Tag Archives: Debt

The end of globalisation as we know it?

By Durukal Gun , Christian Keller, Sree Kochugovindan, Tomasz Wieladek – Modern globalisation has gone well beyond the trade of goods, as technology allowed for transfer of know-how and skills.

Since glottalization began in the middle of the 1800s, it has been through several different cycles. Now it appears to have reached yet another turning point.

Only recently has globalization matched the heights it reached before World War I.

  • First wave of globalization (1850s to 1914)
  • Protectionism (1914 to 1945)
  • Second wave of glottalization (1945 to 1990)
  • Hyperglobalization (1990 to present)

Among the clear beneficiaries of hyperglobalization are the emerging economies, which have become increasingly integrated into more and more complex global value chains. Their role in processing raw materials, and in value-added manufacturing and services has grown rapidly.

The first signs of opposition to hyperglobalisation emerged amid major demonstrations at the 1999 meeting of the World Trade Organization in Seattle. Concerns mounted in the wake of the 2008-09 financial crisis and subsequent global recession, reflected more recently in public resistance to trade and investment agreements such as the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership.

Discriminatory protectionist tariffs and trade measures are on the rise. more> https://goo.gl/K54eeK

The world is sitting on a $400 trillion financial time bomb

By Allison Schrager – Financial disaster is looming, and not because of the stock market or subprime loans. The coming crisis is more insidious, structural, and almost certain to blow up eventually.

The World Economic Forum (WEF) predicts that by 2050 the world will face a $400 trillion shortfall (pdf) in retirement savings. (Yes, that’s trillion, with a “T”.)

The US will find itself in the biggest hole, falling $137 trillion short of what’s necessary to fund adequate retirements in 2050. It is followed by China’s $119 trillion shortfall.

Much of the massive shortfall is baked into retirement systems; setups in which nobody, neither individuals nor the government, saves enough.

About three-quarters of the projected comes from underfunded promises from governments, with the rest mostly accounted for by under-saving on the part of individuals. more> https://goo.gl/UUisEk

End-times for humanity

BOOK REVIEW

Death of the Posthuman: Essays on Extinction, Author: Claire Colebrook.
This Changes Everything: Capitalism vs the Climate, Author: Naomi Klein.
Antifragile, Author: Nicholas Taleb.
A Vindication of the Rights of Woman, Author: Mary Wollstonecraft.
The Social Contract, Author: Jean-Jacques Rousseau.

By Claire Colebrook – The panic isn’t merely about civilisational threats, but existential ones. Beyond doomsday proclamations about mass extinction, climate change, viral pandemics, global systemic collapse and resource depletion, we seem to be seized by an anxiety about losing the qualities that make us human.

Social media, we’re told, threatens our capacity for empathy and genuine connection.

How did we arrive at this moment in history, in which humanity is more technologically powerful than ever before, and yet we feel ourselves to be increasingly fragile?

What contemporary post-apocalyptic culture fears isn’t the end of ‘the world’ so much as the end of ‘a world’ – the rich, white, leisured, affluent one. Western lifestyles are reliant on what the French philosopher Bruno Latour has referred to as a ‘slowly built set of irreversibilities’, requiring the rest of the world to live in conditions that ‘humanity’ regards as unlivable.

And nothing could be more precarious than a species that contracts itself to a small portion of the Earth, draws its resources from elsewhere, transfers its waste and violence, and then declares that its mode of existence is humanity as such. more> https://goo.gl/1nriI9

Our obsession with GDP and economic growth has failed us, let’s end it

BOOK REVIEW

Wellbeing Economy: Success in a World Without Growth, Author: Lorenzo Fioramonti.

By Lorenzo Fioramonti – The idea that the economic “pie” can grow indefinitely is alluring. The “growth first” rule has dominated the world since the early 20th century. No other ideology has ever been so powerful: the obsession with growth even cut through both capitalist and socialist societies.

But what exactly is growth? Strangely enough, the notion has never been reasonably developed.

For common sense people, there is growth when—all things being equal—our overall wealth increases.

Paradoxically, our model of economic growth does exactly the opposite of what common sense suggests.

Here are some examples. If I sell my kidney for some cash, then the economy grows. But if I educate my kids, prepare and cook food for my community, improve the health conditions of my people, growth doesn’t happen.

If a country cuts and sells all its trees, it gets a boost in GDP. But nothing happens if it nurtures them. more> https://goo.gl/k6G27r

Updates from Chicago Booth

By Robert Shiller – The human species, everywhere you go, is engaged in conversation. We are wired for it: the human brain is built around narratives.

We call ourselves Homo sapiens, but that may be something of a misnomer—sapiens means wise. The evolutionary biologist Stephen Jay Gould said we should be called Homo narrator. Your mind is really built for narratives, and especially narratives about other humans. That is why advertisers tend to focus not on a product itself, but rather on somebody doing some human action related to the product.

Narratives are contagious: they spread from one person to another. Some narratives disappear quickly; others can last a long time.

The stock market gives us opportunities to construct narratives. For instance, earlier this year there were narratives around the Dow-Jones Industrial Average eclipsing 20,000 points for the first time in its history.

In reality, that’s absolutely meaningless: the Dow started at 40 points in 1896, but it could have started at 50, or something else. Yet we constructed narratives around this moment.

Why do narratives affect economics? Because when we want to understand a depression or recession, for instance, we have to understand why some people will stop spending. Recessions happen when people stop buying things: they don’t buy a new car; they don’t buy a new house. So why not? They might say they stopped spending because recession struck, but that doesn’t tell me why the recession started. I think the catalysts for events such as that are related to narratives. more> https://goo.gl/hjpU4r

Related>

Why Wall Street Went Astray: Eight Ways To Humanize Finance

BOOK REVIEW

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return, Author: Mihir Desai.

By Steve Denning – Why did Wall Street go astray?

For most of the last several centuries, bankers and financiers were the pillars of society, the bastions of morality, the people in society that everyone respected.

Yet over the last few decades, Wall Street has become almost a synonym of evil. What went wrong? What can be done to restore the financial sector to the level of respect that it once enjoyed?

For people outside finance: Finance is deeply misunderstood, and we need to make it understandable to people so that they don’t demonize it. The way to do that is not through equations or graphs, but through stories. Finance is central to our lives and ignorance of it is very costly on an individual and societal level.

For people in finance: The core ideas of finance are quite life affirming and very noble — we should make people in finance aspire to them rather than expect so little of them. If finance is going to rehabilitate itself, and I do think it’s broken in many ways, the way to rehabilitate is not through regulation, or outrage, but rather returning to its basic underlying ideas, which are actually quite wonderful. In the long run, that’s how we make finance better — by getting back to the core ideas. more> https://goo.gl/Kr4Mnj

Deficits In Trade And Deficits In Understanding

By Omar Al-Ubaydli – To see why the current trade deficit is benign, we need to understand the relationship between trade and the dollar’s value. Greenbacks are like any commodity in that the more people want to possess them, the higher their price. People acquire dollars primarily for two reasons: buying American goods and investing within the United States.

If the United States is importing more than it exports, then American consumers are exchanging dollars for foreign currencies to buy foreign goods more than foreigners are doing the reverse, meaning that foreigners are accumulating lots of dollars that they’re not using to buy American goods.

So why has America been recording a large, persistent trade deficit, and why isn’t the dollar devaluing? It’s due to the second major difference (from 1970s): The investment-based demand for foreign currencies—which we momentarily set aside—has ballooned. People no longer exchange currencies just to buy foreign goods.

Consequently, the dollar no longer corrects trade imbalances. more> https://goo.gl/L1VHHr

The European Crisis

By Ross Douthat – Those problems bear a certain resemblance to those of our own politics. In Europe as in the United States, recent trends in culture and economics have elevated an educated upper class while separating it, geographically and ideologically and in every other way, from a declining and fragmenting working class. In Europe as in the United States, a growing immigrant population serves this upper class while seeming to compete with downscale natives for jobs, housing and social benefits.

In Europe as in the United States, the center-left coalition has become a kind of patronage arrangement between the multicultural meritocracy and minority groups both new and old, while the white working class drifts rightward and votes for Brexit, Trump and now Le Pen.

So far, so similar. But as counterintuitive as it may seem — after all, we elected Trump and they have not — in many ways these problems are worse in Europe, part of a systemic crisis that’s more serious than our own.

They’re worse because Europe is stuck with a horribly flawed experiment in political economy, a common currency without a common fiscal policy or a central political authority capable of claiming real legitimacy. The damage that this combination has done to the economies of Southern Europe, in particular, is striking and severe — years of elevated unemployment and stagnation, all of it imposed without democratic accountability by a mostly Northern European caste of bankers and politicians. more> https://goo.gl/VTMNjq

America is Regressing into a Developing Nation for Most People

BOOK REVIEW

The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Author: Peter Temin.

By Lynn Parramore – America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates.

In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future.

They make plans, influence policies, and count themselves as lucky to be Americans.

The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt.

They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. more> https://goo.gl/LKhYy6

How Norway Proves Laissez-faire Economics Is Not Just Wrong, It’s Toxic.

By David S. Wilson, Dag O. Hessen – For most of human existence, until a scant 10 or 15 thousand years ago, the human ladder was truncated. All groups were small groups whose members knew each other as individuals. These groups were loosely organized into tribes of a few thousand people, but cities, provinces, and nations were unknown.

Today, over half the earth’s population resides in cities and the most populous nations teem with billions of people, but groups the size of villages still deserve a special status. They are the social units that we are genetically adapted to live within and they can provide a blueprint for larger social units, including the largest of them all – the global village of nations.

Modern nations differ greatly in how well they function at the national scale. Some manage their affairs efficiently for the benefit of all their citizens. They qualify at least as crude superorganisms.

Other nations are as dysfunctional as a cancer-ridden patient or an ecosystem ravaged by a single species. Whatever teamwork exists is at a smaller scale, such as a group of elites exploiting the nation for its own benefit.

The nations that work have safeguards that prevent exploitation from within, like scaled-up villages.

The nations that don’t work will probably never work unless similar safeguards are implemented. more> https://goo.gl/r9OigY