Naomi Klein, Friedman, Pinochet and the earthquake

Long time after the last post, but I just came across this today and it looked interesting! Looks like the Chicago boys are everywhere (and will not stop bothering us) even after all these years.

Enjoy!

http://www.naomiklein.org/articles/2010/03/chiles-socialist-rebar

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Greenspan interview on Age of tirbulence

http://us.penguingroup.com/static/html/video/age_of_turbulence.mov

Interview with  Greenspan on “the age of turbulence”

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Wal-Mart starts ‘Black Friday’ early

Wal-Mart starts ‘Black Friday’ early

Deals on turkey dinners and electronics start this week.

Posted by Teresa Mears on Thursday, November 5, 2009 1:22 PM

At least one store isn’t waiting until Black Friday to unleash its deals. Rather than leaking its ads early, Wal-Mart is starting its electronics sales early, plus offering $20 turkey dinners for eight.

Wal-Mart will begin the first of several one-week “electronics savings events” on Saturday, Nov. 7. Here are the first week’s deals:

  • HP Notebook Computer, $298. 3GB memory, 250 GB hard drive, Windows 7 Premium.
  • Sharp 1080p HDTVs: 42-inch for $498, 46-inch for $698 (120 Hz), 52-inch for $898 (120 Hz).
  • Panasonic 46-inch 1080p plasma HDTV, $788.
  • Xbox 360 Arcade Console, $199 with $100 Walmart gift card (for use on future purchases). The company will stock at least 10 per store, which makes it sound as if you need to arrive early to get this deal.
  • Sony Blu-ray player (model #BDP-S360), $148.
  • Magnavox Upconvert DVD player (model #DP170MGXF, 1080p), $29.

Quantities are limited, no rain checks and there is a limit of two per customer on select electronics. While the Wal-Mart news release says these are one-week specials, the Web site says one-day specials, and it’s likely some will sell out quickly, so be prepared to shop Saturday if you want the electronics deals.

Does this mean you can skip that mad dash the day after Thanksgiving? Probably not, says Jon Vincent, founder of BlackFriday.info. “It won’t replace Black Friday,” he says. The deals are good, but pretty comparable to its offerings last year, including a $298 Compaq laptop and a Playstation 2 bundled with a $30 gift card for $129.

Wal-Mart also is offering 12-pound turkeys for less than $5 (that deal started Nov. 4), or 40 cents per pound. Limit two per customer. This deal is good through Thanksgiving.

Wal-Mart’s $20 Thanksgiving feast for eight includes:

  • One 12-pound Grade A turkey.
  • Three 11 to 15.5-ounce cans Green Giant vegetables.
  • Two 14-ounce cans Ocean Spray cranberry sauce.
  • Three 6-ounce boxes of Stove Top stuffing.
  • One 5-pound bag of red potatoes.
  • One 12-count package of Sara Lee dinner rolls.
  • One 22-ounce pumpkin roll cake.

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The big Casino Market in China

I recently was writting an assignment concerning the Chinese Stock Market. I found it just like a big Casino.
Here is an article from the Economist. The woman in the picture is actually playing poker in the stock market, while waiting for any “desired” changes in the prices.

Another great leap
Aug 27th 2009 | HONG KONG
From The Economist print edition

Share prices in China are once again unhinged

EVEN critics of China’s stockmarket would be hard-pressed to call it dull. After losing almost three-quarters of their value between late 2007 and the end of 2008, shares have gone back on the rampage. They are up by more than 70% this year, and that encompasses a wrenching 15% decline since late July (see chart). Combined, China’s two mainland bourses in Shanghai and Shenzhen are second only to America’s, measured by the value of domestic listings. Activity is frenetic: the average share in China has changed hands three times so far this year.

Since foreigners are largely barred from investing in the mainland Chinese market, what goes on in Shanghai and Shenzhen used to be largely of interest only to local punters. But now China’s position as the only big economy reporting strong growth, and the general scepticism surrounding the accuracy of the government statistics underlying these reports, has transformed the role of its equity market into a potentially unique source of information. Jing Ulrich, a regional strategist for JPMorgan, was bombarded with questions about China’s market on recent overseas travels in the hope they could elicit clues about the future course of the economy. Anecdotally at least, global stockmarkets have become more sensitive to Chinese gyrations, on the premise that they reflect real shifts in the country’s prosperity which have repercussions everywhere.

Whether this reputation is deserved is an open question. The market’s remarkable rise comes with enough caveats to suggest it is priced as much by madness as by reason. On average, shares in China trade at 31 times trailing earnings, double the global average. Although this is less than half the stratospheric valuation that existed prior to the market’s crash last year, it can only be justified by remarkably strong and sustained earnings growth.

There is evidence that business conditions are improving in China, but only by going from abysmal to merely bad. According to JPMorgan’s calculations, the year-on-year decline in industrial profits has ebbed from a dreadful 37% in February to a still awful 21% in June. The same story holds for the profits of companies listed on China’s exchanges. Profits were down by 26% in the first quarter. About half of all companies have reported their figures for the second quarter; earnings declined, on average, by 18% year-on-year.

Share prices should reflect future, not past profits, hence the hope that the rally in China cleverly looks beyond today’s problems to better times. In support of this, the consensus estimates of Chinese security analysts are that earnings will rise by 9% this year and 22% in 2010. A big bounce is not unprecedented. Demand for housing, which uncharacteristically (for China) dried up earlier in the year, has rebounded sharply. Only in southern China, hit particularly hard by the collapse in exports, do prices remain below their prior peaks. Retail sales continue to be strong.

Taking a break

Taking a break from the serious gambling

But even that sort of growth, if not followed by more of the same, does little to justify current prices and there are any number of reasons to be pessimistic. Exports, a core component of the Chinese economy, remain soft. Critical demand has come from a huge government stimulus plan that, by design, is transient.

Of even greater concern is that much of the market’s strength may be the result of the abundant money sloshing around China, rather than a fundamental change in profit expectations. This would help explain why companies with dual listings in Hong Kong and the mainland have seen disproportionately large rises in their mainland shares.

One source of this liquidity is individuals, usually responsible for about three-quarters of all share purchases in China. Capital restrictions limit investment options to bank deposits (at low, government-mandated, rates), property, or the stockmarket. That the vertiginous rise in mainland share prices accompanied a decline in the rate of growth for money in longer-term time deposits suggests small investors may have shifted from the safety of banks to riskier market punts.

More controversially, there is widespread speculation that the tidal wave of bank lending initiated by the government as part of its stimulus plan has made its way into the stockmarket. The proportion of loans going into shares is hotly debated (see article). Executives at Chinese firms and the chastened survivors of other Asian stockmarket collapses worry that despite government restrictions lending trickles into the market indirectly.

Redirecting bank loans is typically a violation of credit agreements, but the main impact of such rules is likely to ensure any diversion is not reported. Recently rumours have circulated that the People’s Bank of China has initiated investigations to determine if these claims have merit—a move which, by itself, may have put a damper on the market.

Equally jarring, after an extraordinary lending binge, the country’s leading banks are abruptly pulling back on credit expansion, a move that could affect the funds available for investment in the stockmarket, and indirectly undermine the market by reducing the near-term prospects for growth. Rumours are rife that banks’ capital requirements are being tightened, as are the conditions for various kinds of loan. A decline in new lending in the second half of the year had been expected; the rate of decline has, for many, been a shock. As share prices rose earlier in the year, numerous private companies and their bankers began the lengthy process of preparing for public offerings. In June debt was abundant and there was every reason to expect equity would soon be as well. Such confidence is now frayed.

China’s mainland market has come a long way since its relaunch almost 20 years ago in an old hotel on the Bund in Shanghai. It is now the world’s second-largest on most measures, but a second speculative bubble in three years raises real questions about its credibility. The job of a stockmarket is to provide useful signals to help allocate capital. However thrilling, China’s market is a long way from doing that.

http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=14327311

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Is less more? Degrowth Economics

This summer I was reading the newspaper in Greece and I came across an article about an economist named Serge Latouche, Emeritus Professor at the University Paris-Sud. Latouche talks about the need of a society of degrowth instead of growth, as the way the economy is currently organized is wasting resources and cannot be sustainable. He argues for a society in which people will work less and consume less products but of better quality; in which people will rediscover the gift culture besides commodities and products. Happy that I finally found that my views are also supported by university professors, and tired of being called a primitivist every time I expressed them, I kept the article aside and rediscovered it somewhere in my diary last week. This lead me to some more online research and here are the results, I hope you enjoy!

Would the West actually be happier with less? The world downscaled

What if the very idea of growth—accumulating riches, destroying the environment and worsening social inequality—is a trap? Maybe we need to aim to create a society that is based on quality not quantity, on cooperation and not competition.

PRESIDENT George Bush told leading meteorologists last year: Economic growth is the key to environmental progress, because it is growth that provides the resources for investment in clean technologies. Growth is the solution, not the problem (1). That is not only a rightwing position: the principle is shared by much of the left. Even many anti-globalisation activists see growth as the solution for the world, expecting it to create jobs and provide for a fairer distribution of wealth. […]

After several decades of frenetic wastefulness storm clouds threaten. As our climate becomes increasingly unstable, we are fighting oil wars. Water wars will no doubt follow (5), along with pandemics and the extinction of essential plant and animal species through foreseeable biogenetic disasters. In these conditions the expansive and expanding growth society is neither sustainable nor desirable. We must urgently consider how to create a society of contraction and how to downscale as serenely and convivially as possible.

The growth society is dominated and often obsessed by growth economics. It makes growth for growth’s sake the essential aim of life, if not its only aim. This is unsustainable because it pushes the limits of the biosphere. Calculating the impact of our lifestyle on the environment in terms of how much of the Earth’s surface each person’s consumption uses reveals a way of life unsustainable in equal rights to natural resources and those resources’ capacity for regeneration. […]

TO RECONCILE the contradictory imperatives of growth and environmentalism, experts think they have found a magic formula, ecoefficiency—the centrepiece of the argument for sustainable development and its only credible aspect. The idea is progressively to reduce the intensity and impact of our use of natural resources until it reaches a level compatible with the Earth’s recognised maximum capacity (7). […]

THE problem is that values currently dominant, including selfishness, the work ethic and the spirit of competition, have grown out of the system, which in turn they reinforce. Personal ethical choices to live more simply can affect trends and weaken the system’s psychological bases, but a concerted radical challenge is needed to effect anything more than limited change.

Will this be dismissed as a grandiose utopian idea? Is any transition possible without violent revolution: or rather, can the psychological revolution we need be achieved without violent disruptions? Drastically reducing environmental damage does mean losing the monetary value in material goods. But it does not necessarily mean ceasing to create value through non-material products. In part, these could keep their market forms. Though the market and profit can still be incentives, the system must no longer revolve around them. Progressive measures, stages along the way, can be envisaged, though it is impossible to say whether those who would lose from such measures would accept them passively, or even whether the system’s present victims—drugged by it, mentally and physically—would accept its removal. Perhaps this summer’s heatwave in Europe will go further than any arguments to convince people that small is beautiful.

from: http://www.hartford-hwp.com/archives/27/081.html

and here’s an article about how degrowth could be applied: http://mondediplo.com/2004/11/14latouche

Proponents of contraction want to create integrated, self-sufficient and materially responsible societies in both the North and the South. It might be more accurate and less alarming if we replaced the word degrowth with “non-growth”. We could then start talking about “a-growthism”, as in “a-theism”. After all, rejecting the current economic orthodoxy means abandoning a faith system, a religion. To achieve this, we need doggedly and rigorously to deconstruct the matter of development. The term “development” has been redefined and qualified so much that it has become meaningless. Yet despite its failings, this magical concept continues to command total devotion across the political spectrum. The doctrines of “economism” (1), in which growth is the ultimate good, die hard. Even counter-globalisation economists are in a paradoxical position: they acknowledge the harm that growth has done but continue to speak of enabling Southern countries to benefit from it. In the North the furthest they are prepared to go is to advocate slowing down growth. An increasing number of anti-globalisation activists now concede that growth as we have known it is both unsustainable and harmful, socially as well as ecologically. Yet they have little confidence in degrowth as a guiding principle: the South, deprived of development, cannot be denied at least a period of growth, although it may cause problems.

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Economics of Christianity (Part 1)

Based on a previous article I posted and some of your articles (such as ‘economics of happyness) I did a little search for ‘ Economics of Christianity’ and this showed up.
It nicely shows how you can fit the bible to almost any store you like, in this case that the bible is libetarian and that you ‘transfer’ the ownership of your body from yourself to God which means you must be very good for ‘your’ (or actually God’s) body.
http://thideology.wordpress.com/2007/02/01/economics-of-christianity-part-1/

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Economics In Bed

When I decided I would study economics 9 years ago,  what I liked about this science was that “the fundamental laws of economic science, in fact, were the laws of life”. The term “economic imperialism” that we did in class has made me think a lot since that week’s assignment! I believe we can talk about “economic imperialism” when we apply economics’ scientific methodology into other fields; yet when it comes to the reasoning and not the equations or models, I would not distinguish economics from everyday life. The way we function in our relationships and in our non-economic decision making is the same one as in our economic thinking: seeing the pros and cons, gains and losses and picking the one that would make us feel best. Not in a way that other people would describe as rational, but in a way that always seems rational to us, where “prices” would be replaced by “value” (how we value things and situations) – always a subjective definition of course!

Yet I do strongly believe that there are certain aspects of life that economics should really be out of! Still, we might enjoy some posts like this one🙂 ( http://www.marginalrevolution.com/marginalrevolution/2005/05/why_dont_people.html )

Why don’t people have more sex?

We need not just reasons, but rather gains-from-trade-defying reasons.  I can think of a few:

1. The long-run lifestyle costs of being “more open to sex” involve a loss of integrity and control.  (OK, but I know many married couples, not all of whom hate each other, who don’t seem to have much sex.)

2. The average utility of sex is high but the marginal utilities are falling off a cliff.  You just don’t want any more.  But how many people are at this margin?

3. Freud was right and we are all repressed.  The will is not unitary and the utility-maximizing part is not always in control.

4. There has been a market failure, but the Internet is remedying it.  People are having more sex and this will only go up.

5. Sex stops being fun when you do it to close a gap between your marginal utilities.  It requires spontaneity or some other quality inconsistent with the classical model of the consumer and the equation of marginal rates of substitution.

6. Sex isn’t as much fun as the studies indicate.  Perhaps people lie about their quality of their sex or remember only the better experiences.

7. People want their sex to consist of peaks, rather than seeking to maximize lifetime utility.  Tom Schelling once told me this is why he did not listen to Bach more.

8. The market-clearing price for more sex is positive, and people feel shame about paying too explicitly; see also #5.

9. We are biologically programmed to “stick to our guns,” rather than just kiss and make up; read more here.  Or perhaps your wife has read my earlier post on why it is hard to avoid torture.

10. People are having sex in other ways.  Maybe that is really good too.

11. Everyone else is having sex all the time — Michael Vassar simply doesn’t know about it.

12. You’re all addicted to reading blogs.

My wife’s question: “Should you be flattered or insulted that you are considered an expert on this?”

Although I find that prostitution is a very very sensitive subject, I’ll publish this link not because I agree with what the writers say in the article but because I find interesting the economic approach: http://abcnews.go.com/Technology/Story?id=1919192&page=2

Is sex a female resource and could sexual interaction be viewed as a marketplace? This article really made me want to shout “Come on people! Leave some things alone! Don’t kill the magic! Don’t rationalize and economize everything!”. Yet I still find it more interesting to read about this than, let’s say, finance🙂 so here goes:  http://www.csom.umn.edu/Assets/71503.pdf

In this article sex is considered the good, and the probability of getting a sexually transmitted disease is its price. Interesting what it might say about people’s sexual preferences! http://www.nytimes.com/2005/12/11/magazine/11wwln_freak.html?pagewanted=all

and the last one for today: when it comes to risk taking can hormonomics explain why men are from Mars and women from Venus? Or are we all from planet Earth in the end? http://www.hhs.se/BusinessAndSociety/press/pressreleases/Pages/economicbehavior.aspx

Man, interesting topics people find for research sometimes! So much for late-night posting.. hope you found something interesting at least. 🙂

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