Sunday, 20 December 2015

Gregory Mankiw and the $300 Textbook

Mankiw is trying his best to increase income inequality. How can he justify the price for his textbook, esp as the 7th edition should mean that he has already reaped a high enough revenue stream through the previous editions.

Tuesday, 8 December 2015

ABP to introduce 'Carbon Budgets'

Does it really make sense to introduce 'Carbon Budgets' as a constraint on the mandates for Asset Managers? First of all, the calculation of carbon usage for all investment options is expensive and it is also more than likely to be imprecise or liable to be gamed. And why not a Carbon budget for fixed income investments (even more complicated and expensive, how much Carbon usage to you allocate to a bond?), and before we forget, I hope there will be Carbon budget for 'Private' Equity and Hedge Funds? And last not least, don't forget the HFT firms. And what about Bank lending?
Nevermind that there is a simple solution at hand (Tax Carbon if you are hell-bent on limiting its use). Why not act according to the principle, what is good for the Consultants MUST be good for the Consumer (here in the shape of hapless end investors in Mutual and Pension Funds, Private Banks and Insurance Companies).
And while we are on the subject of Climate Hysteria, has any political or business 'leder' ever received a democratic mandate for imposing ever-more 'green' taxes, costs and regulations on the citizen/consumer/investor anywhere in the world?

Friday, 4 December 2015

Saving Capitalism?

Interesting contribution to the debate about Inequality. But misses some key aspect: there is a myriad of micro-economic and legislative decisions that need to be adjusted: Copyright Laws, Governance of Corporations, Competition Regulation etc.

Are they really stupid at the ECB?

The believe that pushing inflation up to 2 pct will really make one iota of difference to the economic well being of millions of Europeans can only be described as stupid. If anything, workers will be worse off in real terms, as will be savers. So consumption will in all likelihood be on a downward trajectory. With respect to 'structural' reforms, maybe the ECB should first look at itself: what benefit have the people of the Eurozone gained from employing thousands of overpaid jobsworths in the super expensive tower that accommodates them in Frankfurt? Does one notice any difference from when the countries had their own currencies?

PS: Just spotted Bill Gross' opinion about Fed Policy, so I am not alone with my opinion!

Sunday, 30 August 2015

Immigration aids Growth Fallacy

It is amazing that even seasoned Commentators fall for this fallacy. Economic growth has been relatively 'robust' in the UK in the past year (if you want to call growth in the low single digits that way). But to claim that this is partially due to an 'open door' immigration policy is disingenuous to say the least. Fact is that any economy will grow faster if the number of active workers increases. So the all-important measure of growth PER CAPITA is not growing by a similar amount. Sad thing is that the influential lobbies representing employers get too much of a hearing when they complain of labour 'shortages'. It is disgraceful that the overpaid bosses in large listed companies and these owned by 'Private' Equity - who dominate the discussion with easy access to gullible politicians and media - do so little to raise skill levels in order to achieve more output with a given pool of labour, i.e. by improving productivity. They prefer the easy route of importing cheap labour from countries that are at a completely different stage of economic development. But they care little about wage dumping as long as they live securely in their gated mansions or offshore tax havens.

Saturday, 22 August 2015

Working in a Neo-Feudal Corpocracy

Reports about the Work 'Culture' at Amazon puts the spotlight on one aspect that the current version of a Free Market Economy (dubbed 'Capitalism') seems to carry to its logical conclusion: in a world devoid of any moral yardstick the ego of the few controlling the profit maximising at all cost company people are just disposable inputs.
This form of Capitalism has worked surprisingly well for a long time (but so has slavery and feudalism) as the people at the helm (owners or their agents) had some sense of noblesse oblige and were also restrained by some inner moral or societal compass.
Capitalism will always have an image problem as its success seems to be reliant on a Darwinian model of markets: One side wins when the other side loses, i.e. if you want ever-rising profits you have to squeeze the people working for you. But the invisible hand does not work as Adam Smith thought. His model of the economy might work for the neighbourhood bakery. It assumes perfect competition and free entry to the market. When you and your employer clash you just walk down the street and open your own bakery.
And while this model works to some degree - nearly all businesses have competition - it only works to a degree.
As long as the 'Capitalist', the owner of a firm, calls the shots when dealing with an atomised workforce there will not be a proper balance in the business world. In the case of Amazon only a united representation of the workforce will be able to deal with actual or perceived abuses.

Thursday, 29 January 2015

Currency Union CAN work without Fiscal Union

Academics, assorted Analysts and Media Commentators regurgitate ad nauseam that Currency Union without Fiscal Union cannot work. Sorry but repeating this does not make it a truth. Admittedly a Fiscal Union would make things easier but the Euro-zone could function quite well without establishing a (technocratic) Super-Government far removed from any democratic control.
The Gold Standard - and the post-Bretton Wood system of fixed exchange rates - worked quite well without Fiscal Union. All it took was discipline on the part of the participating governments. This is what is missing - in most aspects of policy making - these days. The Currency Union is doomed if the member states do not adjust their internal economic and fiscal policies and disregard market signals.
Excessive speculation - magnified by leverage and uncontrolled capital flows - pose a risk as they turbo-charge price signals (falling sovereign bond prices in particular). This is akin to some panicky bodies in a small rowing boat. But decisive changes to policy measures should be able bring markets under control - fiscal adjustment, penal interest rates should quickly give the markets the right signal.
Do not blame lack of Fiscal Union for the problems of the Euro-zone. These have been left to accumulate in a reckless fashion over many years if not decades. Introducing Fiscal Union may douse the smoldering fire - for a while. But if there is no proper fundamental adjustment - remember the Mezzogiorno - patience in some member states that are paying high transfers will run out. In addition even bigger waves of speculation will set in when Fiscal Union looks frayed, funds will pour into the stronger member states until the pressure point is reached and the Currency Union can no longer be maintained. George Soros would relish this Mega-Tsunami if he would still be around at that time.

Thursday, 22 January 2015

Childcare Subsidy no panacea for Job Creation

We may not have the intellectual firepower of Christopher Pissarides (being neither a 'enobled', a Nobel Laureate or professor on the LSE) but that may be an advantage. He argues that paying subsidies for childcare would create jobs - one for the mother (usually) who can now enter the job market and one for the childcare worker. What this simplistic argument forgets is that another solution to the employment problem (if you accept there is one) is that the childcare worker could just take another job while the mother stays at home. Net result is the same, unless you assume that more than one child would be looked after by the childcare 'industry'. It is up to you to decide which child is better looked after. That - and the question who pays the subsidies, and at what level - is another question.