December 28, 2006

The problem with Marxism is that it does not have an owner like Coca Cola

Sir, if we look at how globalization like a sunflower that looks for the sun orients its production facilities towards low salary environments and if we instead of the ownership of physical productive capital assets think about intellectual property rights and other modern means to acquire the control of markets that allows for the extraction of surplus rents, well then of course John Thornhill could argue his rebirth of Marxism in “Behold Marx’s twitch” December 28. But, we also need to remember that is we really set our mind to it we could in fact take any philosophers book or treaty and twitch and read anything we want into it.

Coca Cola was launched after Karl Marx death but long before the last volume of Das Kapital was published and it contained cocaine; was sold in fountains; bears very little resemblance to today’s vanilla coke but is still 100% more Coca Cola than what today’s so many Marxism are an original or even a Classic Marxism… whatever that now signified. The problem with Marxism is that contrary to Coca Cola there is no owner of the brand and so anyone is allowed to lift his hand up and proclaims himself a Marxist or a communist and, if he finds enough people to scare and are willing to serve as his amplifiers, then he can bask in the shine of a historical movement and sell himself as an ideologue with a vision.

Of course we all know it would be difficult for politicians to market themselves as brittneyspearists even when such a label could be more indicative of their movements but, as so many real problem exists out there in the world and for which so many new solutions have to be developed, it really behooves us all not to make things more difficult by allowing for the use of misleading labels. Marx missed his train, it is over, let us now please move on.

December 27, 2006

Valium or placebos?

Sir, Lawrence Summers with “A lack of fear is cause for concern”, December 27, put his finger where it really hurts since many of us never imagined possible the huge discrepancies that exists between how nervous most investors seem to feel, in private, and how little of this risk perceptions the market seems to be transmitting through its public pricing.

Somehow it looks like either the market has lost the connection with the investors or that someone somewhere is peddling some real potent valiums or extremely credible placebos. At least when Summers says “As institutions have become more sophisticated in their approach to risk they have felt comfortable in taking positions they might have been reluctant to hold even a few years ago” we know someone has been gulping down a lot of medicine lately. So let us now pray it is what the doctored ordered and that it does not have too bad side effects.

December 22, 2006

Should we let the market really work the migration flows?

Sir, I subscribe almost entirely to Martin Wolf’s “Why immigration policy must be a compromise”, December 22, and the almost is there as I find it hard to understand how his view “that work permits should be auctioned” to the best bidder is related to a “compromise”. Will the one offering the most for the work permit be the best worker or is he just the one needing or capable of paying the most for a shelter?

If Wolf really believes that the market mechanism should be used to optimize migration flows then anyone wanting to move out of his country should also have the right to sell his “place” in the market. We could thereby create some real incentives for people to sell an expensive UK residence right and buying themselves a dirt-cheap Tanzania one, with view of making a huge capital gain when this last poor country gets developed.

In the debate on immigration we must never forget that no matter how much we take shelter behind reinforced borders, at the end of the day, we are all still living, ever more cramped, on the very small planet earth.

December 15, 2006

Should then the ageing population emigrate?

Sir, Martin Feldstein argues in his “Immigration is no way to fund an ageing population” December 14, that immigration would generate very little additional tax revenues as immigrants “generally earn less than native Spanish workers” but which is something that with time, and increased scarcity of younger working people, is and should not necessarily be true. That said by giving the example of Spain where “the number of working-age people per retiree is expected to fall from 4.5 today to fewer than two in 2050” he also brings forward evidence that seems to prove that without immigration there would be no way to fund or manage an ageing population… unless of course the ageing population emigrates. The way out of this conundrum that Feldstein proposes is to “supplement the tax-financed benefits with increased saving and investments” but what that has to do with immigration is somewhat hard to understand, since whether they can afford it or not, the elderly will still need help, and also someone should be doing the jobs they all do now in Spain, unless you want that nation to behave like an old soldier and just fade away.

Thankfully the victims in Darfur do not read FT

Any poor victim of Darfur’s genocide like killings who might have invested his last few hopes in someone coming from abroad to save him, would have collapsed in despair had he read Christopher Caldwell’s “It is best to stay out of Darfur”, December 16. Of course we must agree with Caldwell that no country should be expected or even have a carte blanche to enter anywhere for anything but, if the world cannot find an expeditious way of taking care of the worst kinds of political hooliganism, then it will stand precious little chance of solving the many other challenges that are increasingly posed by a globalizing world. And so Mr Caldwell do you really not believe that your XXI century country with 37.600 per capita GNI, together with some others likeminded, do not have in them the capability of designing an effective plan of what to do in the XIX century 640 per capita GNI Darfur? If no, then, if it is not too late, may I humbly suggest that it is also best for you to stay out from bringing new children into this world.

December 09, 2006

Some might not want to face the competition from the dead or forgotten

Sir, you are absolutely right defending that the term of copyrights and patents should not be extended. Just to think about all those great works out there that are condemned to live in the twilight zone between not being considered economically viable for republishing but not yet either worth any other effort while they are copyrighted, make us want to cry. In fact sometimes it might not be about protecting intellectual property at all, it might just be that many new writers out there just do not want to face the competition from the dead or forgotten.

Having authored a book that I believe great and relevant and might yet not find its way to the general public during my lifetime, I at least relish the idea that someone will discover it in the future and then push it in any way he can.

November 28, 2006

Too well tuned?

Sir, Stefan Stern in “The supply chains that could bind unsuspecting managers”, November 28, argues that when everyone strives to be lean and efficient this could on a global scale create greater risks and vulnerability. He is right though it extends to much more than supply chains.

Martial arts legend Bruce Lee, who died at the age of only 32 is an example of how an organism could be in such a highly tuned and perfect condition that it could not resist a small external shock if the rumors that his death were caused by some sort of aspirin are true. In the same vein companies nowadays, pressured by the stock market’s expectations for the next quarterly results; the latest theories in corporate finance as to how squeeze out the last drop in results; and, perhaps, even some bit of creative accounting, might be so well-tuned (no little reserve fat left) that they would not be able to withstand any minor recession.

PS. Whenever I expose this theory, I can see in my wife’s eyes that she believes this is just my preparing an excuse for my growing—ok, grown—midline.

November 13, 2006

Iraq needs mercenaries for peace

Sir, as Venezuelans know so well, it is impossible to build a real democracy upon abundant oil. Democracy is about creating a level playing field, and, therefore, if you want a real chance at democracy in an oil-rich land like Iraq, you need first to distribute their oil revenues equally among all their citizens. For Iraq, distributing their oil revenues upfront, in cash, would carry a special significance since not only would it help to solve the problem of their oil being located only in some parts of the country, but it would also foster an additional bond of national identity among all the Iraqis, be they Sunnis, Shiites, or Kurds. The possibility for each citizen to receive perhaps a couple of thousand dollars a year would promote interest in reaching normality. The World Bank could be the perfect candidate to help implement a very transparent sharing of the oil revenues for Iraq.

In a world where so frequently mercenaries are used for wars, why don’t we help Iraq contract their own citizens, using their own money, to be mercenaries for peace?

November 09, 2006

European blindness

Sir, you must excuse me using Philip Stephens’ (November 3) “A bitter crop from our failure to tend to global warming” for a somewhat different discussion but when he says that “Europeans . . . are beyond rational calculation: bad for George W. Bush by definition must be good for everyone else” that must be exactly the reason for which many Europeans have not distanced themselves completely from a Hugo Chavez, who has positioned himself as a big time Bush foe, and have been turning a blind eye on issues such like that in a notoriously divided country the Congress of Venezuela has 167 members in favor of Chavez, and none, zero, zilch, of those who differ with him. I said a “somewhat different discussion” because in fact, with respect to global warming, they have also wanted to ignore that petrol is sold domestically in Venezuela for about three euro cents per liter and thereby producing runaway consumption and the transfer of about 10% of it GDP from the poor to those who have cars. Indeed, how hatred can make you blind!

November 08, 2006

What discount rate should be applied to analyze the benefits of the unborn?

Sir, Nicholas Stern, in order to tell us that the “Gains from greenhouse action outweigh the costs” (November 8) had also to argue that “we cannot avoid the ethical issues involved in allocations between generations” so that he could be allowed to use the low discount factors that validates his cost-benefit analysis. When so coincidentally FT´s front page that very same day carried the story on “Big Four firms in call to switch to real-time reporting” this really helps to illustrate the conflicts between the short terms results we all expect and the long term actions the world needs.

Recently I read a small publication titled “Faiths and the environment” that spoke about some pioneering work supported by the World Bank aimed to furthering whatever links could exist between those two and since given that religious groups are in fact one of the very few driving forces behind helping us to take a longer perspective on issues they could by prioritizing more the environment really assist us in lowering the high discount rates that prevail out there.

The second thought picks up on what Stern says about “the needs of future generations should be represented in decision-making” which reminds us of the urgent need to get some more real representation of the young and perhaps even the unborn into our democracies… and I mean before they are completely taken over by the baby boomers.

November 03, 2006

Long and short position abuses frequently come hand in hand

Sir, in your “Do not sell us short”, November 3, you correctly argue that we should not identify the abuse of false bad news with the mechanism of the short sale. Usually we do not react to it the same but false good news that inflate the value of a stock is exactly as much an abuse than bad news that deflates it and often both long and short positions abuses come hand in hand.

Distribute the gains but also try to avoid their concentration

Sir, in your “Politicians must focus on middle America” November 3, you identify other causes for the stagnation of their real income than the migrant or foreign worker, such as “the rise of winners take all markets” and for which you should be commanded. You then suggest (to democrats) that we need to be very careful not killing off globalization, as it generates many benefits but also (to republicans) that we need to redistribute the benefits better from winners to losers, through higher taxes. Given that the market value of many public services franchises and of the “winners-take-all-markets” are in some cases so extraordinary high that it proves the absence of a real regulator, may we also suggest that some more efforts are invested in avoiding the concentration of those profits that you suggest to afterward tax.

November 01, 2006

Though that could also be good news

Sir, Richard Lambert scares us with his news about how “Too many people are tuning out of the news” November 1, until we reflect upon the sad fact that in some cases that could in fact be good news, given the very low quality of some of the news.

A compelling case for the right actions

Sir, we should really wait for next weeks conclusion to Martin Wolf’s “A compelling case for action to avoid a climatic catastrophe”, November 1, but meanwhile we should point out the fact that the more compelling the case is, the more should be the need to take the correct actions. Until now, unfortunately, much of what is being done in this field seems more like having to do with peddling commercial solutions than with solving the real problems. For example all that money that with good and decent motivations is invested in hybrid cars, would do much more to avoid a climatic catastrophe if invested in other ways.

For regulation in a world without borders you need minds without borders

Sir Walt Lukken writing about “Exchange regulation in a world without borders” November 1, correctly concludes that “Individual regulators, no matter how big, do not have the resources to monitor properly an entire global market” but then recommends that “They must enlist the expertise of other regulators with similarly high standards” which sounds like the creation of the coalition of the overrun. Instead we believe that a complete and very humble rethinking of what can and should be regulated in a global world that does not necessarily equate high standards with the right standards, is a much better place to start but, for that to occur, you will need to bring in a new generation of regulators that are not so stuck in their current geographic framework

If reforming democracies, don´t forget the young

Sir, Deanne Julius and John Gault opine that “American democracy needs reform”, November 1, and though we agree with their recipes, especially the term limits, we wonder whether they carry sufficient punch to bring about that revival of democracy that seems to be needed, not only in America, to capture the attention and the compromise of the quite disenfranchised younger generations. Some of us believe for instance that there is now an urgent need to introduce a much more direct representation for the young to balance out for the baby-boomers.

October 31, 2006

Let the nosy naggers also have a go at it

Sir, when you opine that the “Stern review offers counsel of hope” October 31, but only if the world acts quickly to curb climate change you place though the responsibility primarily in the hands of supra national entities such as the European Union and a Kyoto protocol, though if we really are going to have a chance to save the world we must get the world into action. One small but potentially very important step all of you Europeans could take is to start shaming the Americans for their exaggerated gasoline consumption on the roads. Somehow they seem to believe gas guzzling is “macho” and you got to them it is of irresponsible wimps. For that action you can call to arms al those horrendous nosy naggers that were so horrendously effective in getting people to stop smoking.

October 30, 2006

Get hold of the right boogeyman!

Sir Larry Summers is correct when he says that “The global middle cries out for reassurance”, October 30, and one of the first things that has to be done is to make it very clear to that middle that it is not the 500 dollar per month worker in a poor country willing to do the same job that someone in a richer country aspires 3.000 for, who is the boogeyman. In fact globalization has produced extraordinary benefits to the middle but the problem is that parallel to it, there are been many other things going on that are eating up the income of the middle and thereby their capacity to enjoy it, to its full extent. Let me give you a concrete example. I pay for a mobile phone monthly plan a fee of 70 dollars and which gives me a free allowance of one thousand minutes. When suddenly, because of unforeseen circumstances, one month I had to use my mobile for 2.000 minutes, then every single one of the additional minutes was charged at the mind-boggling rate of 40 cents each and which resulted in that I was presented with a total bill of 470 dollars, and this though my mobile phone company must have incurred in minimum marginal costs. Clearly some regulators are not working as they should, and this is one of the elements that is hiding the true net benefits of globalization.

October 27, 2006

Making the accountants more accountable

Sir, in what might be a preview of things to come when the banks further consolidate into some very few, you reported on October 27 that Charlie McCreevy, the European Union Internal market commissioner, argues that the big four accounting firms need to be shielded from potentially ruinous lawsuits and that he might thereto propose a cap on their liabilities. Since there is nothing such as a cap on the harmful consequences an irresponsible audit could produce, this cannot be the right way to go about it. Perhaps what is needed, as a quid pro quo for the much easier marketing of their professional services that being in one of the four signifies, is to tighten the screws on the individual responsibility within the organizations. By following the money you could easily establish who are the real direct beneficiaries of any audit and with that what accountants to hold accountable. You want to work in one of the big four, precisely because they are one of the big four? Great, but of course that entails much more responsibility! The good news is though that a commissioner has offered to cap your individual financial responsibilities to only 100 times your earnings.

October 26, 2006

Are we detecting some envy?

Sir, in your editorial “Italy can save itself”, October 26, you prescribe fiscal discipline and no one would argue with that. But, from there on, your suggestions seem more subjective. For instance when you hold that Italy absolutely needs to change from traditional family controlled ownership to general shareholder control this ignores the effects this could have on Italy’s social fabric. Also, we agree that incurring more household debt could be good but, to claim as you do, that this could signify the start of a virtuous cycle seems to be stretching the concept too far. On Italy’s families closeness and low household debts are we perhaps detecting a hint of UK envy?

October 25, 2006

The Italian need to reflect more on their business model for their Italy

Sir, Martin Wolf argues that “Fiscal tightening and reform can rescue Italy’s economy” October 25, among others because Italy has a plentiful reserve of women not working, though it is not very clear whether having more women working is the type of reform he suggests or a response to the lack of other reforms. If the first, we guess the Italians themselves would like to have a say before going down Wolf’s reform path.

That said and in order for the whole suggested exercise to proceed smoothly Wolf also mentions the need for sustaining domestic demand, for which he neo keynesially recommends that since the government has run out of borrow and spend power, the private households should now have a go at it.

Presenting OECD figures that show that in 2004 the ratio to GDP of medium and long term-loans to household was “just” 37 per cent against 114 per cent in the UK, he thinks Italian household have ample room for more debt, though many of us humans would tend to react with some horror over the UK figure.

Whatever, before taking up Wolf’s suggestions about going into debt and given that globalization acts in many and strange ways, we believe the Italians should reflect a bit more on their business model for their Italy.

October 21, 2006

The United Nations needs to get its diplomacy in order

Sir, whether Guatemala, Venezuela or a third country is going to be a two year member of the United Nations Security Council might be an important issue, at least for the candidates, but it does not justify that circus spectacle of 35 rounds of voting until now that shames the UN. With so many serious issues waiting to be tackled all over the world we cannot simply understand how UN diplomacy has not been able to evolve into concepts like the best out of 10, or sudden deaths.

October 20, 2006

How depressed could net real western wages be without globalization?

Sir, Samuel Brittan in “Globalization depresses western wages” October 20, discusses a very delicate issue where a wrong answer could lit up a fire of protectionism that would just make things so much worse, on so many fronts, at least in the long run. Mr Brittan puts forward some interesting thoughts on how to transfer some of the gains of globalization to the losers but before doing so we might need to understand better all the other factors that might be affecting how the benefits are currently distributed. For instance, the increased tendency of awarding, through patents and copyrights, so many small, medium and large monopoly rights and that has been running parallel to globalization, could indeed be reducing the net take home for most much more than the competition in the labor market. Also, in the case of the privatization of many public services, it might very well be that some weaknesses in the regulatory agencies have allowed for the capture of private rents to exceed the efficiency savings produced. So, in the name of the worker who for a low salary toils away in poor developing countries, let me ask instead; how depressed could net real western wages be without globalization?

October 19, 2006

We must keep the wwwinding road open

Sir, Lawrence Lessig as one of the leading voices in this issue is so right when in “Congress must keep broadband competition alive” (October 19), he urges us to forbid “business models that favor scarcity over abundance”. No one would question that the internet represents potentially one of the most important roads toward a better future. Just see how far we have come, in such a short time. It would be a real shame, bordering on criminal, to go for the fast buck and allow any kind of tollbooths that difficult the access to it, before we have even really begun to understand what could lie behind its next curve.

October 18, 2006

How to save ourselves from an ättestupa

Sir, if countries were open-ended investment trusts, then if the average lifespan was eighty years, a newborn baby should have eighty shares, a fifty-six-year-old consultant (like me) should have only twenty-four shares, and anyone over eighty should count his blessings and be happy with the one he’s got left. From this perspective, the representation of the young in our current democracy is null.

Lorenzo Bini Smaghi, in “How to save the young from the burden of pensions” October 18, describes precisely the conflicts that are getting more serious by the day as the graying of the democracies in Europe (and the US too) is reducing even more the low representation of the younger generations. This though is not a problem restricted to the developed countries. The World Development Report 2007 from the World Bank titled Development and the Next Generation is a truly hair raising reading that evidences our failings as a society and that most of those coming after us are giving up on participation and hope, with damned good reasons.

It is said that in Scandinavia, a long time ago, when the older people felt that they stood in the way of the young, they threw themselves off steep cliffs known as an ättestupa. In this respect Bini Smaghi, instead of talking about saving the young would be more correct phrasing it as saving ourselves, before they throw us down an ättestupa—for damned good reasons!

You step on one corner of the dry hide and up goes another

Sir, Martin Wolf gets it right when he ends up his series on China telling us that “A domestic spending surge is the best thing for China” (October 18) though we should remember that any and they lived happily ever after would be quite premature. Since economics is like the dry hide and whenever you step on one corner to put it down up goes another, the problem of increasing Chinas domestic consumption is that on the margin a society going from bicycles into cars, might place extreme pressure on some other serious bottlenecks in the world, such as oil. But then again why should the Chinese refrain from consuming oil when for instance the US on a per capita basis gobbles it up a twelve times faster rate.

October 17, 2006

The basics are ignored at your own peril

Tony Jackson gets the point when in his “Fingers could get burned as hot money floods infrastructure” (October 17) he quotes a banker saying “what matters is not what the contract says, but whether in the long run the electorate will tolerate it.” South America is littered by privatizations gone wrong because of much advanced financial engineering that somehow forgot to take the basics into account.

A couple of years ago when the hundred-year-old private electric utility company that served my hometown (a South American city) was taken over by an international player, it became within a short time leveraged up to its hilt in debt, and I suspect also poison pills and golden parachutes, and I just knew we were heading into the wrong direction. When I now read about all the consolidations in Europe, which can only distance consumers from their day-to-day local electrical engineers and place their needs in some distant trading rooms, I feel the same. It is clear that sooner or later all those high valuations paid by financial wizards purchasing utilities and that are expected to be repaid by the European electricity consumers, will shatter everyone’s blissful ignorance.

Get the banks back into doing credits

Sir, the banks are there to provide a safe haven for savings but also to promote growth and distribute opportunities through their credits. Over the last decade we have seen an almost obsessive effort by regulators to drive out the risk from banks with none of them really giving an iota about the other two objectives. Are we then to be surprised that the whole credit giving business is going underground hiding out in hedge funds and other sort of murky places? You now propose that “Regulation must not hedge funds in” (October 17) and though we fully agree with what is said we still have a lingering feeling that what we really need to look for is how to get the banks back into doing credits. As the average central banker will never be able to comprehend that we also run risks trying not to run risks and that risk is what going forward is all about, diversifying the regulators might be a good place to start our quest.

October 05, 2006

What about some more fundamental accountability?

Sir, what a creditor really wants to know from a credit analysis is how much money he risks to lose given that there is a world of difference between a debtor who can only repay ten cents on the dollar and one who, though defaulting, repays 90 cents. According to Paul J Davies and David Oakley, “New stress on recovery for rating agencies” (October 5) this is what the credit rating agencies now planning to do, about a decade after they were handed over the extremely profitable franchise of measuring the risks for the market and it begs the question of what to do with all the then useless ratings given until now. Could the credit rating agencies be sued? Furthermore the fact of changes in ratings that have nothing to do with changes in debtors but only with changes in the criteria used by the raters, illustrates perfectly the immense systemic risks bank regulators imposed on the world, ever since they arrogantly thought themselves capable of controlling risks.

October 04, 2006

Why don’t they?

Sir, Martin Wolf using deductive methods he attributes to Sherlock Holmes tells us “Why Beijing should dip into China’s corporate piggy bank” (October 4) something that seems quite reasonable for a country with many needs and that now should have about a trillion dollars stacked away in foreign reserves. The real Holmes worthy mystery though, which Dr Watson would certainly ask about is, why don’t they?

Be careful with lulling us into a false sense of security

Sir, Douglas Ferrans and Peter Scales write that “Investors are taking the lead to help save the planet” (October 4) and argue that “how quickly [the institutional investors] move their investments from high carbon to low-carbon companies will, to a large extent, determine our success in mitigating global warming. We need to make sure though this does not just become another script for a massively expensive Hollywood production about some world saving heroes.

Of course it is good that investors act responsibly but, if some of them are allowed to keep on maximizing pure financial returns, without any consideration of the environment, then our heroes will just fade away and all this brouhaha has served the unnoble purpose of lulling us into a false sense of security. I am certain the authors are aware of the risk.

October 02, 2006

An UN idol?

Sir, when you say in relation to the procedure of appointing a Secretary General in the United Nations that this is “No way to choose the world’s top diplomat” (October 2) you are absolutely right. The problem though is that no other procedure, except perhaps having the whole world’s population cast their votes simultaneously on the web, which is something we should strive for because at least it puts us in the right direction and which also, with today’s technological progress, is not really that farfetched as it seems.

Meanwhile, as a temporary stopgap alternative, maybe the world should come up with 15 suitable candidates, and then leave it formally to a lottery, which in fact is what it always has and always will be.

Is this any sort of formula for social justice?

Sir, Larry Birns and Eytan Starkman, believing that “Guatemala is antithesis of the ideal member for UN Security Council” (October 2), dutifully come up with a long list of arguments as to why this post should be given to Mr. Chávez´ Venezuela. All of them could be discussed but the icing on their cake must be when they say that “Mr. Chavez has introduced into the Bretton Wood’s international financial formula the concept of social justice”. In Venezuela, after almost eight years of Chavez´ 21st century version of socialism, petrol is sold at about 3 US cents per liter (12 US cents per gallon) and with that he is effectively transferring about 10% of the country’s GNP from the poor to those who use cars. Luckily for the world, his financial formula of social justice, has been duly ignored.

September 30, 2006

Sir, keep it simple please

Sir, in “Undead Pensions”, September 30, you describe well the risks that a higher than expected longevity could have for any pension plan, but be careful though that this does not turn into the perfect useful excuse that hides the much more serious consequences of too much optimism with respect to the estimated return rates. Now after rightly mentioning the role of the “real insurance company” you thereafter go into some not easily understood sophistications asking for “a market in longevity” and that if I read it correctly seems like a proposal for hedge funds that trade in longevity derivatives and cover themselves by going long in avian flu risks and look to settle their trades within their own lifetime. Financial Times in its great knowledge should never forget that there is also some wisdom and some value to keeping things simple, especially in such certain things as death and taxes.

September 29, 2006

In immigration you cannot and should not have the cake and eat it too

Sir, Marin Wolf’s suggestion that “Immigration can no longer be ignored” September 29, is a perfect example of how muddled this issue is since his prime recommendation that “the focus now should be on bringing in skilled people who are most likely to make a big economic contribution to the country” will of course only deepen that divide that makes unskilled labor even more willing to risk their life’s crossing it. When we think about the capital labor relation that economics is really all about going Wolf’s way makes us just think about “if only we poorer countries could classify the capital as skilled and unskilled”.

Wolf’s skilled/unskilled dilemma also reminded me of a new development of expensive houses close to Washington, where the new owners had to get together and build some low price houses, so that persons willing and capable of being firemen could afford to move in close enough to be able to arrive before the houses had burned down. Also, in the long term, it is very difficult to see how a country could be better off keeping the relative incentives for their domestic low skilled workers high, while imposing competition on the skilled ones since to me it sounds like a sure recipe to end up as servants to the newcomers.

Finally when Wolf tells us that “Countries matter . . . as communities with a shared destiny” he, as a columnist that thrives on globalization, should also remember that whether we like it or not, all these communities are part of a bigger humanity living on a small planet.

September 28, 2006

Ooops, we expected 30 seconds, or 30 minutes at the most

Sir, Timothy Geithner, Callum McCarthy and Annette Nazareth make a call for “A safer strategy for the credit products explosion” (September 28) and they clam us by giving credit to the industry for acting in advance of a crisis. But, since they also mention that “confirmations outstanding longer than 30 days have been reduced by 85 per cent” which sounds truly scary for any outsider like myself that would be expecting 30 seconds, 30 minutes at the most, I guess we all better knock on wood and pray they are right and that we are not riding on a full-blown crisis, only to be confirmed when the market really catches up with what it is doing.

September 27, 2006

Don’t suppress the fund’s board, allow it to function instead

Sir, Charles Wyplosz asks “Why not suppress the International Monetary Fund’s board altogether?” (December 27) and he is wrong. What you need to achieve though, and here I speak as a former Executive Director of the World Bank, a quite similar institution, is that the board has a chance to effectively perform its functions. Currently the board is literarily drowned in mind-boggling thousands of documents on thousands of issues. The day the management of the Bank and the Fund has to report on what they consider the best ten and the worst ten projects or programs, that day the board can really start working on what they should, instead of muddling away and diluting all of their voice on the grayish middle spectrum. What is stopping this from happening? The fact is that a list of the ten best and the ten worst is also an immensely effective tool for holding the management accountable.

I am looking for the 50 most influential bartenders, barbers and taxi drivers to discuss my blog

Sir, I just sent a letter commenting on a Martin Wolf article but I guess it is going to be hard for it to reach the presses now that he has appointed 50 of the world’s most influential economists to discuss his articles. What a splendid idea! I as a much smaller and humbler voice will now try to look for the 50 most influential bartenders, barbers and taxi drivers to discuss my blog. By the way with my choice of feedback I probably risk less to limit it incestuously to a club of mutual admiration.

"In the US we trust" becomes global term of economic faith

Sir, Martin Wolf’s “America could slow us down” (September 27) somehow ignores the possibility that just as the Americans did when they accepted the “In God we trust” printed on their bills as an act of faith when the dollar abandoned its convertibility into gold, the world is now willing to live with an “In America we trust”, at least while there is such a world shortage of better alternatives. If this is so, one could argue that we have still far to travel on the roads of the American current account deficit currently used by the world to dollarize since the fact is that, if you want to lay your hand on a dollar, you have to sell or give something for it.

Frightening? Yes, but is not the world itself a frightening place that needs many acts of faith in order to make life bearable?

September 26, 2006

What they need is some good ghostbloggers

In all modesty I have what I presume is the best blog THIS ONE, but if I dared check it, it probably receives very few clicks. In this respect I found Gideon Rachman’s “Apostles of the blogosphere may just be political Pooter” (September 26), where he describes the unsuccessful efforts of some politicians to create good blogs very interesting as it opens up new possibilities for establishing those PPP’s (Public Private Partnership) that are currently so much favored. As I see it many of our public sector figures are in deer need of a ghostblogger and I could be a good one, if only I could feed my needs some other ways, since blogs are, by all means, the poor man’s best ego trip.


Just no cell-phones or private consultants

Sir, as a reply to your article “MBA Students cheat the most” September 21, Guy Wroble replies with a suggestion of creating a SEC-like body “to police the academic performance of MBA students something that only has value from a job creation perspective. Instead examiners should develop open books exams because this does indeed reflect better the future working conditions of any MBA but they don’t do it, because they are lazy and it is easier to ask questions when designed for closed books. The way examinations are being done is stacking the MBA deck in favor of the cheaters, which presumably could have some negative societal consequences. The only tools I would keep out of any MBA examination rooms are cell phones and private consultants.

September 25, 2006

Stop egging them on!

Sir, on September 25 you tell us that “European critics inflict defeat on Wolfowitz” but reading it over and over again I cannot really fathom how you can even try to look for a victor in squabble where the only defeated will most ceartainly again be the poorest of the poor. We did not pick Wolfowitz, we might not like how he was picked, but the fact is that he was picked and given the extremely important real battles the World Bank has to fight out, it is now our responsibility to be as helpful as possible and call upon the discussant to reach workable agreements, instead of egging them on.

September 22, 2006

Is it time for a Victorian inflation measure?

Do we need a basket of consumer assets?

Sir Samuel Brittan in “It’s not he labour market, stupid” (September 22) talking about what his Victorian forebears did is sort of hinting at the need for a new inflation measure that instead of measuring the value of a basket of consumer goods just in term of dollars, pounds and what have you should also measure it in terms of a basket of consumer assets. Though perhaps too Victorian for many, it might not be a bad idea.

Tax gasoline rather than anything

Sir, since on the margin there is nothing that could help reduce the threath of global warming so much as to have the US reduce its gasoline consumption, and since on the margin there is nothing as effective for that than to tax it more, you are absolutely right when in your editorial (September 22) you spell out the truth telling your american friends to “Tax gasoline rather than sue carmakers”. This is what friends are for, even when the truth is so inconvenient that even an Al Gore does not dare to mention it. Next time though and since they are really in a full blown denying mode about their addiction, please do take the full step and make clear that they should tax gasoline… rather than anything.

How do you diversify for the investment advisor’s risk?

Sir, in “For many rich people, wealth is a consequence of being succesful, Peter Scholla, himself an investment advisor, tells us that “the rich through the hiring of independent advisers with broad ranging responsibilities and powers. . . end up employing a variety of firms” meaning private banks. This sounds like a good suggestion for a diversification technique although the follow-up questions would of course then be, how many independent advisors do you need to hire to diversify yourself out of the investment advisor’s risk?

We all need global communications to be a pure global commodity

Sir, Stephen Littlechild tells us that “Brussels has got it wrong on roaming charges” (September 22) and that “regulation undermines market discipline and incentives” which coming form a former UK electricity regulator could seem as a sign of very little solidarity with his brothers in arms but this is not so since until the fuel-cells arrive and free us from the need of the electricity lines the electricity sector is fundamentally different from the mobile telephone sector that has already been freed from the telephone lines. That said neither is Littlechild’s statement as pro free-market as it seem since there is currently no reason for not allowing free open global competition in the mobile phone sector. Having a good number of satellites flying around up there offering to connect us with anyone anywhere and turning communications into a pure commodity that is really what we the consumers are all waiting for, in Europe and everywhere.

September 20, 2006

Should we really give IMF management carte-blanche?

There is no doubt that the International Monetary Fund needs to evolve but that “The fund’s ancien régime will have to give up its privileges” in order for this to happen as Martin Wolf says (September 20), is not a foregone conclusion. Reducing the European representations, allowing the managing director to be from any country and giving more independence to management which are the three things that Wolf consider needed seems a bit like putting some order in your desk while you are thinking about what to do.

Wolf mentions that the IMF has the potential to play a valuable part in managing the world’s transition to an integrated global financial system and tough it sounds very right it would be good if he shared with us some concrete examples of what this would entail so that we can better share into his act of faith. As an outsider that has very respectfully questioned many of the Fund’s actions over the last decade, before giving what in Wolf’s French amounts to a carte-blanche to management, the least I would expect from them is a detailed plan of action which of course should also include the terms on which they themselves will be held accountable to stop them turning into even a less legitimate new ancien régime.

September 19, 2006

Why don’t you just try moving in together

Sir, I found Gideon Rachman’s “Clashing civilisations on the banks of the Bosphorus” (September 19), both interesting and confusing. Though I must confess ignorance about the specifics of the Turkey-Europe issue the fact that when it comes to sensitive issues such as borders knowledge does not guarantee much either I dare to put forward some thoughts that came to my mind.

The first is whether in a world that is globalizing you should still be looking to draw the borders along their natural lines, Bosphorus, cultures and what have you, or whether you might be better off placing those borders on more greyish terrain so as to not exasperate the differences. The second question, more pragmatically, is if instead of marrying why don’t you just move in together and see how it goes. You should never forget that a relation is always a two way street and so even while Europe might like the set up, Turkey might not. Finally, in case of separation, the “I am not good enough for you” has shown itself innumerable times to work much better than any alternative, not only because it is also frequently true.

September 18, 2006

Help parents to pick among school-brands

Sir, James Tooley in his “Low-cost schools in poor nations seek investors” (September 18), explores the immense possibilities that private sector education has to offer the poor in countries where weak institutions do not allow for good public sector education, and he is very right about it this especially when considering that competition is also useful for keeping strong public institutions strong. He also correctly hints at the important role that school brands could have in developing good standards but this is of course only as long as the value of the brands are based on educational facts and not just publicity stunts. In this respect we recently read about some extremely simple tests that the World Bank used in Peru and that by just measuring the number of words a child could read in one minute, were capable to tell very much about the quality. These tests which empower parents to navigate between school “brands” during those vital early years of their child’s education are extremely important tools, perhaps even for rich parents in rich nations.

September 13, 2006

IMF is enyoying the calm in the eye of the hurricane.

Sir, in his “Why bad news for the Fund is excellent news for its clients” September 13, Martin Wolf tells a story of countries that have finally learned that there is such thing as a limit to the inflows to your economy that can be productively digested but, since they do not want to stop these inflows by allowing an appreciation of their currency, as this would make them lose job-creating competitiveness in a global world, they instead accumulate foreign reserves. Does this mean that the problem is solved and that IMF is no longer needed? Of course not! The only thing that is happening is that instead of spreading around the imbalances around the world we are now putting them all in the same basket, the US and clearly when that unsustainability is not longer sustainable, and then IMF will be just too much back in business. Let us pray that IMF does not use this calm in the eye of the hurricane to diversify into other businesses but to build up their forces and their spirit to confront the perfect storm when it arrives.

September 12, 2006

The value of the inflation figure really depends on what you need guidance for

Sir, Stephen Cecchetti though making a good point explaining why “Core inflation is an unreliable guide” September 12, ignores the fact that depending on what you really are looking for guidance on, headline inflation might be just as off the charts. If we need to measure inflation for an “average” worker to make a cost of living adjustment then headline inflation could be alright but, if the inflation figure is to be used by an investor to make sure he is not losing purchasing power, then headline inflation might not mean anything at all. As an example let us imagine a world with just one product, a house, that can be either bought or rented. Since inflation as normally measured reflects the cost of renting houses and not their prices then, if the rent is not increased you will record zero inflation, even though the reason for it was that much savvier investors were all running to buy houses to protect their purchasing value and avoiding to rent like pest. When you consider that many public debt issues include inflation adjustments clauses one could be tempted to ask if the real meaning of inflation is truly transparently disclosed.

September 11, 2006

What institution is not maladapted?

Sir, in the editorial of September 11 you mention the World Bank Group as maladapted for life in this century but, frankly, what institution is not? Although we believe, as much or more than you that the World Bank has a vital role to play in a world of ever-growing interdependency we are not very sanguine about the possibilities of it being adequately reformed when the reformers themselves are those truly maladapted countries who do all they can to hang on to the illusion of being independent.

On another issue and observing how in the fight against corruption there seems to be more and more work to be done each day, we cannot think of one single reason why you feel the need to hit down so hard at Mr Wolfowitz qualifying his drive at it as obsessive. I have no doubt that the billions of individuals that suffer at the hands of corruption would all love him to be obsessive about fighting it, as long as he is was also effective.

September 09, 2006

About life in the buffet lane

Sir, this week, September 9, Dear Economist had to answer the question how to get the most out of a buffet and without falling into the trap of complicating life with analyzing whether the marginal utility of that extra carb lies on the frontier of the efficiency curve of the calories where it intersects with best value per spoonful, something which would be very hard for us normal economists without PhDs to follow, he does a superb analysis of the motivations of the kitchen telling us, if a restaurant, wait until the end since they want to fill you up early with the cheap stuff or, if a wedding, go for the hors d'oeuvres since they’re out to impress you and wedding cakes make lousy fireworks.

These are valid suggestions indeed and they would suffice for most occasions. Nonetheless knowing a bit myself about life out there on buffet lane, where sharp elbows compete, let me just add a couple of pointers. Mind you, just in case, for the record, let me assure you that I have never ever tried them myself, as I would hate to get entangled with some transparency advocates just because one of my parents spoiled what would otherwise be the perfect genetic map of a gourmet by spilling gourmand chromosomes all over it.

First, just as a precaution, always remember to keep a plastic bag in your pocket, for your doggy. Second do not ever sub-estimate the value of privileged information and so while looking like you’re looking for the men’s room always try to get a peek into the kitchen to see what’s cooking. Finally, numero uno, workable everywhere, even in private weddings, is to put a ten dollar bill into the hands of a waiter of your choice and then relax knowing you’re in for a special treat.

Ignorance is vital to keep the economy going

Sir, in your editorial “Back to work for the world’s investors” (September 9) you wisely remind us that “new paradigms often turn out to be new ways of losing money” but when you then, after only one paragraph, mention favorable possibilities in the trading of options on market implied volatility, this also reminds us of that old paradigm that says that investors go for what they least understand, since this is what allows them to harbor their largest illusions.

As someone who has extolled the virtues (and bliss) of ignorance since it helps to drive the search for greener valleys that is such an essential component of economic growth, I have been somewhat leery about the power of the web to spread too much knowledge. Luckily the duration of the information imprints are also shortening and so therefore we see that Argentina’s public debt is already back on the investor’s menu.

Finally let me congratulate you on your valiant effort to raise some sympathy for the hardships of investors and fund managers, even though it might not suffice to console those who only get their income through a salary exposed to the jaws of the global crusher.

September 08, 2006

What is really meant by international support?

Sir, Krishna Guha reports from Washington (September 8) that “The World Bank is to seek international support for a new push to help poor countries recover assets stolen by corrupt leaders and held in banks overseas” but that “Many governments have been skeptical about the plan, fearing it would overshadow the bank’s development objective, slow down disbursement of aid and lead to arbitrary decisions on which countries get help.”

As a citizen of a developing country I cannot help bit to reflect on the fact that if it only were we the citizens who voted on this issue, and not some of our governments, Mr Wolfowitz would count with all the international support he could ever wish for, not only with respect to the poor countries.

The confusion is global

Sir, yes globalization is indeed a difficult and confusing issue when even a Nobel Prize winner as Joseph Stiglitz can tell us that “We have become rich countries of poor people” (September 8), totally ignoring that this has less to do with globalization and much more with how the richness is distributed locally in each country.

Also on the issue that “so many countries end up with unmanageable debt burdens” he seems to blame it primarily on that those debts were contracted in foreign currencies, exposing it to global volatility and suggests as a solution that developing countries should be able to borrow in their own currencies or in a basket of currencies, but blithely ignoring the fact that most unmanageable debt burdens are just the logical consequence of the governments having contracted excessive debts for the absolutely wrong reasons.

As a citizen from a developing country I can testify that when your country cannot pay its debts because its government has wasted away the resources you really do not care whether you problem is in dollars or in pesos. Besides, if in dollars perhaps the mistakes are even more globally shared (haircuts) since, if in pesos, most of the cost, through inflation, would fall mostly on your own poorest poor.

Finally as to the high volatility of the global markets, I cannot but invite Mr. Stiglitz to try some of our attractions and then he would really be able to talk about volatility. As a financial consultant, I have seen hundreds of good projects go belly up precisely because they were not funded in dollars but in local currencies, when inflation and interest rates teamed up to overnight transform what were ten year repayment terms into effective ten months.

September 07, 2006

We must stop the emergence of a global lumpenproletariat

Sir, Desmond King and David Rueda do a very good job at scratching the surface of the immense problem with “Cheap labour is creating an outsider class in Europe” (September 7), especially since the problem is not only Europe’s; it is happening all over the world; the problem is growing rapidly so much that non-standard jobs are already standard in many countries; and as they mention it leads to a tendency of equating cheap labour with second-class citizenship, although perhaps the term ignored citizens would be even more appropriate.

There is an urgent need for the world to find ways of truly assimilating within their societies all these new non-standard workers, informal sector workers, illegal immigrants and workers that work in the everyday growing illicit activities because if we are ever going to have a chance of putting the global house in order, for instance in terms of protecting the environment, the last thing we need is the emergence of a global lumpenproletariat.

One of the real challenges we face finding solutions to these problems is the fact that since there is so little data available about these sectors our PhD researchers have nothing to run their regressions on, which makes many of them stand at loss as to what to do, and has them instead going back to study, again and again, the plenty data available about the formal sector and its standard jobs.

By the way the problems that we confront here are not really related to the issue of labor being cheap since the other side of exactly the same coin, is just that labor is too expensive.

September 06, 2006

When does the “loss” really occur, when the worker has become globally uncompetitive or when his job finally disappears?

Sir, Martin Wolf, back with vigor, tells us that “We must act to share the gains with globalization’s losers” (September 6), which sounds right but when he then says that “being opposed to trade is no more reasonable than being opposed to other sources of higher productivity” he also reminds us that there really is no reason why we should make a case of specifically differentiating losers from globalization from losers affected by other factors.

Fact is that whenever there is a more efficient alternative to deliver goods or services elsewhere but countries are not using them because of other considerations, like wanting to assure employments at home, these jobs are effectively placed on artificial life support and so the “loss”, when the jobs finally disappears, has much more to do with a reduction of the subsidies or the cost of keeping them, than with globalization. For instance in the case of the orange growers of rich Florida and that are now kept in business by specific duties on orange concentrate that in some cases have been equivalent to more than 70% ad-valorem duties, the already existing losers are those consumers of poor Arkansas that have to pay a higher price for their morning juice.

By the way the whole concept of “losers” is wrong if implies having to win all races, since the real losers from globalization and from all other sources of higher productivity as well, are those that hang on too long on days gone by without moving on.

September 05, 2006

Seems migration estimates were wrong all over

Sir, it was interesting to read John Kay’s piece on “How the migration estimates turned out so wrong” (September 5) where he describes the serious underestimations made in in official studies commissioned by the European Commission. These estimates stand out in stark contradiction with the extremely high unofficial estimates of millions I was told by my close to panicking European friends and family. From what we now see the estimates were normally distributed with reality coming out close to the average.

Bank ghostbusters?

Published in FT September 12, 2006

Sir, David Skeel ("The ghost of a crisis in equity funds hides real benefit", September 5), tells us the reason equity funds and hedge funds are "the ghosts of the market's future" is that they "may increasingly assume many of the functions traditionally handled by banks" and "use a wide array of financial instruments now available to hedge the kind of risks traditionally borne by the banks". If he is right then that would make them more like the ghosts of banks past and also turn the banking regulators in Basle into some slightly foolish-looking ghostbusters.

Global stability depends on globalization

Sir, Jan Kregel and William Milberg in their “Global stability rests on sharing the gains” (September 5) get it quite right in their title but from thereon their message seems a little bit muddled, perhaps because the authors are still suffering that wall-syndrome that makes us all want to believe you could isolate yourself sustainably from your neighbors.

Globalization, in any form, is unequivocally here and is as a bare minimum seeping through all borders with its environmental impacts and its spread of nuclear arms capabilities. Of course there are gains, and pains, to be derived from globalization but in order to understand them better we must move away from looking at short term data like this year’s GDP growth or last year’s unemployment rate and find ways to measure it more in terms of where we would have been without it, after a couple of decades.

For instance when Kregel and Milberg mention that in “the US, a strengthening of the pension systems, a substantial increase in the minimum wage and the provision of universal access to health insurance would protect against the unequal effects of globalization” they create false expectations. Better pensions and a health insurance could indeed, if provided independently, by redistributing some of the profits, help to aminorate some local inequalities (not global) but an increase in the minimum wage would just directly eat away on the possibilities of competing in the global markets, thereby willingly renouncing to capture some of the profits that could be shared.

This comment is not intended to criticize the authors but to try to illustrate the complexities of the issues. I am the first to admit taking some wrong turns in this debate, a couple of times a day.

Let us then wish for a good backlash

Sir, Gideon Rachman in “Why the world may regret the end of the neo-con era” (September 5), warns us about a possible backlash that could “take America back into isolationism or a cynical abandonment of the promotion of democracy”. This sounds indeed like very awful possibilities, until you look a little closer at the significance of the terms. For instance, doing foreign affairs “my way”, “on my own and with “God on our side”, is in fact just another very real type of isolationism, no matter how many times you visit your McDonald’s across the Rio Grande. From this perspective a backlash could be good if it leads America to a more participatory global responsibility.

The same could be said about democracy since when we outsiders observe the ever increasing powers of the lobbying industry in Washington and on how the representation of its younger citizens is diluted by the aging baby-boomers, some of us would argue that it could be good for America to take a time out from selling its democracy worldwide, so as to give their own an overhaul first.

That said what we truly need to worry about is if a backlash would change America from having a we-care-for-the-world attitude into a we-don’t-care-a-damn about them but that does not seem to have much to do with neo-cons either, as they sometimes have shown to care just a bit too much for their own good (and ours).

IMF cannot be the independent central bankers' clubhouse

Sir, In your editorial "What is the IMF for?" (September 1), you qualify the original formulas used to assign the quotas determining responsibilities of nations to deposit cash and the rights to borrow it as "arcane". Yet you seem to favour a recalculation that will just produce a reshuffling of the local interests. In a world where we see multinationals getting rid of their "home country", it might instead be time to introduce some representation in the International Monetary Fund that is not bound by pure arcane geographical considerations.

You mention a lack of credibility and legitimacy but seem to believe this could be solved by giving the professional staff a free rein. It is much more difficult than that. One of the reasons the IMF has lost credibility is in fact the mistakes of its staff and these go much further than the handling of the Argentine debt crisis. If you take a closer look, you will find them backtracking on so many of their "cast-in-iron" policies. The world needs not less accountability in the IMF, but much more.

In my view the Fund's problem is that it has now turned into the clubhouse of the "independent" central bankers. What instead we need the IMF to do is to open up its executive board and diversify the recruitment of its staff so there is a better chance for the board to have a healthier perspective of what the IMF's role should be.

Though I agree completely with you that the top job should not be reserved for a European, since "he must now defend interests wider than those that put him in place", may I also advance the idea that it should not be reserved for a central banker either?
Published in FT, September 5, 2006

September 02, 2006

Who told Dear Economist that parents are more able negotiators than children?

Mr. Gill Harnsley, September 2, in sheer desperation over his young children’s behavior that drives him crazy and sometimes makes him spank them reaches out in what most probably he considers a last resource to an economist for advise and comfort. Dear Economist though, believing he is being consulted on a much earlier stage responds with the whole shebang about creating a rational financial incentive system where in an open cry market of stars and black marks their weekly allowances are to be decided.

Little does Dear Economist realize, perhaps he is not yet a father, that Mr. Harnsley’s problems are way beyond that stage and has much more to do with his children turning out to be more able negotiators than he, having already developed their own charts with immediate rewards that go from hugs to the screaming out of accusations such as, mommy, daddy spanked me!

At the end of the day, of course it is all an issue of negotiation but where does Dear Economist get the notion that the children are more hooked than their parents to immediate gratifications? Since he blurts out something about children’s high discount rate and short term horizons I must ask him to look around and see the many non-existent savings rates and fiscal deficits that are out there in the world of the parents, just to finance their current consumption.

September 01, 2006

It is still good old Swedish pragmatism!

Sir, as you so correctly state in “Sweden’s decision”, September 1, many countries around the world do indeed follow with much interest what those Swedes are up to and so it is very important to be very clear about what they really do. For instance when you mention to “combine a vigorous private sector with high taxes”, we know that many in the developing countries would read that as having high corporate taxes, though in fact in Sweden high taxes are applied primarily to the individuals, after fairly low taxes on the corporations have allowed the individuals to find well paying jobs. In this respect my reading on what changes are currently on the menu in Sweden, especially those related to payroll taxes, sounds very much like traditional standard fare of old Swedish pragmatism and that looks to make it easier to create those jobs they intend to keep on taxing, just the same.

August 30, 2006

The death of the hydra of inflation is also a myth.

Sir, Kenneth Rogoff’’s “The myth of how central banks slew the hydra of inflation”, August 30, correctly concludes after analyzing the effects of globalization that “there is some urgency in the need for central bankers to take greater pains to avoid taking too much credit for upside performance”. I myself, in my book Voice and Noise, wrote a while ago that “to put some check on their egos, every time I see a central banker I urge him to take a shopping trip to the closest IKEA so as to see who really should get the credit of controlling inflation as we currently know it.”

That said the issue is not really about who should get the credit for the death of the hydra of inflation, that is of secondary importance, as its demise might also have been a big myth. The way inflation is measurd by looking only at a cost of living basket while mostly ignoring the price of assets, might have in fact lulled us all into a very false sense of security.

When Rogoff mentions “The advent of modern independent and anti-inflation oriented central banks is one of the great success stories of modern economic science” I also beg to differ. We should all know by now that placing your full trust into a non-accountable club of mutual admirers will, more sooner than later, induce incestuous thought processes that guarantee disasters.

When I also read in FT that “inflation-linked municipal bonds, a small and relatively unknown part of the US municipal bond market, have had a surge of issuance this year”, I start shivering at the pure thought of the consequences of having to restate inflation figures.

August 26, 2006

Has Dear Economist gone raving mad?

Dear Economist, August 26, when asked by Mr. Holden, a father preparing his will, whether he should favor more the daughter that being single is therefore more likely to provide him assistance in his old age, responds with a proposal of paying for the care services by the hour. Has Dear Economist gone raving mad?

Mr. Holden is a member of that union free cooperative called family and so when at last it is getting to be his turn to have someone else carrying the load for him, and he should most be in need of maintaining the institutional principle that a father loves each daughter more than anyone, equally, here comes Dear Economist and wants to upset the whole relation. Come on, they never paid Mr. Holden by the hour!

Dear Economist has to be one of those disoriented persons willing to release society from its responsibility of caring for him just in order to have the illusion of getting that extra percentage of earnings on his private pension plan, and which he knows will anyhow disappear into foggy fees. Perhaps he wishes also to suggest some fast competitive tender procedure on the open market for the hourly fee when needing to urgently contract the services of a policeman.

No, Dear Economist should know that in view of the many current financial and economic uncertainties, now it is more important than ever not to tangle with the family institution, treating therefore every daughter in exact equal financial terms, yet giving each one of them that special love that makes them feel different.

When reading Dear Economist’s answer to Mr Holden it reminded me again of how rarely we see in sophisticated studies on social security and pension plan issues elaborated by multilaterals, such as the World Bank, any mention of the importance of family, much less of the importance of having many daughters.


Per Kurowski, a father of three loving daughters and who is aware that they, as individuals and as a portfolio, constitute the only real pension plan that he can afford but that he also wishes for.

PS. That he might end up paying for his daughters services by taking care of grandchildren well although that is a different issue it will neither be dealt with hourly fees.

August 25, 2006

Great, now it is that you are concerned with Chávez? You’ve got to be kidding!

Sir, Venezuela is a notoriously divided country and yet its current Congress has 167 members in favor of Chávez and zero against. Its government is handing out 100.000 Kalashnikovs rifles to sympathizers, subsidizes oil consumers in Massachusetts, and 8 years into their surrealistic 21st Century Socialism sells petrol for less that 4 cents per liter and effectively transfer about 10% of GNP from the poorest poor to those who have cars. On pure impulses, without telling or asking anyone, we are taken out of the Andean Pact. Crime and corruption is rampant and of around 20.000 prisoners in jail-hells half of them have not been judged and last year more than 400 inmates were murdered. And we could go on and on.

Yet, on August 25, "Watching Chávez" you now say that the world should be concerned because he is trying to buy himself with our money a very expensive place in the United Nations Security Council? Sorry, but as a Venezuelan citizen my reaction was… you’ve got to be kidding! Your only true concern should be your lack of concern for us.

What you really need to exorcise the curse!

Sir, Wayne Murdy is clear about what he can do in “Mining companies can help lift the resources curse”, August 25, and we much appreciate his efforts. That said and as a citizen of a “cursed” nation I know all his efforts will come to naught until we get rid of the prime voodoo rite used. When in a non-resource rich country you elect your governments they work for you and you pay their salaries with taxes, but when you elect them, for instance in an oil rich Venezuela, they get the keys to the vaults and you are thereafter reduced to having to beg them. If you then also happen to be living an oil boom things get even worse since with so much money and so much begging these very simple vault-guards begin thinking of themselves as gods.

Therefore since the only way to build a country is to make its citizens responsible for the resource dividends these should of course be paid out directly to them. Unfortunately there are just too many interests, everywhere, in declaring citizens not up to snuff and so as to be able to negotiate on their behalf. That day that Murdy instead of referring to a “partnership between companies and government” could refer to a partnership with the people, most of the curse would just vanish.

August 24, 2006

We were many and then granny gave birth

Sir, there’s a Spanish saying that goes “we were many and then granny gave birth” and it applies so well when a shrinking planet in need of so much urgent collaboration, for instance to protect its environment, could certainly do without many divisive issues, such as the patents on medicine.

When (August 24) you say that “the moral and practical case for providing poor countries with access to essential medicines, at a price they can afford to pay” is compelling, no one can disagree, but when you state that “The Industry’s incentive to innovate would be weakened if widespread erosion of patent protection enabled generic drug makers to eat away its profits” I must confess having at least some doubts, such if whether this type of protection does not also breed its own inefficiencies.

Whatever, in this vital matter of patents on medicines, the world needs and deserves some clear answers and also transparent ways of arbitraging among any conflicting objectives. Is it really impossible to gather a group of independent professionals with no conflicts of interest in order to get some credible answers? Since the United States has been much accused of working for the big laboratories, as an outsourced mercenary branding the weapon of trade agreements, they have obviously the most to gain from any clarifications, especially since in terms of their brush with bad reputation, lately, granny seems also to have been very active.

Letters to the editor

Do you think that all our comments to a newspaper such as Financial Times sent to are read right away by the editor of FT? Wrong! They go there so that a blue-collar editor can first make heads and tails out of our comment. Only then does it get forwarded to Sir.

Do you know who is a good editor? One fine day, you find yourself agreeably surprised by the fact that they have actually published your letter in FT and you say to yourself, “and this is exactly what I said, so this time I must have written it well.” I challenge you to go back to your original and find out how many changes were really made, some of them with feathers, but others with axes.

And so, talking about editors, this is an as-good-as-it-gets opportunity to thank them all.

For my letters to the Financial Times I have been able to identify two editors of my words, Heather Davidson and John Munch. If there are more of you over there, please tell me or consider yourself thanked in absentia.

For the editing of my one and (so far) only book, and of my many English-language major statements, my editor-in-friend is James T. McDonough, Jr., Ph.D., whom you can find through

Finally for all my writing in Spanish, it is my wife Mercedes who helps me out, not so much with feathers though, but I will not give you her e-mail address as she is exclusively retained by me. (Shhh! She doesn’t know it!)

And so, friends, the next time you read a posting in this blog and you don’t understand what Per Kurowski is talking about, most probably it is because his letter is still in the bottle, it never got there, or it was just hopeless.

Dear editors, once again, thanks!


August 21, 2006

A global monetary fund needs foremost to go global

Sir, we agree with Peter Costello that “The global monetary fund needs to reform its quotas”, August 21, but we do not believe this is achievable by reshuffling some local interests. In order to globalize the International Monetary Fund what it really needs is to get free from many of the constraints imposed by outdated geographical considerations. In this respect the world has to find ways of providing the Fund with a representation that is more independent from borders, perhaps even giving a Chair to the Constituency of the International Rovers by which we mean all those workers, skilled or unskilled, legal or illegal, who nowadays represent jointly one of the largest economies of the world.

It is also somewhat contradictory with democracy being promoted around the globe to still hear that the voting rights in multinational organizations should be based on some dubious relative economic weights. Dubious? Yes indeed! Who says that it is the gross national product of a country that should be determinant? What about the net results (quality of life), what about the balance sheet (market capitalization), what about cross border trade, what about idea generations, what about other real power sources?

When I was an Executive Director in one of the international finance organizations, the World Bank, 2002-2004, what most worried me was how extremely underrepresented “Mother Earth” really was. It behooves us more to get a fix on that.

August 19, 2006

Long-term benefits of a hard landing

Published in FT, August 23, 2006

Sir, While you correctly argue (“Hard edge of a soft landing for housing”, August 19,) that “even if gradual, a global housing slowdown would be painful” you do not really dare to put forward the hard truth that the gradualism of it all could create the most accumulated pain.

Why not try to go for a big immediate adjustment and get it over with? Yes, a collapse would ensue and we have to help the sufferer, but the morning after perhaps we could all breathe more easily and perhaps all those who, in the current housing boom could not afford to jump on the bandwagon, would then be able to do so, and take us on a new ride, towards a new housing boom in a couple of decades.

This is what the circle of life is all about and all the recent dabbling in topics such as debt sustainability just ignores the value of pruning or even, when urgently needed, of a timely amputation.

PS. When the moment came, they preferred to kick the can down the road. This would have had a better chance of success if they had eliminated the distortions in the allocation of credit to the real economy that the risk weighted capital requirements for banks cause. Unfortunately they did not, and the crisis can is still out there and it will roll back on us.

Can the markets do more for the moviegoer?

Mr. Arthur Spilling a socially conscientious moviegoer from Rochester, NY, commented that he felt a bit bad when watching a big-budget flick knowing he was paying the same price that those poor folks who were watching a cheap run-of the mill movies and so decided to ask Dear Economist August 19 in FT-Weekend, about why do not movie theaters have adjustable pricing.

Dear Economist answered with a set of very good arguments like that it was not really a question of movies being purchased but of screening time; multiplexes not wanting to sell cheap tickets that could be used to sneaking in on more expensive ones; no one wanting to be associated with discount movies (don’t know why? I would, if the pay is right); and the rumored possibility that the whole movie industry might in fact just be fronting for a much more profitable popcorn business.

I am no one to argue against such insightful comments but, nonetheless, especially since Dear Economist never really answered why more efforts were not made to get every seat in the house full, I felt that something went amiss. So let me try to deepen the discussion with humble comments.

First, if it really was screening time that was being sold, then of course the question would be how come Mr. Spilling who probably sat there with a partial view of screen and a totally stiff neck looking up could accept to subsidize a Mr. Poor Folk who most probably was enjoying something more close to a private screening. Then also Dear Economist, as an economist, should take us though the world of elasticity of demand in order to help us understand better how moviegoers would respond to differential pricing. One big issue is of course how markets could help? Is there room for a market in futures in-a-year-from-now-screenings-on-stage-4-at-7pm and, if so, could there be some derivatives through which you could cover bad movie risks and, if so, what critics might get a hold on the movie rating monopoly?

Honestly, I think we are just scratching the surface of issues that besides Mr. Spilling, must be concerning a lot movie producers and screen time or popcorn vendors in these times of confusing entertainment patterns, when movie industries are still able to sell an expensive experience based primarily on sharing it with others, in times when iPods are threatening with extinction such rock solid sharing concepts as “our song”.

Of course a more in-depth study could occupy Dear Economists a full year ahead and since we are aware there are many other economic anxieties out there in need of guidance, a good question would be how Dear Economist allocates his column space.

August 18, 2006

How does FT know this is not a teenage prank?

“A powerful cocktail of data for predicting recession” by Simon Ward, August 17, tells you that by mixing “four key indicators of monetary indicators, both lagged and current . . . blended together appropriately” you turn into a especially good crystal ball reader. Sir, how does FT know this is not a teenage prank?

August 17, 2006

Has the fat lady really sung for the libertarians?

Sir, as someone who has understood and accepted some of the fundamentals of the libertarian arguments but just as frequently opposed the too fundamentalist solutions they offer, I cannot but reject Michael Lind’s “The unmourned end of libertarian politics” August 17. The presence of any ideas and opinions should never be evaluated in terms of if they win or not politically, but in terms of how much they can contribute to the debate.

A world without extremes would be a very grey and dull world as Mr. Lind should do well remembering as he comes out as a sort of smugly satisfied self proclaimed pyrrhic victor.

And so, to all those libertarians out there, remember that there are many of us who hear you, respect (most of) you, appreciate much of your arguments and really feel you should keep on arguing just as we will keep on arguing our dissent.

August 16, 2006

Forget the global warming fund and help instead the US to overcome its addiction.

Sir, Jagdish Bhagwati proposes that “A global warming fund could succeed where Kyoto failed”, August 16, and argues that “it is hard to imagine the US objecting to making nations pay for their total pollutions . . . [as] Such as tax is only way of creating a missing market”. Where has he been?

The US is a country that has gone berserk consuming petrol and therefore a tax to put some break on that would be a perfectly natural thing to do, and not only for environmental reasons. Nonetheless, such is the depth of its problem that even their high priest Al Gore does not even dare to mention a tax, not even as a possibility.

Since a fund, in order to function, needs that all its partners share in its objectives, and values, Mr. Bhagwati should instead join us in telling the US, as friends tell each other the truth, that it is really not worthy of sitting down to discuss global warming, until they have reduced their per capita consumption of petrol, at least 20%. Besides, if successful in helping the biggest oil addict to fight his habit one would, in environmental terms, have accomplished more than any ambitious global warming fund could ever dream of achieving, in more than a decade, or two.