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Tuesday, May 23, 2017

Two Swedish economists foresaw the backlash against globalisation — here's how to mitigate it

Rodrigo Zeidan, NYU Shanghai

The first article in the series Globalisation Under Pressure looks at work from the 1930s that anticipated the backlash against globalisation.


Economists Eli Heckscher (1879-1952) and Bertil Ohlin (1899-1979) died more than three decades ago. But it’s fair to assume that neither would have been surprised by the underlying causes of Donald Trump’s election as president of the United States, or Brexit for that matter.

Their Heckscher-Ohlin (H-O) model of international trade – developed at the Stockholm School of Economics in the 1930s – clearly predicted today’s middle-class discontent bellowing at the ballot box.

The two Swedes recognised the simple but too-often-overlooked soft underbelly of global trade and growth: prosperity doesn’t distribute evenly. And workers in bustling export industries benefit at the expense of those who face foreign competition.

Inherent inequality

Eli Heckscher’s work predicted today’s middle-class discontent bellowing at the ballot box. Slarre via Wikimedia Commons

Building on the H-O model, academic economist Branko Milanovic has described in an elegant chart how income around the world changed from 1988 to 2008. Only one income bracket failed to get significantly richer: those around the 80% percentile. That’s the middle class in the developed world and the upper class in poor countries.

Ironically, Milanovic’s graphic both resembles and reflects the proverbial elephant in the room that carried Trump to victory in regions such as the US Rust Belt, which are populated by those he characterised as forgotten Americans.

It supports Heckscher and Ohlin’s fundamental premise about the unequal consequences of economic growth – rare is the tide that lifts all boats. Milanovic demonstrates the disparities of our era of globalisation: the rich get richer, the poor get much less poor, and a big chunk of the middle class gets left behind.

The argument is relatively easy to understand. Assume that in a country there are only two industries, divided into high-skilled and low-skilled workers who produce high-tech content (product H) and low-tech content (product L).

Country A (say the United States) has proportionally more high-skilled individuals than country B (let’s call it China). Let’s further assume that both the Chinese and Americans have similar tastes for products. That’s a lot of assumptions, but the intuition should be straightforward: countries with a higher proportion of more educated workers have an advantage in producing more technologically advanced goods. It’s as simple as that.

In the absence of trade, the United States would produce more goods and services that use high-skilled workers than China. A simple demand and supply graph illustrates this:

Without trade, the United States produces more high-tech goods and consumers pay a lower relative price for them than in China. But here is the important point: in the US, the wages of high-skilled workers are lower than in China. Not lower in absolute but in relative terms.

Great programmers in the US are handsomely rewarded because the country can export the goods and services they produce. If Apple, Uber or Facebook could sell and operate only in the US, the demand for high-skill workers would be much lower than it is today, and the country’s lower-skilled labor force would not face such strong competition from abroad.

With trade, low-tech goods become relatively cheaper in the US. But, critically, people who work in low-tech industries there face the prospect of lower wages, even if the overall price of goods and services in the economy falls, because there is less demand for their jobs. Trade increases job growth in the US economy, but in some industries there are job losses.

Bertil Ohlin was Eli Heckscher’s student and collaborator. Wikimedia Commons

The argument is relatively easy to understand. Countries with a higher proportion of more educated workers have an advantage in producing more technologically advanced goods.

Mitigating harm

There’s plenty of other evidence that trade has an impact on income inequality. Reviews from 1990 and 1995 describe the old evidence on the relationship between trade and inequality; there’s a 2003 exploration of the link between opening up to trade and inequality in Argentina; and a review of cross-country studies with data from the 1990s and early 2000s.

More recently, a 2015 update of the H-O model has extended the empirical evidence to show how trade increases the technology level in all partners and a 2012 paper has examined urban wage distribution in China.

But all the empirical evidence on the importance of trade to income distribution comes to fruition in a 2014 paper that finds clear evidence that openness to trade increases wage inequality at lower levels of income (within the OECD). It also found there was no significant effect at higher levels of income.

The H-O model sharpens focus on the realities of our modern world. Inflation has been strikingly absent in the rich world during the 21st century due largely to the growth and efficiency of international trade. This has made products cheaper for the average American but, at the same time, globalisation has significantly spurred income inequality.

The model provides a direct link between the Chinese internal migrant working long hours in a Shenzhen factory and the Silicon Valley employee enjoying an elitist’s workday, replete with healthy snacks.

Many economists had mistakenly expected Heckscher and Ohlin’s canon to become less relevant, but that’s changing.

Recent work from MIT has provided the first and timely systematic evidence that the inequality effects of the H-O framework are much more profound and longer lasting than previously thought.

The fact is that too few people acquire better skills as quickly as needed; too few disenfranchised families relocate to more promising regions; and the combination of decaying skills and lack of mobility generates a downward spiral of discontent.

But all is not lost. Trade lifts all countries and contributes to improvement in productivity and the range of products at our disposal, and engenders myriad innovations that make modern life easier. Increased trade has even helped improve human rights and made companies more socially responsible.

And we have known the optimal policy regarding trade agreements for a long time but failed to implement it effectively. Free trade has a necessarily distributive effect. And the correct path is to have trade agreements with specific programs to diminish its negative impact on certain levels of income.

In NAFTA, for instance, the Transitional Adjustment Assistance (NAFTA-TAA) program had as its primary goal to assist workers who lost their jobs or whose hours of work and wages were reduced as a result of trade with – or a shift in production to – Canada or Mexico.

We should concentrate on designing programs complementary to trade agreements, such as the TAA, especially as we now know some of the distributive effects of free trade don’t dissipate easily as previously thought.

Ignoring Heckscher and Ohlin’s prescient wisdom has cost many people their livelihoods. The best path for society is to increase trade agreements but only if accompanied by fail-safes for the segments of society most likely to be adversely affected.

Policymakers and researchers forgot this for too long and we are now facing the backlash.

Rodrigo Zeidan, Associate Professor, NYU Shanghai and Fundação Dom Cabral, NYU Shanghai

This article was originally published on The Conversation. Read the original article.

Thursday, May 18, 2017

Brexit: London's loss in euro trade

Financial Times: London's euro clearing dominance has been in the spotlight since the Brexit vote, as Europe would like this returned. The FT's Philip Stafford and Daniel Hodson, chairman of FSNForum and board member of Vote Leave, discuss the merits of such a move.

 

Wednesday, May 17, 2017

Thug Nation: Venezuela’s broken socialist revolution

FT Video: Once touted as a beacon of revolutionary socialism, today there are fears that Venezuela is on the cusp of becoming a failed state. Andres Schipani and Ben Marino report on the spiralling violence and economic, social and political crisis facing the oil-rich nation.

Last year 29,000 people were murdered in Venezuela

 

The Economist reported last week:

YOU find them driving taxis in Buenos Aires, working as waiters in Panama or selling arepas (corn bread) in Madrid. The number of Venezuelans fleeing hunger, repression and crime in their ruptured country grows by the day. For years, Latin American governments kept quiet as first Hugo Chávez and then his successor, Nicolás Maduro, hollowed out Venezuela’s democracy. Now their economic bungling and Mr Maduro’s increasingly harsh rule are causing a humanitarian crisis that the region can no longer ignore. At last, it is not...He retains the support of 25% of the population and of the security forces (some from ideological conviction, others because of perks or corruption). His recent actions suggest that he plans to turn Venezuela into an autarkic dictatorship in the mould of Fidel Castro’s Cuba. 

Tuesday, March 14, 2017

Seth Meyers and John Oliver show how Trumpcare will kill many Americans

On Monday the US Congressional Budget Office report on Trumpcare — the replacement for the health insurance system that the Obama Administration proposed for Americans without employer provided health insurance — estimated 14 million people losing insurance in the first year 2018 and 24 million by 2026, with premiums soaring for older, lower-income Americans. The CBO says Trumpcare would cut the annual budget deficit about $30 billion a year in a $19 trillion economy. It adds: “In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.” That’s a fifth of the non-elderly population left to fend for themselves, nearly double the current proportion.

Last January, days before Donald Trump became president, he said in an interview that he was nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody."

The Los Angeles Times reports that among those hit the hardest under the current House bill are 60-year-olds with annual incomes of $30,000, particularly in rural areas where healthcare costs are higher and Obamacare subsidies are greater. In nearly 1,500 counties nationwide, such a person stands to lose more than $6,000 a year in federal insurance subsidies. Ninety percent of those counties backed Trump, the analysis shows.

And 68 of the 70 counties where these consumers would suffer the largest losses supported Trump in November.

The billionaire champion of poor whites is going to be responsible for the premature deaths of older supporters — in effect killing them.

Seth Meyers takes a closer look at Trump's outlandish claims on wiretapping and the Republican plan to repeal and replace Obamacare.

 

The Republican health care bill could leave many Americans without affordable coverage. Last Week Tonight's catheter cowboy returns to morning cable news to explain that to Donald Trump.

 

The New York Times says that two of the biggest tax cuts in Republican proposals to repeal the Affordable Care Act (Obamacare) would deliver roughly $144 billion over the coming decade to those with incomes of $1 million or more, according to a congressional analysis.

Wednesday, March 08, 2017

Interview tricks of Trump's chief mouthpiece Kellyanne Conway

Kellyanne Conway has a supernatural ability to derail any interview that paints Donald Trump in a negative light. How does she do it?

 

Mika: Here's Why I Won't Book Kellyanne Conway | Morning Joe | MSNBC  

 

Jake Tapper of CNN on interviewing Kellyanne Conway - CONAN on TBS 

 

 

Sunday, November 06, 2016

The Price of Certainty

A short film The Price of Certainty, by a Jewish survivor of wartime Poland:

If you have high “need for closure,” you tend to make decisions quickly and see the world in black and white. If you have a low need for closure, you tolerate ambiguity, but often have difficulty making decisions. All of us fall naturally somewhere on this spectrum.

http://www.nytimes.com/2016/11/01/opinion/the-price-of-certainty.html

Saturday, September 10, 2016

Foreign countries not US have first call on Apple's $200bn+ cash trove in Irish shell firms

It's not a recent development for tax offices to look behind sham/artificial structures in dissecting schemes to reduce tax. In recent years the abuse in the CT area has also focused on sham arrangements.

The House of Commons Public Accounts Committee in 2013 rejected Google's argument that sales of corporate advertising were completed and thus invoiced in Dublin as Google UK staff only partially handled sales issues with clients — "an argument which we find deeply unconvincing on the basis of evidence"; "Google has also conceded that its engineers in the UK are contributing to product development and creating economic value in the UK"; "HMRC needs to be much more effective in challenging the artificial corporate structures created by multinationals with no other purpose than to avoid tax."

Edward Kleinbard, professor of law and business at the University of Southern California, is a former chief of staff of the US Congress's Joint Committee on Taxation, and he testified at the US Senate hearings on Apple in May 2013. Prof Kleinbard wrote this week on The European Commission ruling that Ireland provided Apple with illegal state aid:

Tax here was just the instrument for delivering state aid. The US Treasury is expert in detecting tax shams used to disadvantage US tax collections, and should have recognized that the EC similarly is making a sham arrangement argument.

Kleinbard says Jack Lew, US Treasury secretary, and Apple are wrong when they argue that only the Internal Revenue Service has a legitimate claim to Apple’s $230bn in largely untaxed offshore cash, technically in Irish offshore shell companies but actually in the United States. "This is a misstatement of US law."

Apple says 65% of its earnings are foreign-related but it also contradicts itself by saying most profits are generated in the US. However, the the profits it books overseas puts overseas tax offices other than the IRS ahead in the taxing queue. Apple settled a tax fraud case last year with Italy and there are more to come.

For nearly 100 years the nation has followed the principle that the jurisdiction in which income arises (the “source jurisdiction”) has priority in taxing cross-border income. To prevent double taxation, a US company can claim a credit against its US tax bill for levies already paid to source countries. So US tax on a dividend repatriation is a residual liability of the company, payable only to the extent that source countries have not first taxed the income.

Kleinbard says the United States aids and abets US multinationals in their stateless income tax gaming, whose object is to skim profits from countries where income actually is earned, and then to deposit those profits in a zero or near zero tax receptacle. That is the source of Apple’s offshore cash hoard totaling more than $200 billion.

Distilling the facts to their essence, in Europe, Apple has deployed the almost farcical charade that its income from retail sales in Germany, for example, really is earned by an Irish subsidiary that hovers just beyond the German border, doing all the value-added work to offer Apple products to German retail customers, but never quite putting a foot down in Germany.

For the United States, the game is different, but just as artificial. Apple’s plan, authorized in broad outline by IRS regulations, was to create an Irish subsidiary, stuff it with seed money, and to pretend that the subsidiary had its own independent business agenda. Apple Cupertino and Apple Ireland then entered into an “arm’s length cost sharing agreement” of the sort that two independent drug companies might employ to jointly develop a new drug.

The Irish shell companies were available to Apple for massive tax avoidance with reported sales in several countries artificially suppressed. The EC views the structure as a sham and it's unlikely that it was commonly available to other companies.

What makes this a state aid case rather than a tax one is that there is no plausible explanation for Ireland ceding its tax authority other than its understanding that jobs would follow. The parties reverse engineered a methodology to yield an agreed minimal tax take.

Edward Kleinbard: Apple’s Ireland tax avoidance should spur major reforms

Fortune magazine: Nearly 50,000 people have signed two petitions calling on the US Treasury Department to launch an investigation into Apple’s tax practices.

Finfacts:

Apple's stateless firm tax claims likely broke Irish law

Apple's tax woes as Irish conventional wisdom fails again

Ireland's Apple tax appeal to European court likely to fail

EU vs Apple: Ireland's €13bn tax windfall will be shared

How Apple found a bigger tax loophole than the Double Irish

The fable of the frog and Ireland's response to Brexit

Apple's foreign tax rate fell from 12 to 2% in a decade

Top 10% rich world incomes up 40% in 20 years as growth slowed

Italy's lost decades but average Irish standard of living lower

Monday, August 01, 2016

One month after Brexit

The question for markets after the referendum was whether the UK’s Brexit decision would result in a short, sharp shock or a more fundamental re-set. One month on, uncertainty persists. The FT’s senior investment columnist John Authers assesses sentiment.

 

Talking Trade: The FT’s Sebastian Payne rounds up the week’s Brexit news, including International Trade Secretary Liam Fox’s first foray into diplomacy and Prime Minister Theresa May’s visit to Rome.

Lionel Barber, FT editor, and Janan Ganesh, political commentator, discuss how the UK’s three Brexit ministers — Boris Johnson, Liam Fox and David Davis — plan to negotiate exit from the EU, and how they will work

Wednesday, July 27, 2016

How Trump changed US conservatism

Ed Luce of the FT talks to political commentator EJ Dionne about how the Republican party has been transformed in recent years and how the rise of Donald Trump is changing conservative politics.

 

Monday, May 30, 2016

China’s economic miracle under threat from slowing economy

China’s economic miracle is under threat from a slowing economy.

A dwindling labour force and turbulent stock market are adding to the country’s woes.

The FT investigates how the world’s most populous country has reached a critical chapter in its history. Jamil Anderlini narrates.

Will the End of the Chinese Miracle Bring Down Southeast Asia? — Knowledge @Wharton

 

On April 14, 2016, the John L. Thornton China Center and the Hutchins Center on Fiscal and Monetary Policy at Brookings hosted a discussion examining challenges and opportunities facing the Chinese economy, as well as the financial and economic links between China and the world. Ben Bernanke, former Federal Reserve chairman, joins later in the discussion.
 

 

Thursday, April 14, 2016

Irish Times returns to property porn in 2016 with fawning editorial

Ten years ago the Irish Times' Thursday property supplement typically comprised 60 pages — mostly of advertising at €10,000 to €15,000 per page and puff pieces on expensive properties.

We first published this article in 2006 when property porn was at its height in Ireland:

Global Survey 2006: Cost of comparable house in Dublin, Ireland, could buy 9 in Houston, Texas, 3 in Amsterdam, 2 in Sydney and Tokyo

In 2005, the Collins English Dictionary defined property porn as "a genre of escapist TV programmes, magazine features, etc showing desirable properties for sale, especially those in idyllic locations, or in need of renovation, or both."

Ever seen the nauseating 'Lifestyles of the Rich and Famous' American television series that ended each episode with the grovelling host using the catch phrase "champagne wishes and caviar dreams"?

Ten years later after bubble and bust, The Irish Times newspaper is back in full flight with fawning editorial on expensive properties.

Today the main feature is titled 'Riverdance duo’s Howth home for €9.5m' with a strapline 'Moya Doherty and John McColgan, are downsizing. Their 9,000sq ft home is on the market (picture above).

Madeleine Lyons, property editor and special reports editor of The Irish Times, writes:

What’s prophetic is that the site they chose was one of the finest in the capital, and has only been enhanced since. This is reflected in the €9.5 million minimum asking price through Ganly Walters. Danes Hollow will be one of the best properties to come on the market in Dublin this year.

With further elegant homes in London, Manhattan and Martha’s Vineyard, Danes Hollow might be just another part of the couple’s portfolio, but it has that something special.

As the agent puts it: “Whoever buys this property doesn’t even know that they want it. It’s when they see it for the first time that they will know.”

What is part of the property porn genre is the bullshit or exaggerated lexicon of the property industry: so the couple of course have "elegant homes in London, Manhattan and Martha’s Vineyard" but because a place is expensive doesn't mean its elegant!

Property porn typically gives a reason why the property is put on the market and in the past The Irish Times has used "downsizing' as a reason when in fact the vendors were trying to settle bank claims — I'm not suggesting that this is relevant is this case but the fact is that the content is advertorial not objective information.

There are other properties of the rich/ well off that are featured today. Note again the bullshit lexicon used by the freelance writers.

Fishing rights and island included in Co Cork for €3.5m — A sensitive renovation and makeover, costing €2 million, makes this Georgian gem, on the banks of the Blackwater in Fermoy, one of the best of its type in Ireland

Modern drama with rural charm for €2.8m — This Co Meath house near Collon has been tastefully rebuilt and offers plenty of period features, while the extensive grounds are perfect if you – or your horse – like a bit of space

Edwardian elegance in Killiney for €2.8m — Extended in 1990, Steeplewood is a detached period house on beautiful gardens

Smart mix of old and new in Dalkey for €1.95m — Spacious home on Sorrento Road has new enclosed patio area at front of house

Donnybrook five-bed with oodles of potential for €1.4m — Bring your architect with you when you go along to view this one

Show-stopping gardens and seclusion on Sorrento Road for €1.35m — Secluded three-bedroom property with gardens as outstanding feature

A redesigned upside-down mews in Ballsbridge for €950,000 — Delightful town garden with giant ferns and evergreens, raised patio and spot lighting

Thursday, March 24, 2016

John Oliver on Trump's beautiful border wall

Donald Trump, US presidential candidate, has put a range of price tags on the wall he wants to build on the 2,000-mile border with Mexico. It would be 1,000 miles long, made of precast concrete slabs, rising 35 to 40 feet in the air.

John Oliver, the British presenter of Last Week Tonight, a US comic news show, says Trump’s estimates of the cost range from $4bn, $6bn, $7bn, $10bn and $12bn. Estimating the cost of the wall based in part on a piece by Glenn Kessler of The Washington Post, Oliver concluded that the wall would actually cost “conservatively” $25bn.

 

Wednesday, March 16, 2016

War on Drugs: How to make money selling drugs

A documentary on how a street dealer can rise to drug cartel lord with relative ease. 'How to Make Money Selling Drugs' is an insider's guide to the violent but extremely US lucrative drug industry. Told from the perspective of former drug dealers, and featuring interviews with 50 Cent, Eminem, Russell Simmons, Susan Sarandon, and David Simon (creator of The Wire).

The film gives you the lessons you need to start your own drug empire while exposing the corruption behind the war on drugs.

Finfacts 2015: Disastrous War on Drugs and ignoring the evidence

Finfacts Blog 2015: What happened when Portugal decriminalised drugs — Overdose deaths fell to lowest in Europe

 

The Economist wrote in June 2015:

WITH less than 5% of the world’s population, the United States holds roughly a quarter of its prisoners: more than 2.3m people, including 1.6m in state and federal prisons and over 700,000 in local jails and immigration pens. Per head, the incarceration rate in the land of the free has risen seven-fold since the 1970s, and is now five times Britain’s, nine times Germany’s and 14 times Japan’s. At any one time, one American adult in 35 is in prison, on parole or on probation. A third of African-American men can expect to be locked up at some point, and one in nine black children has a parent behind bars. [ ]
Reducing the prison population to European levels is probably impossible, for America is still a much more violent place, even if most districts are reasonably safe. There are roughly 165,000 murderers in American state prisons and 160,000 rapists. If America were to release every single prisoner who has not been convicted of killing or raping someone, its incarceration rate would still be higher than Germany’s.

Sunday, March 06, 2016

Living in Bangkok as a foreign correspondent

In this episode of My City, the FT’s Bangkok regional correspondent Michael Peel takes a closer look at the Thai capital. He meets outspoken critics of the ruling junta and those trying to help the country’s most vulnerable.

 

Tuesday, February 23, 2016

Big brands' cheap clothes and modern slavery

Trendy clothes are cheaper than ever. That sounds great for the people who buy them, but it's horrible for the people who make them.
 
Buying cheap clothing is easy these days, especially thanks to fast fashion labels like Joe Fresh, Zara, Forever 21, and GAP brands including Banana Republic and Old Navy, but despite commitments that slavery work conditions would be forbidden for example at contractors in places like Bangladesh, senior executives of big brands only respond with bromides for public relations purposes when there is an embarrassing story in the media.

Last April, John Oliver, the British comic, in a segment on his America show, "Last Week Tonight," examined the labour practices of fashion brands and he highlighted how unethical they really are.

The Huffington Post says that Oliver points out the problem of child labour has been publicized since the '90s, but thanks to clever and frilly ad campaigns and cover-ups, we as consumers, become blinded (and perhaps sometimes ignorant). That is, until we see something like the Rana Plaza factory collapse, which happened in recent years ago, flash all over our screens.

Oliver closes his segment with preparations of dirt-cheap lunches to be delivered to the offices of the bosses of Gap, Walmart, Joe Fresh, H&M and The Children's Place, making the point that the food had been produced by various outfits and like the clothes, the supply chain has been complicated — how could any company be responsible for their contractors' sub-contracting to more shady operators?

How would they like eating dodgy food from unknown providers?

Tuesday, December 29, 2015

The World in 2016 - Economist video

 

The Economist: Watch some of the biggest stories of the year ahead — before they happen. Early access to our latest film, featuring behind-the-scenes access to China's Olympic training camps, former Doctor Who star David Tennant, the biggest environmental problem you've never heard of, therapeutic virtual reality and much more.

World in 2016

More on El Niño: Irish environmental vandalism and Bandon flooding

Sunday, November 22, 2015

Thanksgiving dinner, Matthew McConaughey, Adele and contemporary prejudices

Matthew McConaughey, the accomplished and versatile American actor, was the host of the Saturday Night Live comedy show yesterday (21 Nov) and Adele, the British singer, was his special guest.

This Thursday is Thanksgiving day and this is a clip from the show with a typically dysfunctional Thanksgiving dinner complete with contemporary prejudices, where Adele's “Hello” keeps intervening as the only thing everyone in the family can agree on.

 

Larry David in Curb Your Enthusiasm - Black Man In A Suit

''Yeah, it is possible for black people to have other jobs.''

Larry David, producer, writer and actor, wrote for Saturday Night Live, wrote and produced the sitcom Seinfeld and created HBO's Curb Your Enthusiasm. He currently plays Bernie Sanders, the Democratic candidate for president, on Saturday Night Live.

Video

Beyond comedy, Jane Elliott, an Iowa schoolteacher, on the day after Martin Luther King Jr. was murdered in 1968, gave her third-grade students a first-hand experience in the meaning of discrimination. She devised a daring "Blue Eyes/Brown Eyes" experiment with labels on participants as inferior or superior based solely upon the colour of their eyes and exposes them to the experience of being a minority.

 

 

Wednesday, November 18, 2015

Solidarity with France after night of terror in Paris

La Marseillaise has been prominent in recent days as peoples across the world have showed solidarity with France after the terrorist murders in Paris.  

A YouTube video of the scene from the 1942 film 'Casablanca,' in which character Victor Laszlo (played by Paul Henreid) leads customers in Rick's Café bar, in singing an impromptu rendition of the French national anthem, La Marseillaise, in response to a group of Nazis who are singing the German national anthem.

La Marseillaise chantée par tout le stade de Wembley lors de France-Angleterre!

Wembley Stadium, London, prior to the start of the England-France friendly football game 17 Nov, 2015 — 4 days after 129 people were murdered in Paris in the worst terrorist attacks since the end of teh Second World War  

 

La Marseillaise (full, high quality) - Placido Domingo

 

Monday, November 16, 2015

Financial Repression: QE undermines pension funds and savers

 

Quantitative easing has been a serious problem for the pensions industry. Amin Rajan, chief executive of Create Research, explains to Long View columnist John Authers how the resultant volatility has reduced investment decisions to a shot in the dark.

According to the FT's Lexicon financial repression is a term used to describe measures sometimes used by governments to boost their coffers and/or reduce debt. These measures include the deliberate attempt to hold down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers. Financial repression is also used to describe measures to facilitate a domestic market for government debt and the imposition of capital controls. The combined effect of all these measures means funds are channeled to the government that would otherwise flow elsewhere. Financial repression in China is said to be the cause of its huge accumulation of foreign currency reserves. Similarly western governments were being accused of financial repression following the 2008/2009 financial crisis as they embarked on measures including quantitative easing, capping interest rates and creating more domestic demand for their own bonds.

Living in unique economic/ financial times; Interest rates at 5000 year lows

Wednesday, October 28, 2015

Economist Films: Prison reform in Norway compared with the US

Economist Films: More former prisoners are reoffending than ever before. It reveals the latest efforts to break the cycle in the first episode of the new Economist Films series.

 

In Norway according to Business Insider fewer than 4,000 of the country’s 5m people were behind bars as of August 2014. There were about 4,200 Irish prisoners on 30 Sept 2015.

Norway’s incarceration rate is just 75 per 100,000 people, compared to 707 people for every 100,000 people in the US.

On top of that, when criminals in Norway leave prison, they stay out. It has one of the lowest recidivism rates in the world at 20%. The US has one of the highest: 76.6% of prisoners are re-arrested within five years.

The Economist wrote in 2014 that prisoners are often released with no supervision and no help finding a job. That makes them more likely to reoffend. According to a report published in June 2014 by Pew, a think-tank, the number freed with no form of parole has more than doubled over the past 20 years, though this varies a lot from state to state. In Florida 64% of prisoners leave like this; in California the figure is less than 1%.

One US study found that within three years of release, about two-thirds (67.8%) of released US prisoners were rearrested.

In 44 US states the biggest mental-health institution is a prison, and police spend much of their time dealing with the effects of untreated mental illness (see article). But it is not the only one. British police spend as much as two-fifths of their time dealing with cases that involve mental illness, though few have the necessary training. Across Europe, 40-70% of prison inmates are mentally ill.

Badly educated men in rich countries have not adapted well to trade, technology or feminism

The Financial Times reported today that in 2015, the number of over-60s in jail topped 4,000 for the first time on record, more than double the figure 10 years ago. It is the fastest-growing age group in custody and the rise relates to recent convictions for sex abuse dating from past decades.