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Friday, February 26, 2010

Is anyone changing the paradigm on acceptable public debt?

I wonder about public debt and debt to GDP. As we all know, public authorities have been either borrowing money- internally or externally- cutting taxes to spur the economy, spending money on public works in attempt to do the same or have been having decreasing revenues due to the fall off in public taxation- because folks, simply, do not have it to pay.

However, what debt ceiling is "really" acceptable? To me, from the works I have read from Desbonnete and Ayagari- the former from the Sorbonne in France and the other, is a former, deceased, Federal Reserve Executive and Professor at NYU, it is all a mixed bag.

Through their works they have tried to expound on public debt and debt to GDP, as a form of a standardization of the exact amount or debt as a function of the state as it relates to inflation and deficits- particularly with Ayagari. Desbonnet, particularly, focuses on aggregate risk as a function of increasing public debt- but examines it from a policy choice and preference standpoint, as it relates to how policy makers make decisions about increasing public debt as it relates to that risk.

However, while inflation is a concern, what about thinking about public debt in discretionary terms. Not merely as a function of welfare spending to stave off a recession or bring an economy out of a recession. But, public debt, as a form of social optimization as well as examining public debt, in the manner of social optimization and with the parameters of the related service expenditure to spend on public debt- i.e., the maintenance, monitoring and processing of public debt related agencies.

Maybe I'm just blowing smoke. But, I think it would be interesting to examine.

Thursday, February 18, 2010

Better days ahead?

Well, better news are abound about the American economy. A report from the Wall St. Journal states that manufacturing is up and inventories are moving.

I would bet 1 billion Zimbabwean dollars, that the Obama administration or the persons on his Economic Council, can account for the recent activity.

The worst of it all, the employment statistics are still soft. While over the last two months, un-employment has been receding. However, it still is a little to early to suggest that there will be permanent jobs for folks within the next six months.

While higher manufacturing and orders, should indicate that jobs are soon to follow- with a lag in profit margins and employment, we still would have to wait and see what follows next.

No doubt, US exports, should be higher considering the issue of the value of the American dollar, due to the low interest rates, which would have boosted production as well as made exports cheaper- relative to Chinese, European and Japanese goods.

The issue with the higher production, is certainly tied to that of the countries and firms competing with American goods.

Asia is becoming more insulated, as has been pointed out by Razeen Sally (LSE/ECIPE) in a recent paper- who also claims that it is fool hardy by Asian and South-East Asian economies, to further insulate themselves, because it would 1. damage the unilateral system and 2. (most importantly) the fact that the South-East Asian economies, in particular, have low value per currency coupled with producing similar goods- so, in a sense, negating any gains from trade, especially since a) import competing goods are too similar to export competing goods and, more importantly, for the way I see and expound on Sally's analysis b) GDP per capita per country, particularly in Indonesia, a large economy, is relatively small, making value per export not worth the effort of insulating it from the rest of the world via trade barriers and regional trade partnerships.

The beat goes on, as they say. We all will have to wait and see- particularly in the Caribbean, as we all wait for the USA and, to some extent, Western Europe to start spending money and making money, again.

Sunday, February 14, 2010

Unintended consequences of a recession.

Everyone by now, knows, that a recession can be a very painful thing to endure. It almost seems as if God has turned his back on the lot of the us, and focusing his energies on another planetl with hopes of cultivating it with a new form of biped and the beasts that it will master.

No one would blame him either, as we have done a fine job with this one over the course of the last 100 years.

In any case, snarky sarcasm and cynicism aside and while some may feel that way, God is still very much alive and in good spirits while his forces of a social nature, run its course.

While some may think of forces of nature in the real and natural terms; i.e., hurricanes and earthquakes, there are other forces of nature that are less seen, but, rather, felt and experienced through daily social life and within the economy.

They, like natural forces of nature, have their own direct impact and furthermore, unintended consequences that when you really sit and think about it, when the dust settles and when that times comes upon us, it is an obvious effect of what took place prior.

A recession, as with natural forces, is no different with regard to the notion of direct consequences, effects and impact.

I love it when my mind finds time to wander on issues that can either be quantified, or easily observed. It gives my readers a time to think on what may be in store or to what is actually brewing in the undercurrent. Also, it allows persons to see the social fabric and how it is changing, in real time, whether they agree whole hearted or not and identify that with what took place as a result of other social phenomena.

More importantly, it is a fresh look at the landscape through a social lens, in an attempt to see how the issues observed, will impact the economic landscape- the trends and tastes and how they shift due to factors and stimuli.

Take for example the Baby Boomer Generation. A generation, marked with excess and an understanding of the possibilities of the new frontiers of liberties.

Their generation, which spanned the years of 1943 to 1960, was seen to have been created as a direct result of the slowdown of the world economy, due to the Second World War- a painful recessionary period, which caused their pre-war parents, to be a little more cautious about their finances and held closer to their faith.

Boomers, in turn, rejected these ideas- as all next generations do when faced with the fascinations of modernity and constrictive social concepts- and sought about not only financial wealth and capitalism, but freedoms in sex, religion and personal development- the affects of which are felt all the way down through Generations X through Z.

No doubt, this current recessionary period has its own brand on the social fabric. In fact, it may define what it is to be a Generation X, Y or Z. It’s a force that has a mind of its own. A contagious state of being, which can be both positive and negative- depending on the moral compass of the people who have to live in this world, post crisis.

Take for example another phenomenon unfolding right before our eyes; the issue of education- not only the quality of education, but the current and contemporaneous socio-economic characteristics of education.

Education is not the only issue that is changing due to the state of the economy. For example, management practices, re-alignments in rights and priorities, most importantly health care and immigrant rights, sexual preferences and the changes in the domination of the gender roles in the society, are issues that are larger issues within themselves, but are too affecting mass social attitudes and preferences.

But, education is a little starker as the mutual concern for the access to education, and particularly education of strong cultural desire that is seen as valuable. is one in which we can examine by outputs- scholastic achievements and cultural behaviour within the school system.

We all know of the direct consequences of the economy on education- loss of jobs, will and do indicate that less people have a chance to go to private schools and are foregoing college.

However, what is less examined is the issue of how these persons, of perhaps different, previous social strata and cultural characteristics are performing and will perform in their new, involuntary environment.

Will the persons who are put into the public school system, be” dumbed down” due to inferior teaching? Will they, also, have a net positive effect on their peers by bringing a new level of competition? In the future, will they, in turn, rebel against the system because of a new and educated understanding of what circumstances caused their stunt in development?

How would all of this, affect the work force 10 years later? Will employers have a greater pool of under trained personnel to choose from? Will employers receive net benefits, especially in the lower skilled sectors due to the previous diffusion of knowledge diffusion, brought in by once private school students to the public sector who pushed their contemporaries to be a little better?

How will that shape the economy moving forward? How would these factors, impact the current state of technology and information access to the ordinary person? Would it even make a difference?

To begin to answer these questions, one must only look at and track the performance of the demographics of students outlined- former private school students and current and lifelong public students.

Are grades of former private school students suffering in the public school system? Are the grades of lifelong public school students improving? Is behaviour, generally, better or worse; i.e., are tamed social behaviour of private school students, having a net effect on their lifelong public school counterparts or vice versa?

With these parameters, we can begin to look at what needs changing and what doesn't. What also may be a good place to begin analysis, is in whether or not public school students are performing and behaving at a higher level on their part time jobs- if they have one- or are they, generally, less focused and more disruptive?

While there are litanies of issues to which leaders- management, political and civic- must focus in order to make the necessary interventions, trying to imagine ourselves as the Nostradamus of our times, won't hurt.

Especially if we use previous experiences, to gauge what would likely be scenarios from natural human tendencies and behaviour, in order to shape our intervention methods to impact a greater, positive, end result.

Tuesday, February 9, 2010

Bloggers and Journalists I read...

Hi folks...I know most of you who pop in and read the blog, especially the friends on my friends list, want to know-- well, Youri, who do you read and why?

Its a good question. In fact, I read allot of random stuff. But, mostly, I read allot of economic, political and financial news. Stuff that really bores you. Stuff, so boring, that it would put folks to sleep on the first few paragraphs!

I'm not a novel kind of guy...you know!?!? The guy who likes Sidney Sheldon, or even a Steven King. I read allot of magazines and working papers, with a little bit of non-fiction.

Have not yet read Freakonomics, but am dying to. I should have jumped at the chance to read it when the book was offered to me by a friend of mine. Ah, well...hopefully, it won't go out of print.

But, back to the topic: Who do I read?

Well, I read, when he goes to print, Eugene Robinson from The Washington Post. I can see why he is the "award winning" Eugene Robinson from the Washington Post. He always gives you a great insight, plus a few new words. I have learned more about American news and politics from Robinson, than I have from anyone else in the print media.

Another person I read, almost all the time, is Clive Crook from The Financial Times. Simply a down the line, unbiased-- at least as far as I can see-- when he writes about American politics. Probably because he is a Brit, who observes American politics than someone who feels as if they have a vested stake in what goes on.

Willem Butier from The Financial Times as well. He had stellar, award winning style, work when the economic crisis of 08-09 was going down. He led the intellectual community and led the thought on what must be done. His stewardship of the thinking on how to handle the crisis- from government bail-outs to zombie banks- is priceless. Plus, he is an LSE Professor...my alma mater. If he has not won an award yet, he should!

Paul Krugman from The New York Times. Say what you want to say about his politics, his views are valuable and his work, stands for itself. Another great mind of our time that we must take into out daily living, if we say we are management and development personnel and, leaders of the free-world. Another professor from The LSE

Charles Krauthammer, who publishes in the Washington Times from time to time plus a Fox news contributor. The centre of the centre when it comes to common sense. When the left goes loony, he brings issues back into focus. Eye always on the ball. Concerted. Probably a little too much on the right, but certainly enough centre to make a good case against lefties like Krugman and the other folks who go way off the rails.

Dani Rodrik's weblog, is also a must follow. Probably more academic content than Krugman and Butier combined. Harvard Professor of Economics. His work on industrial activity and the need for government, gives the free market proponents more than a minute to rethink their strategy. When you read Rodrik, you get a sense that the unashamed free-marketeers "know" better!

Of course, staples like The Economist, Financial Times and the Wall Street Journal are in the mix. But, these few authors, stand out.

Monday, February 8, 2010

R.J.Samuelson- Obama's Fed budget lacks clarity!

A clear and precise article from Robert J. Samuelson (no relation to the other famous Samuelson).
"In all the recent reports, speeches and news conferences concerning the federal budget outlook -- including the administration's proposed budget for 2011 -- hardly anyone has posed these crucial questions: What should the federal government do and why; and who should pay?"
Its about the candor gap and how the US budget, lacks clarity and clear purpose on initiatives and issues.

I think president Obama, spent a great deal to identify some of the initiatives in his state of the union address a few weeks back. He said that there would be definite changes in spending in education and, particularly, more pell grants will be dished out as well as an increased focus on early childhood development.

I don't think that we can talk about the returns to scale of such investments. But, education, is a clear best bet if we are taking into consideration the information age as well a the new, knowledge based global community.

Allot of other things were a little scant. He is pushing health care reform, but not so much the real or expected inflated price of health care. Definitely, there are going to be tax increases and budget cuts. Defense spending was slated to be cut, from what I remember.

While Samuelson makes a sound point, while most people missed it as it should be obvious, the lack of financial literacy and a lack of macro-economic principles, within the public main, especially when we take into consideration all of the other things going around- terrorism and the wave of employment news- especially the ad campaigns, meant more to confuse rather than illuminate the American people, we have to take what we can get unless we have a real grassroots movement, which seeks to educate the people on these matters, rather than hype them up for their attentional and voting block power.
"We can no longer just tinker. We need to ask whether government spending serves genuine public purposes or merely benefits favored constituencies."
Such idealism, while true, is a little cute-- sounds like the same old Federal Government, to me.