Couple of Interesting Articles That I Have Been Reading

It has been a while since I have last posted here and I have been relatively busy the last couple of weeks. Here are the links to several interesting articles that I have been reading on top of the numerous economics journals and numerous other magazines I have been rummaging through the last couple of weeks:

1. An article by Steve Mufson in the Washington Post on possible Federal Reserve signals that a rate hike is possible. Here's another article on this particular subject written by John Cassidy of the New Yorker. It has been an interesting signal by the Federal Reserve, headed up by Janet Yellen, that they will eventually raise interest rates, but there are conflicted signals on what the economic outlook is. I forsee a not-so-great economic outlook at least for the next couple of quarters.

2. Matt Rognlie's thoughts on Thomas Piketty's observations posted on the Brookings Institution website. Quite an interesting article that he has written and here's the full copy of his work posted again on the Brookings Institution website. He is currently a PHD down the street from where I live at the Massachusetts Institute of Technology and in this article, he comes up with interesting data that somewhat backs up Thomas Piketty's thesis, but refutes it in the most part. He should be one economist to be followed in the coming years as he publishes more works.

3. A charming German couple goes to the former capital of Greece and pays off their portion of the "German World War 2 reparations" to Greece. This is quite a lovely move by the couple on a very serious issue of Greece threatening Germany with seizing German property if they do not pay long overdue World War 2 reparations, but it just shows the desperation of a completely bankrupt nation with no money left in the bank.

4. An interesting article that actually just came out on my news feed approximately 30 minutes ago. It talks about how debt will hit emerging economies. As predicted by an earlier blog post of mine, a potential economic crisis will start when some of these emerging economies see growth slow, debt accumulate and possible defaults happen.

Thoughts on "Firm Leverage and Unemployment During the Great Recession"

There has been several articles, papers and books I have been reading during the last week. The one I will write about today is an article written by Xavier Giroud and Holger Mueller entitled Firm Leverage and Unemployment During the Great Recession. (For those interested in reading the paper, I cannot seem to find the PDF link online, but you can perhaps contact the two professors for a copy of the paper.) Both are professors of Finance and affiliated with the NBER (National Bureau of Economic Research) and the CEPR (Center For Economic Policy Research) , one at the MIT Sloan School of Management and the other at the NYU Leonard N. Stern School of Business. The paper is interesting in that it listed an interesting conclusion in that there is a strong correlation between high-leverage firms and job losses in response to the household demand shocks during the Great Recession. This is an interesting observation that both professors were able to make, but with any article there are significant gaps in which the data was compiled. Due to certain lack of data, I think there needs to be significant improvements to potentially the next paper that they can gather. 

The 3 potential improvements that the two esteemed gentlemen can make are as follows:

1. Utilize more wage/labor data that is available, which could perhaps include statistics by the Bureau of Labor Statistics. This could be utilized perhaps in determining relevant wage levels of certain households within the two sets of data between the change in both high-leverage (ΔLev 02-06 > Median) and low-leverage (ΔLev 02-06 < Median) firms between the years 2002 and 2006. By utilizing wage and labor data, you can also factor the significance that the drop in employment that are caused by both high-leverage and low-leverage firms especially in the realm of (ΔLog Emp) 07-09, which could possibly confirm the conclusions, especially under the Alternative Hypothesis: Growth, Productivity, Wages (Tables 8, 9, 10) sections of the data tables that the paper had presented. With this wage and labor data, there could be potentially another set of information the user could interpret about the changes that are caused between the two time intervals of which the data is measuring.

2. Another striking improvement that I could potentially see is a change in the dependent variables on the regression model that the two professors have used to compute their data. One possible way is to shift the focus towards labor/wages versus unemployment. With this new information, they could generate another new set of information, which could possibly further validate their results that are written under Firm Leverage and Unemployment (Table 2), Instrumental Variable IV Estimation (Table 3) and Industry Sectors (Table 4). With the change in certain dependent variables, they could see a change in the data results in Establishment Closures (Table 5), in Firm-Level Analysis (Table 6), Within-Firm Spillovers (Table 7), Alternative Hypothesis: Growth (Table 8), Alternative Hypothesis: Productivity (Table 9), Alternative Hypothesis: Wages (Table 10) and in the County-Level Analysis (Table 11). The main piece of data that could be changed is how they measured the two corresponding variables: (ΔLog (Emp) 07-09) and (ΔLog (HP) 06-09). By introducing a dependent variable into the design, they can add another dimension in their measurements in order to incorporate better analysis at the end of the day.

3. The last improvement that they could incorporate is by organizing the time and the date each locale  had a significant drop in a better way that represents the drop in employment versus the drop in housing better. Perhaps by compiling a couple of new data tables with different time ranges than just the standard ranges that the data used (02-06, 07-09), we can perhaps see where the most striking changes are and what pertinent macroeconomic results are corresponded in the findings. 

Overall, the paper is a fantastic read for those who are just getting into reading published papers on financial economics, but also an interesting find in that unemployment is correlated heavily to firms that tightened their debt capacity in the run-up in response to household demand shocks than to certain firms that freed their debt capacity. Maybe the authors weren't exactly correct in their predictions and percolations on potential ramifications to macroeconomic theory, but they found an interesting correlation in the data from their current research.

March Reading List

It has been a very snowy and bitterly cold February, so I got a lot of reading done this month, but here's my reading list for March, of which I have not included some of the books I have not yet started on the previous two months.

Econ Books:
1. Theory of the Leisure Class - Thorstein Veblen (re-read)
2. Capital in the Twenty-First Century - Thomas Piketty (reading it thoroughly)
Non-Econ Books:
3. The Origins of Political Order: From Prehuman Times to the French Revolution - Francis Fukuyama
4. The Limits of State Power - Wilhelm Humboldt
5. The Complexity of Cooperation - Robert M. Axelrod

14 Cheesy, but Funny Ways of Love as an Economist

I have stumbled upon this particular link, which is quite a comical take on economics. Fourteen quirky, but lovable charts that describe a Richard-light-hearted approach to Economics.

I hope everyone is staying warm, especially in this particular weather...

Greek Finance Minister, Game Theory and the Big Showdown

In an earlier and rather detailed blog post, I had talked about the Greek debt situation and the stories that surround it. I have decided to post another blog entry primarily about the game theory and the Greek financial minister, Yanis Varoufakis, especially due to his showdown with Germany and the developing crisis in the European Union. The news has just hit today that Germany has rejected the Greek proposal to extend the bailout program by an additional 6 months. The Syriza government had been under enormous pressure by both the European monetary authorities and the officials of various European financial ministries to continue the bailout program despite rejecting the program itself. This article will try to explain the background of the Greek Finance Minister, Yanis Varoufakis, in more detail, but also will go deeper into how his research interest in economics, Game Theory, has also come into play during the midst of this big showdown between the new leftist Syriza government and the European monetary authorities.

The Greek Finance Minister, Yanis Varoufakis, has now become very well-known within the politics of the continent due to his showdown with the European monetary authorities and his penchant for his plain dress combined with a defiant attitude towards what the Troika had committed to his native country of Greece, but also within the economic world with his unorthodox economic views. In two articles, one commentary article written by him in the Guardian newspaper several years back and another article on the left-liberal activist site, CounterPunch, it illustrates a man who is determined not to just change the policies of austerity and liberal capitalism in Greece, but throughout the entire European Union. In the first article, we can picture a man who was trained within the confines of mainstream economics, but had defined himself in 2012 as a Marxist. He did not describe himself as the prototypical Marxist, but one that is committed to changing the economic dimensions within Europe. In the article, he described the economics within the continent as one that is committed to the form of neoliberal capitalism, but his progressive politics of the left will be rejuvenated from the doldrums to saving European capitalism. From this article, we can see a man who is dedicated to the leftist ideology of changing Europe and the economics within the continent towards one that is certainly socialist both in policy and in application.

The second article describes Mr. Varoufakis' plans in detail about changing the dynamics of the European economic system into one that promotes growth and not austerity. The tone of the article also described how a previously unknown Greek economist had stared down the monetary bureaucrats of the European Union and sent some of them scared. It could be best said that Varoufakis had utilized some of his training as an economist, especially in the arts of game theory, to give what little the Greek government had previously into an enormous advantage over the people at the Eurogroup. For those, who are not familiar with Game theory, here's a short BBC article that explores the dimensions of the games (which include possible applications of zero-sum games and of the prisoner's dilemma) that Greece has been playing with the Troika, the Eurogroup and other European countries like Germany. He also has written an article in the New York Times on the big showdown with the European monetary authorities, which includes Germany and Angela Merkel. In the article, he lambasted how they "should not" be utilizing game theory with each other over the debt deal, but should be best focused on how to provide the average population a way out of desperate poverty and destitution. It does make a lot sense to anyone who has read his article, but Varoufakis has been utilizing all sorts of strategies that are based on game theory in dealing with the European monetary authorities! In an article by a popular Forbes contributor, Tim Worstall, there's absolute no room for game theory here! Regardless of whether most people have agreed with Greece's accession into the Eurozone or with the following policy decisions that the European monetary authorities have undertaken, Greece and the European Union are in trouble.

Exactly how much trouble are the European Union, Greece and the Eurozone in? A good question might be to ask about the other debt troubles that various European nations such as Spain, Italy, Portugal and even France have in the future. Germany is not even immortal with its enormous debt burden that it has also managed to start decreasing in the last couple of years, but another crisis could exacerbate the debt levels even in Germany which are already alarmingly high. I strongly disagree with a recent Economist article on how Greece could have made the Eurozone work better. Greece could not have made the Eurozone work better, as there are numerous other economies that are facing similar problems as Greece. I believe that with the Greek Finance Minister's dangerous moves may put the European Union and the Eurozone at its brink, but there is also ample room for finding a balance between the views of both Germany and Greece. By rejecting each other's counter-proposals, they are putting the world economy at risk with their latest proposals. Worried Greek depositors and international investors will now brace for the final showdown between Greece and the European monetary authorities. Let's hope we don't wake up to see an avoidable financial crisis.

Death of Economics, Interesting Book to read

I have been reading an particular interesting book, Death of Economics by Paul Ormerod, over the last week or so. I had chosen to read this book the previous month after rummaging through the large amount of books at my alum mater's economics section. Both the title of the book and the introduction jumped out at me. I read a couple of quick reviews, I decided to add this onto my February reading list. The book jumped out to me as an essential read to me because it shared Ormerod's views of conventional economics such as the many different various forms of modern conventional economics.

In the book, he viewed those adhering entirely to conventional economics as not particularly helpful for economic policy and for monetary policy. He said that their usage of complex mathematics, mathematical models and other complex terminology as having not caused tremendous success in predicting the horrible economic mismanagement that has been rampant in these times. He figured that a return to the political economy of Adam Smith and introducing more non-economists into the arena would benefit economics as a whole. By explaining a lot of his ideas in many well-organized, detailed chapters full of his thoughts and explanations, Paul Ormerod dissects the fundamental deficiencies of modern economics in solving even more complex social situations, while still presenting key information that is necessary for the understanding the basics of economics. In presenting pieces of important information and comparing an economy to ecology and not to a machine, Paul Ormerod has written an excellent introductory book for economics. I think it'll be a great companion book alongside Thomas Sowell's Basic Economics or Henry Hazlitt's Economics in One Lesson.

I highly recommend this book to anyone who wants a quick and fast read on economics as it is only 240 pages or so of relatively fast and quick reading. A great introductory book for those that want to get into the topic at first, but also see the deficiencies within the field as well.

The Greek Debt Situation, the Troika, Syriza and Few Thoughts

As eyes of the world has turned towards the recent developments in Greece, I can admit that this will be an interesting period of time for Greece and the other member states of the European Union. Following the election of Syriza in the latest election, the leader of the Syriza party, Alex Tsipras, has promised the Greeks an end to the crippling austerity that the Greeks have faced ever since the start of the European debt crisis in 2009. The party aims to boost economic growth through stimulating the depressed Greek economy through Keynesian policies that will the new Syriza government promises to generate economic growth and to promote "social solidarity". What has really shocked the markets lately is Syriza's promise to stop negotiating with the Troika that consists the IMF, the European Central Bank and the European Union. The government has promised to return to the government-heavy policies of the past and to negotiate a write-off in Greek government debt. The decisive action in the economic and the political policies of the Marxists and the Keynesians that make up the intellectual leadership for the now ruling Syriza government has ran into a lot of controversy with the mainstream economic institutions that has been bailing out the Greek government and the Greek economy. In this particular blog post, I can hopefully explain the Greek situation in more details, but also impart my opinion on the state of this interesting situation that has been developing in Greece and the European Union.

Debt Situation Background and the Economic Crisis
The debt crisis in Greece had started even before the 2007-2008 Global Financial Crisis with the entrance of Greece into the Eurozone and the overspending that occurred during the Olympics was blamed for the current debt crisis that had its seeds all the way back in 2004. While the Olympic Games was one of the many financial debacles that the Greek government has had in the last two decades, I would say it compares nowhere to the other pressing problems that led up to their debt implosion that occurred after the Global Financial Crisis.

A combination of a corrupt government bureaucracy that struck shady back room deals, a culture of endemic tax evasion and a burdensome public sector led to one of the most serious debt crises that any country has faced. It has been said that the corruption of Greek officialdom led Greece into the Eurozone by utilizing the services of Goldman Sachs to make their debt situation comfortable enough for the not as corrupt European bureaucrats to let Greece into the European Union. The mistake of letting one of the most corrupt nations in Europe to enter the Eurozone was compounded by the fact that much of this debt could have avoided if Greece undertook an immense political restructuring program that changed the way politics in Greece had been operating. From the bribes that the officials had extracted from the Greek taxpayers in order to bribe corrupt European Union officials to the bribes that Greek political parties had handed out in public sector jobs led to one of the worst possible economic environments in all of Europe. The public also engaged in one of the most institutionalized tax evasion schemes in the world. Here are two articles that explain the tax evasion problem that had plagued Greece: One published by the Economist and another by the New Yorker. The Greeks had also simply been living way beyond their means for a long time with the government deficit financed growth and when the financial crisis had hit the country, the entire corrupt Greek political and economic system fell apart.

The US economic crisis caused a huge breakdown in the global debt pyramid that had partially relied on the US mortgage-backed securities for further growth. With the entire debt pyramid collapse, there it unleashed an onslaught of bad debt and bad loans. It triggered a tidal wave of debt crises around in Europe and the worst basket case example in the Hellenic country of Greece. Countries like Greece that had largely been living beyond their means through cheap interest rates that the Eurozone had brought. Through years of unnatural interest rates and a horribly mismanaged national economy, Greece paid the ultimate price for being in the same economic zone with countries like Germany. The Greeks had to be bailed out several times and here's an article from 2012 that described the situation in Greece 3 years ago.

The International Lenders and Greece
The 'Troika' of the International Monetary Fund, the European Union and the European Central Bank had to bailout certain failed European economies, but they also wanted these economies to restructure their economies based on the rules and the regulations of the IMF's "Washington Consensus". Here's an article by the English economist, Dr. John Williamson, which had coined that term as a way to disapprove of the policies that the IMF had implemented in many countries. In Greece, the Troika have demanded the exact same policies as John Williamson had lambasted in his article, especially when it comes to privatization of state industries. This leads to an interesting situation in Greece, where the bloated public sector has been connected to previous political election campaigns of both the major Greek parties as a way of institutionalizing corruption through vote purchasing. The anger of the crowds could be linked to these new policies which should have goals of liberating the Greek economy from the malaise of having an extremely unproductive and corrupt public sector. This has not really worked in Greece as it is very difficult to get rid of the old culture, plus the downward spiral of the Greek economy, which has been exacerbated by the cuts in benefits for ordinary citizens.

The crisis has caused tremendous hardship for many of the normal members of Greece with sharp increases in unemployment, cuts in state spending on welfare and on healthcare, reduction in the state infrastructure and a massive program of privatization. This has not just led to a breakdown in the Greek economy, but also numerous other social problems. Over 25% of Greeks are unemployed, with youth unemployment at 50% of above and many talented Greeks are moving out of Greece to find a more high-paying and desirable job within the Eurozone and in countries such as the United States. There has also been a tremendous breakdown in the normal social order, with countless people living on the streets, rummaging through trash cans to find out and the official poverty rate has increased to 45% by some estimates. Here's an extremely glaring chart that I found on Zero Hedge categorizing the tremendous poverty that has been accelerated acutely by the austerity that has been imposed on the Greece by the Troika:

From this chart, we can talk about the very sharp and very acute increase in poverty that Greece has suffered ever since the start of the financial crisis. There has been reports of a huge resurgence of crime and lawlessness in Greece, which radical political groups such as the anarchists, the fascist Golden Dawn and some say, the current government, Syriza, have all seized the opportunity to increase their following. There have been countless numerous riots and incidents where there have been clashes between the different political elements in Greece. By browsing the internet and YouTube, you will be able to see these many incidents that has happened in a very unsettled and impoverished country. The radical leftists of the Syriza party have seized upon this crisis and by promoting an anti-austerity, pro-stimulus policy program, they have made the rest of the world look at that with a wary eye.

The Recent Election of Syriza and Current Situation
With the rather explosive situation in Greece, the radical leftists of the Syriza party was able to defeat the Troika's favored political party, the mainstream conservative party of the New Democracy. With this election of the Syriza, there has been a tremendous amount of both media coverage in what Alexis Tsipras and the radical Syriza might offer for the country. Here are two articles on Syriza: one that talks about the Syriza intellectuals that were educated in British universities and another on the roots of Alexis Tsipras. What's interesting from this particular situation is the clash between the leftist ideologues within the Syriza party, such as the Finance Minister, and the European finance and banking bureaucrats. Ever since the situation, Syriza has overturned many of the Troika's economic policies, such as the reduction of public sector workforce, the privatization of key publicly held companies and most importantly, they want to overturn the Troika's loan and debt policies. Alexis Tsipras has declared the end of the crippling austerity that the reforms have caused in Greece, but will face a tough battle and an intense clash with the authorities that have been dictating the terms of the Greek economy for the last 5-6 years.

Within the election of Syriza, financial markets at first reacted negatively to the possibility that Syriza would do great harm to the reform process that the Troika had implemented on the Greek economy, but now it has emerged that the European Central Bank will most likely dictate the terms to the Greek government. The Greek government had hoped to renegotiate the terms of the bailout package and the other economic terms that the Troika had implemented on Greece, but it looks like Alexis Tsipras and the Syriza have not completely backtracked from their strong anti-austerity rhetoric. Despite the fact that the European monetary authorities have a strong stranglehold on the Greek government's ability to operate as they had originally promised, they have found little common ground between them and the monetary authorities of countries like Germany. According to a recent article, Greece has been isolated in a previous meeting of finance ministers just before the Eurogroup meeting that will take place on Feb. 11th, which will be an important meeting in which the new Greek authorities will put forth a proposal that they want to be implemented in order to save their country from actually going bankrupt. With this meeting, Alexis Tsipras has just set up a clash with these ministers after laying out concrete plans to end the reforms that the Troika had implemented, especially the crippling austerity that has trapped millions of Greeks into long-term poverty. It will be a very interesting next couple of months for those who will be following how this interferes with the financial markets.

Possible Results and Possible Macroeconomic Effects
I believe that a Greek default and a Grexit of the euro are both entirely impossible. A more realistic solution to this confrontation is a negotiated write-offs of small amounts of Greek debt, while still not solving the problems in the structure of the economic institutions within Greece. Greece will still be continued to be saddled with massive public debt, institutional corruption and an extremely inefficient public sector. To improve the situation in Greece, there must be a change in how Greece functions as a democratic country. There needs to be more transparency in how the bureaucracy is managed, as debts could be potentially saved without resorting to drastic privatization or the massive public sector layoffs. I still don't believe that the institutional corruption or the entrenched political interests within Greece could be fixed overnight, since the new Syriza government wants a return to the statist government that promotes 'social justice' versus an economic model that promotes business growth. I believe that they will be able to get some debt concessions, but it does not address the long-term debt issues that Greece will have to face. The new Syriza government and the European monetary authorities will most likely end up kicking the can down the road.

There are many possible solutions and results that could come from this particular and interesting situation that Greece is facing, not just against its creditors, the Troika and the financial markets, but also against the underlying principles of liberal economics that has been prevalent throughout the world since the 1980s. There has been a resurgence of a previous dominant Keynesian thought in economic thought that has expanded beyond the confines of the New Keynesians and the followers of Paul Samuelson's neoclassical synthesis. I believe the election of Syriza in Greece will continue to trigger the resurgence of left Keynesian economic thought throughout the world, but also other left wing alternatives that might spurn the IMF's Washington Consensus and the general Monetarist and New Keynesian approaches to economic policy. I also believe we could potentially see the development of new economic models to explain the problems that countries such as Greece went through. Maybe there are possible solutions that could be utilized without the pitched ideological battles that has raged within the European community and beyond. I think there are a tremendous sets of new data that could be extrapolated from this particular situation and that data could be analyzed from the resulting resolution to the Greek crisis.

World Addicted to Debt (McKinsey Report)

I was rummaging through my usual several articles to begin the day and I came across a particularly interesting article in the Economist that talked about a McKinsey report on the debt binge that the world has undertaken in the past and in the recent years. Unfortunately, the trend has accelerated at a trajectory that has been quite frightening to those have followed this. Personally, I have followed this ever since I started following the financial markets and the finances of certain countries such as the United States and China. Both countries have had significant problems with the debt, especially when it came to bad debt that had accumulated from the wrongful policy decisions that led to further market turmoil. The most troubling aspect of this debt addiction is the amount of advanced economies that have extreme turmoil in the last decade or so, with some countries more addicted to debt that ever. What's interesting about the article is that some countries have debts that are at extremely dangerous levels, which are at or above 300% of GDP. In this blog post, I will focus on two other situations about debt, but isolated to two of the largest economies in the world in the United States and in China.

In a connected Guardian article about debt, global debt has grown tremendously ever since the financial crisis especially in China. What's interesting about the fact of this tremendous growth in debt is that China has been one, if not the main driver of global economic growth ever since the financial crisis. The chart in the Guardian article gives us several amazing representations of how China's debt has grown since 2000, with the country's total debt quadrupling in the space of 7 years between 2007 and 2014 alone. China's total debt to GDP ratio has reached the levels witnessed in the advanced industrialized economies of the United States, Japan and Western Europe. This curious rise in debt has been especially troubling as the Chinese economy has become an important cornerstone in the world economy.

According to the data gathered by the McKinsey Global Institute, most countries have been leveraging their debt, while the growth rates for many of these countries have not matched the outstanding growth that a country like China has witnessed in the last 35 years. From the new data on debt that McKinsey has out, we can surmise that there is a significant amount of countries that have racked up enormous debts, such as China, but many of these countries cannot utilize these particular instruments to boost growth to Chinese levels via either government stimulated or central bank stimulated growth. What we're seeing here is that with the economic engine of growth that China has been for the world economy in the last 35 years is stalling at the present moment, due to the style of economic growth that China has been pursuing. For this long and sustained period of time, the export engine that is China has been working overtime to ensure that the world economy, which was led by the advanced economies of the United States, Japan and Western Europe, has been running smoothly. With this new piece of information about the Chinese manufacturing Purchasing Manager's Index (PMI) and the continued industrial slowdown that has dented world confidence in China's growth potentials, we are right to be worried about the future growth trajectories of the Chinese economy and the world economy.

Like China and various other economies, the debt in the United States has reached similar troubling levels as total debt has reached close to the 300% threshold, with the debt to GDP ratio at around 269%. While this number is reputed as tremendously higher than perhaps a more ideal debt to GDP ratio, the growth in the debt in the United States is slowing compared to various countries like China, where debt has grown more rapidly. This signals an improvement over the debt battles that have raged within the country's intellectual realms, but there needs to be work done on this to combat the unsustainable growth in the country's government debt.

From the McKinsey report, we can easily picture that the sustainable growth in debt is an extremely worrying trend for the world as a whole, especially in countries like in China, where the growth in debt risks putting the world's largest economy by PPP terms in grave danger. I believe that reports like this particular McKinsey report reveal a world that is needing a new path towards a new economic consensus on growth that is not entirely based on debt and on deficit financing.

Thoughts on this week's World Economic Forum in Davos

Like many around the world, I have been following this year's World Economic Forum in Davos, Switzerland. As I described in a previous blog post, lots of pressing issues are discussed among the leading policymakers from around the world. I mentioned the key points to this year's meeting and it includes many of the pressing issues that we as a world have to face today. Here is the link to the key moments that had happened during this year's World Economic Forum. From what I gather, this year is the year where a combination of low energy prices, terrorism, growing income inequality and a looming economic malaise surround the world at large. I believe the people at this particular conference talked about some of these pertinent issues and they have overall tackled some of the more pressing issues. These issues are very indeed alarming and I believe some of these issues can be tackled without the "action" that some of the conference attendees have come up with.

Thoughts on the key points of the yearly conference:

1. Reduce inequality, but to promote growth
The most pressing issue around the world is the growing inequality that has been prominent in world headlines and in numerous discussions between economists. As Thomas Piketty's book has reached its popularity around the world, numerous other economists and many politicians around the world has mentioned that this was a huge issue that needed to be tackled. There have been tremendous amounts of press coverage in the last couple of years towards this particular subject and the people at the forum have talked about various ways to tackle this pressing issue. Sustainable growth is something that the people at the forum have talked about as a possible resolution to the most critical issue presented at this particular conference. I believe that while it is possible to reduce inequality through promoting growth, it is also important to consider other possible solutions such as structural reform of key institutions and of how certain private institutions could function within the confines of society. It's interesting to note that while some solutions are offered, I believe there should be more radical solutions such as that posited by Piketty's Capital in the Twenty First Century than the more conservative ones mentioned at the forum.

Here are a couple of video links to certain conversations at the forum that concern this particular problematic issue and other related issues: The World Economic Outlook, IMF Director Christine Lagarde's Address, Issue Briefing: Income Inequality, BBC World Debate.


2. Europe's Quantitative Easing program
As announced in a previous post, the European Central Bank has announced a new massive quantitative easing program of over a trillion that will be pumped into the European economy. There has been a lot of discussion over this particular policy decision by the panel discussants at the forum, by top economists such as Robert J. Shiller, by the top bloggers and with some of my friends. As mentioned in a previous blog posts, there has been a tremendous controversy over this particular issue, with numerous speakers giving their particular opinion on the particular issue. Here's a list of quotes by key forum speakers and here's a video on the discussion of the effects of quantitative easing in the United States and beyond. Here are two contrasting opinion articles on the effects of quantitative easing, one from Professor Jeffrey Sachs and another from Stephen S. Roach. With this particular problem that has already been implemented by Mario Draghi, I believe it is important for them to promote these particular policies, even though there might be strong negative consequences that come from this round of quantitative easing, such as a combination of weak growth and of higher inflation that might come from this monetary policy, but we will have to wait and see.


3. Energy Prices
I think the recent drop in energy prices have been affecting everyone domestically here in the United States and globally around the world. Energy consumers have been given a break in the recent drop in petroleum prices, but energy producers have hit a wall. Countries such as Russia, Iran, Iraq, Venezuela and others will suffer tremendously in the coming years, which might contribute to significant political instability. I mentioned in an earlier blog post about Russia's internal and external problems, which I think will compound in the coming years. This will see a surge in Russia's more aggressive and nationalistic foreign policy. The oil producers will see significant domestic problems, which were already tremendous in volume, expand rapidly throughout the Middle East. We could see trouble in the coming years with this drop in oil prices because it cause an acute global recession.

Here's a video of an interesting panel discussion during the conference that concerned energy.

4. Market Volatility
The last important point that the people at the forum have made concerned with the issue of market volatility. The markets have been very volatile over the years since the Great Recession with the recent drop in energy prices and the global stock market rallies been at the forefront of discussion.

Here are a couple of discussions that deal with this pressing issue: Volatility as the New Normal, The New Growth Context.

Other Important Points:

1. China
A couple of key panel discussants talked about China at this year's conference, which included the Chinese Premier, Li Keqiang. As mentioned in a previous paragraph, he was one of the first to talk about the income inequality issue in an address to the Forum. China has tremendous challenges when it comes to its economy and its new role in the global economy, but I think it can be a tremendous benefit to the world to more fully incorporate a nation of China's size into the world economy. Here are two videos that address the issue of China in the world: Video of Premier Li Keqiang's Speech and China's Impact as a Global Investor.

2. Al Gore and Climate Change
There was a discussion by Al Gore and another discussion throughout the 4 day conference that concerned the topic of climate change. As many have watched Al Gore's documentary and other documentaries that have talked about the pressing issue of climate change, we can conclude that this is one of the more important topics talked among conference participants and conference followers. These two discussions presents the views of many that concerned this particular issue, with several others chiming in on the discussion. I think there are a tremendous number of economic issues that we will run into if we implement Al Gore's plan to combat climate change. I believe the biggest issue has to deal with the continued development of emerging economies and with the issue of lifting billions of individuals, while simultaneously counteracting this increase in carbon emissions and in pollution.

3. Conflict zones
There were a tremendous number of discussions that dealt with the increasing number of conflicts that have developed in the world, which include a variety of countries. This included actual military conflicts such as those in Syria, Ukraine and Iraq along with competing geopolitical games that larger powers are always conducting. The key discussion in this particular subject is that of the development of a new multi-polar world, which always had potentially dangerous consequences. This also leads us to the question of the viability of the democratic institutions, which has been the landmark of industrialized Western countries such as the United States. Is the end of history as describe by Francis Fukuyama not possible or is it a new chapter in history? We will have to wait and find out what unfolds in the coming years.

There were a lot of great panel discussions over the course of these 4 days in Davos. Despite the amount of content that was covered at this year's edition of the World Economic Forum, there are many economic (and political) issues that are still yet to be discussed. With the interesting economic and monetary situation unfolding in Europe and in Greece, we will have to wait and see what unravels.

February Reading List

I have decided to post my February reading list in the midst of this gargantuan snowstorm of epic proportions.

Econ books:

1. Jeffrey Sachs - The End of Poverty

2. Paul Ormerod - The Death of Economics

Non-Econ books:

1. Marcus Aurelius - Meditations
2. Robert Nozick - Anarchy, State and Utopia (Started reading this book last month)

Due to the lack of adequate snow travel accommodations, I will most likely be home tomorrow. It has been a very busy month on my end and I didn't necessarily have time to finish all of my readings, so this is the reason why the reading list for this month is much shorter than the previous several months.