Papal Encyclical: Pope Benedict and the Economy
Benedict XVI
Pope Benedict XVI has issued a Papal encyclical that gives the Vatican’s stance on the need to rethink the world economy. The Pope is critical of markets and calls for an international organization to regulate markets world-wide. Why exactly the Pope is weighing in on economic issues is a bit beyond me. Part of it may have to do with the fact that the Vatican is a country too, and the Pope is essentially its elected king. Heads of state have more business opining on global economics than heads of religion.
Another reason is the title of the encyclical, which translates to “Charity in Truth.” Charity is more the purview of the Roman Catholic church, and in the encyclical, the Pope calls for debt forgiveness to poor nations and greater social responsibility on the part of business.
One funny note, is that, apparently, the Vatican is having a difficult time translating the 144-page document into Latin, from the original German in which it was written.
July 8, 2009 |
Posted in: Politics |
By: Charles | 
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Krugman: Universal Healthcare Can Work
In his latest editorial, Paul Krugman argues that universal health care can be affordable. He makes to points. First he reminds us that a large proportion of people who are currently uninsured are young and cost very little to insure. Second, he states that many of the uninsured are receiving treatment in emergency rooms and other “free” means. These costs are passed on to the insured through higher health care costs and to taxpayers for instances in which governments pick up the tab.
Because of these two facts, he argues that, on net, expanding health care to everybody is affordable. According to his editorial, the scoring by the Congressional Budget Office puts the cost of the plan at $587 billion over ten years, which, he contends, would actually be about $1 to 1.3 trillion after we expand Medicaid to help insure the poor. This amount, he states, is not that great compared to the estimated $33 trillion we already expect to spend on health care over the next decade. Read the rest of this post »
July 6, 2009 |
Posted in: Policy |
By: Charles | Print
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The Great Game Version Two?
When everyone is dead the Great Game is finished. Not before.
-Hurree Babu in Rudyard Kipling’s, Kim, 1901
Sir Francis Younghusband
The Great Game describes the behind-the-scenes diplomacy and spy games played by the British and Russians for supremacy in Central Asia during the mid and late 1800s. Made famous by the Rudyard Kipling novel, Kim, it was a power struggle between Great Britain’s interest in Asian, especially India, and Russia’s desire to exert influence on all the countries along its southern borders. One of the most famous participants in the Great Game, Sir Francis Younghusband, traveled all over Central Asia, as well as Nepal, modern-day India, Pakistan, and Bangladesh working to destabilize Russian alliances established by his counterpart Bronislav Gromchevsky.
While Kipling fantasized what was really most likely a boring, diplomatic series of negotiations, there is nothing benign about the events currently taking place in the exact same area over a century later. Russia is once again desperate to exert its influence on Central Asia. It has used a series of carrots and sticks to buy, cajole, and bully its way into the politics of Turkmenistan, Belarus, Kyrgyzstan, and their central Asia neighbors. This time, however, Russia’s Great Game foes are the United States and China. Read the rest of this post »
July 3, 2009 |
Posted in: Politics |
By: Charles | Print
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Why Do Recessions Happen?
The Bureau of Labor Statistics released numbers yesterday stating that, non-farm payroll employment continued to decline in June (-467,000), and the 
unemployment rate was little changed at 9.5 percent. Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction. This means that roughly 14.7 million people are currently looking for work. In addition according to the Economic Policy Institute, this is the first recession since the Great Depression that has completely wiped out all the job gains from the previous economic expansion. In sum, even though growth in unemployment is slowing, we show no signs of a turnaround any time soon.
A good question to ask at this point is why do recessions occur.В Why can’t we maintain periods of growth indefinitely? Some answers commonly heard are the housing market crashed or Wall Street screwed things up. While both these statements may be true, recessions occur even when these are not the causes.
First of all recessions are a phenomenon of capitalist, market economies. Centrally planned economies such as Cuba and the Soviet Union do (did) not experience recessions. Of course, those economies are largely depressed all the time. In essence, recessions are the price we pay to have the long-term economic growth that we get with market economies.
July 2, 2009 |
Posted in: Economics |
By: Charles | Print
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GM and Market Overexuberance?
Yesterday, General Motors had to remind investors that when it emerges from bankruptcy, its common stock will be worthless. Why did they have to do this? Well, apparently GM stock has undergone several days straight of heavy trading, and they cannot really figure out why anyone is buying up equity that will soon be worthless.
According to the GM press release, “GM management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios.”
Weird. Why exactly would people buy up stock that has no resale value? One answer is that until the end of the bankruptcy, the stock will have some value, but this doesn’t make sense under an efficient market hypothesis. As long as it is known that the stock eventually will have no value, someone down the line will not be able to sell it. So, even if there is a cue of buyers waiting to buy GM shares, the last guy would not pay for it. If the last guy won’t pay, then the next to last guy won’t buy, and so on. As soon as the bankruptcy started, the stock should cease trading.
I am not sure why GM is still trading; it has been de-listed, and it should be worth nothing. Perhaps the stock market is not as efficient as we would like to believe.
July 2, 2009 |
Posted in: Economics |
By: Charles | Print
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