Tuesday, February 26, 2013
Today, El Erian posted another analysis that Fed. interventions simply can't continue without serious consequences for markets and economic health. See here: But with all due respect, no, it won't all crash down. In a new, postmod age now. Erian still thinking old skool modern production model where firms invest in plant, produce, and then profit. Who does that? That economics model is over. We are in speculations mode of competitive uncertainty. The certainty of productive investment has been replaced by the productive investment of uncertainty. The markets can now profit from it, e.g. mulling over Fed minutes or gauging Israeli threats to stop Persian oil flows. But it happens competitively, which after all is what capitalism has always said it was about. One month commodities markets do well. The next they don't. Then bonds lose value, now they are in again. Equities drop but then find something to cheer about. The euro falls then it is the yen's turn, etc., etc. This is musical chairs economics. And so long as no one sector nor region is permanently left out of the flows, this new global system can, over the long term, stay in balance. So stop the nostalgia and let's develop new models (besides the let's raise global growth model) from this situation that are sustainable.
Flying under the radar of globe watchers: Saudi Arabia. Some writers think the monarchy is shaky but their evidence is shaky. This G20 state is doing well economically and even better politically. Confident after Bahrain, these men of the desert have learned to fish well and are netting the whole of the Near east thereby. Egypt is off balance. And with Sunni missionaries and schools spread out from Mauritania to Indonesia, sunni soldiers winning in Libya and soon Syria, backed up by unlimited funds, Saudi looks to clean up this year. And they have the US working as bodyguard. Plus, should the US destroy Iran (and the current global balance, don't think that Russia and China won't follow the US example and at the very least destroy their enemies too, e,g, Georgia and Taiwan), the Saudis can then bag Baghdad too. Before it gets to that, the fear premium will put a few extra petrodollars in their pockets. It is a win win; their time to shine.
Sunday, February 17, 2013
Political economy attracts me. There is much talk these about crony capitalism, which is the idea that business profits are made through collusion with politicians. But the market is more profound. Instead big profits are being made not simply by collusion with politicians, which has primarily only kept some firms out of bankruptcy. Instead the market is a shark tank where any investment in production invites hedge fund shorts and even eventual acquisition. Everyone is waiting to see which firm will be a chump and put money down for a future that will not exist. This is why today firms fire, not hire. They destroy factories, not build them. They let refineries rot not build new ones. Etc., etc. Chump firms that dare to invest in production are subject to a stock feeding frenzy and shareholder outcry.
The new leadership approach for professional associations for lawyers or scholars has become having the former, present, and future presidents interact and pass on knowledge to each other. Certainly Benedict will have a say on who will occupy his chair. He can also offer advice; two heads are better than one, right? But why did this happen? Not old age or infirmity. John Paul 2, the last pope was even more frail. Doing the bidding of some powerful secret society? Maybe. The Vatican is most worried about Europe, and Benedict could not figure out a strategy to turn around its fortunes there. Now Europe's current crisis offers an opportunity for the Vatican, but not under Benedict. A twitter account was a puny start. The Vatican possesses much more Virtual capacity and resources than that. The Catholic god and associated saints are perfect icons for a postmodern age of transmission flows. But the physical church is becoming quite burdensome. Its various, ongoing scandals are sapping the strength of the organization. The Vatican can succeed by turning the various parishes into franchises. Take a page from new capitalism: turn them into 'contractors' and thereby release Vatican responsibility for their misconduct.