Global Economic Intersection - Opinion Blog

Taleb Does Not Understand Money/Sovereign Debt

Archidev Ghosh — Wed, 19 Jun 2013 06:38:32 +0000

I was going through Taleb's book on anti-fragility last weekend, noting that he doesn't understand money/sovereign debt. His main idea that there are things which benefit from volatility is interesting. However, the way he writes about sovereign debt implies that he does not understand it. Since I have only been reading the German version I will have to translate the quote. Page numbers will be those of the German version as well. Let us start with the table on p. 52. Sovereign debt is listed as fragile, unsecured private debts as robust, and convertible bonds as antifragile. That is not how things played out in the crisis. Except for those countries using foreign currencies (like euro zone countries), sovereign bonds did exceptionally well:

France's Great Chance to Be European Leader

Archidev Ghosh — Wed, 19 Jun 2013 00:40:15 +0000

Written by Hilary Barnes

France's President, Francois Hollande, is probably a man who thinks clearly, but as a wise politician he is careful not to let people know too clearly just what he thinks. Perhaps a man after the heart of the character in a novel by Benjamin Disraeli, who was asked which party he supported:

"The party of all wise men."

"And which party is that?"

"Wise men never tell."

Out of Thin Air

Admin — Tue, 18 Jun 2013 03:49:25 +0000

Special from Daily Reckoning

by Ron Paul, Daily Reckoning

When I talk to many teenagers and grade schoolers, they seem to have no problem comprehending the fact that if you just create a lot of money, it’ll be like Monopoly money and it won’t have value. Governments do that for all kinds of reasons, especially to enhance political power to fight wars we shouldn’t be fighting or to pass welfare programs that aren’t deserved.

The Irrelevance of Equilibrium Economics

Admin — Mon, 17 Jun 2013 07:27:53 +0000

by Dirk Ehnts, Econoblog101

The title of this post refers to a paper by Nicholas Kaldor from 1972. He starts his article on p. 1237:

I should go further and say that the powerful attraction of the habits of thought engendered by “equilibrium economics” has become a major obstacle to the development of economics as science – meaning by the term “science” a body of theorems based on assumptions that are empirically derived (from observations) and which embody hypotheses that are capable of verification both in regard to the assumptions and the predictions.

Time for the US to Rethink Its Latin America Policy

admin — Sun, 16 Jun 2013 21:46:37 +0000

by Kevin P. Gallagher, TripleCrisis

This week Chinese President Xi Jinping will make his first official visit to Latin America since taking office. Xi will visit Trinidad and Tobego, Costa Rica, and Mexico. In a scramble the United States has sent Vice President Joseph Biden to the region on a goodwill mission at the same time.

The two leaders will spar over the airwaves, web, and blogosphere offering different visions of cooperation. The US should use this opportunity to strengthen ties with the region and take advantage of the fact that Latin America’s love affair with China appears to be cooling.

On the Importance of Sound Money

Admin — Sun, 16 Jun 2013 05:15:12 +0000

Special from Daily Reckoning

by Art Laffer, Daily Reckoning

When I first went to work for the Nixon administration, I told my mom,

“Mom, you can’t believe it. I just wrote a speech for Nixon and he used every single word. Well, he did make two little changes. Everywhere I had ‘is’ he put ‘is not,’ and everywhere I had ‘is not’ he put ‘is,’ but other than that, Mom, it’s exactly my speech.”

Nixon did all sorts of things wrong: the import surcharge, the wage and price controls, the huge increase in social spending, the doubling of the capital gains tax rate. But to my way of thinking, Nixon’s biggest problem was going off gold.

Force Risk Takers to Take Their Losses

Archidev Ghosh — Sat, 15 Jun 2013 05:19:37 +0000

Everything the IMF Wanted to Know about Financial Regulation and Wasn’t Afraid to Ask

by Sheila Bair

Voxeu.org published this article 09 June 2013.

A NOTE: Does anybody have a clear vision of the desirable financial system of the future? This article has one. It gives simple answers to 12 simple questions panellists at a recent IMF conference failed to answer.

I was honoured when the IMF asked me to moderate the Financial Regulation panel at this year’s Rethinking Macro II conference. And while naturally, I delivered one of the more enlightening and thought-provoking policy discussions of the conference, I did fail in my duties as moderator to make sure my panellists covered all the excellent questions our sponsors submitted to us. Of course, this was to be expected, as panellists at these types of events almost never address the topics requested of them (I certainly never do), but rather, like Presidential candidates, answer the questions they want to answer. However, being the conscientious person I am, who accepts responsibility for my mismanagement (unlike some bank CEOs we know), I will now step up and answer those questions myself.

Adam Smith's Uneasy Grave

Admin — Fri, 14 Jun 2013 03:59:50 +0000

by Dirk Ehnts, Econoblog101

UK prime minister David Cameron held a speech this week that according to the Guardian that was "months in preparation". Here is the main part:

He said the need for domestic reform was being driven by the pace of global competition. "Those who defend the case for an ever bigger state and ever bigger spending, or those who say we don't need to radically reform welfare or education, they're fundamentally saying we can ignore these leaner, fitter countries who are breathing down our neck."

Click on image for larger view of entire Adam Smith grave marker.

Location of Adam Smith grave: Canongate Churchyard, Royal Mile, Edinburgh, Scotland.

Jon Stimpson: A Self-Made Man!

admin — Thu, 13 Jun 2013 07:40:47 +0000

Written by Frank Li

Jon Stimpson is the owner and president of National Scale Technology, based in Huntsville, Alabama.

Experience has made Jon very philosophical about life. Here is one of his guiding principles: Life is filled with opportunity and adversity. Every one experiences both. The ones who succeed are the ones who best handle the adversities. Some even turn them into opportunities ...

Jon was born in Hartford, Connecticut in 1951. After university, he worked for an insurance company, because there were no jobs available in his chosen field: engineering. Several years later, one "real" job became available and his career finally began.

Where I Disagree with Michael Pettis

admin — Wed, 12 Jun 2013 03:24:40 +0000

by Dirk Ehnts, Econoblog101

Recently, Michael Pettis has written a book on Chinese rebalancing and published an article at Foreign Policy on the euro zone crisis. While I have read through the first chapters of his book and will publish a critique at a later stage, I want to take issue with his article. While his Saldenmechanik (balance of payments mechanics) is the right approach, his neglect of endogenous money leads to the wrong causalities and therefore the wrong conclusions.

US Treasury Attempts Mind Control

Archidev Ghosh — Mon, 10 Jun 2013 05:42:04 +0000

The New York Times Butchers the Story of How Treasury Got NPR to Censor My Criticism of It

by William K. Black, New Economic Perspectives

We have further proof about how thin-skinned Treasury Secretary Geithner was, but we have it in the form of a weird May 29, 2013 story by Ben Protess in the New York Times. The story is in part about me, though it doesn’t mention me, because it is a story that notes that Treasury was able to convince NPR to remove from its December 13, 2013 broadcast, a statement I made criticizing Geithner – an action that NPR took and noted, but without naming me as the source of the criticism. The weird part of the NYT story is that while it confirms the accuracy of the statement I made about Geithner it asserts that the statement by the unidentified “academic” criticizing Geithner was false.

At Least One Reason Why People Shouldn't Hate QE

Archidev Ghosh — Mon, 10 Jun 2013 00:32:39 +0000

by David E. Altig

Federal Reserve of Atlanta-Macroblog published this article 30 May 2013.

You might not expect me to endorse an article titled "The 7 Reasons Why People Hate QE." I won't disappoint that expectation, but I will say that I do endorse, and appreciate, the civil spirit in which the author of the piece, Eric Parnell, offers his criticism. We here at macroblog, like our colleagues in the Federal Reserve System more generally, pride ourselves on striving for unfailing civility, and it is a pleasure to engage skeptics who share (and exhibit) the same disposition. What the world needs now is ...well, maybe I'm getting carried away.

Let me instead appropriate some of Mr. Parnell's language. It is worthwhile to explore some of the reasons that people do not like QE from someone who does not share this opposing sentiment. In particular, let me focus on the first of seven reasons offered in the Parnell post:

Japan: Abe is Channeling the Gipper

Admin — Sat, 08 Jun 2013 23:50:56 +0000

From Daily Reckoning

by Addison Wiggin, Daily Reckoning

Nothing in politics is new... except for the euphemisms.

Premise: In math, science and technology, learning is linear. Each idea gets built on the innovations that have gone before it. In politics and economics, as in love and war, we keep making the same dumb mistakes over again.

Is Modern Life Making Us Dumber?

Archidev Ghosh — Sat, 08 Jun 2013 21:42:45 +0000

by Washington's Blog, Washington's Blog

Forget “Peak Oil” and “Peak Credit” … Are We On the Downslope of “Peak Intelligence”?

Scientists say that we have much smaller brains than our ancestors had 20,000 years ago … and we might have gotten stupider since agriculture became widespread.

Indeed, Huffington Post reports that we’ve probably gotten dumber than even our Victorian ancestors: