I’m taking advantage of The Economist‘s insight to give you this interactive map of the Euro Crisis. Maybe there are some that haven’t seen it yet.
Further analysis on my part will follow as soon as I have some time. At first sight, I can say that we shouldn’t blindly follow what statistics tell us, in some cases the situation is more dire or better than previewed.
Yeah, I know. I couldn't have come up with a better infograph. But it's not mine. I found it on Good and it was made by them and @Column Five.
Not much to say here, surprised Romania isn't in the top. :)
Laurie Santos delves into the irrationality of human behaviour in economics. Great talk. Enjoy!
I'm hating politics and politicians and their ties with corporations more and more each day...
So, Joseph Stiglitz, Nobel Laureate for Economics and one of my favourite economists, decided to give us some insight about the rule established so many years ago by none other than one of the grandfathers of modern economics, Adam Smith.
He makes some good points, the lack of efficient regulations is one of the key factors of the reduction of the world economy - Some call it crisis. I think it's just a Kondratiev cycle, what just happened.
So, being a men of very few words, I'll let you listen to Mr. Stiglitz'.
I have nothing against the citizens of Greece, but I'm not willing to pay to save what politicians broke. In any country! They must be held responsible. You know, heads must roll (and I mean that literally).
Sorry for the lack of posts, I'm away with work issues these days and my internet connection is limited. But now that I've got it, I decided to share with you Gerd Leonhard's new presentation, which in my opinion (and by all appearances, his as well) is the best he did so far. Enjoy!
The crisis originated in the US where the State and the Central Bank was guilty of injecting too much liquidity into the system. The liquidity led to a boom in spending, the consumption of consumer and durable goods, the purchase of properties on credit. This spending boosted imports, particularly those from Asia. This resulted in the creation of enormous currency surpluses, which were reinvested in the American public debt. Low-cost liquidity was again injected into the system, spending went up further and the concept of risk went haywire, particularly that of risk pricing. Perversely, what had seemed a virtuous circle was in fact a vicious circle. What are the real reasons? The media and politicians have spoken of reckless bankers, stratospheric salaries, and the failure of market economics. In reality, the reasons are deeper and more varied. Firstly, there was the injection of liquidity in English-speaking countries, driven by the Governments and the central banks. The second problem was the lack of regulators, particularly in the US, the UK and, on a much smaller scale, in Europe.
The third key stumbling block was that of leadership: behind all of the poor decisions and error-strewn behaviour there were people guided by unhealthy or myopic value systems. We can therefore argue that if there was a general failure, it lay in the leadership system rather than with market economics. Let us analyse a few trends that seem to be taking shape. The crisis that took hold in the summer of 2007 in the US originated in finance, before spreading to the real economy. Today the cause and effect relationship has done an about-turn and it is the real economy that threatens to infect the financial sphere.
So what are the macro trends? Firstly we will have to get used to greater interference by the State which, when it does intervene, will have a greater influence in the governance of the economic system. We are facing a period of greater sovereign risk (of national debit), with a greater probability that fiscal pressure increases. The US has a public deficit of 12%. How can this public debt be financed? In two ways: you either increase the debit and there is a deterioration in its quality (as happens in Greece and Iceland) or you increase fiscal pressure. Or both. It is obvious that countries with high debts, such as Italy, are unlikely to increase it even further. This results in the removal of resources from economic development.
The other macro trend is deleveraging, or rather the reduction of one's debts (banks by providing less credit, companies that reduce their investments, families that consume less). We are already witnessing a greater number of insolvencies, all of which conspires to result in reduced growth and higher unemployment.
Another important macro trend is the reduced role of the US, who in recent years have been the locomotive for development but who can now no longer act as the spearhead. We will move towards a multipolar system with the balance shifting eastwards, towards Asian countries, oil producers and Russia, with a reduction in the importance of the G8 countries. We will move towards a new normality, one that is different and less opulent than the golden period that we have known. There are three major risks lurking around the corner that must be avoided. The first is populism (which even Obama can't resist when he criticises the salaries of bankers - reorganization of rules and regulators).
The second is statism which generates public debt, and I don't think anyone can show that public debt is better than private debt.
The third major danger, perhaps the most threatening, even if we feel its presence less in Italy, is protectionism. Protectionism derives from the apparently noble goal of protecting jobs. But if a country introduces protectionist measures, other countries have to follow suit, and this creates a distortion of the market and competition, with the resulting costs borne by the consumer and the taxpayer. It is also important to remember that international trade is the primary engine of economic growth, and if this becomes blocked, growth too is also blocked. History can also teach us something in this case. After the Great Depression there was an explosion is protectionism, and this was followed by nationalism and then the Second World War. We must try not to be seduced by these dangers, these traps that may appear seductive in the short term but which in reality are measures that lead us to focus on the symptoms rather than the removal of the problems.
What do you think?
