Monday, May 26, 2014

When writing about “Capital”, like Piketty, can you just use data about it, without ever having seen it at work?

The real importance of capital is when it marries risk… meaning when it is willing to burn itself up in order to multiply enormously or reach something much higher.

And that angle is entirely absent in Piketty´s “Capital”.

The closest he gets is when on page 115 he writes “Capital is never quiet: it is always risk-oriented and entrepreneurial, at least at its inception”. 

Indeed… but then? What happens after its inception? Truth is that from being muscle creating capital, most of it turns into obesity creating capital… and dies out over time.

Look for instance at those many trillions invested in the debt of the “infallible sovereigns”. Is that capital? No way! In fact all that has already been condemned to disappear through financial repression.

Frankly… the more I read the book (I am almost through it) the more upset I get... at least with its too capitalistic publisher's campaign.

From reading Thomas Piketty’s Wikepedia biography it becomes absolutely clear that he has never ever seen capital put to work… and yet he dares to write about capital.

Is this an expert to follow? No way Jose! He is just another Bill Easterly tyrant!

PS. Avoid the merchants of poverty!

Thursday, May 22, 2014

Risk premiums and ethic ratings

And again, for the convenience of those who do not have sufficient political leadership, the government of Venezuela, and PDVSA, announced new bond issues, in order to pay for social "investments" today ... leaving the bill to the Venezuelan youth of tomorrow.

And all this while the Financial Times of London described that soaring interest rates paid, for example by Venezuela, "tempts investors to ignore the fears of civil war, crippling inflation and legal battles."

And indeed Venezuela ( PDVSA and ) pay for ten year credit interest rates that are about 10% higher rate about 10 % than the U.S.. 8% more than Mexico ! That means in essence that already after the first year we have paid the creditor an additional 10 % ... and still owe him 100% of the loan. And that means in essence that at end of the tenth year, when we have already paid the creditor additional 100% ... our children still owe 100% of the principal. This is simply something abominable.

In fact, when a sovereign country is required to pay an interest rate that exceeds by more than 4% the rate of those who pay less, the risk premium, I consider we are in the presence of an economic crime against humanity being committed, fragrantly, against future generations.

And we citizens of the world should do something about it ... for example:

All stock exchanges of the world should suspend trading of all sovereign debt that show a risk premium higher than 4%... (as that would indicate a basic incapacity of the government)

Besides credit ratings, we should develop and use a system of ethic ratings.

All those who purchase sovereign bonds carrying a risk premium of more than 4% risk, and which do not meet minimum ethic ratings, should be exposed publicly as financiers of Sovereign Evils.

We the people should refuse to pay taxes while our sovereign bonds pay a risk premium higher than 4% and do not possess some minimum ethic ratings... and that should be a clause explicitly included in all bond issues.

PS . Whoever believes that China treats us Venezuela as accommodating as we treat Petrocaribe, is a dreamer.

You, who are about to finance Pdvsa, are you sure crimes against human rights are not committed in Venezuela? Ask your children!

Tuesday, May 20, 2014

My view on minimum wages

In a booming environment a minimum wage might do some good, as it is not that kind of big hinder to employment, and helps to distribute the boom more equitably to those less benefiting from it.

In a recession, sometimes even with deflation threats, a minimum wage is utterly bad, as it hinders many from at least being able to get a foot in the door of an employment... in fact in these dire cases, the lowering of a minimum wage could be the right signal...

The economy is the economy is the economy... and there is sadly very little little me can do about that. 

Sunday, May 18, 2014

This is what Sean Penn, Oliver Stone, Danny Glover and Mark Weisbrot, with their deafening silence, support in Venezuela!

Imagine that this was your daughter in a country where some macho robocops, obeying instructions from Cuba, are emboldened and busy themselves confronting students, but cower when they see any real criminals ... God bless and take care of our young!

What can we say?

Thanks Amnesty International!

Friday, May 16, 2014

How much would you pay per year for a guaranteed net neutral search engine?

How much? Per year? Per search? 

I do not know, but I would certainly pay something for a search engine that guaranteed giving me the results, instead of making me the searched for result of others.

Thursday, May 08, 2014

Did you know the banks are regulated by means of an ideology?

In 2004 I wrote in the Financial Times: "Bank supervisors in Basel are unwittingly controlling the capital flows in the world. How many Basel propositions will it take before they start realizing the damage they are doing by favoring so much bank lending to the public sector (sovereigns)?

In May 2014, in the Brookings Institute in Washington, while discussing the book by Jean Pisani-Ferry "The euro crisis and its consequences", Jörg Decressin, the deputy director of the European Department of the International Monetary Fund (IMF), dared to put forward an explanation...finally! ... God bless him.

My question: “In Sweden there is a psalm that prays ‘God make us daring’. And risk-taking risks has been critical to get Europe to where it is. However, in June 2004, the Basel Committee introduced bank capital requirements based on perceived risks, which subsidizes risk-aversion and taxes risk-taking.

For example, a German bank, when lending to a German businessman should keep 8 percent of shareholders’ capital (equity) but, if lending to its government, or to Greece, it could do so without having to hold any capital. That distorts allocation of bank credit in Europe. The book does not mention that problem. Do you have any comments?"

His response: "You raise a very good question and an answer to this revolves around: 

Do you believe that governments have a stabilizing function in the economy?

Do you believe that government is fundamentally something good to have around?

If that is what you believe then it does not make sense necessarily to ask for capital requirements on purchases of government debt, because you believe that the government in the end has to have the ability to act as a stabilizer, when the private sector is taking flight from risk, that is when the government has to be able to step in and the last thing we want is then for people also to dump government debt and basically I do not know what they would do, basically like buy gold. 

If on the other hand your view is that the government is the problem then you would want a capital requirement, so it depends on where you stand [ideologically]. 

I think the issue of the governments being the problem was very much a story of the 1970s, and to some extent of the 1980s. The problems we are dealing with now are more problems in the private sector, we are dealing with excesses in private lending and borrowing and it proves very hard for us to get a handle on this. We have hopes for macro prudential instruments but they are untested, and only the future will show how we deal with them when new credit booms evolve.” End of quote

Jean Pisanny-Ferry… said he agreed and left it at that. 

No Decressin! It is not about the government or the private, it is about the balance between the two, that which is broken.

And I had no chance to ask: Are you arguing that we should support the government’s borrowing ex ante, so that the government can help us better ex post? Would that not result in that when the government is truly needed it might not be able to help because it would already be too indebted… like Greece?

Who authorize regulators to regulate the banks with THEIR ideology?

And what about those who argue that the IMF is a bastion of neoliberalism?... Is it just a Potemkin facade?

Europeans, the structural reform most necessary for Europe to grow, is to get rid of its current bank regulators with their foolish risk aversion and their pro-government and anti-citizen ideology.

Translated from El Universal

Friday, May 02, 2014

FCC any impairing of network neutrality will de facto increase the man-made inequality.

And this not by increasing the wealth of the 1% but of the 0.01%

If I am to be solicited at home on my flat screen or my on computers, the least I can ask is that all solicitors stand on equal ground.

That is all!