOWED INSTEAD.
TO SUM UP: THE BOOK REGRETFULLY CONTINUES TO FOCUS ON THE QUESTION OF BLOCKAGES IN THE SUPPLY OF CREDIT (WHICH *IS* PART OF THE CRISIS), BUT DOES NOT FOCUS ON THE UNDERLYING *FINANCIAL CAUSE* OF THE CRISIS, WHICH WAS NON-TRANSPARENT GAMBLING, NOT ONLY WITH ALL THE MONEY THAT ORGANISATIONS HAD, AND NOT ONLY WITH ALL THE MONEY THAT THEY COULD ENTICE PEOPLE TO LEND THEM, BUT EVEN WITH MONEY THAT THEY HAD NO HOPE OF ENTICING ANYONE TO LEND TO THEM.
NATURALLY, THE BOOK MAKES NO MENTION OF THE SOCIAL AND MORAL CAUSE OF THE CRISIS: THE RISE OF THE BABY-BOOMER GENERATION, WHICH DID NOT WANT ANY RULES (MORAL OR REGULATORY) TO PLACE LIMITS ON THEIR ACTIVITIES, AND WHICH WAS RATHER DEVOTED TO SELF AND SELF-INDULGENCE THAN TO SOCIAL RESPONSIBILITY. Sphere: Related Content
Monday, March 16, 2009
Artificial life as a mark of the bankruptcy of our civilisation's moral values
I see a report that researchers from the USA have claimed that artificial life could be "created within five to ten years".
With two billion people (a third of humanity) living on less than $2.50 a day - and a half of that on less than $1.25 a day! - it is clear that our political, economic and social systems refuse to deal with the most basic problems of the real lives that we already have.
And we want to create artificial life? Why? To ensure that we condemn these artificial lives to even worse conditions? Or to condemn existing creations to worse conditions than they already have because we are so busy cosseting and pampering "our own" creations?
Those promoting the research claim that artificial living system could produce everything from new drugs to biofuels and greenhouse gas absorbers. Sounds remarkably like the promises we have heard from similar technophiles in the past about how household gizmos will make us a society of leisure.
The fact is that we already have a living system that provides us drugs, biofuels and greenhouse gas absorbers - and provides all that for free. It is called "nature". We haven't looked after nature, and we seem incapable of looking after it very well. And we want to add to our burdens by creating an artificial system at great cost that may do a few things for the rich. The result will be that lives of the rich may perhaps improve, but the lives of the poor will continue to be wretched - and even more wretched because of seeing the gap grow deeper and wider between the real needs of the poor and the imagined needs of the rich.
Am I an anti-scientific Luddite? No. I do believe that science and technology are worthwhile pursuits and that they have contributed enormously to solving real challenges.
So what am I railing against? What would I like done? What I would like done is what any right-thinking and morally-responsible human being would like: re-orient global spending on science and technology so that it focues on what will benefit not the few who are rich, but the masses who are poor. The diseases of the poor are still hugely under-researched. And there is too little spent on tackling the political, economic, social and cultural factors that create and perpetuate poverty and disease.
However, it is not as if we have no clue about what to do about eradicating disease, promoting health and eliminating poverty. Science and technology have already given us many solutions. But we like to keep pretending that we lack solutions so that we can spend more and more on seeking "new solutions". Meanwhile, we are fooled into spending far too little on applying solutions that already exist.
Prioritising the poor in our science and technology spending would be one mark of a morally-responsible civilisation. Sphere: Related Content
With two billion people (a third of humanity) living on less than $2.50 a day - and a half of that on less than $1.25 a day! - it is clear that our political, economic and social systems refuse to deal with the most basic problems of the real lives that we already have.
And we want to create artificial life? Why? To ensure that we condemn these artificial lives to even worse conditions? Or to condemn existing creations to worse conditions than they already have because we are so busy cosseting and pampering "our own" creations?
Those promoting the research claim that artificial living system could produce everything from new drugs to biofuels and greenhouse gas absorbers. Sounds remarkably like the promises we have heard from similar technophiles in the past about how household gizmos will make us a society of leisure.
The fact is that we already have a living system that provides us drugs, biofuels and greenhouse gas absorbers - and provides all that for free. It is called "nature". We haven't looked after nature, and we seem incapable of looking after it very well. And we want to add to our burdens by creating an artificial system at great cost that may do a few things for the rich. The result will be that lives of the rich may perhaps improve, but the lives of the poor will continue to be wretched - and even more wretched because of seeing the gap grow deeper and wider between the real needs of the poor and the imagined needs of the rich.
Am I an anti-scientific Luddite? No. I do believe that science and technology are worthwhile pursuits and that they have contributed enormously to solving real challenges.
So what am I railing against? What would I like done? What I would like done is what any right-thinking and morally-responsible human being would like: re-orient global spending on science and technology so that it focues on what will benefit not the few who are rich, but the masses who are poor. The diseases of the poor are still hugely under-researched. And there is too little spent on tackling the political, economic, social and cultural factors that create and perpetuate poverty and disease.
However, it is not as if we have no clue about what to do about eradicating disease, promoting health and eliminating poverty. Science and technology have already given us many solutions. But we like to keep pretending that we lack solutions so that we can spend more and more on seeking "new solutions". Meanwhile, we are fooled into spending far too little on applying solutions that already exist.
Prioritising the poor in our science and technology spending would be one mark of a morally-responsible civilisation. Sphere: Related Content
Monday, March 09, 2009
Dr Ted Malloch on video, accessible on the Internet
You may recollect my brief review of Dr Malloch's book, SPIRITUAL ENTERPRISE.
I discover that he has recently been interviewed by The Economist, and a series of short clips are at: http://www.templeton.org/video/bishop_malloch/1.html
An interview with Dr Malloch is also at the Wolfsberg website: http://www.wolfsberg.com/xml_1/internet/en/application/d378/f426.cfm
Please note that it is the 2nd video listed at the Wolfsberg site - or you could just do a Search for "Malloch" on that page. Sphere: Related Content
I discover that he has recently been interviewed by The Economist, and a series of short clips are at: http://www.templeton.org/video/bishop_malloch/1.html
An interview with Dr Malloch is also at the Wolfsberg website: http://www.wolfsberg.com/xml_1/internet/en/application/d378/f426.cfm
Please note that it is the 2nd video listed at the Wolfsberg site - or you could just do a Search for "Malloch" on that page. Sphere: Related Content
Lawrence Summers now makes the market system itself the scapegoat - or, do we actually need to pump more money into the system?
I no longer know what to make of Lawrence Summers.
As President Obama's top economic adviser, he should be presenting a cogent analysis of the current crisis, and some sensible solutions.
Instead, according to his interview with the UK's Financial Times, Summers now thinks that the market system is in crisis because of "its own excesses" from which it needs to be "saved" by the world's leaders pumping "more public money into the economy in a co-ordinated effort to boost demand and lift the world out of recession". In other words, the problem was "excess", and we need to save the world from "excess" by providing MORE "excess"!
It is a remarkable thing for Summers, who was Bill Clinton’s Treasury secretary in the 1990s,and is generally regarded as one of the most pro-market voices now in the White House, to opine that "the view that the market is inherently self-stabilising has been dealt a fatal blow....This notion that the economy is self-stabilising is usually right but it is wrong a few times a century. And this is one of those times . . . there’s a need for extraordinary public action at those times.”
If Summers has come around to the view that the market is indeed NOT "self-stabilising...a few times a century" then it would be most interesting to know what new statistical and historical evidence underlies his change of view. What would be even more interesting for us to understand is his current view of the conditions under which the market loses its ability to stablise itself.
But the fact of the matter is that no new statistical and historical information has come to light, and Mr Lawrence the economics scholar has been overtaken by Mr Lawrence the political animal.
We are simply being told lies. The first lie is that free markets are self-stabilising (markets are never totally free, so they cannot be self-stabilising OR non-self-stabilising). The second lie is that the current collapse was simply an accident of the sort that happens for reasons we do not understand (the reasons why the markets collapsed are very clear: non-transparent speculation caused a sudden, entirely unnecessary and historically unprecedented rise in global commodity prices which caused people on the margins of society who should never have been sold mortgages to become unable to meet their monthly housing-related financial commitments; this, in turn, caused a fall in housing prices hitting the historically unprecedented mountains of leverage sitting on the bet that house prices would continue to rise even when it was clear to everyone that there was a bubble - but all the financial players suffered from the illusion that they were smart enough to pull out "just in time" to avoid losses on their leveraged bets while maximising profits from their leveraged bets. As the institutions making these leveraged bets found themselves unable to pay for their leveraged bets, their own liquidity and viability came into question - wiping out, according to today's reports of the Asian Development Bank's estimates, $50 Trillion in the value of financial institutions worldwide).
If 50 trillion has in fact been wiped out, then we know that we are near what would have been wiped out in normal times in the eventuality of these leveraged bets going wrong as they have. Technically, therefore, we could be perhaps not very far from the floor of the problems for financial institutions taken as a whole worldwide. But these are not normal times - and we are entirely dependent on market psychology. Of course there could still be sour assets sitting somewhere that could surface at any time. Meanwhile, an enormous amount of damage has been done to the real economy - and that damage needs to be reparied.
So we come back to the question: is Mr Summers correct that what is needed now is simply to pump more money into the system?
Undoubtedly, pumping more money could help. But neither Summers nor anyone other official has given us any reason why all the money which has already been pumped into the system has not restored the system to health.
The real reason for the system's declining health is continued lack of transparency, because of which we still do not know if any country, municipality, pension fund or company is sitting on what quantity of sour assets.
Till such transparency is created, no one will know whether their potential business partners are, or are not, able to meet their business commitments.
Without such confidence in one's potential business partners, all the money that all the world's presses can produce are not going to restore health to the system.
And, as I have already argued, the only rules that need to be put in place are:
(1) all exotic financial instruments and deals should be required to be registered in the same way as normal financial instruments and deals - but on separate exchanges so that there is complete transparency about the total size of these markets and regarding how and with what structure they are growing;
(2) the number of such special exchanges for exotic instruments and deals should be at least 7 worldwide, maintained by public regulation and private investment as necessary and useful from time to time - purely in order to ensure cost-effectiveness and business-efficiency;
(3) no company or other entity engaging in any sort of business activity should be allowed to grow to more than 0.5% of the total value of the area or country in which the company is registered - so that no company is too big to rescue.
Any legislation over and above these is not only entirely unnecessary but is also an infringement of liberty.
Once the three fundamentals are in place, Mr Summers may find that pumping more money into the system is ENTIRELY unnecessary to restore health to the existing system for the moment.
The question of whether the current system is adequate for the challenges of our times is a separate question - on which I have written earlier, for example, in my Open Letter to President Obama which you can find both on this Blog and elsewhere by Googling for it. Sphere: Related Content
As President Obama's top economic adviser, he should be presenting a cogent analysis of the current crisis, and some sensible solutions.
Instead, according to his interview with the UK's Financial Times, Summers now thinks that the market system is in crisis because of "its own excesses" from which it needs to be "saved" by the world's leaders pumping "more public money into the economy in a co-ordinated effort to boost demand and lift the world out of recession". In other words, the problem was "excess", and we need to save the world from "excess" by providing MORE "excess"!
It is a remarkable thing for Summers, who was Bill Clinton’s Treasury secretary in the 1990s,and is generally regarded as one of the most pro-market voices now in the White House, to opine that "the view that the market is inherently self-stabilising has been dealt a fatal blow....This notion that the economy is self-stabilising is usually right but it is wrong a few times a century. And this is one of those times . . . there’s a need for extraordinary public action at those times.”
If Summers has come around to the view that the market is indeed NOT "self-stabilising...a few times a century" then it would be most interesting to know what new statistical and historical evidence underlies his change of view. What would be even more interesting for us to understand is his current view of the conditions under which the market loses its ability to stablise itself.
But the fact of the matter is that no new statistical and historical information has come to light, and Mr Lawrence the economics scholar has been overtaken by Mr Lawrence the political animal.
We are simply being told lies. The first lie is that free markets are self-stabilising (markets are never totally free, so they cannot be self-stabilising OR non-self-stabilising). The second lie is that the current collapse was simply an accident of the sort that happens for reasons we do not understand (the reasons why the markets collapsed are very clear: non-transparent speculation caused a sudden, entirely unnecessary and historically unprecedented rise in global commodity prices which caused people on the margins of society who should never have been sold mortgages to become unable to meet their monthly housing-related financial commitments; this, in turn, caused a fall in housing prices hitting the historically unprecedented mountains of leverage sitting on the bet that house prices would continue to rise even when it was clear to everyone that there was a bubble - but all the financial players suffered from the illusion that they were smart enough to pull out "just in time" to avoid losses on their leveraged bets while maximising profits from their leveraged bets. As the institutions making these leveraged bets found themselves unable to pay for their leveraged bets, their own liquidity and viability came into question - wiping out, according to today's reports of the Asian Development Bank's estimates, $50 Trillion in the value of financial institutions worldwide).
If 50 trillion has in fact been wiped out, then we know that we are near what would have been wiped out in normal times in the eventuality of these leveraged bets going wrong as they have. Technically, therefore, we could be perhaps not very far from the floor of the problems for financial institutions taken as a whole worldwide. But these are not normal times - and we are entirely dependent on market psychology. Of course there could still be sour assets sitting somewhere that could surface at any time. Meanwhile, an enormous amount of damage has been done to the real economy - and that damage needs to be reparied.
So we come back to the question: is Mr Summers correct that what is needed now is simply to pump more money into the system?
Undoubtedly, pumping more money could help. But neither Summers nor anyone other official has given us any reason why all the money which has already been pumped into the system has not restored the system to health.
The real reason for the system's declining health is continued lack of transparency, because of which we still do not know if any country, municipality, pension fund or company is sitting on what quantity of sour assets.
Till such transparency is created, no one will know whether their potential business partners are, or are not, able to meet their business commitments.
Without such confidence in one's potential business partners, all the money that all the world's presses can produce are not going to restore health to the system.
And, as I have already argued, the only rules that need to be put in place are:
(1) all exotic financial instruments and deals should be required to be registered in the same way as normal financial instruments and deals - but on separate exchanges so that there is complete transparency about the total size of these markets and regarding how and with what structure they are growing;
(2) the number of such special exchanges for exotic instruments and deals should be at least 7 worldwide, maintained by public regulation and private investment as necessary and useful from time to time - purely in order to ensure cost-effectiveness and business-efficiency;
(3) no company or other entity engaging in any sort of business activity should be allowed to grow to more than 0.5% of the total value of the area or country in which the company is registered - so that no company is too big to rescue.
Any legislation over and above these is not only entirely unnecessary but is also an infringement of liberty.
Once the three fundamentals are in place, Mr Summers may find that pumping more money into the system is ENTIRELY unnecessary to restore health to the existing system for the moment.
The question of whether the current system is adequate for the challenges of our times is a separate question - on which I have written earlier, for example, in my Open Letter to President Obama which you can find both on this Blog and elsewhere by Googling for it. Sphere: Related Content
Wednesday, March 04, 2009
A Historic Day: The ICC's Arrest Warrant for Sudan President's actions in inflicting suffering on Darfur
The International Criminal Court's arrest warrant for Sudanese President Omar al-Bashir has come not a day too soon - in spite of all that political regimes which are in principle more or less equally-guilty may plead in terms of danger to the "stability" of the region.
According to UN officials, up to 300,000 people have died and 2.7 million have fled their homes since the Darfur oppression began in 2003. The ICC's Prosecutors say that there was widespread murder of civilians in their villages, followed by continued attacks on them in refugee camps, and the Sudanese militia has systematically used rape as a weapon against Darfuri women.
Apparently, a number of African nations are considering pulling out of the court in response to the warrant. Good riddance to countries that don't want to belong to the civilised world say I - let them withdraw from the WTO and the UN, too!
Though the ICC action is unlikely to help the millions of Darfuris in refugees camps immediately, the warrant is an important signal of the norms that the international community intends to apply to everyone: the mere fact that someone is in office as a President is hardly a basis for avoiding the application of norms to their actions.
Rather the reverse. The Biblical view is that people in positions of power have GREATER responsibility to be accountable for their actions, and must pay MUCH MORE in terms of punishment than ordinary people for the same offenses.
It is of course true that no one is likely to arrest Bashir unless he leaves Sudan, or is handed over by the Sudanese. But everyone knows what happens to dictators sooner or later. Sphere: Related Content
According to UN officials, up to 300,000 people have died and 2.7 million have fled their homes since the Darfur oppression began in 2003. The ICC's Prosecutors say that there was widespread murder of civilians in their villages, followed by continued attacks on them in refugee camps, and the Sudanese militia has systematically used rape as a weapon against Darfuri women.
Apparently, a number of African nations are considering pulling out of the court in response to the warrant. Good riddance to countries that don't want to belong to the civilised world say I - let them withdraw from the WTO and the UN, too!
Though the ICC action is unlikely to help the millions of Darfuris in refugees camps immediately, the warrant is an important signal of the norms that the international community intends to apply to everyone: the mere fact that someone is in office as a President is hardly a basis for avoiding the application of norms to their actions.
Rather the reverse. The Biblical view is that people in positions of power have GREATER responsibility to be accountable for their actions, and must pay MUCH MORE in terms of punishment than ordinary people for the same offenses.
It is of course true that no one is likely to arrest Bashir unless he leaves Sudan, or is handed over by the Sudanese. But everyone knows what happens to dictators sooner or later. Sphere: Related Content
Another hero of our times: Stanislav Markelov
You may recollect my post on Lasantha Wickrematunge, the inspiring Sri Lankan journalist (see my Blog, 14 January 2009).
Now I have come across the story of Stanislav Markelov - of whom I was aware, but regarding whom I had nothing like the complete story, not even in brief:
http://www.opendemocracy.net/russia/article/Stanislav-Markelov-a-hero-of-our-time
In these days when cynicism and hopelessness abound, it is important to highlight such positive personalities, which enable us to realise that there are still many people "who have not bowed the knee to Baal".
Many, many more than we think! Sphere: Related Content
Now I have come across the story of Stanislav Markelov - of whom I was aware, but regarding whom I had nothing like the complete story, not even in brief:
http://www.opendemocracy.net/russia/article/Stanislav-Markelov-a-hero-of-our-time
In these days when cynicism and hopelessness abound, it is important to highlight such positive personalities, which enable us to realise that there are still many people "who have not bowed the knee to Baal".
Many, many more than we think! Sphere: Related Content
Tuesday, March 03, 2009
Ready to Lead? Rethinking America’s Role in a Changed World
The UK's Royal Institute of International Affairs is also known as "Chatham House" (after which the famous "Chatham House Rule" is named). Indeed, the Institute is nowadays better known as "Chatham House".
The Director of the Institute, Dr. Robin Niblett, has recently published a Chatham House Report with the title, "Ready to Lead? Rethinking America’s Role in a Changed World", in which he gives the US six pieces of advice, which I sum up as follows:
1. Don't talk about "global leadership", simply provide it: "The risk of international disappointment will be intense if the United States proves unable to deliver meaningful solutions to key international challenges – from ending the Arab-Israeli conflict to helping achieve a comprehensive international deal to combat climate change. There is also the risk of a divide between the administration’s aspiration to lead as a force for good in the world and the reality of how the United States must pursue its national interests". Wise words.
2. The dollar isn't almighty, and the US military isn't almighty - and US has to act in recognition of the fact that "US influence in most regions has declined in recent
years, while the US economic model has lost some of its appeal. (So) the US ... should concentrate wholeheartedly on promoting the conditions within which specific countries can develop their own routes to positive change for their citizens". Nevertheless, he argues, the Bush administration leaves a strong legacy of wellfunded foreign assistance programmes.... President Obama can build on this approach and add his own initiatives, such as his proposal to create a Global Education Fund. Further opening US markets to goods from developing countries will also need to be a key part of the policy mix". The question this raises is WHICH developing countries should have access to US markets? Anti-democratic ones or democratic ones?
3. Spend less time making demands of opponents, more on understanding their domestic compulsions - and make more efforts to support its friends and allies. "By so doing, the United States will play to its strengths, run up less against the limits to its leadership potential and still change to its advantage the context within which its opponents must then operate." Sounds good. But it isn't clear what Dr. Niblett means specifically: in what new ways does he propose that the Obama administration "support friends and allies"?
4. Stop focusing so much on leaders and parties abroad, and focus instead on governance and political processes: " supporting the creation of viable institutions
and processes that promote good governance is more likely to establish a durable framework for positive change. President Obama’s intention to strengthen the role of the US State Department should help achieve this rebalancing of effort, but it will also depend on increasing the financial resources for US diplomacy and the other
instruments of US ‘soft power’. Equally important will be ensuring that the diplomacy of the administration’s special envoys does not recreate the same reliance on personal relationships and some of the interdepartmental competition which blighted parts of the Bush administration’s foreign policy." All good stuff. The only problem is that the contrast which Dr. Niblett draws between personalities and institutions is one that does not hold in most developing countries - that is precisely the nature of the problem and the key reason why these countries remain stubbornly unable to "develop". Dr Niblett does not seem to realise that he lives in a cultural context where that crucial distinction was won by the Protestant Reformation. In pre- and non-Reformed cultures, institutions exist to serve individuals; in Reformed cultures, individuals create and/ or serve institutions.
5. Get involved with others, as an equal, in "turning the transatlantic relationship into an effective player in tackling global challenges". For example, enabling the G-20 to be a more representative forum for consultation, strengthening the UN system, "renewing the Nuclear Non-Proliferation Treaty in such a way that nonproliferation remains a rational option for sovereign governments around the world, and helping craft the framework for a new global deal to combat climate change at the Copenhagen Climate Conference at the end of 2009." My impression is that the Administration is going about precisely this agenda, though still in a sometimes ham-fisted way.
6. Lead by example. In this context, Dr. Niblett makes several different sorts of points. I provide the gist of each of them below, each of which is followed by my comments in capitals: (a) "President Obama ... took immediate steps after his inauguration to underline the connection between US policy and the nation’s ideals. Beyond closing the Guantánamo Bay detention facility, the administration could adapt its legal treatment of detainees in armed conflict, and encourage the inclusion in the mandates of peace-keeping missions of the obligation for them to cooperate with investigations by the International Criminal Court. I'M AFRAID I SEE NO CHANCE OF THIS HAPPENING. ANY U.S. PRESIDENT THAT MADE EVEN TOKEN MOVES IN THIS DIRECTION WOULD IMMEDIATELY RUN INTO TROUBLE. (b). "President Obama’s commitments to strengthen national environmental standards and to use federal procurement to drive higher levels of energy efficiency could be the basis for reaching new international environmental standards and benchmarks.". THIS WOULD BE A GOOD APPROACH, AND WOULD MOREOVER BUILD ON WHAT, FOR EXAMPLE, CALIFORNIA HAS ALREADY INITIATED. (c) "Most important of all, at this critical time, America must not revert to protectionism. President Obama’s national economic recovery strategy needs to serve as an example for the rest of the world of the progress that a dynamic and open but well-regulated market economy can achieve for its people." WE WILL SEE WHETHER THE U.S. IS CAPABLE OF DEVELOPING AND MAINTAINING A GLOBALLY OPEN MARKETPLACE, COMBINED WITH LIGHT BUT EFFECTIVE REGULATION ALONG WITH FUNDAMENTAL HUMAN RIGHTS. Sphere: Related Content
The Director of the Institute, Dr. Robin Niblett, has recently published a Chatham House Report with the title, "Ready to Lead? Rethinking America’s Role in a Changed World", in which he gives the US six pieces of advice, which I sum up as follows:
1. Don't talk about "global leadership", simply provide it: "The risk of international disappointment will be intense if the United States proves unable to deliver meaningful solutions to key international challenges – from ending the Arab-Israeli conflict to helping achieve a comprehensive international deal to combat climate change. There is also the risk of a divide between the administration’s aspiration to lead as a force for good in the world and the reality of how the United States must pursue its national interests". Wise words.
2. The dollar isn't almighty, and the US military isn't almighty - and US has to act in recognition of the fact that "US influence in most regions has declined in recent
years, while the US economic model has lost some of its appeal. (So) the US ... should concentrate wholeheartedly on promoting the conditions within which specific countries can develop their own routes to positive change for their citizens". Nevertheless, he argues, the Bush administration leaves a strong legacy of wellfunded foreign assistance programmes.... President Obama can build on this approach and add his own initiatives, such as his proposal to create a Global Education Fund. Further opening US markets to goods from developing countries will also need to be a key part of the policy mix". The question this raises is WHICH developing countries should have access to US markets? Anti-democratic ones or democratic ones?
3. Spend less time making demands of opponents, more on understanding their domestic compulsions - and make more efforts to support its friends and allies. "By so doing, the United States will play to its strengths, run up less against the limits to its leadership potential and still change to its advantage the context within which its opponents must then operate." Sounds good. But it isn't clear what Dr. Niblett means specifically: in what new ways does he propose that the Obama administration "support friends and allies"?
4. Stop focusing so much on leaders and parties abroad, and focus instead on governance and political processes: " supporting the creation of viable institutions
and processes that promote good governance is more likely to establish a durable framework for positive change. President Obama’s intention to strengthen the role of the US State Department should help achieve this rebalancing of effort, but it will also depend on increasing the financial resources for US diplomacy and the other
instruments of US ‘soft power’. Equally important will be ensuring that the diplomacy of the administration’s special envoys does not recreate the same reliance on personal relationships and some of the interdepartmental competition which blighted parts of the Bush administration’s foreign policy." All good stuff. The only problem is that the contrast which Dr. Niblett draws between personalities and institutions is one that does not hold in most developing countries - that is precisely the nature of the problem and the key reason why these countries remain stubbornly unable to "develop". Dr Niblett does not seem to realise that he lives in a cultural context where that crucial distinction was won by the Protestant Reformation. In pre- and non-Reformed cultures, institutions exist to serve individuals; in Reformed cultures, individuals create and/ or serve institutions.
5. Get involved with others, as an equal, in "turning the transatlantic relationship into an effective player in tackling global challenges". For example, enabling the G-20 to be a more representative forum for consultation, strengthening the UN system, "renewing the Nuclear Non-Proliferation Treaty in such a way that nonproliferation remains a rational option for sovereign governments around the world, and helping craft the framework for a new global deal to combat climate change at the Copenhagen Climate Conference at the end of 2009." My impression is that the Administration is going about precisely this agenda, though still in a sometimes ham-fisted way.
6. Lead by example. In this context, Dr. Niblett makes several different sorts of points. I provide the gist of each of them below, each of which is followed by my comments in capitals: (a) "President Obama ... took immediate steps after his inauguration to underline the connection between US policy and the nation’s ideals. Beyond closing the Guantánamo Bay detention facility, the administration could adapt its legal treatment of detainees in armed conflict, and encourage the inclusion in the mandates of peace-keeping missions of the obligation for them to cooperate with investigations by the International Criminal Court. I'M AFRAID I SEE NO CHANCE OF THIS HAPPENING. ANY U.S. PRESIDENT THAT MADE EVEN TOKEN MOVES IN THIS DIRECTION WOULD IMMEDIATELY RUN INTO TROUBLE. (b). "President Obama’s commitments to strengthen national environmental standards and to use federal procurement to drive higher levels of energy efficiency could be the basis for reaching new international environmental standards and benchmarks.". THIS WOULD BE A GOOD APPROACH, AND WOULD MOREOVER BUILD ON WHAT, FOR EXAMPLE, CALIFORNIA HAS ALREADY INITIATED. (c) "Most important of all, at this critical time, America must not revert to protectionism. President Obama’s national economic recovery strategy needs to serve as an example for the rest of the world of the progress that a dynamic and open but well-regulated market economy can achieve for its people." WE WILL SEE WHETHER THE U.S. IS CAPABLE OF DEVELOPING AND MAINTAINING A GLOBALLY OPEN MARKETPLACE, COMBINED WITH LIGHT BUT EFFECTIVE REGULATION ALONG WITH FUNDAMENTAL HUMAN RIGHTS. Sphere: Related Content
One in the eye for The European Commission regarding Genetically Modified Foods
The European Commission usually bases its decisions regarding genetically modified foods (GMF) on the "scientific advice" provided by EU food-safety officials, who usually support the view that GMF do not present a health danger.
On Monday (March 2), Environment Ministers from EU countries successfully blocked a move by the European Commission to force Austria and Hungary to lift bans on genetically modified corn.
Britain, Finland, the Netherlands and Sweden supported the move to force Austria and Hungary to lift the bans, while all other countries did not see why Austria and Hungary should be forced to do something that they believe imperils health.
BTW, The German government is also considering whether it will lift its restriction on Monsanto's "MON 810 corn", which that government imposed in 2007. Let's hope that the supporters of Monsanto will continue to be defeated in Germany.
As I find myself being forced to repeat: I am FOR technological progress but, when it comes to human or animal health, or environmental matters, I am solidly of the view that we should not accept new products or technologies unless and until their potential for damage has been demonstrated by neutral outsiders as being, beyond doubt, nil. Something that is not yet the case with GMF. Sphere: Related Content
On Monday (March 2), Environment Ministers from EU countries successfully blocked a move by the European Commission to force Austria and Hungary to lift bans on genetically modified corn.
Britain, Finland, the Netherlands and Sweden supported the move to force Austria and Hungary to lift the bans, while all other countries did not see why Austria and Hungary should be forced to do something that they believe imperils health.
BTW, The German government is also considering whether it will lift its restriction on Monsanto's "MON 810 corn", which that government imposed in 2007. Let's hope that the supporters of Monsanto will continue to be defeated in Germany.
As I find myself being forced to repeat: I am FOR technological progress but, when it comes to human or animal health, or environmental matters, I am solidly of the view that we should not accept new products or technologies unless and until their potential for damage has been demonstrated by neutral outsiders as being, beyond doubt, nil. Something that is not yet the case with GMF. Sphere: Related Content
The New American Government downgrades freedom to a lesser issue
According to press reports of statements made by US Secretary of State Hillary Clinton during her trip to China last week, efforts to press China on issues like Taiwan, Tibet and human rights "can't interfere with the global economic crisis, the global climate change crisis and the security crisis."
In other words, the economy, climate change and security are more important than human rights.
What would be the use, in the view of the new US Government of addressing the economy, climate change and security issues, if human rights are to disappear or be downgraded?
Isn't the whole point of living to have responsibilities and rights as a human being? Sphere: Related Content
In other words, the economy, climate change and security are more important than human rights.
What would be the use, in the view of the new US Government of addressing the economy, climate change and security issues, if human rights are to disappear or be downgraded?
Isn't the whole point of living to have responsibilities and rights as a human being? Sphere: Related Content
Obama and the Future of "the Culture War" in the USA
Most people outside the USA are unaware of the "Culture War" IN the USA.
And, inside the USA, talk of the "Culture War" has abated following the election of President Obama.
However, as President Obama's budget is so uncompromisingly "liberal", and as he has started taking actions that stoke the "culture war", expect a resurrection of "Culture War" issue.
So, if you don't know what the "Culture War" is all about, here is a good introduction to it (of course from ONE side, but the description itself is unbiased and accurate):
http://www.pearceyreport.com/archives/2006/01/j_richard_pearc_1.php Sphere: Related Content
And, inside the USA, talk of the "Culture War" has abated following the election of President Obama.
However, as President Obama's budget is so uncompromisingly "liberal", and as he has started taking actions that stoke the "culture war", expect a resurrection of "Culture War" issue.
So, if you don't know what the "Culture War" is all about, here is a good introduction to it (of course from ONE side, but the description itself is unbiased and accurate):
http://www.pearceyreport.com/archives/2006/01/j_richard_pearc_1.php Sphere: Related Content
Recording of my talk, "The Future of the Global Crisis", delivered a couple of days ago, is now on the Internet
The talk itself is at:
www.chrischona-frauenfeld.ch/downloads/guptara-talk-1-3-2009.mp3
The other mp3 is where I respond to questions from the audience:
http://www.chrischona-frauenfeld.ch/downloads/guptara-question-answering-session-1-3-2009.mp3 Sphere: Related Content
www.chrischona-frauenfeld.ch/downloads/guptara-talk-1-3-2009.mp3
The other mp3 is where I respond to questions from the audience:
http://www.chrischona-frauenfeld.ch/downloads/guptara-question-answering-session-1-3-2009.mp3 Sphere: Related Content
Monday, March 02, 2009
Top international banker calls MY rescue plan radical, when what is happening is far more radical!
One top international banker, on reading my Open Letter to President Obama" wrote to me saying that he thinks my plan "radical".
Developed countries are nationalising (or otherwise guaranteeing) the "commanding heights" of their financial sector and even their manufacturing sector - and that's far more radical than my plan would be.
On the basis of any sensible and rational criterion (amount of money involved, universality rather than pork-barrelling in application, actual guaranteed impact in terms of stabilising the economy, restoring trust and actually getting it moving again), my plan is far less "radical".
I can only think that the "new" criterion for what is "radical" is not the content of the proposals but the origin of the proposal - if the proposal comes from a government in power, it must be "non-radical", but if the proposal comes from someone not in power, then it must be "radical", irrespective of the contents of the proposals concerned! Sphere: Related Content
Developed countries are nationalising (or otherwise guaranteeing) the "commanding heights" of their financial sector and even their manufacturing sector - and that's far more radical than my plan would be.
On the basis of any sensible and rational criterion (amount of money involved, universality rather than pork-barrelling in application, actual guaranteed impact in terms of stabilising the economy, restoring trust and actually getting it moving again), my plan is far less "radical".
I can only think that the "new" criterion for what is "radical" is not the content of the proposals but the origin of the proposal - if the proposal comes from a government in power, it must be "non-radical", but if the proposal comes from someone not in power, then it must be "radical", irrespective of the contents of the proposals concerned! Sphere: Related Content
The shape of the new international order begins to emerge?
Perhaps the shape of the emerging new global economic measures is beginning to emerge in odd hints and phrases here and there.
According to news reports in relation to British Prime Minister Gordon Brown’s visit to President Obama, Prime Minister Brown favours:
(a) coordinated measures to stabilise the world economy,
(b) reform and new regulation of the banking system and
(c) increase of the International Monetary Fund's firepower to help countries hard hit by the crisis.
Let’s take these one by one. Clearly (c) is not possible without enhanced contributions from one or more countries, unless the entire system for financing the IMF is going to be revamped – not impossible but, as there is no public news of what a new system for financing the IMF might be, no comment on that is possible. So let us stick to “enhanced contributions by one or more countries”. It is not clear, at this point in history, why countries would allocate their (relatively limited) financial resources to a multilateral agency rather than use those resources themselves in direct diplomacy to support their own direct interests in neighbouring or distant countries. However, let us be optimistic and assume that at least some countries are willing to put some more of their money into the IMF system. The question is: if all the money that could possibly be provided by all the countries in the world were actually put into the IMF, would that be enough to help the number of countries that already need help – let alone the increasing number of countries that will need more and more help as the crisis worsens and before we emerge from the crisis? In other words, unless steps are taken to counter the crisis itself, providing money to the IMF itself is simply more of an effort to muddle through which will be unsuccessful.
Or let’s take item (a). It is fairly clear that countries are already “co-ordinating” as much as possible, so “co-ordination” itself doesn’t hold out much hope, unless there are new FORMS of co-ordination that are being proposed – and we have no hints at present about what such new forms of “co-ordination” might be. Some forms of co-ordination could be dangerous to human freedoms and should be rejected, as I have argued in my "Open Letter to President Obama"
That leaves item (b), which has two elements: REFORM of the banking system, and REGULATION of the banking system. Again, as we don’t know the details, it is not really possible to comment on these. So we await the details with interest. Meanwhile, suffice to say the following:
1. Reform of the Banking systems alone will not do the trick, without REFORM OF FINANCIAL AND MONETRY SYSTEMS WHICH IS NEEDED AS WELL.
2. Insofar as the banking system itself is concerned, the danger today is what we might call “over-reform” and “over-regulation”. Better to go for the “minimum necessary regulation” – and I have already proposed that that might focus on creating complete transparency in all forms of leverage (not merely in terms of supposed Value At Risk), and on creating a counter-cyclical system of leverage for banks – the requirement to loan more at crisis times, but less at times when the economy booms, in order to discourage loans and encourage investments.
3. The tax system, internationally, also needs to be reformed to encourage investments and discourage loans. Again, I have commented on this elsewhere. Sphere: Related Content
According to news reports in relation to British Prime Minister Gordon Brown’s visit to President Obama, Prime Minister Brown favours:
(a) coordinated measures to stabilise the world economy,
(b) reform and new regulation of the banking system and
(c) increase of the International Monetary Fund's firepower to help countries hard hit by the crisis.
Let’s take these one by one. Clearly (c) is not possible without enhanced contributions from one or more countries, unless the entire system for financing the IMF is going to be revamped – not impossible but, as there is no public news of what a new system for financing the IMF might be, no comment on that is possible. So let us stick to “enhanced contributions by one or more countries”. It is not clear, at this point in history, why countries would allocate their (relatively limited) financial resources to a multilateral agency rather than use those resources themselves in direct diplomacy to support their own direct interests in neighbouring or distant countries. However, let us be optimistic and assume that at least some countries are willing to put some more of their money into the IMF system. The question is: if all the money that could possibly be provided by all the countries in the world were actually put into the IMF, would that be enough to help the number of countries that already need help – let alone the increasing number of countries that will need more and more help as the crisis worsens and before we emerge from the crisis? In other words, unless steps are taken to counter the crisis itself, providing money to the IMF itself is simply more of an effort to muddle through which will be unsuccessful.
Or let’s take item (a). It is fairly clear that countries are already “co-ordinating” as much as possible, so “co-ordination” itself doesn’t hold out much hope, unless there are new FORMS of co-ordination that are being proposed – and we have no hints at present about what such new forms of “co-ordination” might be. Some forms of co-ordination could be dangerous to human freedoms and should be rejected, as I have argued in my "Open Letter to President Obama"
That leaves item (b), which has two elements: REFORM of the banking system, and REGULATION of the banking system. Again, as we don’t know the details, it is not really possible to comment on these. So we await the details with interest. Meanwhile, suffice to say the following:
1. Reform of the Banking systems alone will not do the trick, without REFORM OF FINANCIAL AND MONETRY SYSTEMS WHICH IS NEEDED AS WELL.
2. Insofar as the banking system itself is concerned, the danger today is what we might call “over-reform” and “over-regulation”. Better to go for the “minimum necessary regulation” – and I have already proposed that that might focus on creating complete transparency in all forms of leverage (not merely in terms of supposed Value At Risk), and on creating a counter-cyclical system of leverage for banks – the requirement to loan more at crisis times, but less at times when the economy booms, in order to discourage loans and encourage investments.
3. The tax system, internationally, also needs to be reformed to encourage investments and discourage loans. Again, I have commented on this elsewhere. Sphere: Related Content
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