July 31, 2006

Migrants is just what the doctor orders for an aging society

Sir, yes of course “Migrants mean money”, July 31, but they also mean so much more and do not belittle it. By being able to attract that kind of entrepreneurship, drive to move forward, restlessness, non-conformity and so much more that is embedded in the migrant spirit, aging societies are able to get that vitamin they need in order to keep up with a world that does not stop just because you might be happy where you are. Anyone that pushes away migrants or just wants to accept “adequate” migrants, with PhDs, do so at their own peril, since standing still you will just fall back.

How can we make “possibilism” more possible?

Sir, Richard Lapper, July 31, while reviewing Latin America’s Political Economy of the Possible by Javier Santiso, MIT Press, makes a very good point bringing forward how “Chile controlled its exposure to world financial markets [resulting in] a relative smooth encounter with globalization.” Controlling the short term capital flows is indeed one of the most important musts for any small nation that has to travel the oceans in a bathtub. Many countries should be adopting something similar to Chile’s flow controls but instead even Chile was prohibited from using them any more, for no very good reason at all, when this was so required by the United States as a condition to sign the US-Chile Free Trade Agreement. Sir, is there any way you can think of how to get Washington to be less extreme in their preaching on free-market faiths? This would no doubt be the best way of helping the Latin America’s economies to avoid finding so much attractive in extreme populism and allow them to go more for the rational way that Santiso calls “possibilism”.

July 28, 2006

Should they now sue their Central Banks?

Warning, believing in your Central Bank is lethal for your pension plan!

Sir, Samuel Brittan, in “Central banks need not divine bubbles”, July 28, tells us, quite blasé, almost like shrugging some dust of his shoulders, that inflation, as measured, does not measure inflation, because although wheat, consumer goods, are cared for, cattle, capital assets, are royally ignored. The adjectives he uses in the process are ludicrous and absurd, but concludes in “Yet that is the perceived central bank doctrine today”. We are left a little bit confounded though with what he really means with “perceived” since reading further from what Brittan has to tell us it seems that it is indeed state of the art in how central banks try to measure inflation.

Which leaves us now with the question, what are all those poor blokes that believed the inflation figures reported by their central bankers were for real and did such stupid things as invest in government debt, instead of a house, thinking it paid enough to cover for inflation? Should they now sue their central banks and central bankers for misrepresentation? Whatever, it sounds like making nursery rhymes out of Enrons and Parmalats.

It is not that we believe it is easy to measure inflation and in fact it might be impossible. Nor can it be easy do to a central bank's job for that matter, but it is the arrogance by which they sell us the how good they are at it that really kills us.

It is a sad day when think-tanks are found out not to have been thinking for many years.

July 27, 2006

Who is a threatening who?

Sir, Jim Kolbe’s warning that “Baby-boomers threaten the war on global poverty” July 27, seems a bit off the mark since, as threats come, it should be quite clear by now that global poverty is a much larger one to the baby-boomers themselves.

Kolbe is of course right when he explains about how much the competition from entitlement programs might signify for what’s-over-for-aid-and-alike, in terms of cash budget allocation, but if we are really going to be more explicit about the links between them, then he should also explain that it is much more than about money. Equally no one would object that the US needs to be much more careful with its international stature but, also, even in this case, it is not really the amount of aid-dollars paid that will break or make the day, and believing that it is only a question of hard money, is about the surest way of loosing international stature. When Kolbe says that “Nothing provides as much tangible evidence of America’s leadership as foreign aid” we, the good friends of the USA, do not know where to look.

Nonetheless, let us not despair, who knows if satisfying the high expectancies build up by the baby-boomers could not turn itself into a real growth opportunity for the many poor, far superior in effectiveness than aid itself, and all in line with frequently heard clamors such as “give us trade not aid”. Mr. Kolbe, do help in fixing your entitlement overhangs, not so much for the poor of the world, they would hardly notice it, but try doing it for your own soon to be poorer baby boomers.

Are we consuming hypocrisy in an unsustainable way?

Sir, Jacob Weisberg’s “A path between puritanism and excess”, July 27, makes a great description about some of the legal and moral issues involved with decisions such as declaring illegal gambling on the internet.

Among his observations, we find that “Further restrictions will breed even more disrespect for the law, while creating exciting new opportunities for criminals” stands out as an issue that needs to be much more seriously considered, so that society stops fertilizing the markets where evil forces thrive and that, through any available means, are always trying to go for a takeover of the world.

It is high noon to call in some good economic analysis into any legislative procedure destined to prohibit something, to ascertain there is a due analyst of the supply and demand curve for the to-be-prohibited, and of the available resources for the fight. If the demand for the “bad” in question is inelastic, meaning that the “marginal” human urge for it is very strong, and the supply elastic, meaning that better returns will immediately place more offers of “bad” on the markets, and finally, the resources scarce, meaning mostly there is not a sufficient social consensus about the need for the fight, well then we are all better off forgetting it.

As a society we should never forget that hypocrisy, as a last ditch resource, has its limits too, and we should be careful not to consume it in an unsustainable way.

July 24, 2006

Yes anything could indeed happen!

Sir, Andy Webb-Vidal’s report “Bush told to plan for Chávez oil shock”, July 24, ignores the fact that oil prices are highly contagious and transmittable through world markets and in this respect it is absolutely impossible for Venezuela to launch an oil boycott that would only target the United States. The only real beneficiaries of a boycott of this sort are as always the well informed intermediaries and the shipping industry that will be asked to service longer delivery routes.

But, with respect to that anything could happen, in Venezuela, with Chavez, this could perhaps be better understood by your readers if you also had informed them that at this moment, almost eight years into Chavez’s XXI Century Socialism, gasoline is being sold in Venezuela at 3.7 cents of dollar per liter or less than 15 dollar cents per gallon.

With this marvel of a public policy Chavez, besides stimulating a runaway consumption of gasoline with all its environmental consequences, based on the international cash-opportunity cost manages to transfer a regressive subsidy of about 10 billion dollars, or about 10% of Venezuela GDP, or about 100% of the GDP of a country like Bolivia, from the poor who do not buy gasoline, to those that love to guzzle it up.

For comparison the gasoline price in an oil country like Norway that seems to been doing things right is 52 times higher and in the USA of Mr. Bush, Chavez´ sworn enemy, and the Cuba of Castro, Chavez´ best buddy, the price is only about 25 times higher. Even in the land that has inspired the term of oil-Saudism the price is seven times as high.

Now you try to draw your own conclusions of what Chavez is all about! Are you clear now?

Now so you can also understand the current opposition groups that are against Chavez, let me inform you that they do not mention this issue either. Are you clearer yet?

July 19, 2006

We need to find and fund our global National Parks

In the first of his energy & environment trilogy Martin Wolf expressed some worship of King Coal, in his second he warned us against crying wolf and panicking with respects to the global warming and so, suspecting limits to how far anyone would be willing to stretch green incorrectness, we felt he was setting us up for some conclusions that would bring him back into their arms again, with big fanfares. His “Taxation can give earth a chance, July 19, places himself squarely on the side of investing in new technologies and a carbon tax applied globally is a very good effort, that should make him presentable again, tough perhaps without the fanfares. When Wolf refuses to cross the bridge and says that each country would “keep their revenue” from the tax so to only have a “limited need for politically unpopular transfers of income across countries”, he gives up on all the efficiency gains that could be obtained by using those funds where most needed, and he complete misses out that for our earth to give us humans a chance, we need to learn to find and fund some global national parks.

July 18, 2006

Are they really sure it is enforceable?

Sir, in “Banning net gambling would serve no point”, July 18, you make some very good observations analyzing the pro and cons of this issue, though perhaps not sufficiently about the risks that are present from the needs to enforce any prohibition. Yes we read that they managed to capture some of those responsible for betting on the web, but that was the easy part, those were the ones who were looking to formalize their activity. Now comes the tough and expensive part of finding out how to handle all those operators that until now have been operating semi-informally and that after this will go into deep hiding, as will their clients, and who might very well even include some of the enforcement agents.

How long will legislators around the world be allowed to go on declaring things illegal without giving sufficient considerations to whether they have the enforcement capability and the full backing of the society’s social sanctioning mechanisms? If this is not ascertained then all what will be achieved is to take society further down on that slippery road of loosing credibility and hand over on a silver plate a new growth opportunity to those who prosper from participating in illegal and illicit activities.

Is there some state-of-the-art anti corruption tool we do not know about?

Sir, Patti Waldmeir, Stephanie Kirchgaessner and Richard Water’s report “Google campaign tests power of cash versus votes in Washington”, July 18, will have many of us from developing countries scratching our heads, for the umpteenth time, trying to understand how all that “money-talks” is not corruption when in our corrupt countries it would definitively be considered so. Of course money-talks, we all know that, but a legislator or any other government official is supposed to be above it and resist the temptations, but here you speak so brazenly open about it, without even the slightest effort of hypocrisy, so we must be missing out on something. Might there be a special state-of-the-art-legislation that permits this to happen and that we could copy since that sounds like a fresh though perhaps somewhat strange approach for getting ourselves out from the awful corruption trap we sadly confess we are in.

July 17, 2006

Why was not 6 cents on the dollar offered before the invasion?

Sir, Monday 17, Comment & Analysis gives a very complete report on the restructuring of the Iraqi debt which “by 1990, when the United Nations imposed sanctions after Iraq had invaded Kuwait, all the debt was in default” and “by the time the US-led invasion toppled the regime in April 2003 the build-up of interest owed meant the debt had grown to $140bn, making Iraq one of the world’s most indebted countries relative to the size of their economy”.

What remains a mystery though is how, under such circumstances, no one thought of making a debt purchase offer, let us say of a quite generous 6 cents on the dollar, before the US invasion, since not only is that what you would rationally expect from any normal rescuer willing to stick their neck out for a bankrupt company/country, but also, in this particular case, since it would probably have been the most effective way of transmitting the seriousness of the American threat. As is, when having to read all the front page horror stories about the Iraqi tragedy, it is hard to know whether to laugh or cry, when you describe their recent efforts “to develop a creditor profile in international markets and debt management capabilities.”

Something will indeed explode in our face

Sir, Indeed “Credit derivatives play a dangerous game” and they could and will explode in our face, at least if Murphy has his say. That said we feel that Frank Partnoy and David Steel in their article, July 17, are not sufficiently forthright in making clear that this is just another side of that same coin that was haphazardly thrown in the air when banking regulators in Basel arrogantly thought they could drive out risks from banking, but, the way they are going, risk only to drive banking out of banking.

On July 10, in FT, Jeremy grant reported on how “Regulators ‘face challenge posed by multiple ownership’” and have to work overtime trying to identify who are the owners of all those hedge funds that are taking bets on credits in order to understand their conflicts of interests and, that very same day, Giles Tett describes how “Credit officers are hot to trot in a fired-us up market for loans” and now leave the banks to work for hedge-funds.

It seems the world did not learn enough from overly centralized economies falling into pieces, as otherwise there is no way of explaining the blind support it has given to that systemic risk factory that has been set up in Basel.

July 15, 2006

Allow it, or call in the Righteousness Brigade!

Sir, Christopher Caldwell in “Online gambling can be regulated”, July 15, does not get to the real dilemma which is whether society can afford to prohibit something when doing so could mean opening up another growth opportunity for all those informal illegal and illicit activities that, if we are not careful, might one day signify more than the legal and formal economy. Before anyone is allowed to prohibit anything he should first have to present an enforcement plan that makes sense in terms of recourses and results, and that foremost has the backing of his constituency. Prohibiting online gambling while allowing Vegas and when gambling itself is exposed to a minuscule fraction of that social sanction that weighs down on smokers, does not make a lot of sense.

Since even online gamblers would probably like to know who they are dealing with, and at least who deals them the cards, perhaps much more could be gained by allowing online gambling and developing some good governance principles. Alternatively, let society bear down its full weight on gamblers. Most of us who have stopped smoking have not done so because it was prohibited, in fact in many cases that might even been the reason why we started, but because there is a quite obnoxious but extremely effective social pressure against it and which, to top it up, does not cost a lot of taxpayer dollars.

July 13, 2006

What a curious argument!

Sir, Andy Webb-Vidal reports from Caracas, July 13, that “Venezuela is to halt petrol supplies to 1,900 filling stations” and quotes the spokesman for the Venezuela owned Citgo that distribute petrol (gasoline) in the USA through 13,100 brand bearing franchises as saying “We are short [of] about 130,000 barrels a day of gasoline that’s required to meet our customer obligations and we have to purchase that on the open market and that places us in a competitive disadvantage”.

What a curious argument that is! Anyone would have thought that buying gasoline in the open market and distributing was what that business was all about. If Citgo can’t distribute petrol profitable to these 1,900 filling stations, then it sounds like they should perhaps retire from the other 11,200 too.

July 12, 2006

Careful though with giving the illegal and the illicit markets (the IIM's) another juicy growth opportunity

Sir, I am no iPod listener since I prefer radio and when I hear music I feel that sharing it is part of the experience. That said Thomas Hazlett “Antitrust regulators must listen to reason on iPods”, July 12, caught my attention when it said “Were Apple to exploit its users, its market would be ripe for an upstart”. I have some difficulties in understanding in this context the meaning of the word exploitation since if it is getting more out of the consumer by offering them something very attractive and leveraging that on his lack of choices then I would say that the consumer has most probably already been exploited by iPod, for quite a while.

Now, if I read Hazlett right, he seems to suggest that it is better to allow some time for competition to provide the market with the alternatives before calling in the trustbusters. He is probably right, I agree, though I would also have to warn against waiting for too long, since it is always preferably to legally bust a trust (if there is one) than to allow for yet another new growth opportunity for the illegal and illicit forces of evil to start pirating and copying the iPods. By the way, are there already some fake cheap iPods out there? Hey, just asking!

About the calm and silent Mr Wolf

Sir, walking in the smog of Mexico City, flying over the Amazon jungle and seeing it being deforested in order to grow soybeans for China, and soon perhaps even ethanol for the US, and seeing how the most powerful country in the world still structures its American way of life around the car, is more than enough to know that something is wrong and that something needs to be done. It is then utterly confusing to read Mr Wolf’s “Do we need to cry now that the climate wolf is at the door?”, July 12, that poses such questions as “is the warming itself a bad thing?” and “is there any chance that we will, in practice, find a workable way of dealing with it?” since with these type of doubts he could run the risk of justifying inaction, but perhaps Mr. Wolf suffers from a special phobia against “crying wolf”. Of course, we should be very careful with panicking, and with all those salesmen out there offering lousy escape doors and not really wolf-proof doors, but that does not mean that with respect to the world’s environment, it is not high time to scream out wolf!, at the top of our lungs.

About priorities and painting firehouses

Sir, Edwin Truman in “Time is running out to rebuild the Fund, Mr Paulson”, July 12, screams out for putting the IMF fire-brigade in order so that it will be better prepared to confront whatever disasters might come out of the global “massive distortions” of which some of these, for instance the doubling of foreign exchange reserves over the last five years, he suggests has somewhat occurred as a response to a “weakened Fund” Wow!

Yes, a good functioning Fund is an absolute must for the World, it needs new equipment, it needs new young forces and it probably needs a totally new mindset, and so let us make it really sure that we are not just rearranging the drawer or painting the firehouse, just to calm our nerves. I for one have for a long time sustained that the way the Fund has given in to their bank regulator chums in Basel, forcing the substitution of some few credit rating agencies for the diversified views of a free market, has just been one of the most incredible build up of systemic risks the world has ever seen and so, to me, enhancing the Fund’s legitimacy, post Argentina, needs a lot more “than redistributing voting shares and executive board chairs” based on whatever concocted ratio someone might deem appropriate. The reshuffling of pure local interests will not lead us anywhere in a global world.

Where I do agree completely with Mr. Truman is in his call against the “irresponsible fiscal position” of the US and that on remedying this is where the new Secretary “needs to exert leadership at home to achieve results abroad”, perhaps even to such an extent that he should instead ask Mr Paulson to forget about the Fund for now, do not even go to Singapore!, less it becomes an excuse for him painting his firehouse too.

July 11, 2006

Hedging our emotional investments in World Cups

Sir, Dave Shellock, July 11, reports that Italy’s victory in the World Cup final gave a boost to the shares of Juventus, the Turin club that aligned several players in the team that beat France. A bit late though since had we only known about it earlier, many of us could have used this possibility to hedge our emotional investments in our respective favorite teams. Let us not worry though, by next World Cup, the market should have created some derivatives against the risks of defeat.

On pushing the merchandise!

Sir, Stephany Griffith-Jones and Robert Shiller in “A bond that insures against instability”, July 11, discuss the possible role of bonds that are linked to the growth of a country’s gross domestic product and, yes, the service of a debt linked to results should be easier than one that is not. That said and as this proposal is clearly aligned with all the current discussions on debt sustainability that are so in vogue we need again to warn that by focusing primarily on how much debt can be served you risk relegating to a remote second place, the far more important issue of what all the contracting of that debt should achieve.

In this respect and since the authors mention the positive experience with Argentine GDP-Warrants, which ironically is only the results of the Argentina economy bouncing back after the crisis, they should also have tried to answer what would have happened if all of Argentina’s debt had been contracted their way. As I see it Argentina would just have been able to contract more debt, and the fall would have been even more severe, some few months later.

There are a couple of truths in life you cannot just structure yourself out of and to try so, could only make things much worse. With respect to developing countries and their public debt, it is high time to leave this “how-much-can-we-load-them-with-before-they-break” thinking and go back to basics, perhaps to the financial “innovation” of contracting debt that repays itself!

July 10, 2006

Mr. Paulson Drop the Big Tax Bomb Now!

Sir, your must-do list for Mr. Paulson as a new US Treasury, Comment & Analysis, July 10, is very long but nonetheless you sort of forgot the “whatever-you-do-just-remember-your-wedding-anniversary” item in it.

The only thing really worthy for sticking out a reputable neck such as Mr. Paulson’s at a time like this, would be to promote a substantial new tax on gasoline consumption in the USA, thereby killing many sick birds with one single shot, and bringing much rewards for the neck-owner, the nation and the world at large.

For instance when so many remind Paulson about the need for Social Security reform they should not forget that whatever he does there will come to naught if the USA does not solve its most fundamental structural weakness, its excessive consumption of oil. Now reduce oil consumption and you need to do much less about Social Security, financial crisis, fiscal deficits, trade-deficits, oil dependency and, the top of the heap, Gore’s environmental sermon.

Let us hope Mr. Paulson does not go for a pellet gun and starts to dilute all his personal goodwill capital handing out one little aspirin here, and another one there. Let us hope he has already spoken with his perhaps willing but until now completely ineffective oil-addiction-fighting boss, about the need to Drop the Big Tax Bomb Now!

July 05, 2006

Wolf’s viva la vida loca

Sir, Martin Wolf is absolutely right in that “Coal and open markets are the best hope for energy security”, if of course he means our own generation’s energy securities, though I must say that I had come to believe, perhaps mistakenly, that part of the civilization process, of which Mr. Wolf with his column is presumably one of its anointed spokesmen, was to work on trying to make a better world for the next generations.

Now, if it is just about how much our generation can rip off the planet abandoning itself with gusto in the hands of the markets to feed their gluttony of oil and coal, then I do not really see why Mr. Wolf would exclude seizing energy resources from other countries with power, as it “would create serious global insecurity and even war” since, at least in moral terms, we are already effectively at war securing by brute force resources from our descendants.

Nonetheless as Mr. Wolf made it absolutely clear that he left the whole global warming issue pending for the next week, I guess the world will just have to wait and see. Meanwhile his voice sent a comforting message to all our political viva-la-vida-loca promoters. It said “Boys, we still have time, so take it easy and whatever you do, do not rock the boat, “the future lies. . . with old king coal”!”

For how long does the fact that we should all have started action along time ago provide us with a valid excuse for delaying it just a little bit more?

July 03, 2006

Why do you then support secrecy Mr. Carter?

Former president Jimmy Carter lectures us today in the Washington Post with a “We Need Fewer Secrets” where he solemnly advises us that “access to information advances citizens' trust in their government, allowing people to understand policy decisions and monitor their implementation.” Well as this is something that most citizens would full heartedly subscribe we need to ask Mr. Carter what he was then up to when in Venezuela his Carter Foundation gave support to an election where the opposition was not allowed to scrutinize what they felt was a very murky list of eligible voters, or access to the vote counting carried out by programmable electronic in a quite non-transparent way. Carter ends up declaring “We cannot take freedom of information for granted. Our democracy depends on it.” Mr. Carter, as a Venezuelan, might I humbly advance the possibility that so does our.

Yes, But, Yes!

Sir, Christopher Earl’s and Harvey Bale’s “A market remedy that can bring vaccines to the poor”, July 3, is very hope-lifting as they describe how Advance Market Commitment funds could give incentives for the research of medicines mostly needed by the very poor. That is of course until we get to the “once the fund was exhausted, the company or companies supplying the vaccine would have to lower its price to ensure market’s sustainability, but a reasonable return on investment would already have been achieved”, and which crudely brings us back to reality check one. Nowadays when we even hear about how the patented rights of fully amortized medicines are purchased in order to raise the prices to consumers, we need to better understand whether the concept of a “reasonable return” can indeed be mentioned in the context of creating the right incentives for research. That said, of course this is a good idea to be explored, and why not to the extent of forcing perhaps a small percentage of all the medicine costs in the developed countries to feed into these funds. The way the world is getting more and more contagious who knows if medicine developed through these systems for the poor will also benefit the rich tomorrow.

Let the willing consumer in on the carbon trading principle!

Sir, James Macintosh in “The car industry needs carbon trading”, July 3, puts the full responsibility for carbon-trading on the car manufacturers and also mentions the problem that “automotive carbon trading might not provide politicians with the image boos they get from driving a hybrid car or filling up a car with ethanol from Iowa’s cornfields”. Well, he misses the most important part of the story. As the environmental conscientious consumers are the ones actually purchasing the hybrids and the ethanol, the most important thing to be done is to make them aware that there are more efficient ways for them to help out. Let them get their real image boost by placing a sticker on their window shield stating that though they drive normal cars, with normal fuel, they are contributing all of their cash savings from not using hybrids or ethanol, to smart and cost-efficient environmental projects, like for instance a reforestation of a couple of acres in Tanzania, and that they could perhaps even watch growing on the web.