Since the NY Times closed the comments thread for this post – An interesting morning – I thought I congratulate over here… Congratulations on winning the Nobel Price in Economics!
More Krugman – Moment of Truth – NYTimes.com.
„Let’s talk about where we are right now.
The current crisis started with a burst housing bubble, which led to widespread mortgage defaults, and hence to large losses at many financial institutions. That initial shock was compounded by secondary effects, as lack of capital forced banks to pull back, leading to further declines in the prices of assets, leading to more losses, and so on — a vicious circle of “deleveraging.” Pervasive loss of trust in banks, including on the part of other banks, reinforced the vicious circle.
The downward spiral accelerated post-Lehman. Money markets, already troubled, effectively shut down — one line currently making the rounds is that the only things anyone wants to buy right now are Treasury bills and bottled water.
The response to this downward spiral on the part of the world’s two great monetary powers — the United States, on one side, and the 15 nations that use the euro, on the other — has been woefully inadequate.
What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.“
With the DJIA falling below 9000 points today, it’s reassuring to know that, right?
Paul Krugman, in his Blog at the NY Times reminds us that
„[o]n a separate note, one good thing is that there haven’t been any reports of people on Wall Street jumping out of windows. That’s because the windows in modern office buildings don’t open.
He’s had a busy day commenting, find the rest here. Including a link to a 38-page pdf-file full of recommendations from economists to policy makers ahead of the upcoming summit season. It’s been published by voxeu, edited by Barry Eichengreen and Richard Baldwin and it’s aptly called „Rescuing our jobs and savings: What G7/8 leaders can do to solve the global credit crisis„. Let’s hope some of the people representing out jobs and savings at these talks will actually read it.
It’s another one of those days for global stock markets. To honor the occasion, I thought about linking to one of my favorite management articles of all times, that appeared in the McKinsey Quaterly right before the first dot-com crash in 2000 and is called „Valuing dot-coms“ even though the subtitle is far better: „Discounted Cash-Flow Analysis Without Cash-Flow“. Alas, what was available back than without a cash-flow is now only available to premium users, or about USD 150 per annum… now that may be an interesting analogy to the current US housing market.
Be that as it may, here’s a great way to stay updated: the global markets page of the NYT business section makes excellent use of available web technology to visualize a lot of information.
Helmut Schmidt ist wahrlich kein Oskar Lafontaine. Daher ist es auch immer lesenswert – wenn auch nicht immer zustimmungspflichtig – wenn er sich in der Zeit zu Wort meldet: Wenn er, wie in diesem Falle, die gesellschaftliche Kontrolle von zur Zeit unkontrollierten Kapitalclustern fordert, dann stimme ich ihm darüber hinaus auch grundsätzlich zu – Helmut Schmidt: Beaufsichtigt die neuen Großspekulanten!
Die New Yorker Investmentbank Goldman Sachs hat im vergangenen Jahr 16 Milliarden Dollar an ihre Vorstände und Mitarbeiter ausgezahlt, die fünf größten amerikanischen Investmenthäuser zahlten insgesamt 36 Milliarden Dollar. Für einen normalen deutschen Staatsbürger ist das eine unvorstellbare Summe, sie entspricht in der Größenordnung der Jahreskreditaufnahme durch den deutschen Finanzminister. Man fragt sich unwillkürlich, ob auf den Finanzmärkten alles mit rechten Dingen zugeht. Der ehemalige Finanzminister Helmut Schmidt erklärt Ursachen, Zusammenhänge und Gefahren.
Germany’s economy has had a rather rough ride in the last couple of years. A lot of the problems from weak investment to rising unemployment had not only to do with changing global markets and slow German coordinational reaction, and reappearing distributional conflicts in the light of slower growth, but also with a fundamental shift in credit regulations, called Basel II.
Grossly simplyfying, increased rationalisation, as well as „locusts“, were just different strategies to handle the need for a boost in the equity vs dept capital share imposed by the epochal switch in corporate control away from banks to less hierarchically structured „capital markets“.
It was a tough time, no kidding. But as even the Economist, whose reporting about non British European economies is often informed by a bias Edward Said might have labeled „Continentalism“, noted in this week’s issue , things are beginning to look up a little. Tonight, Reuters informs us that the cabinet silently passed the implementation of the new rules into German law, which can only mean that most German companies are now able to deal with them.
There will be a long debate in economic history one day that will focus on the question whether it was actually necesary to do what was done, given the price so many paid in the 1990s and early post millenium years. But that’s for the future, for now let’s enjoy the fact that things are indeed looking brighter again.
„… we also honor the important friendship between the United States and Germany. Our nations share beliefs in human rights and dignity, and on this day, I join all Americans in celebrating the bonds that tie our two nations and in reaffirming the importance of our continuing friendship.“
Leaving the the podium the President added to a close advisor – „… of course, we can always suspend it unilaterally, hehehe… that Chancellor guy I hate, what’s his name again, does he still rule those folks? Hmm, whatever, now go, get me a Pretzel! And buy some German knives. And guns. Germans know how to make guns. And knives. Oh wait a minute… guns… hmmm… were these folks really always our friends? Whatever… where’s my Pretzel?“
„You can be as flexible as you want to, work as much as you want to, earn as much as you want to – but only if we allow it.“
In a move displaying the current hipocrisy of German trade unions in all its beauty, IG Metall, the poweful metal worker union, struck a deal with Siemens AG that will increase working hours in one plant to 40 hours a week – something the union previously claimed would be the end of the world as we know it.
Apparently it’s not – as long as the union’s officials get to decide instead of the people affected…
More via Deutsche Welle.
The Economist ponders about a self-regulation mechanism adjusting the European work/leisure trade-off in favour of work. Even in lazy Germany.
But it also reviews this year’s LSE Lionel Robbins Memorial Lecture by Richard Layard [pdf] who presented new insights into the hypothesis that more doesn’t always, in fact, usually, make you happier.
So working more might not add to your personal utility if you’re simply doing it for the stuff you can buy with more cash. Having more, he claims, is only important as long as it means – „having more than Jane Doe down the road.“