The Great Debate UK
Never make forecasts, especially about the future – wise advice, which I’m reluctant to ignore. But I will say I think the risk of a panic in the financial markets at some point in the next three or four weeks is extremely high. Wherever you look, there are icebergs on the horizon – small ones, like Greece, Portugal and Ireland, and giants, like Spain and Italy, and now most menacing of all, France.
If the opinion polls turn out to be correct, the French election will mark a turning point in the euro zone crisis. It is not just because the new president will be committed to leading the nation in the opposite direction to every other developed country, increasing government spending, reducing the pension age and the working week, raising the minimum wage by more than inflation and introducing a 75 percent tax rate, all of which are bound to threaten France’s creditworthiness which is already so low that it is paying nearly 3 percent to borrow compared to Germany’s 1.75 percent rate. More important in my view is what a Socialist victory will mean for the balance of power inside the euro zone.
The crisis has cruelly exposed the split in the euro zone between the parsimonious North and the spendthrift South, with France under President Sarkozy uneasily straddling the divide. There is a long history to this situation. Back in 1992, when the Maastricht Treaty was originally negotiated, France refused at the last moment to sign the Stability Pact until it was rechristened the Growth and Stability Pact, making the rift with Germany public to anyone who cared to pay attention and clearly pointing the way forward to the current mess. The only real surprise is that it has taken as long as twenty years to reach this point.
An election victory for Francoise Hollande will mark the end of France’s balancing act. It will have given up its increasingly desperate effort to keep abreast of Germany at the heart of Europe, and definitively signed up to ClubMed, a shift which will be fatally destabilising for the euro zone as a whole. Quite simply, the Northern bloc of Germany, Netherlands, Finland and Austria will be outgunned by opposition from the other thirteen member countries.
The words ‘tech bubble’ have been bandied about since the Apple share price really started to climb at the end of 2011. Earlier this month, its market capitalisation hit $600 billion dollars, only the second company to see its market cap get that high. So it appears like everyone wants a bite out of the proverbial apple.
There is a dangerous precedent for markets’ believing that tech stocks can only go in one direction. The dotcom bubble back in 2000 caused havoc in the equity markets and also contributed to the Federal Reserve keeping interest rates incredibly low, one of the contributing factors to the housing crisis in 2007.
It was bound to happen. You could see it waddling into view from a long way off. We are now being told by the medics that we should seriously consider a tax on fatty foods, in order to combat the scourge of obesity. How appropriate that, according to The Independent, the Deputy PM is planning to recruit 65,000 “State Nannies”!
One wonders how the new tax will be computed. Will it be a higher rate of tax on higher fat-content foods? Will chicken breast be taxed at a lower rate than chicken legs? Will omega-3 fats be taxed at a lower rate than omega-6? Either way, we can look forward to a tabloid feeding frenzy which will make pastygate look like a Cornish picnic.
from The Great Debate:
Bogota, Colombia – Although the phone rings incessantly, Carlos Moreno is not distracted. He continues to talk, not just about his life as a slightly graying 78-year-old pastor but also about how he became what some consider to be the world’s first microfinance recipient. It wasn’t as an entrepreneur.
“My life is dedicated to the Lord,” he says. Although Carlos had launched a tea and spice business in the early 1970s, he hadn’t aspired to be an entrepreneur. That is the case with most microfinance recipients. Yet the movement that extends small, uncollateralized loans to the poor to start businesses has marketed itself as being about entrepreneurship. That is a mistake. While microfinance may have helped Carlos start a business, it did not make him an entrepreneur.
The Law of Diminishing Returns states that a continuing push towards a given goal tends to decline in effectiveness after a certain amount of effort has been expended. If this weren't the case, Usain Bolt would be able to run the mile in less than 2-1/2 minutes.
From an economic standpoint, this law now seems to be fully in force in Greece. The latest jobs figures from the twice-bailed out euro zone country paint a bleak numerical picture of the impact of unrelenting austerity in ordinary Greeks, regardless of whether it was self-inflicted or not. To wit:
from The Great Debate:
The United Nations estimates that since Syria’s uprising began over a year ago, more than 9,000 Syrians have been killed. A recent assessment from Council on Foreign Relations Senior Fellow Elliot Abrams puts the total number of Syrian refugees at almost half a million. Worse, it appears that Syrian President Bashar al-Assad’s forces are continuing to torture, imprison and kill Syrian civilians. It also seems that the recent peace plan promulgated by U.N.-Arab League peace envoy Kofi Annan, which Assad’s government agreed to, is dead. According to Turkey’s prime minister, Assad “is not withdrawing troops, but he is duping the international community.”
The conventional wisdom holds that the international community is out of alternatives, short of another potentially dangerous military intervention or the risky prospect of arming Syria’s rebels. Syria’s government has already thumbed its nose at sanctions and condemnations from the Arab League, Gulf Cooperation Council, European Union and various U.N. organs and individual countries. The Security Council, thanks to the vetoes of Russia and China, is also constrained to issuing awkward joint statements rather than passing binding resolutions.
There’s a 250,000 pound prize for the best idea on how to break up the euro zone, but how much would you pay to see the euro zone saved?
There is no denying that the euro zone is in a mess right now, but there are some steps that could help ease the crisis. Essentially the markets hate to be 1) misled and 2) confused. The European authorities have consistently sent mixed messages and reneged on their promises. For example, they said there would be no haircut on Greek debt then when it became obvious Greece had to re-negotiate its massive debt pile the authorities said Greece would be the exception. Now the markets believe there is a good chance that Portugal will have to follow suit.
Like many of the current government’s proposals, the announcement that the Education Secretary is planning to hand over control of ‘A’ Levels to the universities leaves me mystified. The only thing to be said with any confidence is that he is doing the same as each of his predecessors over the last half century: only fix the parts that ain’t broke. Be sure not to touch the worst bits.
The ‘A’ level system has two awful features which explain why our youngsters today are so poorly educated, whether judged in terms of their ability to compete in the global jobs market – it is global, wherever you actually go to work – or whether judged simply in terms of their levels of literacy, numeracy and culture in the broadest sense.
from The Great Debate:
If it were a novel, people would criticize the plot for being too far-fetched – thriving colonies disappear overnight without leaving a trace, the bodies of the victims are never found. Only in this case, it’s not fiction: It's what's happening to fully a third of commercial beehives, over a million colonies every year. Seemingly healthy communities fly off never to return. The queen bee and mother of the hive is abandoned to starve and die.
Thousands of scientific sleuths have been on this case for the last 15 years trying to determine why our honey bees are disappearing in such alarming numbers. "This is the biggest general threat to our food supply," according to Kevin Hackett, the national program leader for the U.S. Department of Agriculture's bee and pollination program.
By Adam Matthews, Secretary-General of Global Legislators Organisation (GLOBE). The opinions expressed are his own.
One of the great advances in the past century in economics is the understanding that there is such a thing as human, social and intellectual capital. We have come to realise that a well functioning judicial system and an excellent education system are as much a part of the wealth of a nation as its roads, ports and factories. The irony is that economists and economies have not caught up with the most important capital of all — natural capital – upon which we all depend.