8.12.10

Elegio de la lectura y la ficción

"Creíamos que, con el desplome de los imperios totalitarios, la convivencia, la paz, el pluralismo, los derechos humanos, se impondrían y el mundo dejaría atrás los holocaustos, genocidios, invasiones y guerras de exterminio. Nada de eso ha ocurrido. Nuevas formas de barbarie proliferan atizadas por el fanatismo y, con la multiplicación de armas de destrucción masiva, no se puede excluir que cualquier grupúsculo de enloquecidos redentores provoque un día un cataclismo nuclear. Hay que salirles al paso, enfrentarlos y derrotarlos. No son muchos, aunque el estruendo de sus crímenes retumbe por todo el planeta y nos abrumen de horror las pesadillas que provocan. No debemos dejarnos intimidar por quienes quisieran arrebatarnos la libertad que hemos ido conquistando en la larga hazaña de la civilización. Defendamos la democracia liberal, que, con todas sus limitaciones, sigue significando el pluralismo político, la convivencia, la tolerancia, los derechos humanos, el respeto a la crítica, la legalidad, las elecciones libres, la alternancia en el poder, todo aquello que nos ha ido sacando de la vida feral y acercándonos –aunque nunca llegaremos a alcanzarla– a la hermosa y perfecta vida que finge la literatura, aquella que sólo inventándola, escribiéndola y leyéndola podemos merecer. Enfrentándonos a los fanáticos homicidas defendemos nuestro derecho a soñar y a hacer nuestros sueños realidad."

Elegio de la lectura y la ficción

25.10.10

¿Por qué los países latinoamericanos deberían preocuparse por el ingreso de capitales y la apreciación de sus monedas?


"Los mayores ingresos de capital pesan sustancialmente en los sectores exportadores y de sustitución de importaciones, y pueden causar daños irreparables si la apreciación es profunda y prolongada. […]México es un claro ejemplo de este doble efecto. En los últimos 18 meses, el peso se ha apreciado 6% contra el renminbi, erosionando la capacidad de México de competir con las exportaciones chinas a Estados Unidos, por lejos el principal mercado exportador de México."

"Pero esta no es la única consecuencia de la enfermedad holandesa 'financiera'. La política de expansión cuantitativa de la Fed, al exacerbar el tsunami de dólares a la región, podría alimentar peligrosas burbujas en los mercados emergentes. Al inflar artificialmente los activos y la riqueza en los países receptores […]"

¿Qué deberían hacer las economías latinoamericanas?

"[…]intervención en el mercado cambiario, imposición de controles de capital, u otras políticas macroprudenciales orientadas a suavizar contracíclicamente los vaivenes del tipo de cambio."




20.10.10

Drug Trafficking, Violence, and the State in Mexico

"Headlines and television commentaries about Mexico becoming a failed state as a result of drug-related violence have become a dime a dozen. Terms such as 'criminal insurgency', 'narco-terrorism', and narco-insurgency are all used to describe the widespread killings."

But Phil Williams argues:

"[…] Mexico—which has a vibrant middle-class; a surprisingly robust economy; and a president willing to confront the drug trafficking organizations, root 4 out drug-related corruption, and reform key institutions and agencies such as the police and judiciary—is a long way from becoming a failed state. Mexico is a functioning and resilient state. It is nothing like Nigeria—which has long teetered on the brink of collapse but not toppled over—let alone Somalia. The problems in Mexico are extremely serious, but we do nothing to help by trotting out over-simplistic and inaccurate characterizations rather than attempting a serious diagnosis of the challenges Mexico faces."

11.10.10

Searching for a growth engine

According to Rodrik:

"In the early days of the global financial crisis, there was some optimism that developing countries would avoid the downturn that advanced industrial countries experienced. […] But these hopes were dashed as international lending dried up and trade collapsed."

"[…] Sustained growth requires a growth strategy, and most developing countries do not yet have one that would put them irrevocably on the path of economic convergence."

Prize in Economics 2010

The Economics Prize Committee

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 was awarded jointly to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides "for their analysis of markets with search frictions".

All Prizes in Economics Sciences

20.9.10

"A trough occurred in June 2009"

Source: WSJ.com

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

17.9.10

Millennium Development Goals

[W]hen world leaders met at the Millennium Summit and pledged to work together to free humanity from the "abject and dehumanizing conditions of extreme poverty," and to "make the right to development a reality for everyone". These pledges include commitments to improve access to education, health care, and clean water for the world's poorest people; abolish slums; reverse environmental degradation; conquer gender inequality; and cure HIV/AIDS.


It's an ambitious list, but its capstone is Goal 8, which calls for a "global partnership for development". This includes four specific targets: "an open, rule-based, predictable, non-discriminatory trading and financial system"; special attention to the needs of least-developed countries; help for landlocked developing countries and small island states; and national and international measures to deal with developing countries' debt problems.

27.8.10

Beast - Bukowski

my beast comes in the afternoon
he gnaws at my gut
he paws my head
he growls
spits out part of me

The likelihood of a double-dip

16.8.10

¿No hacer nada y dejar que los traficantes impongan su ley?

México: ¿Pax mafiosa, imperio de la ley o cambio de paradigma? por Luis Astorga

"Dos sopas: legalizar o colombianizar" por Denise Dresser

"Greed is good"

Gordon Gekko Reborn by Nouriel Roubini

"[G]reed cannot be controlled by any appeal to morality and values. Greed has to be controlled by fear of loss, which derives from knowledge that the reckless institutions and agents will not be bailed out."

9.8.10

The Myth of Authoritarian Growth

"The relationship between a nation's politics and its economic prospects is one of the most fundamental – and most studied – subjects in all of social science. Which is better for economic growth – a strong guiding hand that is free from the pressure of political competition, or a plurality of competing interests that fosters openness to new ideas and new political players?"

26.7.10

The Recession Dating Game

The point at which the economy stops growing is called the "peak", and the point at which it stops contracting, the "trough". The period from the point at which the economy starts to grow again until the point at which it reaches the previous peak is called the "recovery". Thereafter, growth is labeled an "expansion".

Michael Boskin

20.7.10

McDonalds-ization of cannabis

"The Oakland city council is scheduled to vote Tuesday on whether to set up and license four major marijuana factories in the financially strapped California city. [...] The factories would also produce marijuana for medical purposes, cannabis body oil, and baked goods"

Source: Slate

19.7.10

Double Dip? Seven Reasons Why Not

Milton Ezrati offers seven reasons why the Double-Dip scenario is unlikely.

1. The Consumer Seems Firm Enough
2. Housing Data Are Misleading on Two Sides
3. Business Spending and Exports Are Awfully Strong for a Dip
4. Overall Production Levels Look Fairly Good, Too
5. Employment Does Not Look Threatening, Either
6. Financial Markets Are Healthier Than the Headlines Imply
7. China Continues to Grow

Nouriel Roubini recommended: "Fasten your seat belts for the very bumpy ride"

"as the optimists' delusional hopes for a rapid V-shaped recovery evaporate, the advanced world will be at best in a long U-shaped recovery, which in some cases – the eurozone and Japan – may be long enough to stretch into an L-shaped near-depression. Avoiding double dip recession will be difficult."
"[R]ecovery in emerging markets - the great hope for the global economy - will suffer, because no country is an island economically. Indeed, growth in many emerging-markets - starting with China - is highly dependent on retrenching advanced economies."

15.7.10

Confidence Bugaboo

In his Communist Manifesto, Marx went on to say that it is "high time that Communists should openly, in the face of the whole world, publish their views, their aims, their tendencies, and meet this nursery tale of the specter of Communism with a Manifesto of the party itself." Similarly, it would be nice if markets would clarify what they mean by "confidence" so that we would all know what we are really dealing with.

Rodrik

21.6.10

Carezco de Recuerdos

En este vínculo se pueden consultar varias referencias publicadas en La Jornada del 20 de junio de 2010 sobre la partida de Don Carlos Monsiváis. Pérez Gay - Payán - JEP - Pitol - Bellinghaussen

15.6.10

5% or 4% or ??

"Whether the world economy grows now at 4% or 5% matters, but it does not much affect our medium-term prospects. The US financial sector received an unconditional bailout – and is not now facing any kind of meaningful re-regulation. We are setting ourselves up, without question, for another boom based on excessive and reckless risk-taking at the heart of the world’s financial system. This can end only one way: badly."

Creating the Next Crisis by Simon Johnson

How to Avoid a Double-Dip Global Recession

So what should policymakers do? by Nouriel

Europe

The Future of Europe by Joseph Nye

Europe, the Second Superpower by Andrew Moravcsik

9.6.10

Who Lost Europe?

Who Lost Europe? - Dani Rodrick

Malos gobiernos y presidentes anodinos

En América Economía Luis Rubio señala:

"Todo mundo sabe que se requieren cambios fundamentales para poder avanzar. En términos técnicos, no es difícil diagnosticar los males y desplegar las opciones que enfrentamos. Pero nuestro problema no es técnico: matices más, matices menos, las alternativas de solución se conocen. Nuestro problema es cómo romper inercias para salir del atolladero. Un liderazgo efectivo puede hacer una enorme diferencia."

"El mexicano quiere un líder que le confiera sensación de fortaleza, confianza y seguridad en sí mismo, un líder que trascienda el discurso y sus filias y fobias partidistas para hacer posible comenzar a caminar. El presidente Calderón ya sabe que no podrá hacer lo que ningún presidente puede hacer; quizá por eso podría hacer lo que todos deberían hacer. Galbraith decía que la característica común de los grandes líderes es su disposición a enfrentar de manera inequívoca las fuentes de ansiedad de su gente. Este sería un reto digno de afrontar para nuestro presidente."

Fuente: América Economía

17.5.10

Now comes the rescue of the rescuers

Our global debt mechanics are looking increasingly like a Ponzi scheme

"Crises are the inevitable result of a build-up of macroeconomic, financial, and policy risks and vulnerabilities: assets bubbles, excessive risk-taking and leverage, credit booms, loose money, lack of proper supervision and regulation of the financial system, greed, and risky investments by banks and other financial institutions."

"[Additionally] a practical definition of a financial crisis is an event that forces policy officials to spend a long weekend trying desperately to announce a new bailout package in order to avoid national and global panic before the markets open on Monday. In the past years, such weekend all-nighters dealt with the needed bailouts of private firms – Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, AIG, bank rescues, etc."
According to Eichengreen:

23.4.10

Palabras de JEP, Premio Cervantes 2009


"Para volver al plano de la realidad irreal o de la irrealidad real en que los personajes del Quijote pueden ser al mismo tiempo lectores del Quijote, me gustaría que el Premio Cervantes hubiera sido para Cervantes. Cómo hubiera aliviado sus últimos años el recibirlo. Se sabe que el inmenso éxito de su libro en poco o nada remedió su penuria."

20.4.10

JEP


La palabra greed gruñe.
La palabra codicia tiene garras, tentáculos.
La palabra ambición
va suelta por el mundo con las fauces abiertas.


14.4.10

"If you want to succed, rise your error rate"


In fact, industrial policy never went out of fashion. Economists enamored of the neo-liberal Washington Consensus may have written it off, but successful economies have always relied on government policies that promote growth by accelerating structural transformation.

13.4.10

Economic Policy: Lessons from History

At the 43rd Annual Alexander Hamilton Awards Dinner, where was honoring with the Hamilton Award, Ben Bernanke drew four relevant lessons from the financial collapse of the 1930s:
1) Economic prosperity depends on financial stability

2) Policymakers must respond forcefully, creatively, and decisively to severe financial crises - e.g. SCAP

3) International crises require and international response

4) History is never perfect guide – "History does not repeat itself, but it can rhyme"

12.4.10

The Field of Economic History

En El Placer de Disentir encontré la postura de Rogoff sobre "The Field of Economic History"





Sobre el mismo tema hace unos meses DeLong escribió en Project-Syndicate "The Anti-History Boys"

"If you asked a modern economic historian like me why the world is currently in the grips of a financial crisis and a deep economic downturn, I would tell you that this is the latest episode in a long history of similar bubbles, crashes, crises, and recessions that date back at least to the canal-building bubble of the early 1820's, the 1825-1826 failure of Pole, Thornton & Co, and the subsequent first industrial recession in Britain. We have seen this process at work in many other historical episodes as well – in 1870, 1890, 1929, and 2000."

"But if you ask the same question of a modern macroeconomist – for example, the extremely bright Narayana Kocherlakota of the University of Minnesota – you will find that he says that he does not know, and that macroeconomic models attribute economic downturns to various causes. Most, he points out, “rely on some form of large quarterly movements in the technological frontier. Some have collective shocks to the marginal utility of leisure. Other models have large quarterly shocks to the depreciation rate in the capital stock (in order to generate high asset price volatilities)..."

8.4.10

False Alarms

Most flu and public-health experts consider the WHO to have been overly alarmist. The decision in April 2009 to raise the pandemic flu threat to the penultimate level, Phase 5 (“Pandemic Imminent”), already raced far ahead of the accumulated data, so the Phase 6 declaration in June revealed the organization’s paradigm to be fundamentally flawed. A warning system based solely on how widely a virus has spread, but that does not consider the nature and severity of the illness it causes, would classify as “pandemics” not only seasonal flu, but also the frequent but largely inconsequential outbreaks of virus-caused colds and gastroenteritis, for example. (The WHO has never explained why these obvious examples do not meet their criteria.)

No se debe ignorar ni exagerar el problema

México mirándose el ombligo por Joaquín Villalobos

5.4.10

Defining Debt Thresholds

Reinhart & Rogoff (2010), Growth in a Time of Debt, found:

First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies.

Second, emerging markets face lower thresholds for external debt (public and private)—which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half.

Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases.

29.3.10

Ni con un millardo de dólares

Zaid señala "[Las] oportunidades [del crimen organizado] no dependen de tal o cual producto, sino de que esté prohibido [servicios de protección, secuestros, trata de personas, prostitución infantil, contrabando, falsificaciones, agiotismo]", agrega:

"Que los ciudadanos engorden, fumen, se emborrachen o se droguen no es bueno para ellos ni para la sociedad, pero no es algo que amerite la intervención del ejército. La salud debe ser un objetivo personal y social, no un objetivo militar."

"El Estado -dijo Max Weber- es la institución que mantiene el monopolio de la violencia legítima en un territorio. Un Estado que renuncia a monopolizar la violencia legítima deja de serlo. Un Estado que se rinde a la invasión de fuerzas extranjeras, o a empresas que se imponen por las armas, desaparece. El Estado puede prohibir o no la venta de bebidas alcohólicas y seguir siendo Estado, pero no puede legitimar la violencia ilegítima sin autodestruirse."

23.3.10

Entelequia

En "Ciudadanos demasiado reales", pieza publicada en Nexos, Escalante señala al ciudadano como "[...] elaboración imaginaria con atributos quiméricos":

"[...] Acaso ganaríamos algo, para empezar, si dejásemos de pensar que lo que no nos gusta es un lastre del pasado: los caciques del XIX no eran un residuo de la época virreinal, los caciques y clientelas del XX no fueron restos del XIX ni los de hoy son tan sólo astillas del régimen priista; la designación —imprecisa, emotiva— tiende a hacer borrosas las diferencias, tiende a igualar a Juan Álvarez, Gordiano Guzmán, Saturnino Cedillo y Napoleón Gómez Urrutia, que no son ni remotamente parecidos. Los caciques y sus clientelas son absolutamente modernos: por eso son eficaces. Son las más de las veces producto del proceso mismo de "modernización". Y cambian conforme cambian las leyes, la estructura productiva, el orden político. La capacidad de movilización, los recursos de poder e influencia de René Bejarano o Elba Esther Gordillo no tienen nada que ver con los del general Tornel o Manuel Lozada, o los de Luis N. Morones. Por eso no es posible erradicarlos, ni deshacerse de ellos como de un peso muerto."

Who should lead the IMF?

Writing for Project Syndicate Eichengreen gives an answer:

"Now, however, the rumor mill is heating up with gossip that the Fund’s managing director, Dominique Strauss-Kahn, will leave in order to oppose Nikolas Sarkozy in the 2012 French presidential elections. Sarkozy’s popularity is hitting new lows, and Strauss-Kahn’s friends say that he has never made a secret of his political ambitions."

"A lame-duck managing director would hamstring the Fund. Already there is a sense that the IMF is reluctant to tell Europe more forcefully how to handle its problem with Greece because the managing director must be careful to avoid meddling in Europe’s internal politics."

"On top of this now comes the interesting news that the IMF has appointed Zhu Min, previously a deputy governor of the People’s Bank of China, as special adviser to Strauss-Kahn. Zhu will thus be part of the core management team."

18.3.10

¿Oficio?

Comparto un par de artículos que Jean Meyer publicó en El Universal sobre "¿El oficio más antiguo del mundo?"
De acuerdo con Meyer:

"Para empezar hay que tomar conciencia de la dimensión del fenómeno. El 18 de octubre de 2009 el diario Crónica publicó la entrevista de una de las 40 niñas de entre 8 y 12 años de edad, rescatadas en un burdel de Coatzacoalcos. ¿Cuántas niñas sufrirán este calvario en nuestro país? No es noticia. ¿Cómo es posible que no sea noticia que cien mil niñas son secuestradas cada año en China para instalarlas en burdeles? (El País, 1° de noviembre 2009 y en Amazon.com La mitad del cielo: cómo cambiar opresión en oportunidad para todas las mujeres del mundo) Nicholas Kristof y Sheryl WuDum cuentan en este libro la esclavitud de aquellas mujeres y no sólo en China, sino en todo el mundo. Tampoco es noticia."

16.3.10

States of Risk

According to Nouriel Roubini:

The Great Recession of 2008-2009 was triggered by excessive debt accumulation and leverage on the part of households, financial institutions, and even the corporate sector in many advanced economies. While there is much talk about de-leveraging as the crisis wanes, the reality is that private-sector debt ratios have stabilized at very high levels.

By contrast, as a consequence of fiscal stimulus and socialization of part of the private sector's losses, there is now a massive re-leveraging of the public sector. Deficits in excess of 10% of GDP can be found in many advanced economies, and debt-to-GDP ratios are expected to rise sharply – in some cases doubling in the next few years.

As Carmen Reinhart and Ken Rogoff's new book This Time is Different demonstrates, such balance-sheet crises have historically led to economic recoveries that are slow, anemic, and below-trend for many years. Sovereign-debt problems are another strong possibility, given the massive re-leveraging of the public sector.

8.3.10

Huele a podrido + "Pritramposaurios"

De acuerdo con Denise Dresser:

"[L]levamos 10 años […] de pactos PRI-PAN negociados de espaldas a la opinión pública que le han permitido a los panistas gobernar al país, pero sin poder transformarlo verdaderamente. Al ir de la mano con los artífices del pasado, Vicente Fox y Felipe Calderón han promovido su resurrección. Al decirle al PRI que cualquier cosa es negociable, el PAN ha acabado cediéndolo todo. Al sucumbir -una y otra vez- a la presión de Pritramposaurios como Ulises Ruiz, el PAN ha acabado acorralado por ellos. Como botón de muestra basta lo que Gómez Mont estuvo dispuesto a negociar sin ruborizarse siquiera: la rendición adelantada de su partido en la siguiente temporada electoral. Ahora, por fin, parece que el pacto detrás de la Pax Prianista se ha roto y enhorabuena. Las alianzas PAN-PRD sugieren que Felipe Calderón no va simplemente a regresarle la banda presidencial al PRI, o entregar la plaza sin dar la pelea por su conservación."

DeLong vs. Barro

The Stimulus Evidence One Year On – Robert Barro

Is Fiscal Stimulus Pointless? – DeLong

Eugene Fama

My life in Finance by Eugene Fama

Random Walks in Stock Market prices

4.3.10

Hay empresas que duran siglos

Los negocios son parte de la vida nacional y de la construcción del país. Lo supo ver el historiador Luis González y González en un pequeño gran libro (La ronda de las generaciones) donde los empresarios figuran como parte de las generaciones influyentes en México.

Sería bueno que los empresarios tuvieran y difundieran la conciencia histórica de que el país no empezó ayer, ni acabará mañana. Que sigue en construcción, más allá de los entusiasmos y decepciones coyunturales. Y que el horizonte constructivo es de siglos, no de sexenios.

2.3.10

MX BaPo 2009

La semana pasada se dio a conocer el nivel de la balanza de pagos de 2009. De acuerdo con Banxico:

"Durante 2009, la cuenta corriente de la balanza de pagos registró un déficit de 5,238 millones de dólares, monto equivalente a 0.6 por ciento del PIB. Dicho saldo se derivó de la combinación de déficit en las balanzas comercial (4,678 millones de dólares), de servicios no factoriales (8,025 millones) y de servicios factoriales (14,052 millones); y de superávit en la cuenta de transferencias (21,517 millones)."

Balance de Riesgos

Dado el actual entorno de deterioro en las primas de riesgo soberano de economías emergentes (principalmente Grecia, España, Portugal, Italia, Irlanda) es importante tener presente que una reconfiguración del apetito al riesgo global como la ocurrida en la segunda mitad de 2008 generaría fuertes presiones en el financiamiento de la cuenta corriente y presiones en la paridad cambiaria. De acuerdo con Banxico en 2009 la inversión extranjera de cartera pasó de US$ 2.5 bn a US$ 7.7 bn en relación al año previo, i.e. si en los próximos meses se cristaliza un sudden stop la incertidumbre en el mercado cambiario se verá muy afectada.

Por otra parte en caso de concretarse un escenario de recesión de tipo "W". La caída en la actividad económica global conduciría a una contracción en el precio del petróleo y por consecuencia más presiones sobre la cuenta corriente de México.

Si los escenarios anteriores se combinan ¿En que nivel se ubicará el peso mexicano? ¿Podrán cubrirse las obligaciones denominadas en dólares que tienen los diversos actores de la economía mexicana? ¿Cómo atraer más IED?

En el siguiente hipervínculo encontrarán un análisis sobre los riesgos en la balanza de pagos.

¿Por qué a Banxico le urge "hincharse" de reservas? - JMM

24.2.10

Greece

Writing for PS Soros suggested:

"The most effective solution would be to issue jointly and separately guaranteed eurobonds to refinance, say, 75% of the maturing debt, as long as Greece meets its agreed-upon targets, leaving Greece to finance the rest of its needs as best it can. This would significantly reduce the cost of financing, and it would be the equivalent of the IMF disbursing its loans in tranches as long as conditions are met."

"But this is politically impossible at present, because Germany is adamantly opposed to serving as the deep pocket for its profligate partners. Therefore, makeshift arrangements will have to be found."

Forward

"It is clear what is needed: more intrusive monitoring and institutional arrangements for conditional assistance. Moreover, a well-organized eurobond market would be desirable. The question is whether the political will to take these steps can be generated."

Who's Greg? – It's a small world after all

From Wellesley and Weston:

"The world of economics is quite small, smaller than the town of Wellesley," says Mankiw. Mankiw's career trajectory provides a glimpse at the interconnectedness of the world of economics. "I was lucky to study and conduct research with Harvey Rosen, a fantastic professor of microeconomics at Princeton," Mankiw says. After receiving a PhD from MIT, Mankiw had several job offers: going back to Princeton to work with Rosen; following Larry Summers, whom he had worked with at MIT, to Harvard; or working with Stanford Business School's rising star: Ben Bernanke. In the end, he went to Harvard. Several years later, when Mankiw had the opportunity to head the Council of Economic Advisors for President George W. Bush, Mankiw encouraged President Bush to hire Rosen as his colleague. Two years later, Mankiw returned to the classrooms at Harvard to work with then-Harvard President Larry Summers, whose uncles are Nobel Prize winning economists, Paul Samuelson and Kenneth Arrow. Today Summers is President Obama's top economic advisor, serving as Director of the National Economic Council, and Bernanke is the Chairman of the Federal Reserve. It's a small, small world.

An interview with Greg Mankiw

16.2.10

Why Mexico is the missing Bric?


Gideon Rachman for FT said:

"[Mexico's] Economic underperformance has been matched by diplomatic underperformance. As a member of the newly influential G20 group of leading economies, the Mexicans should be well placed. Instead, Brazil has been anointed as the unofficial leader of Latin America. Felipe Calderón, Mexico's president, is serious and hard-working, but he lacks the charisma and high profile of Brazil's President Luiz Inácio Lula da Silva. Brazil's voice matters a lot in world trade talks and in global climate change negotiations, while Mexico’s views barely feature."

15.2.10

¡It was't ready!

In this post I quoted Krugman, Eichengreen and Roubini in order to have a Euro-zone’s Big Picture.

Krugman said that the troubles came from the adoption of the euro before Spain and Greece were ready:

Now what? A breakup of the euro is very nearly unthinkable... As Berkeley's Barry Eichengreen puts it, an attempt to reintroduce a national currency would trigger "the mother of all financial crises". So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states.

But that's not going to happen anytime soon. What we’ll probably see over the next few years is a painful process of muddling through: bailouts accompanied by demands for savage austerity, all against a background of very high unemployment, perpetuated by the grinding deflation I already mentioned.

It’s an ugly picture. But it’s important to understand the nature of Europe's fatal flaw. Yes, some governments were irresponsible; but the fundamental problem was hubris, the arrogant belief that Europe could make a single currency work despite strong reasons to believe that it wasn’t ready.

Eichengreen emphasized the failure to create a "proper emergency financing mechanism"

[…] reating the euro was not a mistake, but it could still be a mistake in the making. The Greek crisis shows that Europe is still only halfway toward creating a viable monetary union. If it stays put, the next crisis will make this one look like a walk in the park.

Completing its monetary union requires Europe to create a proper emergency financing mechanism. Currently, other member states can provide assistance to Greece only by bending the rules, which prevent them from lending except in response to natural disasters or circumstances beyond a country's control. This heightens uncertainty. When Europe’s leaders do help, it makes the public and markets think that they are being dishonest. If it is the Lisbon Treaty that creates these problems, then the Lisbon Treaty should be changed.

Roubini requested a "partial bailout by the EU and the ECB […] in order to avoid the risk of contagion to the rest of the euro zone"

A shadow or actual International Monetary Fund program would vastly enhance the credibility of a policy of fiscal retrenchment and structural reforms. Under the former, the European Commission would impose fiscal and structural conditionality on Greece, while the EU and/or ECB would provide financing, which would be absolutely necessary, because announcing even the best conceived reform program would not be sufficient to restore lost policy credibility. Markets will remain skeptical, especially if implementation leads to street demonstrations, riots, strikes, and parliamentary foot-dragging. Until credibility is re-established, the risk of a speculative attack on public debt – reflected in the current rise in credit default swap spreads – would linger, given the ongoing budget deficit and the need to roll over maturing debt.

Since the European Union has no history of imposing conditionality, and ECB financing could be perceived as a form of bailout, a formal IMF program would be the better approach. The most successful programs undertaken in the presence of a risk of a fiscal and/or external debt financing crisis were those – as in Mexico, Turkey, and Brazil – where a large amount of liquidity/financing support by the IMF beefed up an increasingly credible commitment to adjustment and reform.

Sovereign spreads are already pricing the risk of a domino effect from Greece to Spain, Portugal, and other euro-zone members. The EU and the ECB are worried about the moral hazard of any "bailout". But that is precisely why a credible IMF program that ties financial support to the progressive achievement of fiscal and structural reform goals is the right way to teach Greece and the other PIIGS how to fly.

Ciudad Juárez

Juárez necesita Justos que reduzcan La Lista de Agravios (Dresser, "Sí, pedir perdón")
Parafraseando a Borges se necesita:

Un hombre que cultiva un jardín, como quería Voltaire.
El que agradece que en la tierra haya música.
El que descubre con placer una etimología.
Dos empleados que en un café del Sur juegan un silencioso ajedrez.
El ceramista que premedita un color y una forma.
Un tipógrafo que compone bien esta página, que tal vez no le agrada.
Una mujer y un hombre que leen los tercetos finales de cierto canto.
El que acaricia a un animal dormido.
El que justifica o quiere justificar un mal que le han hecho.
El que agradece que en la tierra haya Stevenson.
El que prefiere que los otros tengan razón.
Esas personas, que se ignoran, están salvando el mundo.

(Borges, "Los Justos")

12.2.10

Entre 12 de Diciembre y Ahuatenco

Se les invita a visitar y comentar el trabajo Entre 12 de Diciembre y Ahuatenco
De acuerdo con el autor:
"[...] el pensamiento colectivo de los habitantes nativos se perfila como un desconcierto ante una comunidad que se moderniza rápidamente pero que acarrea consigo mayor contaminación, desplazamientos, inseguridad, desigualdad, deficiencias en infraestructura y caos."

"Entre 12 de diciembre y Ahuatenco reúne parte de esta crónica gráfica, en la que pretendo dar cuenta de las transformaciones y mutaciones que presencio y vivo cotidianamente en el paisaje urbano de mi comunidad. Este trabajo busca ofrecer una lectura del espacio urbano de Cuajimalpa y de sus actores, así como de la manera en que los habitantes-usuarios perciben, habitan, conviven y se apropian de su espacio.

11.2.10

Three Conclusions and the Past 12-months


Accordingly with Bill Gross based on Reinhart & Rogoff This Time is Different:

"[…] Banking crises are followed by deleveraging of the private sector accompanied by a substitution and escalation of government debt, which in turn slows economic growth and lowers returns on investment and financial assets". [See the Chart]

"What then is an investor to do? If, instead of econometric models founded on the past 30–40 years, an analysis must depend on centuries-old examples of deleveraging economies in the aftermath of a financial crisis, how does one select and then time an investment theme that can be expected to generate outperformance, or what professionals label “alpha?” Carefully and cautiously with regard to timing, I suppose, but rather aggressively in the selection process under the assumption that it’s never “different this time” and that history repeats as well as rhymes. Reinhart and Rogoff’s book, if anything, points to the inescapable conclusion that human nature is the one defining constant in history and that the cycles of greed, fear and their economic consequences paint an indelible landscape for investors to observe. If so, then investors should focus on the following 30,000-foot observations in the selection of global assets."

Last year it was banks; this year it is countries

"Three factors will determine whether such fears are justified [Optimism about a "V"-shaped recovery is being replaced with pessimism about a double-dip recession]. The first is the strength of the recovery—whether it is self-sustaining, or still propped up by government stimulus. The second is the scale of the sovereign-debt problems—whether Greece is a basket-case all of its own, or investors lose confidence in other heavily indebted governments. The third is the deftness with which the world's central bankers and finance ministers design and co-ordinate the withdrawal of policy stimulus."

New dangers for the world economy

10.2.10

Risky, Costly and Complicated

Eichengreen listed the risks for countries tempted to abandon the Euro

"[…] The temptation to exit the euro area remained, the technical barriers to exit would be almost impossible to surmount. It would be straightforward for a parliament or congress to pass a law mandating that the state and other employers would henceforth pay workers and pensioners in the new national currency. But with wages and other incomes redenominated into that national currency, it would become necessary to redenominate the mortgages and credit card debts of residents into the national currency as well. Currency depreciation would otherwise have adverse balance sheet effects for households, leading to financial distress and bankruptcies."

American PIGS

Accordingly with Barry Ritholtz:

While all the investing world seems to be utterly fixated on the outcome of Greece’s solvency woes, perhaps we need to step back and put this into perspective.

Portugal, Ireland, Italy Greece and Spain are in varied degrees of difficulty; but how significant are the PIIGS’ debts to the world’s economy? (If they require a workout, perhaps they can what we do. Give them lower rates and an extended term and/or a cramdown to their lenders).

In contrast, consider the distressed United States: How do our own economic “pigs” measure up? In terms of economic importance relative to the world, aren’t the bigger US States that are in deep distress more important (GDP sizewise)?

9.2.10

Ninguna recaudación es suficiente para el gasto en tonterías

Zaid señala:
"Ninguna recaudación es suficiente para el gasto en tonterías. De 1971 a 1978, la carga fiscal aumentó de 14.45% del PIB a 19.5%. Pero "No obstante el incremento extraordinario de carga en un periodo relativamente corto, los ingresos ordinarios siguen siendo insuficientes para financiar adecuadamente el gasto público" (Francisco Gil Díaz en el coloquio Panorama y perspectivas de la economía mexicana, El Colegio de México, 1980, pp. 583 y 597)."

"Si la carga fiscal en 1978 fue de 19.5% del PIB, ¿por qué bajó a un promedio del 10% en 1983-2006 (Tercer informe)? ¿Una economía estancada debe generar la misma recaudación que la de 1978, cuando el PIB creció al 7% (INEGI, Estadísticas históricas)? En la crisis de 1995, la recaudación bajó de golpe 2% del PIB, sin que bajaran las tasas impositivas, por una simple razón: la gente ganó menos. Y ¿quiénes son los responsables del estancamiento que reduce los ingresos?"

"¿Qué significa "adecuadamente"? ¿Subir la carga al 30%, al 40%? ¿Con base en qué? Según el mismo Gil Díaz (entrevistado por Milenio Semanal, 19 de febrero 2001), "La carga fiscal del país, comparada internacionalmente, es más o menos igual a la media de países comparables de América Latina". Pero ya se sabe que las autoridades fiscales gozan de impunidad declarativa: al día siguiente pueden declarar lo contrario"

8.2.10

"Las candidaturas ciudadanas no son una panacea […] y tampoco rayan zanahorias"

Denise Dresser señala:

"Es cierto, las candidaturas ciudadanas no son una panacea. No curan el AH1N1 ni el cáncer y tampoco rayan zanahorias. No constituyen un pasaje de entrada al paraíso ni tampoco -por sí solas- nos sacarán del infierno. No logran, en la mayoría de los casos, ganar más que 10-20% del voto. Pero sí ofrecen fórmulas alternativas de participación ante partidos que han erigido altas barreras de entrada alrededor de su alcázar. Sí proveen una ruta mediante la cual los ciudadanos pueden acceder a la representación sin someterse a los mandatos de las maquinarias. Sí son una amenaza permanente a partidos que han divorciado la agenda política de la agenda pública, y no hablan de nada que le importe verdaderamente a quienes se ven obligados a votar sólo por ellos. Sí son un correctivo a partidos que han perdido el rumbo, que han dejado de ser puente, que han privilegiado la lógica patrimonial por encima de la función representativa. Sí pueden ser un avatar necesario; la encarnación de fuerzas, de perfiles, de anhelos que los partidos acaparan o sofocan."

3.2.10

Greece as Argentina revisited

De acuerdo con Kenneth Rogoff:

"Avoiding default may be possible, but it will not be easy. One has only to look at official data, including Greece’s external debt, which amounts to 170% of national income, or its gaping government budget deficit (almost 13% of GDP)."

"But the problem is not only the numbers; it is one of credibility. Thanks to decades of low investment in statistical capacity, no one trusts the Greek government’s figures. Nor does Greece’s default history inspire confidence (Greece has been in default roughly one out of every two years since it first gained independence in the nineteenth century)."

"[…] Like Argentina, Greece has a fixed exchange rate, a long history of fiscal deficits, and an even longer history of sovereign defaults. Nevertheless, Greece can avoid an Argentine-style meltdown, but it needs to engage in far more determined adjustment."

2.2.10

Desorden de Identidad Disociativa

De acuerdo con Denise Dresser:

"Beatriz Paredes habla de "nuestra realidad hiperpresidencialista" cuando la presidencia imperial ha sido reemplazada por la presidencia acorralada. Habla de la necesidad de "controles y fiscalización" a nivel local, cuando en la última negociación presupuestal su partido los rechazó. Habla de la necesidad de fomentar "la transparencia en el manejo de los recursos públicos", cuando los estados controlados por el PRI son hoyos negros de opacidad. Habla de la "influencia creciente de los poderes fácticos", cuando el precandidato presidencial del PRI ya se ha encamado con ellos. Habla de acrecentar los derechos ciudadanos, al mismo tiempo que se opone a las candidaturas independientes. Critica "la propaganda como subterfugio para la manipulación social", cuando Enrique Peña Nieto la usa con ese objetivo. Argumenta que los Estados democráticos "son laicos", cuando ella misma ha contribuido a poner en jaque la laicidad en México."

A Timed Stimulus

Fan Gang for Project Syndicate said:

"No doubt, government macroeconomic management that is too strong may delay necessary market-oriented reforms. But the financial crisis has shown that a twenty-first-century market economy requires government participation to function. For a developing economy like China, it is better to have a government that plays an active role in avoiding the ups and downs that the Western economies experienced in their early days – and are still experiencing today."

27.1.10

iPad - eBook Revolution

There's a boom and bust cycle and good reason to fear it

The boom gets started with an expansion of credit
The Fed sets rates low, are you starting to get it?
That new money is confused for real loanable funds
But it's just inflation that's driving the ones

Who invest in new projects like housing construction
The boom plants the seeds for its future destruction
The savings aren't real, consumption's up too
And the grasping for resources reveals there's too few

So the boom turns to bust as the interest rates rise
With the costs of production, price signals were lies
The boom was a binge that's a matter of fact
Now its devalued capital that makes up the slack.

Whether it's the late twenties or two thousand and five
Booming bad investments, seems like they'd thrive
You must save to invest, don't use the printing press
Or a bust will surely follow, an economy depressed

For the full lyric

18.1.10

Regulatory Hybrid Securities

Schiller in Project Syndicate summarizes:
"The group [Squam Lake Working Group] calls their version of contingent capital "regulatory hybrid securities." The idea is simple: banks should be pressured to issue a new kind of debt that automatically converts into equity if the regulators determine that there is a systemic national financial crisis, and if the bank is simultaneously in violation of capital-adequacy covenants in the hybrid-security contract."

"The regulatory hybrid securities would have all the advantages of debt in normal times. But in bad times, when it is important to keep banks lending, bank capital would automatically be increased by the debt-to-equity conversion. The regulatory hybrid securities are thus designed to deal with the very source of systemic instability that the current crisis highlighted."

Change, Future and Hope / The centre right returns to power in Chile

Accordingly with The Economist:

"The new president is unlikely to make radical changes. He has paid regular tribute to Concertación’s achievements and will represent “a change of pilot, not of course,” suggests Patricio Navia, a political analyst. Mr Piñera grandly told a 30,000-strong victory rally in Santiago, the capital, that he aspired to make Chile into the “best country in the world”. But his government is not expected to make big shifts in policy. It is not, for example, expected to roll back the social-welfare programmes that have been a central feature of the government of Michelle Bachelet, the outgoing president. Some polls suggest that her approval rating remains over 80% (Chilean law bars presidents from running for a second consecutive term)."

King’s Speech

13.1.10

Bernanke vs. Taylor












Too low for too long fight


"[…] The alternative Taylor rule (that replaces the current rate of inflation on the right-hand side with a forecast of inflation over the current and subsequent three quarters) prescribes a path for policy that is much closer to that followed throughout the decade, including recent years. In other words, when one takes into account that policymakers should and do respond differently to temporary and longer-lasting changes in inflation, monetary policy following the 2001 recession appears to have been reasonably appropriate, at least in relation to a simple policy rule."

Taylor’s disagreement

"[…] The speech was largly an attempt to refute the now commonly held view that the Fed held interest rates too low for too long in 2002-2005. I was in Atlanta and though I could not go to the speech I read it afterwards and expressed by disagreement first in a Bloomberg interview with Steve Matthews and later in a CNBC interview with Larry Kudlow and will follow up with more details; note that a working paper prepared by seven Fed Board staff was released just before the speech. Others have raised questions about the speech from a variety perspectives […]
"

12.1.10

¿Conmemoración?

"Pensar que el problema de México es mental desvía la atención de donde debería estar centrada: en ese artificio contractual que es el corporativismo postrevolucionario y el "capitalismo de cuates" que engendró. En la permanente redistribución de la riqueza en favor de los grupos que apoyan al statu quo que este acuerdo ha entrañado. En las prácticas de rentismo acendrado que este pacto ha perpetuado. En la apabullante concentración de la riqueza que este modelo ha permitido. En la economía oligopolizada que este pacto ha producido. Esas son las raíces de tantas mentiras piadosas que la clase política elaboró y sigue diseminando; esas son las razones detrás de códigos de culturas que las élites han usado para controlar a la población. El verdadero problema del país no es cultural sino estructural; no es una cuestión de valores sino de intereses. A México no le hace falta ir al siquiatra para resolver un problema mental; más bien necesita combatir una estructura de privilegios que ni la Independencia ni la Revolución lograron encarar."