* This article refers to The Wall Street Journal
JUNE 17, 2011, 3:53 P.M. ET
IMF Cuts Growth Forecast for Global Economy .
I understand how angry the IMF is due to the bad discipline of the EU fiscal policy and the retarded attitude of all national governments in this globe...! I believe the IMF should intervene into both monetary and fiscal policies of all over the world because the world economy has already become globalised. Economic regions in all over the world is now too contingent to avoid focusing on the global economic political censorship by the global financial institute...!
I assume that the IMF "wanted to expect" the USA and the EU to install the right policy as the IMF suggested. I guess, this does not mean the IMF miss forecast; the IMF crackdowned to say these economies will be endangered because they did not listen to what the IMF said! This is the way, the IMF always change the prediction. I have recognised that the IMF economic prediction is rather subjective than objective. But, I do not say it is a bad thing; it is a strong indicator of what the IMF judges. I have more faith in the IMF than any national sovereign any way...
Do you know who said we needed the IMF? John Maynard Keynes, and I support his idea! So, I am not a fundamental monetarist although the national sovereignty in all over the world should be abandoned. This is not due to the political ideological issue (J. M. Keynes was actually an economic pragmatist), it is the "accountability" and "responsibility" issue...! It is a "natural evolution" of economy! As economy becomes globalised and contingent each other, the market (Nature! Geometrical fact!!) needs a global mediator. I am not for a world government, but I am for a world financial liberalisation!!
Sunday, June 19, 2011
Friday, June 10, 2011
Difference between 1929 and 1990s, and 2000s-10s
Yeh, the scale of banks' bankruptcy was much smaller than the current banks' bankruptcy, not so many Friedmanites realised. In 1929, Friedman's claim of temporary money supply for rescuing these private banks may have worked because the bankruptcy occurred because of the fear of people assuming banks could bankrupt.
By contrast, 1990s and 2000s are the entirely different problem!
The financial crisis in 1990s was based on the immaturity of Asian financial institutional policy. I agreed with Stiglitz that these Asian financial institutions were not mature enough to let run independently. He claimed that the IMF should have had a great role to induct them, and more the foreign direct investment from the advanced nations should be injected into.
The ongoing financial crisis is tremendously much more problematic than these previous world financial crises! This problem also involves the "financial accounting" which allows institutions to involve the aggregate market value of the assets investment they have purchased which is their potential gain from asset investments (This is called "Unrealised Profit" in the pure cost accounting because it cannot be simply shown in the balance sheet based on the "Cost Total System" which is based on the total sales revenue minus the total cost).
Before the late 1990s, the financial law in majority of nations did not involve the aggregate market value of their shares purchased. However, from the late 1990s and early 2000s, the financial law in all the advanced nations started allowing involving any potential gain from asset investment. This change in the financial law dramatically changed the attitude of financial institutions in the advanced nations. All these financial institutions started to purchase a lot of shares. This resulted in that, although the profit comes from the total sales revenue subtracted from the total cost is smaller or even loss, the book involving the potential profit (the current value of share minus the value of share when it was purchased) shows the profit is huge.
The opposite case scenario of this financial accounting is Chinese government. Nowadays, Chinese profit based on the sales revenue minus the total cost is higher than the profit based on the aggregate market value because the value of all the foreign currency and all the national debts of the advanced nations, which Chinese government has purchased in the past to depreciate Chinese currency, become depreciated dramatically.
Therefore, unlike in 1929, the central bank could not predict the adequate volume of money supply it should have poured into the market to rescue these banks involved in this activity to increase the "aggregate market value" of their total asset investment. Some of the shares these financial institutions are foreign, different industries, and toxic. Therefore, although I would support Friedmanite bank rescue program in 1929, I am deeply sceptical about his theory applied in the current crisis. Many socialists tend to blame capitalism. But, I would rather blame the national authorities who regulate the financial accounting law. This problem is way beyond the central banks' responsibility and accountability on their loss.
If it were based on the accounting based on the revenue coming from the pure monetary saving and investment, yes Friedmanite policy should have applied. However, this problem highly involves the mal-management, which Friedman should have said there needed a strict crackdown on these financial institutions.
As a matter of fact, one of my lecturer in my MSc in Strathclyde uni was Friedmanite, and he highly criticised the current global financial market situation. He strongly disagrees with the Euro, the sub-prime loans (He said that such a private sector business involving the risk of bankruptcy should not have taken place), and the over-expansion of the current banking system.
Furthermore, the current financial recapitalisation was done by the fiscal policy rather than the monetary policy which Friedman insisted to use.
I know Friedman would have supported rescuing banks by the excess money supply, but some guys would say that it was Friedmanite policy to rescue these banks having involved in race of increasing their aggregate market value. However, if there are a violation of equity, such as the fiscal policy to rescue these mal-managed institutions by using the innocent tax payers' money, and the problem is beyond the accountability of central bank such as the ongoing financial crisis, the responsibility of monetary policy is very limited, Friedman would have said if he follows his original role.
Speaking of Hayek, I am more likely to detest Hayekian than follow. Hayekian theory strongly insists the importance of "tradition" and "traditional moral guide line" (I really despise them!) which Hayek defined as a key to stabilise economic and social order. In addition, Hayek is morea political philosopher than an economist, I would say, meanwhile Friedman is a pure mathematical economist. Hayekian ethics follows the school of Natural Law as same as Edmund Burke. This is why Hayek humiliated Friedman as an anarchist.
This is why Hayekian theory can be also applied to European Social Democracy seen in Germany and Scandinavian nations. Hayek did not particularly support free market economy nor fundamental reconstruction of economic structure unlike Friedmanite. Furthermore, the huge difference between Hayek and Friedman is that Hayek was deeply sceptical about Macroeconomics whilst Friedman put emphasis on Macroeconomics. As a matter of fact, North Western European economic policy is highly microeconomics, and hardly regards of macroeconomics. Hayek would be happy with the continental European economic policy, which is yet Socialistic and has installed the common currency, whereas Friedman would be upset about and against the current continental European economic structure...!
By contrast, 1990s and 2000s are the entirely different problem!
The financial crisis in 1990s was based on the immaturity of Asian financial institutional policy. I agreed with Stiglitz that these Asian financial institutions were not mature enough to let run independently. He claimed that the IMF should have had a great role to induct them, and more the foreign direct investment from the advanced nations should be injected into.
The ongoing financial crisis is tremendously much more problematic than these previous world financial crises! This problem also involves the "financial accounting" which allows institutions to involve the aggregate market value of the assets investment they have purchased which is their potential gain from asset investments (This is called "Unrealised Profit" in the pure cost accounting because it cannot be simply shown in the balance sheet based on the "Cost Total System" which is based on the total sales revenue minus the total cost).
Before the late 1990s, the financial law in majority of nations did not involve the aggregate market value of their shares purchased. However, from the late 1990s and early 2000s, the financial law in all the advanced nations started allowing involving any potential gain from asset investment. This change in the financial law dramatically changed the attitude of financial institutions in the advanced nations. All these financial institutions started to purchase a lot of shares. This resulted in that, although the profit comes from the total sales revenue subtracted from the total cost is smaller or even loss, the book involving the potential profit (the current value of share minus the value of share when it was purchased) shows the profit is huge.
The opposite case scenario of this financial accounting is Chinese government. Nowadays, Chinese profit based on the sales revenue minus the total cost is higher than the profit based on the aggregate market value because the value of all the foreign currency and all the national debts of the advanced nations, which Chinese government has purchased in the past to depreciate Chinese currency, become depreciated dramatically.
Therefore, unlike in 1929, the central bank could not predict the adequate volume of money supply it should have poured into the market to rescue these banks involved in this activity to increase the "aggregate market value" of their total asset investment. Some of the shares these financial institutions are foreign, different industries, and toxic. Therefore, although I would support Friedmanite bank rescue program in 1929, I am deeply sceptical about his theory applied in the current crisis. Many socialists tend to blame capitalism. But, I would rather blame the national authorities who regulate the financial accounting law. This problem is way beyond the central banks' responsibility and accountability on their loss.
If it were based on the accounting based on the revenue coming from the pure monetary saving and investment, yes Friedmanite policy should have applied. However, this problem highly involves the mal-management, which Friedman should have said there needed a strict crackdown on these financial institutions.
As a matter of fact, one of my lecturer in my MSc in Strathclyde uni was Friedmanite, and he highly criticised the current global financial market situation. He strongly disagrees with the Euro, the sub-prime loans (He said that such a private sector business involving the risk of bankruptcy should not have taken place), and the over-expansion of the current banking system.
Furthermore, the current financial recapitalisation was done by the fiscal policy rather than the monetary policy which Friedman insisted to use.
I know Friedman would have supported rescuing banks by the excess money supply, but some guys would say that it was Friedmanite policy to rescue these banks having involved in race of increasing their aggregate market value. However, if there are a violation of equity, such as the fiscal policy to rescue these mal-managed institutions by using the innocent tax payers' money, and the problem is beyond the accountability of central bank such as the ongoing financial crisis, the responsibility of monetary policy is very limited, Friedman would have said if he follows his original role.
Speaking of Hayek, I am more likely to detest Hayekian than follow. Hayekian theory strongly insists the importance of "tradition" and "traditional moral guide line" (I really despise them!) which Hayek defined as a key to stabilise economic and social order. In addition, Hayek is morea political philosopher than an economist, I would say, meanwhile Friedman is a pure mathematical economist. Hayekian ethics follows the school of Natural Law as same as Edmund Burke. This is why Hayek humiliated Friedman as an anarchist.
This is why Hayekian theory can be also applied to European Social Democracy seen in Germany and Scandinavian nations. Hayek did not particularly support free market economy nor fundamental reconstruction of economic structure unlike Friedmanite. Furthermore, the huge difference between Hayek and Friedman is that Hayek was deeply sceptical about Macroeconomics whilst Friedman put emphasis on Macroeconomics. As a matter of fact, North Western European economic policy is highly microeconomics, and hardly regards of macroeconomics. Hayek would be happy with the continental European economic policy, which is yet Socialistic and has installed the common currency, whereas Friedman would be upset about and against the current continental European economic structure...!
Friday, June 03, 2011
Europe in crisis...!
Definitely a strict crackdown on Greek treasury, and a fundamental Eurozone wide reform are required ASAP!!
No more liquidity (buying the bonds by printing excess amount money) 'cos it causes a further interest rate hike up* which discourages the private sectors! Greek economy unfortunately won't be allowed to leave the Europzone 'cos my regression analysis showed Greece economy is highly co integrated with the entire Eurozone economy!
(* Usually when the excess money supply goes into the market, the interest rate often falls if the economy has been in recession which is caused by lack of the aggregate demand which induces the excess supply. The US and Japanese case of the excess money supply caused the lower interest rate. However, European economic problem is not caused by the demand&supply fact; it is based on the "structural" problem. Therefore, it is more likely to cause the hyper-inflation, i.e. need of high interest rate for borrowing, instead of the liquidity-trap, the deflation.)
Greek economy is actually highly reliant on the Eurozone economy... Greek system should be more intervened by the European central government! The silly idea of the Eurozone is that it still allows each member to incur the national debt under the common monetary policy...! This is the same silliness as though allowing each state in the USA to hold its own public debt without complete separation of the states and the federation!
When I read the Wall Street Journal on 10th of May, this American news paper claimed that European economy will be drawn into the insoluble fiscal chaos due to her extremely tolerant attitude toward the irrational European populism... This fiscal chaos won't be overcome unless a strong (even oppressive) enforcement on fixing this fiscal imbalance and the irrational populist influence on the fiscal structure...
... I must say that the Europe suffers from the tyranny of majority as same as Japan! Therefore, any rational movement hardly takes place...
But, unlike Japan, the integrated European economy has a full of potential! An affluent human capital development, variety of factors of productions from different European countries, and the strong capitalist ethics which has been developed over centuries!
"Europe needs an iron-lady" as same as Britain had. But, the problem is that this scale of the economic failure is bigger than what Britain suffered from in the past. Therefore, the figure which is larger than British iron-lady...! But, the tyranny of majority won't accept such the "to be cruel to be kind" method as this majority is already spoiled by the illusion of their Utopian dream.
This is the same as Japanese tyranny of majority expelled Mr. Kakuei Tanaka, the admirable Japan's former prime minister, who thought of people better than what people thought. Mr. Tanaka was the person who could make Japan truly sovereign and enlighten Japanese people to be evolved from poppets to independent minded citizens! The similar event is now taking place in the Europe... If the tyranny of majority is strong enough to oppress the talent, it fails into the problem seen in both Japan and Europe!!
... "In order to defeat a monster, it needs the monster stronger than this monster...!". Hence, the tyranny may be only able to be defeated by another tyranny which is stronger than the current tyranny...............
No more liquidity (buying the bonds by printing excess amount money) 'cos it causes a further interest rate hike up* which discourages the private sectors! Greek economy unfortunately won't be allowed to leave the Europzone 'cos my regression analysis showed Greece economy is highly co integrated with the entire Eurozone economy!
(* Usually when the excess money supply goes into the market, the interest rate often falls if the economy has been in recession which is caused by lack of the aggregate demand which induces the excess supply. The US and Japanese case of the excess money supply caused the lower interest rate. However, European economic problem is not caused by the demand&supply fact; it is based on the "structural" problem. Therefore, it is more likely to cause the hyper-inflation, i.e. need of high interest rate for borrowing, instead of the liquidity-trap, the deflation.)
Greek economy is actually highly reliant on the Eurozone economy... Greek system should be more intervened by the European central government! The silly idea of the Eurozone is that it still allows each member to incur the national debt under the common monetary policy...! This is the same silliness as though allowing each state in the USA to hold its own public debt without complete separation of the states and the federation!
When I read the Wall Street Journal on 10th of May, this American news paper claimed that European economy will be drawn into the insoluble fiscal chaos due to her extremely tolerant attitude toward the irrational European populism... This fiscal chaos won't be overcome unless a strong (even oppressive) enforcement on fixing this fiscal imbalance and the irrational populist influence on the fiscal structure...
... I must say that the Europe suffers from the tyranny of majority as same as Japan! Therefore, any rational movement hardly takes place...
But, unlike Japan, the integrated European economy has a full of potential! An affluent human capital development, variety of factors of productions from different European countries, and the strong capitalist ethics which has been developed over centuries!
"Europe needs an iron-lady" as same as Britain had. But, the problem is that this scale of the economic failure is bigger than what Britain suffered from in the past. Therefore, the figure which is larger than British iron-lady...! But, the tyranny of majority won't accept such the "to be cruel to be kind" method as this majority is already spoiled by the illusion of their Utopian dream.
This is the same as Japanese tyranny of majority expelled Mr. Kakuei Tanaka, the admirable Japan's former prime minister, who thought of people better than what people thought. Mr. Tanaka was the person who could make Japan truly sovereign and enlighten Japanese people to be evolved from poppets to independent minded citizens! The similar event is now taking place in the Europe... If the tyranny of majority is strong enough to oppress the talent, it fails into the problem seen in both Japan and Europe!!
... "In order to defeat a monster, it needs the monster stronger than this monster...!". Hence, the tyranny may be only able to be defeated by another tyranny which is stronger than the current tyranny...............
Monday, May 30, 2011
Milton Friedman, Income Distribution, Matter of live, and Nihilism
Professor Milton Friedman, the counter-revolutionary economist! He denouced socialist economy as an oppressive totalitarianism. Although I disagree with some parts of his macroeconomic theory, I strongly support his political point of view as a laissez-faire capitalist theorist!!
He supports the idea that Adam Smith told that "The poorest in a rich country is certainly better-off than the richest in a poor country because the former has a much better access to the wealth and the culture than the latter. Therefore, the relative income inequality is often irrelevant. The more significant inequality is the "capability" such as avoiding envy, competence, opportunity, and the business cycle.
The deprived individuals themselves are sometimes responsible for their own situation. If it is not merely due to their own responsibility, the family they have been brought up are the fundamental problem! Who want to support someone not-known or hated without any reward? I do not want a government which enforces us to sacrifice our precious property to save those whom we are not associated with and whom we even hate so much!! If I were going to be such a deprived situation, I would rather choose to die without any pseudo moralistic hippocratic sympathy and any antipathy for my misery...! I would be rather happy to become alone to live myself than be made survived by those whom I hate to be enforced to live...!
...... The life is not the matter of live, it is the matter of how to die!!!
The way anti-Friedmanites criticise Financial Liberalism as the cause of the last Asian financial crisis in 90s is too old!
Of course, Stiglitz said these Asian economies did not leave the enough reserves. This is because they had to rely on the revenue coming from the excessive amount of financial investment in order to sustain their economic growth. At that time, this caused the bubble burst.
However, this crisis was caused not only because of the Financial Liberalisation, but also the lack of foreign direct investment (FDI) due to the fact that the world was not enough globalised then.
Nowadays, in development countries, the opposite case scenario from the 90s is happening. They always "increase" the reserve, instead of reducing the reserve!
In the current globalised world, these developing countries do not need to reduce their money reserve because they can crave the FDI from abroad. Therefore, unlike the 90s, they do not have to reduce the reserve any more, and keep their Financial Liberalisation goes by remaining the reserve ration sufficiently high.
Although what Stiglitz said was right as the contemporary time period, Friedmanite counter-revolution brought a big benefit to the global financial market! As the world is more globalised, there are more FDI opportunities for these developing countries! Therefore, they no longer need to make their financial market repressed by the state's control to stimulate their economy by creating the inflation as the cost of this stimulus!!
Financial Liberalisation encouraged raising the interest high enough to calm the inflation! Friedman is great to make us remember how costly inflation is for the lower income people!! The financially repressed economy conducted by state public sectors always causes the inflation unless they artificially repress the aggregate demand such as the USSR did!
In the past, there are only two choices, the financially repressed economy with an intense state intervention with a high inflation rate and the financial liberalisaion with a more flexible private sector based economy with the interest rate flexibly adjusted to the inflation rate with a risk of declining the reserve ratio.
Of course, the latter choice is far better than the former because it gives the freedom of choice (better than a lot of employment artificially created by the state) and the anti-inflation management (Again, the inflation is very costly to the majority of people including both the middle income and the lower income) . In addition, nowadays, they no longer need to reduce the reserve ratio (Actually increasing by financial liberalisation nowadays!) because they can seek the FDI to keep the sustainable reserve ratio! Therefore, although what Stiglitz said was correct at the contemporary time period, but Friedmanite movement was correct as well in order to expand another possibility of the global financial market evolution!!
Viva! The Cold War is over thanks to our liberal capitalists' victory!
Friday, May 27, 2011
Good characteristic of the United States of America (USA) as an experiment of the liberalist nation!
Unlike Europe and Japan, the USA does not have a strong constraint of the "tradition" and "class"! Although the constitution and Christianity are sometimes regarded as the "tradition" (This is the US characteristic I detest), the USA regards highly of "meritocracy" without taking family, educational, and any social class background into consideration (without using a big government intervention: It is based on people's general will!!), flexibility in industries (E.g. accounting, labour mobility, etc), and pluralism (E.g, More people are integrated into the main stream culture than those in Europe).
Europe is more rational and secular when they establish a legal system, argue about moral and ethics, and revise their civilisation (Actually, the US people tend to think their nation is a utopia regardless of the political ideology; conservative Christian Republican and progressive secular Democrat.
However, Europe suffers from the negative effects of Welfare-state, whose socialism is tolerated under the interest of European nobles, people's stereotypical perception of social backgrounds, and inflexible ways of industrial management.
I know both Europe and the USA are much better than Japan which suffers from the disadvantages whose personality is the combination of the negative and unproductive characteristics of both the USA and Europe. Japan and Japanese conscientious people (I've never expect anything like that for stupid insane Japanese mobs!) have got to learn from the comparative study of Europe and the USA...!
One of the greatest aspects of both North and South America is that, unlike Europe and Asia, they have never had to be worried about the threat of losing land and the state of war among endogenous people. (The Civil War was provoked by neither the threat of losing land nor class war (Some historians say it's because of the class war, but it is not the main cause)). Therefore, neither national socialism such as Fascism and Natizm nor proletarian dictatorship (Cuban revolution was based on the interest of the entire Cuban people, not the proletarians against the endogenous bourgeoisie) has never come into the power!
Furthermore, I admire the USA as the father of Libertarianism! It showed the possibility of anti-traditionalism and laissez-faire economy work well to establish one strong and remarkable civilisation! Unlike the experiment of state-socialism such as the USSR, the experiment of liberal (by means of European definition) economism worked!
Nonetheless, I am only sad that the last US Republican party regime distorted the original identity of the USA. It undermined the liberalist establishment... I am happy to see that the current US democratic party regime under Mr. Obama's conduct seems to replace the distorted establishment with the original idea of the US establishment of liberal integration among people and the frontier spirit, which have been once seen in J.F. Kennedy's regime...!
Ref. (Written in Japanese): http://hansenjuku.cocolog-nifty.com/blog/2010/07/post-b06b.html
Wednesday, May 04, 2011
Political Spectrum (Political Compass) Civilisation basis
Political Spectrum (Political Compass) Civilisation base:
* This spectrum refers to the following resources:
- The Political Compass dot org
- Inglehart-Welzel Cultural Map of the World
- The Pournelle Political Axes
- Redefining the Political Spectrum - The Rational Spectrum
- Economic Political Spectrum Part 1: Big/Small Government no longer matters
- Economic Political Spectrum Part 2: Rationality and Proactivism
- Economic Political Spectrum Part 3: Not the parties, it is matter of civilisations
* This spectrum refers to the following resources:
- The Political Compass dot org
- Inglehart-Welzel Cultural Map of the World
- The Pournelle Political Axes
- Redefining the Political Spectrum - The Rational Spectrum
- Economic Political Spectrum Part 1: Big/Small Government no longer matters
- Economic Political Spectrum Part 2: Rationality and Proactivism
- Economic Political Spectrum Part 3: Not the parties, it is matter of civilisations
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