Tag Archives: financial crisis

Joseph Stiglitz on the Euro

Leave a reply

Joseph Stiglitz has written a new book about the Euro. Here’s an interview in the New York Times.

It is difficult to overstate the economic trauma Europe has suffered in recent years — veritable depressions in Greece and Spain, alarming levels of unemployment across much of the continent. You place much of the blame on the euro. What happened?

The euro was an attempt to advance the economic integration of Europe by having the countries of the eurozone share a common currency. They looked across the Atlantic and they said: “The United States, big economy, very successful, single currency. We should imitate.”

But they didn’t have the political integration. They didn’t have the conditions that would make a single currency work. The creation of the euro is the single most important explanation for the extraordinarily poor performance of the eurozone economies since the crisis of 2008…

You conclude that the best-case scenario from here is to reform and save the euro. But absent that, you contend that it is better to just scrap it as a failed experiment. What needs to happen to make the euro viable?

A banking union with deposit insurance. Something like a euro bond. An E.C.B. that doesn’t just focus on inflation — you want it to focus on employment. A tax policy that deals with the inequalities. And you have to get rid of limits on government deficits.

If I understand this correctly, he is suggesting that the problem is that the Euro is not issued by a true central bank, but instead by individual countries with varying levels of wealth and power.

I was debating with a friend the other day about whether the average citizen is capable of understanding current events and issues well enough to support good policies. I think the average human being certainly has the raw intelligence to do so, but even the well educated mostly have not been provided with the mental tools they would need to understand the complexity of the world around us. Central banking is a good example of something an intelligent human being is capable of understanding, but almost none do. I never learned anything about it in elementary or high school. I learned some basic concepts about the money supply and interest rates in college economics courses, but I didn’t really get it the first time around. Part of it is that algebraic equations are just not the right way to introduce big picture concepts to most people including me (and I was doing just fine in engineering school at the time). Simulations or even physical models would work better to gain an intuitive understanding, backed up by symbolic algebra and calculus later.

I’m not really suggesting that the answer is to turn over public policy to the economists. They understand the theory behind the central banking system, sure, but they may neglect the larger social and environmental context it is embedded in, may neglect to consider complex, dynamic, nonlinear behavior that does not fit neatly into their elegant steady-state algebraic theories, and are often terrible at communication with decision makers and the public. We need experts and respect for experts, but we also need a broad base of intuitive understanding of systems among politicians, bureaucrats, and the public. It could be done.

July 2016 in Review

Leave a reply

3 most frightening stories

  • The financial crisis triggered by U.S. banks in 2008 may have been a major factor behind a resurgence of right-wing politics in Europe.
  • Household chemicals may have adverse effects on the developing brain, including a contribution to the risk of “neurodevelopmental disorders that affect the brain and nervous system including autism, attention deficit hyperactivity disorder, intellectual disabilities, and other learning and behavioral disabilities”.
  • The CIA is just not that good at spying.

3 most hopeful stories

  • There are new tools for considering ecosystem services and biodiversity in development decisions.
  • Uber Pool could be a game changing technology that ushers in a new kind of flexible transportation system.
  • The problems of a civilization in overshoot can seem overwhelming, but one thing you can do is convert your lawn to a sustainable ecosystem. Moss is an option. Also related to this, some ecologists are paying more attention to soil.

3 most interesting stories

  • I was a little side-tracked by U.S. Presidential politics. Nate Silver launched his general election site, putting the odds about 80-20 in favor of Hillary at the beginning of the month. The odds swung toward Trump over the course of the month as the two major party conventions took place (one in my backyard), but by the end of the month they were back to about 70-30 in favor of Hillary. During the month I mused about NAFTA, the fall of the Republic, the banana republic, The Art of the Deal, how to debate Trump, and Jon Stewart,
  • It’s really okay to cook pork chops medium rare.
  • It’s really hard to predict earthquakes. Many scientists think it is impossible, but once upon a time they thought that about predicting weather.

the recession and the right

1 Reply

This editorial on History News Network links the rise of the right in Europe to the 2008 financial crisis and recession caused by American banks.

What many Americans fail to admit is that the 2008 bank-induced economic downturn was of global proportions. It triggered an international depression which caused tremendous financial pain to the industrialized West. New Right parties throughout all of Europe (National Front in France; UKIP in the UK; New Right in the Netherlands; and the New Right in Germany, for example) viewed the West’s financial-sector breakdown as an opportunity to ramp up their message. First, international agreements such as the European Union is undemocratic; and second, that immigrants are displacing ethnically pure nationals from jobs, university acceptances, what have you. “Austerity” measures passed by many European governments, at the bequest of the EU, didn’t help but only deepened the insult. To many in Europe, the 2008 depression triggered social cutbacks aimed squarely at the poor and middling ranks of society while giving a pass to the wealthy financiers who created the problem in the first place.

This dual rhetorical message, poured on thick and heavy since 2008, should give considerable pause to all those citizens that fought in, or still remember, the horrors of the Second World War. The Great Depression (1929-1937) aided Adolph Hitler’s rise. One then wonders whether our current depression (2008-??) will create another?

The saddest thing to me is that Western Europe seemed until a few years ago like the part of the world that had done the most to solve the problems of war and peace, economic and social integration. The rest of the world just needed to catch up. Now that seems somewhat in doubt. Still, war between European nation states seems all but unthinkable, and it is hard to imagine that changing anytime soon.

“take on Wall Street”

Leave a reply

According to the Washington Post, there is a new movement forming called “take on Wall Street”.

the group expects to galvanize support for breaking up the big banks and reviving a version of the Glass-Steagall Act, which prevented the combination of commercial and investment banks. It is also expected to push for a transaction tax, which would force some Wall Street traders, particularly high-frequency traders, to pay a fee every time they buy or sell a stock or bond.

 

April 2016 in Review

Leave a reply

3 most frightening stories

  • The U.S. government’s dominant ideology of free trade and globalization may have roots in U.S. government propaganda designed to provide hidden subsidies to Japan and Korea, our Cold War allies in Asia. And resulting financial deregulation in the 1990s may have been the beginning of the end for the U.S. empire.
  • A new study says that ice melting in Antarctica could double sea level rise projections in the long term. Meanwhile, in the short term, the drought in Southeast and South Asia is getting more and more severe.
  • Robert Paxton says Trump is pretty much a fascist. Although conditions are different and he doesn’t believe everything the fascists believed. Umberto Eco once said that fascists don’t believe anything, they will say anything and then what they do once in office has nothing to do with what they said.

3 most hopeful stories

  • Brookings has a new report on encouraging innovation in the water sector. A lot of it is just about charging more, and it should be fairly obvious why that is politically controversial even if it is the right thing economically. But the report did have an explanation of decoupling (p. 28) which I found helpful. Decoupling is an answer to the puzzle of how a utility can support conservation without losing its revenue base.
  • The U.S. Department of Energy says the technical potential of solar panels is to supply about 39% of all energy use. And electric cars may be about to come roaring back in a big way.
  • Better management of agricultural soil might be able to play a big role in carbon sequestration.

3 most interesting stories

Economist Risk Analysis

1 Reply

The Economist “Intelligence Unit” issues a top ten list of global risks each month. The high probability and high impact ones include severe recession and debt crises in Asia, military tension between the U.S. and Russia, and a breakup of the E.U. Donald Trump makes the list as high impact but only moderate probability:

In the event of a Trump victory, his hostile attitude to free trade, and alienation of Mexico and China in particular, could escalate rapidly into a trade war – and at the least scupper the Trans-Pacific Partnership between the US and 11 other American and Asian states signed in February 2016. His militaristic tendencies towards the Middle East (and ban on all Muslim travel to the US) would be a potent recruitment tool for jihadi groups, increasing their threat both within the region and beyond.

Terrorism, U.S.-China confrontation, and a sudden oil price shock make the list lower down as potentially severe but less likely.

Ted Cruz

Leave a reply

Thinking of Ted Cruz as an alternative to Donald Trump? Looking at Ted Cruz on ontheissues.org, here’s my assessment. He’s a traditional “god, gays, and guns” Christian fundamentalist. The government should have the right to tell us what to believe in (his particular brand of Christian fundamentalism, of course) and what it is okay for us to do in our own bedrooms and families. He would continue the failed “tough on crime” policies that have put so much of our poor and minority population behind bars at enormous taxpayer expense. He would “stand up” to nuclear-armed foreign governments like Russia, China and Iran through aggressive military means. On the other hand, in most matters not involving personal religious beliefs, sexual practices or armed violence against the already-born, he’s a “starve the beast” zealot who is ideologically opposed to the very idea of government. He would try to end government involvement in retirement, health care, education, environmental protection, financial stability and the ability to counteract recessions through fiscal and monetary policy.

Personally, I consider it completely non-partisan to look at the risks involved and just say no. This irrational, inconsistent set of ideas is not based on any sort of factual analysis or attempt to understand how the world works. It is likely to destabilize the economy and/or get us into wars. It’s just dangerous. Thinking people of any political stripe should just say no and back candidates who are interested in real solutions to real problems.

February 2016 in Review

Leave a reply

I’m going to try picking the three most frightening posts, three most hopeful posts, and three most interesting posts (that are not particularly frightening or hopeful) from February.

3 most frightening posts

3 most hopeful posts

3 most interesting posts

  • The U.S. election season certainly is getting interesting, although not really in a good way. ontheissues.org has a useful summary of where U.S. political candidates stand…what are the words I’m looking for…on the the issues. Nate Silver has an interesting online tool that lets you play around with how various demographic groups tend to vote.
  • Fire trucks don’t really have to be so big.
  • Titanium dioxide is the reason Oreo filling is so white.

January 2016 in Review

1 Reply

I’m going to try picking the three most frightening posts, three most hopeful posts, and three most interesting posts (that are not particularly frightening or hopeful) from January.

3 most frightening posts

  • Paul Ehrlich is still worried about population. 82% of scientists agree.
  • Thomas Picketty (paraphrased by J. Bradford Delong) says inequality and slow growth are the norm for a capitalist society. Joseph Stiglitz has some politically difficult solutions: “Far-reaching redistribution of income would help, as would deep reform of our financial system – not just to prevent it from imposing harm on the rest of us, but also to get banks and other financial institutions to do what they are supposed to do: match long-term savings to long-term investment needs.”
  • Meanwhile, government for and by big business means the “Deep State” is really in control of the U.S. In our big cities, the enormous and enormously dysfunctional police-court-prison system holds sway over the poor.

3 most hopeful posts

3 most interesting posts

  • There are some arguments in favor of genetically modified food – they have increased yields of some grains, and there is promise they could increase fish yields. 88% of scientists responding to a Pew survey said they think genetically modified food is safe, but only 37% of the U.S. public thinks so. In other biotech news, Obama’s State of the Union announced a new initiative to try to cure cancer. In other food news, red meat is out.
  • Not only is cash becoming obsolete, any physical form of payment at all may become obsolete.
  • The World Economic Forum focused on technology: “The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.”