tag:blogger.com,1999:blog-65818789098929336322024-03-13T20:13:19.731-07:00The Commission of IdeasEconomics to move us forwardCommission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.comBlogger76125tag:blogger.com,1999:blog-6581878909892933632.post-49626220111835599592020-11-29T07:39:00.006-08:002020-12-02T11:23:14.452-08:00<p><b><u><span style="font-size: large;">Killer Acquisition Theory in the Digital Age</span></u></b></p><p><a href="https://www2.slideshare.net/mberre/berre-petit-2020-killer-acquisition-theory"><span style="font-size: x-small;">https://www2.slideshare.net/mberre/berre-petit-2020-killer-acquisition-theory </span></a></p><p>Max Berre and Nicolas Petit</p><p><span style="font-family: "Times New Roman", serif; font-size: 12pt; text-align: justify;">This paper seeks to
contribute to the growing literature on killer acquisitions and to the debate
contextualizing the emergence of the Big-Data industry, in order to enrich and
inform the debate, proposing threshold ideas for purposes of abuse of dominance
and merger control. To that end, it takes a different approach, deconstructing
the killer acquisition narrative. Because killer acquisitions are defensive in
nature, serving to protect the market-share of incumbent firms. </span><span style="font-family: "Times New Roman", serif; font-size: 12pt; text-align: justify;"> </span><span style="font-family: "Times New Roman", serif; font-size: 12pt; text-align: justify;"> </span></p><p>
</p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;">Overall, the debate can
be approached via the examination of the relative likelihoods of competing
acquisition objectives, effects, and contextual realities. Testing these may
yield viable examination tools which could be put to use in real-world policy,
advisory, or litigation contexts. The killer acquisition narrative is based on
several conjectures that must be critically examined and rigorously tested
prior to undertaking policy reform. This paper’s contribution is to provide a
framework for said critical examination. <o:p></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;">The 21<sup>st</sup>-century
emergence of the fourth-industrial-revolution has given rise to new
technological and economic realities. The Big-Data and Internet of Things (IoT)
industries in the digital marketplace has given rise to heated and lively
debate concerning market-structure and competition-policy ramifications going
forward as the 21<sup>st</sup> century develops. <o:p></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;">
</span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;">Because traditional
measures and dynamics are fundamentally challenged by both the technology and the associated economic dynamics of 21<sup>st</sup> century digital markets,
exploration of the market-structure measures and dynamics of industries related
to the fourth-industrial-revolution is increasingly necessary as new
market-realities evolve. <o:p></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;"></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;">What is called for in a
practical sense, is an examination of the various ways in which start-up
acquisitions in the digital market-space can be examined, approached and
weighed, for purposes of ex-ante or export investigation of mergers,
acquisitions, and abuse of dominance. <o:p></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;"><br /></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;"><i style="font-family: "Times New Roman"; font-size: medium; text-align: left;"><span class="Apple-style-span" style="font-style: normal;">-----------------------------------------------------------<br /></span></i><span style="font-family: "Times New Roman"; font-size: x-small; text-align: left;">Max Berre is an economist at Audencia Business School who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: "Times New Roman",serif; font-size: 12pt; line-height: 107%;"><span style="font-family: "Times New Roman"; font-size: x-small; text-align: left;">Nicolas Petit is a professor EU Competition Law based at the European University Institute, and is Joint Chair in Competition Law at the Department of Law and at the Robert Schuman Centre for Advanced Studies. He is also invited Professor at the College of Europe in Bruges. </span></span></p><br /><p></p><div><br /></div>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-57980635009060466002020-11-29T07:34:00.003-08:002020-11-29T07:58:58.307-08:00<p><b style="text-align: justify;"><u>COHERENT STRESS TESTING: A BAYESIAN APPROACH TO SCENARIO ANALYSIS AND STRESS TESTING</u></b></p><p><a href="https://www2.slideshare.net/mberre/hoffman-berre-coherent-stress-test " style="text-align: justify;"><span style="font-size: x-small;">https://www2.slideshare.net/mberre/hoffman-berre-coherent-stress-test </span></a></p><div style="text-align: justify;">Hoeffman and Berre</div><div style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"></div><div class="MsoNormal" style="font-family: inherit; text-align: justify;">In January 2009, during the depths of the financial crisis, the Basel Committee on Banking Supervision published its view that the bank stress-testing which had so-far taken place across Europe and the US was insufficient for a number of reasons.</div><div class="MsoNormal" style="font-family: inherit; text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"></div><div class="MsoNormal" style="font-family: inherit; text-align: justify;"><span lang="EN-GB">While the financial market had grown considerably more complex and less transparent since the previous round of financial crises at the end of the 20<sup>th</sup> century, stress-testing had not kept up with the times. Forward-looking information was not-being taken into account. </span></div><div class="MsoNormal" style="font-family: inherit; text-align: justify;"><span lang="EN-GB"><br /></span></div><div class="MsoNormal" style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: inherit;">Rather, stress-test so far has been undertaken in the so-called frequentist way, meaning that purely quantitative and statistical approaches have been used. By definition, this way of doing things only examines </span>historical<span class="Apple-style-span" style="font-family: inherit;"> data. Subjective data, which, in expert hands could be used to detect when it is that the current circumstances are likely to change -perhaps even in a heretofore unseen way- is overlooked. Also overlooked is forward-looking information of any kind. </span></span>Nassim Taleb's famous book The Black Swan swan points to precisely this sort of thinking as being a major weakness in daily wisdom of financial economists prior to the start of the crisis. The idea that the situation might change was not appreciated. Nor was the idea that we may need to update our information to take into account current happenings.</div><div class="MsoNormal" style="font-family: inherit; text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;">In 2009 and 2010 Committee of <span class="Apple-style-span" style="font-family: inherit;">European Banking Supervisors (CEBS) <span class="Apple-style-span" style="line-height: 17px;">implemented the <span class="Apple-style-span" style="font-family: inherit;">first and second EU-wide stress tests which were conducted along </span></span></span><span class="Apple-style-span" style="line-height: 17px;">frequentist</span><span class="Apple-style-span" style="font-family: inherit;"><span class="Apple-style-span" style="line-height: 17px;"> lines, examining at first only the largest 22 banks </span></span><span class="Apple-style-span" style="font-family: inherit;"><span class="Apple-style-span" style="line-height: 17px;">in Europe and later all of the systemically most important bank at the national level in Europe. Not surprisingly, the first two European stress-tests were widely considered failures. In 2011, the newly commissioned European Banking Authority (EBA) has thus taken to the task. </span></span>Because the European stress tests tried to answer the question of what would happen in the event of both current loss expectations as well as a worst-case scenario whereby losses far exceeded current loss expectations but overlooked the possibility of multi-stage economic shocks, they represented the frequentist point of view. Essentially, they do not revise losses in a dynamic way. Thus, they have left something to be desired, irrespective of the number of banks or percentage of GDP investigated. </div><div class="MsoNormal" style="text-align: justify;"><br /></div><div class="MsoNormal" style="text-align: justify;"><span style="line-height: 18.4px;">Many experts now consider that the key missing ingredient from stress testing procedures is a solid way of capturing the co-relationships between the various stress events. With this in mind, the Bayesian net can help us understand the relationship between some of the key events. Consider for example the relationship between events A and C. </span><br /><span style="line-height: 18.4px;"><br /></span><br /><div style="text-align: center;"><b><span style="line-height: 18.4px;"><span class="Apple-style-span" style="font-family: inherit;"><u><i>The Bayesian Net</i></u></span></span></b></div><div style="text-align: center;"><img alt="" src="data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAWAAAAB6CAIAAAAOOR5SAAAgAElEQVR4nO2d918Uybr/v//A93vPuXvOnnvPPTedFRgYhpyDSgZJCgaCGQnmHNY1Z9cVXRUFMQMm1NU157gmMCCgknOGYfJMh6rn+0PNNM0ALq4uC9jvV73GoWfs6e6q/tTzPPVU9f8BAQEBgR74P3/0AQgICPRf9AJx52ne9Ycvdh06t+vgT7sPn/0hNTN5/8nk9Ozk9HPJ+88np59JTs/ekX4q+cCpHfvPJKef2bH/THJ6tvA6YF7Ts3/L6++9/4H+2h9q9jdd/x8P/bR9f/b2/Wd3pp/dtvfknoPndqSeSN57NDnlIAOgRYgF1EkgNqUe37r/TMTU7xZtODh/3d5lW9OWbtm/YEPq4k1HFm86snjzwcWb05dsTl+8OX3JpsOLNx9esung4s3pwuuAeSV197Gvv/f+B/prf6jZ33L9Dy7Zcmj++rTFmw8v23J4yaaDi9anJi3e9NV/W//tf8U6AAaAxmAkEJlb0k6NmrK8qAmaGWjF0EBBO0Aroy8tLLSy0NK5tAqvwqvwOgBfmyiQAbQyIEXQSkGLDmITl/7fr03+/O9DNAgoDKyRi7Et7UBy+tHISbMrW2ktgBZAB6BGQIG+6Ayv/EIJr8Kr8DrQXikABoAFoFigETAAUiUVOynpT3/9jz999XcWAANgIwtie1ratr37Y6bOrWvR6gBoYFlAGBBgAAwYEAYGA8MCYgH0uxDKACuo16+/9/4H+mv/LB91FjQAA4ZAg0yunjwl/qu//NvXf/sPRL5kZEEkpx3elnI4atKC+laW3P8qlaK+vr6htqWhrrmhvrahvrq+obq+vra+vr6uvrFeKAOv1Pf69ffe/0B/7Z/lI86isbmptr6upVVKY2AB2hXamAlTv/r6P/70l78RC4DTCIMFse/IjrSscRPnVzfQGAPGuK6u7tLPF3Ofv8p9/ir3eU5uzjNScnJycnJe5D4XyofKy+c5uc9zcnJecCX3+YuXz17kPs/Jfd6xJfd5DtkiFKF0LUY3mqEtfWqbycl58Tw352luTnlFFZEDmVIXOznhz1//4y9/+wcDQCHOw+AsiH2Hdu7PHD15XlUzhQEA4aampri4uMePHzMMw7KYohiWZliGommaZhmBD8DSDFAUpikdi7QsaBGiGYRpBigG0xTDMDQDNAMszWCaYhmKpf/oIxboZ5AmQW40TCFMIZYGmkE6ltEhimUoTDNkI8MghkEf2BVN0zRNsyxL3iOEGIZhWPz0+bOysjKWZQFAqdLFToz701//489f/4M4EMYuxva9B3ekHYucPK+6VYcBAENNTc3IiFHm5mYZGRkaLSVXqLRqnUajkcvb1VqVwAdQK1U6hUKrVMjVGqlWI9Vq5GqN1rBRpVLJ1RqlSqNWKdQqmVqlUCv/6CMW6GeQJqFUK5RqhVap0io0aqVGqdLINQq5RqFS6TdqFTqVSqNU92KHajX3Ri6X37l7//jJE0Xv3pMwhEKpjp0Y9+ev//EhgUhOPRo5eV5ls4YIRF1d3YiQYCsry6VLl6rUWgzAUCzDMAgxLGaQwAcBFmEWIYRojCgMNAaMKGApYACzwCJgMYMRhRFFviYgwAezgBCwGHH3GmknLEYs1v8JDAADZOOHdmWA26LRaLLPnDuacaykqBgAYYzlCtX4SdP+9W//+SsCMWbqgupWHYsAMDQ2NoaNDBeJTOfPn68Pk+rHRhGDaBDoDRgAgLh5AAgAAeIuPwJ9JFlAoAsYAPPHJkDffrjmg7kNgA2DEV1BSP8R0QjyRq1WZ585l5GVWVZSSgRCqdLEToz7l7/8/UMCsX3fkbFxC+vaGXJE9fX1waEhEol44cKFDItpBgEGjDFN6z5wQAKd0FczYvn12nH5aZKxhnv43wJfLgaB4LIK+KOSem3QNx30sfejRqM5eSpbb0FgFmNMXIwPWRA7Ug//sPdw5OR5tVKaczGCQ0PEYvMFCxYgrLcgMMa/4YC+QMg15OqvY2gZM4C5foABYHBHCxAQMNC9QDA885PRa8QHGw82DEfgjnEJ0Gg0Z87+lHk8iwgEGGIQX/3bf31IILbvOxIxaW5Vi5azIELDwyQS8aJFiyia5QwdjFnBxfh1OgwDBB1WIgCmAdMYOlJZWQBGEAiB7uDnQXVYDXq/o0MgPm6fGGs0mlOnzxzLzCh+X0SsEpVaGz1+yq+4GDvSjo2ZuqCmjeIsiNDwMLHYfNGiRSzSd4kIIcGC6BU8dejYgAGQDrAOG0SB7dRFCAjo4WczdnJO9VEtMtvytwgEQkitVp86fSbzeFZpcQlGDAAolOqYCVM/5GIk7zuUnHp09JT53DAniUGIxeYkBoE7jlQQiF8Hc9cKs5g1+BQIA6sCStbW1lbfpmxXgxYTdRCup0AHpOdARCUwYMx2RBwwIMAMF9zGhmhlb3ZraJRckLK0uKS3w5yCQPwe6IejMCCEWAQACChpTeHzNSu+W7Bk9Z3n79X6ebVMbytZ4AsAA9AYYQDE0sAygGjADBELAGAxYrj5UOSWRL0yJASB6Ed0HrNAAIhFABiBonHP+m/9PTw9hwftOHJeSoIRiBYEQoCPwZlgANPA0oBowCwCjIgmIEAs0Ajoj3FOBYHoR2BAGLPE/MMsAkCIpYHVPbnxc8KYsMWJCd5eAfM2pjaQifdYsCAEjEEIYawBrCvNe/Xk9q2HDx/euHfn1r27Dx48en7vaX5uQWOLSvcxEW5BIPoRmAxekHQ3DIBYoGXK5qrVSxcvnzPnTnZWmJ9/7LyNVTTQIAiEQBcwaRUqWVPVgoQZvu7DI8aOixwfPSY6JnpcVGxI+LgRo5Yt3Xj/Sb6K7a0dIQhE/wF1jFqT1ElEA5I/uX0xNnrimRPZ1S+fTI4YNS5x1VspUNCRoyogYABhSglYXleaP3H0hImxCfsOHD56+sTJU9mnMjLSf9g6PWaCh2PAitW7GhWMjjdq/gEEgeg/IAAGYQpzKeqIZptKktcsnT5nUUl5nbI4f/746DFTlj6rYnS/bbRKYDCDAGjAKkBt+Y/vjAqN3frDwbL6Fhml06jUtKxd21KR9/BeTOiUiLDE1+VN8t5l7AsC0X/QWxAIMMYYMA2U/PmVs3FjIk79fFOpw9BQtm52UkDk9MvP67RCEoSAMQaB0NZfPX4oMCg249wDJQYKECAMiAYk1bXULE5aMSo4sbCqTdk3ArF935HRU+ZXtWgFgegG3KV8CARAA0vpA9HKuuIn15fNmrV00cqqOhkAQGt5yqbVbkET0y7kqAX7QaAz+vbFakBdl7551TDfqOvPKnUANFAMAAACtrW1qiRu/Jzp09fWtiipj49BnM4+eywzg8zmBEEgPgMfJRAkKokZDDQgVWPhoy2LE8ODQjdu/PHh41evX77Ku39pw7cLHb3HrNt7QUoLqdYCncD6OXw6aHq/fvbUcRPnvarQUAAIaBYAYxaw6urP58ZFzcg4eUupYylG16vdCgLRjyAiQssYRc3R3VsCXJ3cHV09PXyH+4zw8vIK9nb1cHYwsRy2YM3+FhbUvQsyCXwxIAwMYJWs8MHc6JCJ8XNv5ZbW1LS01jfWV1dVVpTdvXljydIV65IPlTTqmF5n4goC0Z9AAAwNuP3NsxtRERFTJsbv3L4nM+NUZsbJzIyjWYf2bF27aphH+JTE1YWNmmZhWQiBTiAMNGDF25unpwQP9/QOnDxr+bdLVn+3YPF3C+fFTx4f5Oc/aerMB2+qZQA6ABYLAjHQwBgD0Iyy8sDe78NGTztw4nZNg4JhgaUR0BpgWopfPx4bOCY2eu6zcnkjAPVHH7BAfwIhrAFQ3s5KC3GxdR/q4xU8OnhEeGig38ggrzC/oQGe7pERURk/P2liQNfryX6CQPQfyCiGpjT/0YSo0QtW/lhYh5U0N6GTBtzeUpE/I2ZC1Oi484/LqljolRMp8KXAAGiAkR35YWOkl9e5c1eKqpuqqmtrayrqqt7Xlby5eSZr/Nio8IkLcyq0GgAaCwIxwGCAVdHtTWnbtk0YO+HW07cyAA0CRPKmEAKkk9aWrFo4OyQ0fMfpm+9VvyIQHzeEIjDgoQG3a6RVm5YtixkZlZdfqcWgBWD1o2MakNbs3rjOzW/cteeVut+Uai0IxB8LAqyrele4bunKIwczpVqs4YUhMYuApbFKcerY/sTpCYd/vleq/BUXQxCILwwacFt9ce6MaUnz5nxX06Akz8ujgQVMA6uB9urk1ct9QibcfV2r63V8WxCIz0+3K3Zx639y8JcGBcMsb8SwCoVCppCXVFW8fJOX+ySn9F1Je7scAFiGAoyQllLINSoGOslHl50DAIs7PfGtl0Epgf5Dt9Vq9AXeHzpgW3NvXhg9Kub77YfaVCwFoAVggMVAAVLW5T+ZNSl6xoLVpU00y/a20xAE4vPw4brkSwZZSpz/KUKIPImEpnB1de3tu3d+3J08clSwtZWFs5VtsHfA+vUbb9y5XV5ertVqMa8qMMbkP3JLD3f6UQAyz5fFCMEHG5pAP4ZbgZ6/xeg7CCFgNaBruJyRMtzTP/nHIxW1jTVNTfUt0trGpoqq8meP769ftmD+9MTbj15qATrm+/Ti18kbQSA+FeP701Cp3P3f/XdYROuoupraXx4+Opx+YM6MmZ7uQyViS7GFiaXZN5J/mlqZWEgkEmd3t3GxMSlpqbfu3a+ta9CqNfq1QHj+AycTnABxbxjECgIx4Oja65AugdtIHmBh+FAD6vLUzQvtJdYxUXELFyxdsvTbFSs2rFmzZfnq9dNnzV+2dOX9e481NDCkTTLa3swGFgTi94Lr3o22cFecYRitVltXU/v08ZNdO3/09/VzsLG1FJmLvjGzMDVzsLf2dHXydvUY5uRuZSmxsrEWWZiLJZbe/n5bvt/6y8NHDTXVGpUaMGAW6den6+plGA5AsCAGJZ2dWR0lfb99zWxXays7sZ2jjUOgf1BYaGTMhGmLV6zLOP1zWVWrjgGkX4aOwdCrBYcEgfgMGHkQ3X5Bvx0DIKxWqmTS9jev83bt/HHShIkjw8J9vLwlYkuRqZlEbOnu7OTtNSxhZuLhjGO3btw8kZEZN2Waj5evg421lYW5pYVkqMewsRGjJo+PPnL44LvCt9LWNswizqDoKhZdbVSBAQf/IVfQuX4RQhRFadSylsain08fnDQm0s3aPmbU6JuXrxcVFZVWVlU3t9W3q9QssAAYAWaBBUThXj2qRhCIz8CHow/cpzqdrqGuvjC/4GD6gdjomED/ADcXV9MhJmJzCytLiYuT84gRI2bPnn3m5Kmid++lCqWSohgWMxTd1iJ98/LVnuTkqIgIHy9/e1sHc5MhVhZmro4OocEhs2bMPH/up8ryCqVcQWl1nLvBhSeMDBmBgcIHZJ18pNPp2traioqKzp07t2rVinHjwr2HuThbSxwsxCE+gXm5rwEQAyyjX2iErFQIwJJnOTJCHsQfCfEmMMbydll5adnzp8+OHDocHzdtqIennY2tuZnIylJia23jPdwrYuSo6YlJJ7KOl5QUtbW1AIXIqjEMAM3N2sQso1G2NTQ8vP9o9eq1kaMiggP83ZycxWYiidjSycExPDRs5Xcrfjp77m1BYVNDI39J0q59jsBAgeg7P6qNEFIqlU1NTYWFhVlZWfHx8T4+Pm5ubra2tiKRSCKRuLm4jgwJ3bJ+a1uLjMXkvmMw0BholqW5dchw7zL1BYH4bPD1HjGsVqutqap+8svjDevWh4wIHurh6eTgaG4mItIw1MNzVPjI5cu+vXHtek1VtUzaTtM0cE/iRIAN685hfSUxwDKAEctirZaqr6/Pe/V6184fI0aO8ho23FpiZSEyt5ZYuTg5+/v6zZ8779qVq2VlZe3t7fq2hQWBGNgghORyeVVVVUFBwdGjR+Pi4jw8PBwdHcVisZmZmbW1tb29fUhIWELi9MOHDxcXl2pUFEOT9kMydGkAHVmvjCxFhpAgEJ8GCexh/d2KuVFDo3FKjLHe80cYEG5vk1ZXVj375fGunT9GjR7j5uRsZ2UtGmIiNreQiC093T2ixo5bvHDRlUuXW1paaJruSILgbmBuVML4cIw3MQwjk8lu3769atWq8ePHu7m52dnYWlqIxeYWttY2fj6+G9atv33zVkVZuUah5GIT3Y6JGm3hcig61kT+ML0bVB9s9HDWnZoHb7xZv6W7NBn9V7mRKfIGYcyi9jZpft6b2zdvrVuzdmRYuJuLq42VtbXESmRqZmdjGxw0IiYqesmixUePHq2oqJDL5YZj4Fcb4pWPPEVBILqi994N+UX8wUQGGQ9YYowRw6qVqqJ3769fvbZv955pk6d4uro52NhKzC0sTM2c7OyDAwKjx0XNnjnr6OEjJUXFGpWaPJe963jkbzhUMhpSVVWVkZGxYvl38XHTAv0DrCwlFiJzGytrd2eXSbHj01L23rl1uzC/QKFQ8P87J0/8HRIJ4RcEuPOIWhcEgej6IcYIIZKEou9geKlxRmlyZMCbCzOzNCOTthfmF1y9fGXDuvX+vn72tna21jaWFmIzE1N7W7sRgUFTJk3esmnzLw8fSVvbdBotraO6bUW/uWnxDw8EgYAehp259wzD8L9GnEOapimKaqxvyMrIHBkWbm9rZ2UpMflmiNjcQmxuYSEyd3d1GxM5+sD+9OL3RSzNcN2CUebCJ9r/fOtD2tqWsntPaHCInY2tRGxpbiYyMzGViC1dnJyjxo47d+Zsc3OzTqcDAJZlO8ZBuzQjol/d5+QIfJAPVKhRwLjTxUQYMSyl1WlU6pKi4qOHj4SFhJqbicjYlpmJqdjcwsHO3t3VLXJUROaxjLaW1g5zA3VMvfoVKf/4cyFvBIHo3kvHXRIfiTRoNJr29vbc3NytW7cmxicEBQTa29pZS6ysJVZWlhInB8eggMDvvl1++eKlonfvFTK5TqPlugiuOvmZEb+tUhmG4Q6PZVnAwNJMW0vr24LCn86eS0pI9HT3cHZ0spZYmZuJLC3EAX7+CQkJu3fvzs/Pl8lk3NmRbC5hQPT3gH9VO6JUna02nU6nkMnfv3136MDBObNmR4+L8vf1s7W2MTcTWYjMHe0dfL19ZiRN35ey996duyVFxfJ2WceotqFRGdXdZ1EKQSC6QX+hDX4g6fMxi2iaVqvVlZWVFy5cWLlyZWxsrI+Pj52dnampqZWVla2trZeXV3h4+Ny5cy9dulRaWtrW0kp2ghiWr/Fg6J/5P/obema+m2PUBBFCOo22pan5Ze6L/alpsdExnu4eHm7uErEl6YhGBAYlxiecPHny3bt3zc3NxD7iN1/SvPi7/bxd0yCma6fChxtUQkjvShS/LzqYfiAxPiHQP8DJwdHSQqwPObu4+Pr6JiUlZWdnFxYWNjU1qVQqTtC79lv895+rpgSB6AbMS2riUpvqa+uuXbs2a9asoKAgNzc3a2triUQiEons7Oy8vLxGjx69bdu258+fNzU1yeVyYsNz3gQn83w/hbzhJ2J/0tHy2qW+CZIfRZjWUY31De8K3548fmLm9Bnew73sbe1IXpajo+PQoUMjIiL27dtXUFAglUqNlKLre0EjekNXS4FLS6FpWqlUVldXP3r0aM+u3ZMnTgr0D7C1thGbW1haiB3s7H28vMdEjp43Z252dnZ5eXlbW5tSqTSKixv1DdxvkT/5Uv65vNffIhA7Ug93FYgRIcEDVyD0lxsDIKzTaGXS9trqmof3H2xcvyEsJNTd1c3cTCQRW1paiCViy6EentHR0WvWrHn06FFbW5tOp+t6dxGMVN94EAQAuninH3XAH3Z6uZ+jdZRSrijML9j9467xMbG+3j4OdvZk2NXR3sHPx3fOrNnZ2dnFxcUymYyiKMSw3Xq53RyGEKM0+gh3Ho/AQOuo9jZpaXHJ9avXvl26LMDP38PN3cnBkTQncv2jx0Vt3bzl2ZOnLU3N8nYZaRL8cCbuMoJmFOw0OoYP2zK9OkdBIPgghBiGaairf1tQeP7cT6tWrBwdEenp7mFrbWMhMre0ELs4OQcHjYiPm7Zh3frLFy/V1taq1epugwg93bTdqsNvpqu+cN2I0W8hhLgQKaXVSVvbfnn4aO3qNVMmTY4cFeHs6GRmYmplKXF1dQ0NDV2xYsX58+fzXr1uqKvnYqsk+ar7SI0gEEYfGboZhUxeW13z6sXLa1euLl/2bciIYA83dzJIaWNl7WjvEDIiOGFafPIP258+fkLGIzhdNrIOjPffw+/yG8BnOMfB5GJ8IA7U9e41esOybGtra9G795d+vrh44aLgoBEktmdpIba0ENtYWZOBpZ3JO4jAa9UalmZ6rKf+fMNgfWFpRqNSy6TtL3NfbNv6/YTY8UEBgXY2tiJTM2uJlZODo/dwrwXz5l/6+eLbgkJ5u4yfncm/1JzxzA9YDERPhH/MXSNE3bYZbouRo6dWq2uqqp89eZqetj8pIdFr2HBnRyeuLXkNGz4yLDwxPmHb1u9f5r6Qy+Uajabbvf3hDCqB0P8SQvzYfldB5XpX8h2VStXa2lpSUpKSkjI6ItLd1c3GypqMKknElnY2tsOHDps1Y+bZ7DPS1jb9ZAfeSES3DAiBIGdB+ivMoubGplMnTsZGxzg7OtlYWVuIzM3NRCSiOToiMisjs7qySqlUdrsChZEbzG3sPw2993SNuXRtS/zv8H1DlmWVSmVjY+OtW7cWzJvv4uTsaO9gZSkxMzEVmZrZWtsQadiZvKPgTT6l1ZFWxJ/jC/3sug1OgTA6Nz0Y9Nayof9UyhXvCt8ez8z67tvl8XHTAvz8baysSTa0s6PTMM+hESNHbVy/4erlK+8K38rbZfxUlsGUDqBvkQi3tbS+yMk9npm1YN58f18/YkNZiMxtrW1Cg0MS4xP27kl5W1AolUq1Wi10ibD+qkvVz+nal3Axo46YAr/wzk6tVkul0pcvX6akpCTGJ0SMHOXi5EyyWq0lVs6OTl7Dhi9evPjMmTM5OTmtra0URXERa47+owscg0ogjK44X+wZhuFGHDUqdXlp2dHDR2YkTQ8PDXOwsyfzKcnYkq+3z5RJk48dOZr36nV1ZZVSruAEpWPMud/V40eDeRg2dUhnU0Nj0bv3d27dXrNqdXhomJuLq5WlRGRq5uTgGBYSGhsbu3r16nv37jU3N1MUhTtnczAMw3c9BiIksmscAsBA2g9pBohhdTqdWq2uqam5ePHi6tWrJ0yY4OPjY29vTxqSva2dr7fPhNjx27Z+f/nipYI3+c3NzUbJJnyPrF8ZDhyDSiD0v8SvWkOHr9No5e2y6sqqK5cuL5g3Pywk1MPNnQw421hZOzs6DfXwjI2O2bsnJe/V64aGBq1Wy9VZV3f088aB/nC4E2EYRn9XYyCDsmQ28alTp6ZPnx4QEODs7CwSichcD19vn8kTJ+3dk/LmdZ60ta2niMwAuko9imbnxbsYipa2tlVXVp05nT1vztywkFAyQ5fkrTo5OPr4+ERFRaWmpr58+bKhoaG9vb3bhgQANE2DkVNDfhBwP3n66qASCL4vpzccKLqpofFtQWHmsYyZ02eMCh85zHOojZW1pYXY3Ezk6e5B7IWU3XsePXjYUFevjyF3iVdxtTsIdMHo+I2iCQSWZkhmHvmTpumWlpb8/PyUlJQxY8aMCAzydPcgOVeO9g4Bfv5zZ885czq7oKCgtrZWp9MZ9ZADCOPpEgarATCoFMr62rrS4pILP51fMG9+aHCIu6sbiTtaS6yGengGB42YNGHizuQdjx8/rqur4ywp3HlJDqPp20Zg3izB/sCgEggw3MBarbaxsTE/Pz/zWEbCtHjv4V7Ojk4k5GYpMndxcAwJDIqfMjXj6LHi90XydhmZPcX1FVz7RgiR1Ry7rTD+Cj8DAv2JdIEfhOt2UgYYGopGo2ltbS0pKj55/ERSQmKAnz/J/BObW7i7urm6usbExKSlpb148UIqlZKJZH18jp9IJ58CgOhCXU3towcPN2/cNG7M2CA/fzcnZ4m5hZWF2N7WbqiHZ9TYccuWLD15/ETRu/cyaTul1T+uhAgEP6bLv5JgcMEQ6jQbsHOI449nUAmEQqEoLy9/9eLl2bNnZ8yY4eLiYi2xIh2duZnIzcV1ZFh4bHTM/tS04rfv1EqVTqPtSHNEHdPp+NeFbCBzOvVbBqwR8YGJ20YnZZxAwduCEAKESYj3bUHh7h93TZ08xdfbx8pSYmFhIRaL7e3tXVxcEhMTL1y4UFRU1NLS8vud0WeHXASyUlNNTc3D+w9Sdu8ZFT7Sw82dRKnMTUxtLCX+3j5RY8d99+3ySz9fbKirZyiai02QweCuQ+w9KS/0oA6DwcXYvvfg9n1HIifPq27VERmsq6sLCQsVi80XLVrUrUB0neVK/uS6GhYjcjeS1kyzDNfvdfxHrqs33NIqhbKlqfnalaszkqb7eXlzQTWSjuLu6hYWErpy5cqbN282NTVRFEUWRxD4zXDeHEVR1dXVx44di4mJ8fHyJglXJErn4eYeExV96MDBmqpqtVJlPEKMeBXaOVzH/6FOyeld/q9R7oBRo/pVmdPvilcorU4pV+Q8e74/NW1G0vTQ4BBnRyduuVB7WzsnB8focVGZxzJKiop1Gm3/TF74jHwGC4IvEPX19R8QCO5qdhvfJq5+q7Qt50WuXKnoam51OHW80QSNSp336nXK7j3xcdNGhYa5ODiam5iam5haS6xsrKy9h3stWrDw/Lmfnj5+Ul1drVQqB5zR288hN0ZbW9ubN29u3biZsnvP2NFjXJ1dyPxRK0tJUEBgYnzCxvUbsk+drqqoZCiai/lxJrdRIgBpCZyH0pFb0dnKA0PzNfrv0J00dHfoHYWEsetr67JPnZ47e05MVHRQQKCTg6PpEBMrS4mVpcTNxXXyxEn7U9Pu3r7z+uWrxvoGkr/wOS9lv+TzuBg1bRTnYnxAIIyknRvy4W7apqamtWvXTpgw4e3bt9zxGWkzTdMMRcuk7SkJveMAABZWSURBVG8LCo8ePpKUkBjoH0BCDCbfDLGxsrazsXWws4+Pm3by+InXL1+1NDXrc1cNkaeeTD6BXsLPF+rUJ2NQK1WV5RWPHjxct2atn4+vo70DmWtA7LgxkaPXrl7z4N59fU5xl16dq2ilUnnmzJmUlJTm5mayhUxmN7I7jMAY0zRdWVl5/eo1tVJl9DV+sJnMpGRpRqVQlpeWZZ86PWvGzFHhI4cPHWYhMucf8+SJk05kHX+Z+6K5sUmtVHF+BAlmd3sMn3yB+xF9KhDQQ8oqoampacOGDc7Ozo6Ojk+ePDH6AsZYrVY3Nja+fv16x/bkyFERgf4BXsOGcwui2Nva+fn4zpsz96ez5wre5Dc1NHbMNSIhhsFVc/0NjA2GOgbMIpm0vbS45PLFSzOSpnu4uTs7OpH5LA529t7DvWKjY3bt/LGwsLCtrU2lUpHRvo79AFRXV8fHx3t4eOzevZsMOQMAXyCM5p5zQwNVVVXLli2bNjUu79Vr6NyEuA5frVY3Nzc/+eXxjzt2JsYnhAaHkHXcyOG5u7qRdT0zjh7LfZ7T3NikVWs6nBG+l8Q75p5a9UDn8whEdauulwJh5CjqLQiKlknbDx046OrsQtzXn89f4GpFq9Y01NW/eZ23d09KTFR0gJ8/sRfIxEo3F9eggMC5s+dcvXyltLhE2trGH5rijFX+CRt1fQIfC1d3PV1DzkYjmRQFBQUXL17csGFDZGSks7OzpaUliWWOCAwaGRa+euWqZ0+eNtTVczXOUPSzJ0/DQkItLcS+3j6nTpwk6Wq4uzUpMNZniyOGra6s2rBuvZODo6uj0+mTpzpZNwAqlaq6suqXh482bdgYGx3jPdzL0d6BrP1FkqAjIyM3bdr06NGjsrIymUzGCRP/5u8a6Rjc9LVAAK95ca5jaXHJ6pWrPN09iDlgZSlZtWJldWVVWUnpi5zcA/vTY6NjvIYNd7R3IAvsWEusfLy8RwQGTU9Myj51urS4pL1N2o3MY+NgcldnVeA30PUactZ71/ns3BapVFpSUnL27NlZs2aFhIQ4OzuTFRbJTOfIUREpu/e8K3zb2tzy/u275B+2u7u6mZmYWlqIRwQGnT/3k1at4f9Wp4MxhKJWrVjp5uJqITK3shDv2fkjIKxSqRobG6uqqu7fv79u3brIURGe7h72tnYkd9bR3sHHy3t0ROSqFSvv3r5TX19Pkpq6njLqxbIdg7Jp9alAGOWHkd+uqKiYOX2Go72DhcjcdIiJhamZuYlpoK/fnBkzA/0Dhnp4ujg5c3nQ/r5+sdExa1evuXfnbk1NjUwm48/Lgs5ir/9hhLo+WUAwHz4FzMNoO/e+6xXmAooymaywsDA1NXXi+AlklQ2xuYW9rZ2Dnb2fj++MpOlrV68JDhphY2UtMjWzFJlbiy0jwsIf3n+gX4aHN3+U/KlRqW9evzEjIdHT1c3cxFRsJhL9c8icGTPv3bmbeSxj9sxZZJK1rbUNCS6QAe/ZM2ftS9n79PGTpoZGjUrN0gz/1LpOUeV+uiel6HpBBgF9G6Q0jO5yrUen0+3Zs8fNxVVsbkFmvFmYmlmYmlmLLe2srEn+Apl9PMxz6KQJE7MyMkuLS+TtMlKdAMbmX9f3Rmc7+Kqwn8BdWP68DKNRbf6iFWq1uqqi8taNm1s2bfbz8eV3A2QZFXMzEddh2EqsFs5fUFdTazSXlLzJe/U6KSHRyc7e3MTUwtRMbCYy/8bEyc4+0NfPe7gXEQUrSwlZziNkRPCGdeufPXna2tyiUij5i+J027t0PUGjPwd3i/oMAjFm6oKuiVI9CQS3bDzh6uUroyMiLS3EIlMzsZlINMTE3MSUrBZvYWpGZsL5eHkvWbT49MlTz548bW5s4q9KIDCwQVilUFaUld+9fWfPrt2jwkeSrDaxmYjogrmJqaXInBgFQz08U3bv4RZl1IOhrqZ24/oN7q5u+m+amFmaiiyGmIrNROSxYyJTMytLiY+X9/TEpMMHDz168LCsrIx7fsTgvr0/nb4WCAR6441hmPPnz4+OiCRxByIQpFiYmomGmHi6uu1M3nHrxs13hW+bG5s6LQktMDjgum4W0Tqqsrzi4f0H69eus7IQk5YgGmIiMhgRJBc2LS1NrVZzS/tVlldsXL/BzcVVZGomMbcwNzE1+99vJGbmViIL0RATidhyZFj4ju3J9+7czXv1mvQuiGGN7BqC4HV2S58KBBdewhi/fPkyMTGRxJBJyiPpMYg62Eqs4iZNLi8t61gVWhiqHHzgTjlvZLWOe3fuOjk4mpmYmpuYWlmILUXmpM8wHWIiMjUbNmzYtm3bqqurAaChoWHLps1EHUyHmJj+8xuJuQWxIyyGmJqbmCZMi793755MJqNpmjg+QijqY+lTgQCDX1peXr58+XIbGxuSlksCDUQdLEXmFqZmZt8MGREYVFFW3mnkuec1EQUGJNxoNMNysYArly6ThxsTN9P0n9+IhphIDNEosVjs4uIyZ86cN2/e/PDDDyTASZb/4ncwEjNziblFTFR0UVERdAklcCm53BahUfVE37oYBgmXSqVk4nBAQIC7uzsZdjIzMTX5ZoiZiSlxOtxcXPPz3vDDWkaT4QQGAUZ1Km1t27h+AzEqyW1PHlBmK7EiQ5KBgYF+fn5z5sy5ffv2t99+6+vr6+3tTfI1xeYWpkNMSAcjNhOZ/vMbFyfnu3fv8hO6oYsroe99+s36C/2NvnYx9H8gRJboqq6uvnXr1tbNW6YnJo0dPYY8BdvKUmJuJrK1trlw4YJKper2cAUGB/wRU4RQRVl5bHSMrbWNm4urr7dPeGjY6IjI8TGx61atPnn8xIuc3MrKSqlUSp48olAoWltbc3JysjIyv/t2+dTJUyJGjhoZEjrUzd3e2sbSQmxrbZOdnU3sBePUCYMxyy2+IDSsbvk8w5x6gUD4V10MvuNH3tA0LW+XVZSVF+YXXL96bdOGjeGhYR5u7q7OLnv27Glpa8W8KZ5YyIAcdPCz196/fx8VFRU3ZeqqFSsPHTh4787dd4VvqyurWptblHKFPiDFfzIVywKAWqlqrG+oqqgszC+4ffPWtq3fj4+KHurh6e7qlpqaqtFowGjwlScKnAUhCES39KlAsJgBQNyiLIABMALEYsySP5VyRXVl1ePHj69duX7gwKEbt24qtRr9k5E7ltlB+nQKoUoHF8SufPr06ZvXeaXFJc2NTSQw0bHUsGGiB8vS+vrXB6dYwIh4sVotVVlV8+xZzt2798+e/elNQT4/NM79Fr9FcU/fFujKZxWIDy4YwwLDAI2BAZoGRMLXCDRyWtmm1ioUGrVOQ+mUWrVardFSLANaHathWZqoA+k0AFjMYGAAGMAIkH7ngon45YBZBIAAGBYQS25thgWGYjRKSq1Sq9VqGqtZoDAwABQCtrOl0GMGndB+eqDvBAJzAoERMAxgBjB95mj6opkJUxPjps6ckZQwfXp8wpzZM7dv33bj+p22NrUOgOLlPWAARPbACYR+WTDEChX8BYFYpMPAMEgHNN1WW3fj0qXtW7csnDtr1szp6zdvuX7vcaOc1gEwADoWWADWaPplFz0QBKIn+k4geAUw0IAVOnnDstkzA7x8lq1Zv3XXvl07d+9N/mH96iWTYkYH+gctXrz6bWWzCgMZxsDcAqKI1u+nw4JAQgV/ASAAxLI0WY8BgFa1N10+czZpasKYMRPipiUtXDB7RuLE0eFBIwKDFn63qahOzgDQuJNAYG7auCAQvaNvBQID6LOtGcDyxvI38eMnzUya/+p9hVTLKpVqRVuzRtFUUpC7dfUqf58R2/ZklTZRxIjAiOwFdwlDIEEgvhAwYgBIGIvWtDRkpu0bO2rMmrWbfnmaV1nT2NrW2NpY9v7V441rVrp7h+w9ckahRUQdWF4KriH41XnPQvvpgb50MRCLEdFywAwwbW8f3YgIGbtl2/4WFaXhApAYgKWKn96ZNnbMyKjZd142qBEY/hffUOQW/CTjI4jbIjCoQYiWg6btxsnMsQEjtm7fW9Oq1uqXm0GAKcDKNzm/REdPmbNgZUV1A2k5vNVku0cQiJ7oyyAlYgDrd8RSoG26eeqwj/fI9OPXZDSrM3zEshhYGlpKlsRP9AyYnHXtfasaGADWkMvCsGSP+rClIBBfDhgBsBRAe11RzoJpcYmTk/KKalXEIGDJUAUCrJE2VK1euS4ubmZpZQ1fIMhCxUKQ8qPoU4FgAShiA7A06BoO7tgwzH/s6esvFUyHHQgIA6uBtuI1sxPc/CfvP5dXJwfGMKbFH+nkR6cFgfgSwAgA0yCvuHf+SHj4qO27D0u1mEz7Rww3Q5tmNIo3L188e/asXabghkeBlx/1Rx3/QKRvXQzQz+gEhgJp2bolMwJGT7v9poECwAAUIt9HwKpAWrR+fuLQEdMOXX7XpAViQiIEiNU/dgBAvxw+y42HCwIx6MEAjKo65/qqOZMiYqf+8q5GZ7AL9L0EQoa0BgYjBrjY5B950AObPhUIBCwGwCwAy+iq8uZOGRszY/nLWkbHORckPMEqoKlw4dQo35FJPz9rbKWAv1K9wV4wPC+DEwihFQxyEGAdKBvun0mPDvFJWLq6UgtaQ7WzLKu3K1lk6C2E0PVnoE8FwjAfE4DWFT+4Mmlk0Jqdh0sVoDMYgSzNANIBVjbm3Y8fG564cOvjUpUCgOVFGQyjXB0uBoAgEF8AmAGkUDe+P5q8Jtjbc8PeIy0Aar7XiWlANGB926AF2+Fz0McuBmIQDYgFVnfnxNFQT8+D2dcaUUc/AIAAdIAVt7OPRo0YkZpxuUIOOgAWGAy0kUDoT4D7R2gLgxwamJaagvtbv50VEuBzMPtaM4AGgAWgWS0GCoABTAOtoLUKqVKrAxj8j7X5/eljCwIAGMA6UEkP/bAl3Dfw0r3cdgASg0AIgNEBkmvbq9cvWzJm5NhfXpbJMFD6BEqaM0O6D0kKAjHI0QFuLXt5fc2cySG+3ofOXJcC6AB0LGBAADTLaADrpFVFW9asXLExuaa9hyfbCHwMfSkQgBgMmAEkp6XV61d9Ny5qwrO8UtIJ6JeqxDSwLaWvH8TETl64/PvKVp0WgAHA2OBh8gWi44iE8OSXAA2opeH9w+1Lp4/080o9frEFA8UCYGAQSzQCGHX+o9vR4WGbfzzYpAHhIYufTp9aEIABMA26Fnndu1mzZk1Jmve+soUCw/AGywDSovbqfckbw8dNzb6ZI2eIOug9CIwxAhbz0ygNO++biyXwh0IDapfX5h/YuDBsmMuKTTvrNMAYJvIxtA4Q1VpT/sO6tROjJ916lKcWXIzPgZFAHM049hECsSP1cFeBGBES3JNAMEgHoAOqveT5g9jo8as27qhvx/pHHTBqwCpFS01m+oG4qUm7D2fXKpDejeRpAQvAkHrvCEQI8eovBARYB9qm55cOTh8bEBwcmX31lxYNywAgSoOV7YWP729bu27SlNmnf74r0wJDGoTQLD4NvkCcOn3m9xUIDAxgLTDK+5fO+Q33nTF7SeaZqxeu3bt69fLNq+eOH05ZNHf6xNiph46cqZXqnQv9rd8xcVMQiC8WBJgBWo5ai2+fPTQqZGTIyOg5S1ds252ye8cPy+bOmDRq5KyEGWcu3W/WGGwHoVl8Mp8kEB/tYgADQAOjO5t1zM/X29fXP3J01JixMdHR0UmJ8d8tX5Kamvrol2dSuYYBoPk/yfvxThuF6v+yQAAMYA0tb3784O66NWvHjRsXHBqSkJCwbdu2ixcvF74tkWvYDrdU4JMxEohjmRmlxSW/12xOjChgKUC0tLkh/83rwoI3b968ycvLKygoePfuXVV1rUyupBBZ70GoXwFjMIk4YBYwA7RG1tJQUVJcmF9QWlbRKlNqWWAMmbWGvCmBT6VPBcK44I7HHJKFfoyKgACfjmQZzACmAdNkpTkWkeAU0JxbSr4m8Mn0nUBgQIilARBGDGAW6+d28g4FgGE7HqRimLUpIKAHk+ErhPVGBGbI5BxMotdYb3gaEiuFQYzPQJ8KBBCNwB3mH3laAf+B7oIFIdAT+lahf4QjWbUQEYFg+AvDdM61FfgU+logMGI4deeeZcI/GhYBizqvICggAAAA+hYFAICAZUC/+CAAkBEyw9Jy+oUh6D/sQAcRfSoQ3I+Rh6+Sn+c/KUN4mKrAB+DZlR3ZtNyK54ZVJ/VfwIj6o45zMNHHFkSn256YD0YLeHDPWfqdTlhg4II7DATQ26Ek3sB78HvHp4KL8TnoWwviIyILQgULGCO0n77nk1KtBYEQ6EuE9tP3fH6B+ECqdd+dloCAwOdAEAgBAYEe+axzMRAWBELg96S3joOQR/O5+MwCUVdXJwiEwO+GIBB9jSAQAgOITmuRGksAb5MgEJ+LTxSII9v3HR09ZX5Fi5YFg0CMCOwkENwvCQIh8KkIAtHXdApSnj5z7FhmSVExubjdCYS+dgwCkXpsy54jkXELylu1ZJ5MbW11aFiQSGR6/GSWXKmQKxVKlUap0shkMrVarRQQEBhoKBQKhUIhl8vvXL99/GhW0bv3RAzaZaqJU5L+9NU//vWv/2ANKe+dBGLHvmPJqZmRcQsq2nTk4TeNDTWBAT5Hjx4uLi2qr6+tqqmurqkrr6iqra2vqqqqERAQGIBUV1fXVFXXVlbdvHqtrKSUYRgMIFNpYyfG/+Vv//PXv/6n0RR7g0DsPrQj5eiYKXPLmzVkckVjbc3t61dUCqVWq1UplAqFQq3WqlQajUqrUvzRSiggINBrVAa4LWqVorWlqa6uhiQ9tslVsRPj/+Uvf//q6/9kEfADCnqB2L334I+pR8ZNmV0rpRkMLItZnZY8hFv/HD1u8owwPVNAYICDEAPAMEhHHsQt11Axk+K++rf/+urr/zSs09PZgti1N23brtSxk2dUt2oMzyBAGDH65aEMi0TRDML6vQsICAxUMACFaQaQBmgKoE2tHTNh8p+//se//vXvrD4wrL/HDQKxLz1536FRk2aUt1I6AAZAQ2EWQIeAAaAwUNBRGKEIRSgDuZAV/XQAWgAdQJuGGTMx/l++/q9/+cvfGb1AdLYgtqUc3p5+Mixuye03DY8Kap8V1j3Pr378qvz5u4ZHeVVPC+sevq68n1f5+G3Nw7zyJ4WVjwuqhCIUoQzE8iS/6peXZbn5NS/f1jx9U/4kr+xpXmX05AX/7y9D/vrvJgwGlvesO0OQMi1jy96MpJU7d2Td2p15Le349X3HLu0/cW1v1o09WddTMq/uO3495fi1lONX0k5d35N5MeX4FaEIRSgDsew9fiX9+I39xy6nHrmYmnnpwInr+45d+n5X1v+Yuf63iT0D3QnEoye595++3nv8csrxa2lZl/dn/Hww81J65sW0zCtpmVfSMy+nZV1MzbqcevxiWtbFtKwLqccvCkUoQhmQJesyua9TMy/p/8y6nJ55ee/Bs/sOnmL04xCdXYwnT549epJLVCA982J6xvlDmT8fyLxwIONyeubFAxkX07MupGdeTMu6kJ51IT3rp7SsC0IRilAGZrmYlnU5LevyPiIQxy+mHr+Ynnlx76HsfYdOGgSC6SQQAgICAl0RBEJAQKBHBIEQEBDoEUEgBAQEekQQCAEBgR4RBEJAQKBHBIEQEBDokf8PXrytjjU8HIsAAAAASUVORK5CYII=" /><span style="line-height: 18.4px;"><span class="Apple-style-span" style="font-family: inherit;"></span></span></div></div><br /><div style="text-align: justify;"><u><span class="Apple-style-span" style="font-size: 24px; font-weight: bold;"><span class="Apple-style-span" style="font-family: inherit; font-size: small;">WHAT IS NEEDED IN STRESS TESTING?</span></span></u></div><div style="text-align: justify;"><span style="line-height: 18.4px;">The most important aspect needed in stress testing in order to overcome black swan events is a forward-looking element. Subjective probability is a plausible way in which this can be achieved. A subjective probability is essentially an opinion – hopefully a well-informed one – regarding the probability distribution of an event occurring. While there is no mathematical proof behind the answer, one can expect that in addition to historical probability distribution, a subjective probability might be influenced by expectations, indicators as to what may occur in the future, and indicators as to why this time might be different. The most significant upsides to this approach are the incorporation of a wide range of indicative and qualitative data, as well as the non-reliance on vast and often difficult-to-obtain amounts of data. The latter factor would render this approach particularly valuable during scenarios involving one or more extremely rare (statistical tail) events.</span><br /><span style="font-family: inherit; line-height: 18.4px;"></span><br /><div class="MsoNormal" style="text-justify: inter-ideograph;"><span style="font-family: inherit; line-height: 18.4px;">Another important issue which needs to be addressed in stress testing is correlation of shocks. In many stress tests, this has truly come to be a key missing ingredient. The simple fact that a financial institution survives an economic shock may might not be perfectly indicative of bank-survivability when the economic shock in question might also set off (or might otherwise be associated with) a chain reaction of economic shocks. <o:p></o:p></span></div></div><div style="text-align: justify;"></div><div style="line-height: normal;"><span class="Apple-style-span" style="color: #333333;">-----------------------------------------------------------</span></div><div style="line-height: normal;"><div style="text-align: justify;"><span class="Apple-style-span" style="color: #333333;"><span class="Apple-style-span" style="font-family: inherit; font-size: xx-small;">About the Authors:</span></span></div></div><div><div style="text-align: justify;"><span style="color: #333333; font-size: xx-small;">-Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord)</span><span style="color: #333333; font-size: xx-small;"> who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span><br /><span class="Apple-style-span" style="color: #333333; font-family: inherit; line-height: normal;"><span class="Apple-style-span" style="font-size: xx-small;">-Kevin Hoefman is a lecturer of software programming at </span></span><span class="Apple-style-span" style="color: #333333; font-family: inherit; font-size: xx-small; line-height: normal;">Hogeschool West-Vlaanderen and a former software engineer and video game programmer. </span></div></div><div><span class="Apple-style-span" style="color: #333333; font-family: inherit; font-size: xx-small; line-height: normal;"><br /></span></div><div></div>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-81902359198462926922013-12-27T16:41:00.001-08:002013-12-27T17:03:00.064-08:00What Makes a Credible Minimum Wage Study?<div style="text-align: justify;">
<a href="http://escholarship.org/uc/item/3hk7s3fw#page-1"><span style="font-family: inherit; font-size: xx-small;">http://escholarship.org/uc/item/3hk7s3fw#page-1</span></a></div>
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<span style="font-family: inherit;">A study released earlier this year by the University of California's </span>Institute for Research on Labor and Employment takes a nuanced view of recent studies which have been published about the labor-market effects of the minimum wage. </div>
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Because minimum wage policy has recently become a highly-contentious policy issue in both the US and Europe, the academic debate has also intensified, with much of the discussion focusing on the underlying empirical methodology to be used for examination of the minimum wage. At stake is the accurate determination of the effect of minimum wage policy. </div>
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The study considers use of spatially-related control variables to be essential, due to both structural and cyclical differences between and among states, cities, regions, and counties. A valid minimum wage study should also, according to the authors, differentiate between different segments of the labor force and should be able to measure actual effects on wages of minimum wage statutes. Overall, labor-market heterogeneity is not taken into effect as much as it should be. Failure to do so can and has clouded empirical results in minimum wage studies.<br />
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Abstract</div>
<i>We assess alternative research designs for minimum wage studies. States in the U.S.with larger minimum wage increases differ from others in business cycle severity, increased inequality and polarization, political economy, and regional distribution. The resulting time-varying heterogeneity biases the canonical two-way fixed effects estimator. We consider alternatives including border discontinuity designs, dynamic panel data models, and the synthetic control estimator. Results from four datasets and six approaches all suggest employment effects are small. Covariates are more similar in neighboring counties, and the synthetic control estimator assigns greater weights to nearby donors. These findings also support using local area controls.</i><br />
<a href="http://escholarship.org/uc/item/3hk7s3fw#page-1" style="font-family: inherit; font-size: x-small;">http://escholarship.org/uc/item/3hk7s3fw#page-1</a></div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-10851970079128300422013-10-19T11:41:00.004-07:002013-10-19T11:41:54.484-07:00OXFAM: Austerity Failed in Africa, Latin Am, Asia. Europe No Different<div style="text-align: justify;">
<a href="http://www.oxfam.org/sites/www.oxfam.org/files/bp174-cautionary-tale-austerity-inequality-europe-120913-en_1.pdf"><span style="font-size: xx-small;">http://www.oxfam.org/sites/www.oxfam.org/files/bp174-cautionary-tale-austerity-inequality-europe-120913-en_1.pdf</span></a></div>
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Last month, Oxfam published a scathing report comparing Europe's post-2008 austerity policies, to those imposed by the IMF on Asia, Africa, and Latin America in the 1980s and 90s. While austerity in Europe have been guided by a certain naivete and blissful ignorance regarding the details and outcomes of austerity politics and structural adjustment in Asia, Africa and Latin America, the reality on the ground is that austerity programs in Europe, as in Asia two decades ago, have begun dismantling the very mechanisms responsible for reducing inequality and promoting stable, sustainable economic growth. Results were rising poverty and stagnant growth. </div>
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As a result of austerity measures, Europe has begun seeing similar results, including slowest growth of all of the world's major economic regions, and slowest crisis recovery. Deficits have also risen as a percentage of GDP due to economic contraction. Moreover, according to Oxfam, European countries are suffering record levels of long-term and youth unemployment. Nearly one in ten working households in Europe now lives in poverty. Effects are most severe in countries that have undertaken the most aggressive spending cuts. Much like in the developing world, the dismantling of social cohesion has also lead to a rise in unrest in Europe. After policy failures in Asia and Latin America, traditional leading proponents of austerity in the developing world, the IMF and World Bank, have begun to formally recognize that austerity has stunted both economic growth and equality in much of the developing world. Unfortunately, it appears that Europe's policy circles failed learn that lesson from events in the developing world.<br />
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The Oxfam report makes policy recommendations focusing on investment in human capital development, expansion in public services, strengthening of institutional democracy and tax reform aimed at counteracting tax avoidance, as well as establishing a more progressive tax code. </div>
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<u>Abstract</u></div>
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<i>European austerity programmes have dismantled the mechanisms that reduce inequality and enable equitable growth. With inequality and poverty on the rise, Europe is facing a lost decade. An additional 15 to 25 million people across Europe could face the prospect of living in poverty by 2025 if austerity measures continue. Oxfam knows this because it has seen it before. The austerity programmes bear a striking resemblance to the ruinous structural adjustment policies imposed on Latin America, South East Asia, and sub-Saharan African in the 1980s and 1990s. These policies were a failure: a medicine that sought to cure the disease by killing the patient. They cannot be allowed to happen again. Oxfam calls on the governments of Europe to turn away from austerity measures and instead choose a path of inclusive growth that delivers better outcomes for people, communities, and the environment. </i></div>
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<a href="http://www.oxfam.org/sites/www.oxfam.org/files/bp174-cautionary-tale-austerity-inequality-europe-120913-en_1.pdf"><span style="font-size: xx-small;">http://www.oxfam.org/sites/www.oxfam.org/files/bp174-cautionary-tale-austerity-inequality-europe-120913-en_1.pdf</span></a></div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-31107885763136955382013-06-30T15:03:00.000-07:002013-06-30T15:03:54.404-07:00NPR Piece: Can Human Genes Be Patented?<a href="http://www.npr.org/blogs/health/2013/04/15/177035299/supreme-court-asks-can-human-genes-be-patented">http://www.npr.org/blogs/health/2013/04/15/177035299/supreme-court-asks-can-human-genes-be-patented</a><br />
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US Supreme Court Decision on Human Genome Patents <a href="http://www.supremecourt.gov/opinions/12pdf/12-398_1b7d.pdf">http://www.supremecourt.gov/opinions/12pdf/12-398_1b7d.pdf</a><br />
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UK Supreme Court Decision on Human Genome Patents <a href="http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2010_0047_Judgment.pdf">http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2010_0047_Judgment.pdf</a><br />
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<br />Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-91019940962665997032013-05-18T07:37:00.000-07:002013-05-18T07:38:37.262-07:00ROI & The Economic Importance of Public Support of Scientific Research<div style="text-align: justify;">
Last month, academic advocate Zack Kopplin debated the importance of maintaining funding for scientific research, even in the face of other economic priorities. Kopplin argued that the Return on Investment reaped from the results of such research far outweigh both any costs associated with said research, and borrowing costs. </div>
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Stephen Moore, a former fellow of both the Heritage Foundation and the Cato Institute, two prominent Washington DC-based free-market think-tanks provided the counter-point to Kopplin's argument. While at first arguing that the debt takes precedent over scientific funding, Moore resorted to mocking Kopplin's views via anecdotal mention of publicly-funded research on snail mating habits. "You are not a scientist" responded Kopplin. The host then chimed in to say that anecdotal arguments really have no place in a serious policy debate. </div>
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/oxIH6bdyvKo?feature=player_embedded' frameborder='0'></iframe></div>
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<span style="text-align: justify;">We can all bring up anecdotes which, while not scientific, representative, typical, underline one's point of vies in the argument. In response to Moore's mention of funding for snail mating habits, I can also submit seemingly questionable research: on Oyster Glue.</span><br />
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<a href="http://www.npr.org/2013/03/28/175550939/why-a-hoosier-state-scientist-is-stuck-on-oysters" target="_blank">2013 Story About Research on Oyster Glue</a><br />
<a href="http://www.npr.org/templates/story/story.php?storyId=130011204" target="_blank">2010 Story About Research on Oyster Glue</a><br />
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For the past 13 years, research has been ongoing at Indiana's Purdue University, on exactly how Oysters, Mussels, Barnacles and other mollusks glue themselves to underwater surfaces. If this research doesn't seem relevant to society overall, think again. </div>
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Although oyster glue research seems unorthodox, this research may very well yield an organic non-toxic glue, which can be used as an underwater construction material, or even to glue broken bones still inside a patient's body. From the economic point of view, the potential returns are enormous. So, we all have our anecdotes.</div>
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All jokes and anecdotes aside, the link between support for scientific research, and future economic growth is enormous, and simply cannot be downplayed or overlooked. </div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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<br />Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-42757926441633876312013-05-05T12:16:00.000-07:002013-05-05T12:21:22.874-07:00LSE Study: Self-Fulfilling Crisis of Eurozone Sovereign Debt<div style="text-align: justify;">
<span style="color: #0000ee; font-family: Tahoma; font-size: xx-small;"><b><u><a href="http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2065711_code459177.pdf?abstractid=2065711&mirid=1" target="_blank">Self-Fulfilling Crises in the Eurozone: An Empirical Test</a></u></b></span></div>
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In an empirical study on Eurozone sovereign debt published at LSE and at CEPS, an EU-financed economic policy think tank, has found definitive evidence of the fragility of Eurozone-member-nation debt vis-a-vis non-eurozone EU debt. In particular, the study finds that aggressive growth in Eurozone sovereign bond spreads since 2010 have been generally disconnected from key market fundamentals. Just outside of the Eurozone meanwhile, standalone countries have faced a much lower degree of sovereign bond volatility, despite having similar Debt-to-GDP ratios as their Eurozone counterparts.<br />
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What this all means is that the credibility and competence of the European institutions behind the Euro, are being called into question by the market, as panicky investors flee the Eurozone, and countries that are hit by the resulting liquidity crises are forced apply stringent, recession-causing austerity measures. While Greece had indeed accumulated an unsustainable Debt-to-GDP ratio, other Eurozone countries that were hit by the crisis had Debt-to-GDP levels, which were certainly not worse than the of the US and the UK. What is needed, LSE argues, are pro-liquidity policies aimed at preventing the spread of sovereign debt liquidity polices from one country to the next. Exactly the sort of the thing Merkel and her henchmen are against.<br />
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The study's main author, Professor Paul De Grauwe, a former Belgian senator, is widely considered to be Belgium's most renowned economist<span style="font-size: x-small;"> <span style="font-family: Arial, sans-serif;">█</span></span><br />
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<b><u><i><span style="font-size: x-small;">Abstract</span></i></u></b></div>
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<i><span style="font-size: x-small;">We test the hypothesis that the government bond markets in the Eurozone are more fragile and more susceptible to self -fulfilling liquidity crises than in stand -alone countries. We find evidence that a significant part of the surge in the spreads of the PIGS countries in the Eurozone during 2010-11 was disconnected from underlying increases in the debt to GDP ratios and fiscal space variables, an d was the result of negative self -fulfilling market sentiments that became very strong since the end of 2010. We argue that this can drive member countries of the Eurozone into bad equilibria. </span></i></div>
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<i><span style="font-size: x-small;">We also find evidence that after years of neglecting high government debt, investors became increasingly worried about this in the Eurozone, and reacted by raising the spreads. No such worries developed in stand -alone countries despite the fact that debt to GDP ratios and fiscal space variables were equally high and increasing in these countries.</span></i><br />
<span style="font-size: xx-small;"><b><a href="http://www.ceps.eu/ceps/dld/7085/pdf" target="_blank">http://www.ceps.eu/ceps/dld/7085/pdf </a></b></span><br />
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<span style="font-size: xx-small;">Paul De Grauwe is a Professor in European Political Economy and head of the European Institute at the London School of Economics. He is also professor emeritus in international economics at KU Leuven and former member of the Belgian Federal Parliament.</span></div>
Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-90516762650911656122013-04-22T03:23:00.000-07:002013-04-22T03:23:02.409-07:00US Congressional Study: Is Copyright the Free Market at Work?<div style="text-align: justify;">
<span style="font-size: xx-small;"><a href="http://www.publicknowledge.org/files/withdrawn_RSC_Copyright_reform_brief.pdf">http://www.publicknowledge.org/files/withdrawn_RSC_Copyright_reform_brief.pdf</a></span></div>
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In November 2012, the Congressional Republican Study Committee briefly launched - <i>and subsequently retracted</i> - an ideologically-unusual study casting skepticism on the state of American intellectual property law. While the study focuses on Copyright law, its conclusions are valid for intellectual property law at large. Overall the, the study challenges three standing ideas about IP law. </div>
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<i>1. The purpose of copyright is to compensate the creator of the content:</i></div>
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According to the study, purpose of the copyright system is to “promote the progress of science and useful arts.” IP law is supposed to incentivize innovation. To the extent that IP law fails to do so -as has been the demonstrable case in the IT industry- IP law is not fulfilling its constitutionally-intended purpose. </div>
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<i>2. Copyright is free market capitalism at work:</i></div>
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In fact, IP law currently entitles the IP holder to a guaranteed, state-enforced monopoly. The retarding effect of this on the progress of economic growth cannot be overstated. </div>
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<i>3. The current copyright legal regime leads to the greatest innovation and productivity:</i></div>
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This echoes the claims many of economists who conclude that current IP stifles innovation and encourages rent-seeking, while interfering with productive participation in the economy as new information is systemically prevented from ever entering the public domain. Productive parties must deal with hampered access to useful knowledge, even decades after the initial discoveries. </div>
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<b><u>Ruffled Feathers</u></b></div>
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Responding to protests from congressional Republicans, the RSC removed the brief from its website in less than 24 hours and fired Derek Khanna, the study's constitutional strict-constructionist author. Khanna, a Yale Law Fellow, has subsequently become a contributor for Forbes. </div>
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<b><u>What Can Be Done?</u></b></div>
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A package of solutions was also proposed by the study. Currently, US has no disincentive against bogus IP claims, which do not actually have innovation behind them (such as attempts to copyright or patent traditional, folkloric knowledge). This could be reformed. Fair Use should also be expanded, and damages awarded for infringement should also be reformed. These measures would serve to discourage anti-competitive patent-trolling. </div>
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The most significant reform that Khanna proposes, is to limit the length and renewability of IP protection, restoring IP protection to the competition-favoring, industrial-revolution-era version of itself. </div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-69413148262837367692013-03-29T10:54:00.000-07:002013-03-29T10:54:04.072-07:00Warren and Bernanke on Addressing Too Big to Fail in US Banking Sector<div class="separator" style="clear: both; text-align: justify;">
<a href="http://www.kc.frb.org/Publicat/Reswkpap/PDF/RWP07-05.pdf" style="font-size: small;">http://www.kc.frb.org/Publicat/Reswkpap/PDF/RWP07-05.pdf</a></div>
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During a hearing of the Senate Banking Committee on February 26, Senator Elizabeth Warren interviewed Federal Reserve Chairman Ben Bernanke on the status of the US' largest banks. The central topic of the discussion was the "Too Big To Fail" issue. According to Warren, the TBTF problem has actually gotten worse since the crisis began. Bernanke, agrees with the specification of TBTF problem. The plan apparently is to develop institutional mechanisms by which America's large systemic banks can be wound-down, should they fail. </div>
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TBTF is toxic to the incentive structure underpinning a well-working financial market because it creates expectations that banks and other economic actors which are large enough to be systemic to a country's economy, and whose collapse would cause severe negative knock-on effects, making the consequences of bank failure disastrous to the economy as a whole. Market expectations are therefore, that the state would bail the banks out in case of failure, thereby dis-incentivizing prudent risk-management within the largest banks.</div>
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/y7X3uac0lzw?feature=player_embedded' frameborder='0'></iframe></div>
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According to empirical research conducted by the Federal Reserve, banks are willing to to pay billions in added premiums associated with M&A costs in order to acquire TBTF status. What this should tell us is that American banks are definitely able to detect economic rents from becoming so large. </div>
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<u><b>Abstract</b></u></div>
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This paper examines an important aspect of the “too-big-to-fail” (TBTF) policy employed by regulatory agencies in the United States. How much is it worth to become TBTF? How much has the TBTF status added to bank shareholders’ wealth? Using market and accounting data during the merger boom (1991-2004) when larger banks greatly expanded their size through mergers and acquisitions, we find that banking organizations are willing to pay an added premium for mergers that will put them over the asset sizes that are commonly viewed as the thresholds for being TBTF. We estimate at least $14 billion in added premiums for the nine merger deals that brought the organizations over $100 billion in total assets. These added premiums may reflect that perceived benefits of being TBTF and/or other potential benefits associated with size.</div>
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<a href="http://www.kc.frb.org/Publicat/Reswkpap/PDF/RWP07-05.pdf" style="font-size: small;">http://www.kc.frb.org/Publicat/Reswkpap/PDF/RWP07-05.pdf</a></div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-24973776614250712172013-02-24T13:39:00.001-08:002013-02-24T15:53:35.443-08:00Are Tax Cuts Good for Growth?<div style="text-align: justify;">
<a href="http://www.dpcc.senate.gov/files/documents/CRSTaxesandtheEconomy%20Top%20Rates.pdf"><span style="font-size: x-small;">http://www.dpcc.senate.gov/files/documents/CRSTaxesandtheEconomy%20Top%20Rates.pdf</span></a></div>
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Just before the 2012 US federal elections, a bi-partisan congressional study investigated the economic effect of tax cuts found their effects to be of limited usefulness. While proponents of higher tax rates argue that revenues are necessary for sovereign debt reduction, and that higher rates on the rich mitigate income inequality, the conservative camp argues that low tax rates are positive for investment, innovation and growth.<br />
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Nevertheless, the study found higher tax rates to be correlated with slightly higher GDP per capita growth rates. Meanwhile, the effect tax cuts on GDP growth is either small, or non-significant.“The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution,” concluded the report.<br />
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Senate Republican leader Mitch McConnell protested the study's ideological bias. It was subsequently removed from circulation by the Library of Congress.<br />
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<u><b>Tax Reductions and Their Spending Cuts</b></u></div>
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<a href="http://www.imf.org/external/pubs/ft/wp/2006/wp0616.pdf"><span style="font-size: x-small;">http://www.imf.org/external/pubs/ft/wp/2006/wp0616.pdf</span></a></div>
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Against this evidence the effect of cuts must be considered. According to an empirical study undertaken by the IMF, spending cuts are useful for reducing sovereign risk spreads. Nevertheless, gains realized via reductions in sovereign risk spreads are short-lived and subject to market-bias. In 2011, the IMF launched another empirical study casting a skeptical light on the merits of using reductions in sovereign debt service costs due to cuts as an economic growth strategy. </div>
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<a href="http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf"><span style="font-size: x-small;">http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf</span></a></div>
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Public expenditure returns on investment must be weighed against potential gains due to reductions in debt service costs. Taking all three studies into consideration, depending on tax cuts to deliver economic growth yields little little-to-no long-term growth, while aggravating income inequality and increasing sovereign debt - and private debt- service costs. In addition, the associated cuts generally lead to a contraction in GDP. </div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
<br />Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-10793284976730526862013-02-10T10:51:00.001-08:002013-02-10T18:05:40.339-08:00Iceland Takes a Different Course<div class="separator" style="clear: both; text-align: justify;">
<span style="font-size: xx-small;"><a href="http://www.lanamal.is/Assets/nyrlanasysla2/Iceland_Credit%20Analysis_February%202012.pdf" target="_blank">Fitch Ratings Full Report</a></span></div>
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We are perhaps all familiar with the meme in which Icelandic President Ólafur Ragnar Grímsson says that Iceland has been successful because it "Bailed its people out and put its bankers in jail". However, beyond the meme, what did Iceland's policy response actually look like?</div>
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As a result of Iceland's banking crisis, the country's sovereign debt stood at a staggering 240% of GDP. As Iceland's economy collapsed, the country suffered a 6.7% GDP contraction in 2009. Since then, sustained GDP growth between 2.5% and 3.0% has made-up for lost ground. </div>
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In 2009, President Geir Haarde was indicted along with the CEOs of Iceland' three largest banks, Glitnir, Kaupthing, and Landsbanki. Thereafter, Iceland's policy response was partial forgiveness of home-owner debt, currency controls to contain risk, and a takeover and re-establishment of the domestic operations of Iceland's three main banks. According to Fitch's February 2012 Full Rating Report, "Iceland‟s unorthodox crisis policy response has succeeded in preserving sovereign creditworthiness at a price; capital controls continue to block repatriation of USD3bn- 4bn of non-resident investment in ISK instruments". Due to measures taken by Iceland, it has been largely unaffected by the Eurozone crisis. According to Fitch, Iceland's sovereign debt returned to investment-grade a year ago. Furthermore, future sovereign risk is considered minimal. </div>
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In this clip, President Grímsson (Haarde's successor) was briefly interviewed at Davos. He cautions against a financial system combining privatized profits and tax-payer held losses, which bailing out the banks has led to. </div>
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Last month, Iceland won a case at the court of the European Free Trade Association over disputes concerning tax-payer funded outlays to UK and the Netherlands stemming from collapse of Iceland's main banks, whose combined balance sheets stood at nine times Iceland's GDP.</div>
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<a href="http://www.lanamal.is/Assets/nyrlanasysla2/Iceland_Credit%20Analysis_February%202012.pdf" target="_blank"><span style="font-size: x-small;">Fitch's Full Rating Report</span></a><br />
<span style="font-size: x-small;"><a href="http://www.eftacourt.int/images/uploads/16_11_Judgment.pdf" target="_blank">EFTA Court Judgement</a></span><br />
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com1tag:blogger.com,1999:blog-6581878909892933632.post-54056407113778638482013-01-31T14:27:00.000-08:002013-01-31T14:38:33.255-08:00IMF: Austerity Has Failed Europe<div style="text-align: justify;">
<a href="http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf"><span style="font-size: x-small;">http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf</span></a><br />
In a recently published working paper, IMF chief economist Olivier Blanchard acknowledged that the IMF under-estimated the size of the macroeconomic multiplier. The result is that the negative economic effects of austerity in the Eurozone have also been under-estimated. Whereas, the IMF estimated a GDP contraction of $0.50 for every dollar of spending cuts, the real contraction was in fact $1.50 for every dollar of spending cuts. According to the Washington Post, this amounts to an earthquake in policy circles. The allegations are that the IMF <i>intentionally</i> under-estimated the negative effects that austerity would have on Greece and its Eurozone neighbors.<br />
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<a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/?wprss=rss_ezra-klein" target="_blank"><span style="font-size: x-small;">Washington Post Wonkblog</span></a></div>
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Notwithstanding, words of caution were first issued by the IMF in a 2011 study which contested the idea of expansionary austerity, calling studies that support the concept biased in favor of over-estimating the expansionary effects that brought on by expanded private consumption expected to result from spending reductions.<br />
<a href="http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf"><span style="font-size: x-small;">http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf</span></a><br />
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At the center of the IMF's under-estimation, is an overlooking of the fact that multipliers change over time. In its conclusion, the study cautions that, in general, multipliers grow during a crisis. "It seems safe for the time being, when thinking about fiscal consolidation, to assume higher multipliers than before the crisis." According to the study's conclusion, this change in multiplier size is due in part to changes in credit availability. Apparently, due to unexpected changes in the size of the multiplier, the paradox of thrift was - at least in this specific case - true after all.<br />
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This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may reflect in part learning by forecasters and in part smaller multipliers than in the early years of the crisis.<br />
<a href="http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf" style="font-size: x-small;">http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf</a><br />
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<a href="http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf" style="font-size: x-small;">http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf</a></div>
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<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-75608511340704324562012-12-21T10:10:00.001-08:002013-03-17T15:46:44.217-07:00The Election of Shinzo Abe: Voters Mull over Monetary Policy<div style="text-align: justify;">
<span style="font-size: xx-small;"><a href="http://www.telegraph.co.uk/finance/economics/9751609/Japans-Shinzo-Abe-prepares-to-print-money-for-the-whole-world.html">http://www.telegraph.co.uk/finance/economics/9751609/Japans-Shinzo-Abe-prepares-to-print-money-for-the-whole-world.html</a></span></div>
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<span style="font-size: xx-small;"><a href="http://www.ft.com/intl/cms/s/0/7e64027c-2f04-11e2-b88b-00144feabdc0.html#axzz2FguSUj9z">http://www.ft.com/intl/cms/s/0/7e64027c-2f04-11e2-b88b-00144feabdc0.html#axzz2FguSUj9z</a></span></div>
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In the world's top creditor nation, a change in policy might soon be in store. Last week, hawkish opposition leader Shinzo Abe was elected to his second term. Abe's first term in 2006-2007 collapsed in the aftermath of Agricultural Minister Toshikatsu Matsuoka's suicide. Adopting an overtly expansionist economic stance for this election, Abe called for "unlimited" monetary policy easing in order to combat deflation and higher spending on both public works and national defense last month.</div>
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Among the key issues in the election, was the general timidity on the part of the BOJ to aggressively pursue inflation targets. Japan's financial markets, as well as its overall economy has been consistently undermined by deflation over the past 15 years. </div>
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What it comes down to is there has been a feeling among the Japanese electorate, that monetary policy should be more aggressively expansionist. So far there have been five rounds of monetary stimulus in Japan. In February of this year, the BOJ set a short-term inflation goal of 1% and a long-term inflation goal of 2%. A move referred to as "meaningless" by Abe. </div>
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<b><u>BOJ's Independence</u></b></div>
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The Bank of Japan's independence is being called into question. Although a 1997 reorganization of the BOJ granted the central bank more independence, making the BOJ one of the last central banks in the world to gain independence, this electoral cycle saw both political parties campaigning on monetary policy issues. Both parties promised to call for more monetary easing. </div>
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The new government has the power to appoint a majority bloc to the BOJ's policy board. It is likely this will happen. Furthermore, Abe has threatened to revise the Bank of Japan Act. </div>
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<b><u>What Does this Mean for Japan's Economy?</u></b></div>
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In general, there is a consensus that Japan must combat its deflation at all costs if indeed it is going to regain its lost economic growth and dynamism. </div>
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While some may talk of structural reforms, the fact that Japan has an extremely high median age is -and thus a high dependency ratio- is a fact that cannot easily be maneuvered around. On the other hand, three prominent features of Japan's economy are its deflation rate, its extremely high savings rate, and the fact that Japan's investors have massive amounts invested overseas, making Japan the world's largest creditor. Expansionary monetary policy might be a positive step in addressing these issues.<br />
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Monetary stimulus would also help reduce the price of export-dependent Japan's currency on international markets, providing a boon to Japanese manufacturers. </div>
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<span style="font-size: 7.5pt;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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<br />Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-33533657729183617702012-11-13T01:38:00.001-08:002012-11-13T01:43:05.875-08:00A Thought About Greek Austerity<div style="text-align: justify;">
<b><u>Time to Scrap a Failed Policy. Time for Greece to Stand up for Itself</u></b></div>
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These days, we are living in the middle ages of economics, where we still treat headaches by drilling in to the head.. and we treat flesh wounds by hack-sawing limbs.... but at least we as a profession are (hopefully) starting to realize how foolish it all is.</div>
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This story is one where austerity demands lead to a full-on dismantling of the Greek GDP.. ostensibly to help things. Of course, if the GDP gets worse, then the Debt-to-GDP ratio will also get worse.. leading to yet another round of austerity (complete with the promise that *<i>THIS TIME</i>* it really is the last round of austerity). Greece has seen six rounds to far, and the situation only gets worse.</div>
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<span style="font-size: x-small;"><a href="http://en.wikipedia.org/wiki/Greek_government-debt_crisis">http://en.wikipedia.org/wiki/Greek_government-debt_crisis</a></span></div>
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When it's all said and done.. it will all seem as foolish as when the Austrians printed money in the 1920s in an attempt to alleviate hyperinflation. At the time, only Hayek saw the foolishness of it. Prescribing austerity to a country whose economy is collapsing is equally foolish. In 20 years, we'll all look like idiots for not having known any better.</div>
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<b><u>Results of Austerity</u></b></div>
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So far, Greek unemployment has tripled is this time in 2008, when the Greek crisis emerged, while interest rates on government bonds have reached 177%. If ever an economic policy failed, German-backed Greek austerity failed. To quote the BBC (a news source which is not sympathetic to any party in the eurozone crisis),</div>
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"The new Greek budget foresees a deepening of the worst recession of any country in modern history, our correspondent says.</div>
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The national economy is expected to shrink next year by 4.5% and public debt is likely to rise to 189% of GDP, almost double Greece's national output. This year, public debt stood at 175%.</div>
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The head of Syriza, a left-wing opposition party, said the latest budget cuts would leave Greeks unable to afford essential goods this winter."</div>
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<span style="font-size: x-small;"><a href="http://www.bbc.co.uk/news/world-europe-20293058">http://www.bbc.co.uk/news/world-europe-20293058</a></span></div>
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<b><u>Greek Left Detects the Pattern</u></b></div>
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Alexis Tsipras was quoted by NPR "I wouldn't be surprised if you were back again in a few months, asking for more cuts. Because these measures are going to bring a deeper recession and we'll have bigger debts." For some reason, this result common to almost all austerity budgets that ever were, certainly true of Argentina, was not immediately obvious earlier.</div>
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<span style="font-size: x-small;"><a href="http://www.npr.org/2012/11/08/164669209/greeks-in-store-for-more-austerity-cuts">http://www.npr.org/2012/11/08/164669209/greeks-in-store-for-more-austerity-cuts</a></span></div>
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<b><u>What Should Be Done? </u></b></div>
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As a matter of National Interest, Greece should realize the pattern being played out and act accordingly. The idea of the Greek government so beholden to foreign (German) economic interests that it is only able to survive by surrounding itself with increasingly massive security cordons is utter foolishness. The Greek government should come to its senses before it turns into the Argentine government. given both the current events, and the direction of things, that is evidently not far off. The looming threat is one of a complete loss of market confidence in Greek markets and Greek debts. But then we must ask... "Has this not already happened?" On the other hand, continuing with austerity will only exacerbate the already desperate economic situation. At this point, Greek citizens have nothing to lose but their chains.</div>
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As for economists, we should realize how ridiculous this all is. Prescribing austerity to a country whose economy is collapsing is pure foolishness and we should see it for the quackenomics that it is.</div>
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<span style="font-size: 7.5pt;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span><br />
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-12367669114178022012-11-01T18:28:00.000-07:002013-02-14T01:11:18.429-08:00Education's Return on Investment<div style="text-align: justify;">
<span style="font-size: x-small;"><a href="http://www.oecd.org/edu/eag2012%20(eng)--Ebook%20(FINAL%2011%2009%202012).pdf" target="_blank">OECD Education at a Glance 2012 Report</a></span></div>
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In this era of austerity, it must be remembered that expenditures by the state are not unilaterally expenses. Funds dispensed by the state are also investments, which yield a measurable return on investment. According to the OECD's Education at a Glance 2012 report, education-related expenses grant massive returns on investment at both public and private levels. The OECD reports that the Net Present Value of public and private premium for completing secondary and tertiary education is $388,300 for men and $250,700 for women across the 28 OECD member nations. The net public return for tertiary education is two to three times public investment level. </div>
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Unfortunately, this is not the way that this issue has progressed. Education expenditures have recently become and issue for the wrong reasons in several places, such as the UK, Quebec and the Netherlands. </div>
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<b><u>A Question of Externalities</u></b></div>
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Another interesting aspect of the OECD report is the discussion over public and private returns to educational expenditures. Private returns on education are comprised by a measurable earnings gap as well as an unemployment gap. Public returns on education include tax revenue, an unemployment gap, and social contribution effects (which are housing benefits and social assistance that does not have to be paid by the taxpayer). In addition, higher education rates are directly causally linked to increased economic growth.</div>
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While costs are borne mostly by the individual, benefits are divided between the individual and the public. The combination of (partially) public gains and (mostly) private financing can cause a costs-benefits mismatch which might lead to lower-than-optimal investment in education under laissez-faire, <i><u>despite</u> </i>high returns, public benefits, and economic growth effects which education causes. </div>
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While education is 31% privately financed in the UK, it is 97% publicly financed in Finland. In 2009, the US spent 2.6% of its GDP on tertiary education. More than half of this figure was comprised by private expenditures. </div>
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<b><u>What Should Be Done?</u></b></div>
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Expenditures of the state should be evaluated taking potential Return on Investment into consideration. For policy markers, this should mean that GDP growth, revenue growth, and growth levels in other relevant measurable metrics should be considered. </div>
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The debate then shifts from asking "Can we afford to spend more on education?" to "How can we best spend on education in order to maximize future revenue growth?" and "How can educational expenditures help reducing other social costs, such as unemployment, housing subsidy, incarceration, and healthcare costs?"</div>
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<span style="font-size: 7.5pt;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-84711690680283191362012-10-28T12:35:00.002-07:002012-10-28T12:44:51.417-07:00Germany Restricts High-Frequency Trading, Chicago Fed Recommends Same<span style="font-size: x-small;"><a href="http://online.wsj.com/article/SB10000872396390444813104578018292059338944.html?KEYWORDS=germany" target="_blank">WSJ Article: Germany to Tap Brakes on High Frequency Trading</a></span><br />
<span style="font-size: x-small;"><a href="http://www.nytimes.com/2012/09/26/business/global/germany-wants-rules-on-superfast-stock-trading.html?_r=0" target="_blank">NYT Article: Germany Act to Increase Limits on High Speed Trades</a></span><br />
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<span style="font-family: 'Times New Roman', serif;">Late last month, New York Times and WSJ reported on Germany's intention to restrict
High Frequency Trading. High Frequency Trading is the use
of proprietary algorithms to trade securities rapidly and at
high speed. The idea is to capture fractions of a penny
per trade. <o:p></o:p></span></div>
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<b><u><span style="font-family: 'Times New Roman', serif;">Chicago
Fed's Concern About HFT</span></u></b><span style="font-family: 'Times New Roman', serif;"><o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif;">Earlier this month, the
Chicago Fed published an essay on the risks of HFT for
financial markets. Every exchange it investigated
has had problems attributable to errant algorithms and software
malfunctions. The worst was the 2010 Flash Crash which caused a
700 point drop in the Dow within seconds. <o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif;">At fault is insufficient risk controls, a phenomenon due to the
competitive time pressures involved. The Chicago Fed found that exchanges that
impose pre-trade risk checks increase latency. Furthermore, investor confidence in the markets has also been adversely
affected and the markets have seen a rise in volatility. <span style="font-size: medium;"><o:p></o:p></span></span></div>
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<u><span style="font-family: 'Times New Roman', serif;">In order to control
risks associated with HFT, the Chicago Fed has recommended:</span></u><span style="font-family: 'Times New Roman', serif;"><o:p></o:p></span></div>
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<span style="font-size: x-small;"><span style="font-family: 'Times New Roman', serif;">•</span><span style="font-family: 'Times New Roman', serif;"> </span><span style="font-family: 'Times New Roman', serif;">Limits on the number of orders that can be sent to an
exchange within a specified period of time;</span><span style="font-family: 'Times New Roman', serif;"><o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><span style="font-family: 'Times New Roman', serif;">•</span><span style="font-family: 'Times New Roman', serif;"> </span><span style="font-family: 'Times New Roman', serif;">A “kill switch” that could stop trading at one or more
levels;</span><span style="font-family: 'Times New Roman', serif;"><o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><span style="font-family: 'Times New Roman', serif;">•</span><span style="font-family: 'Times New Roman', serif;"> </span><span style="font-family: 'Times New Roman', serif;">Intraday position limits that set the maximum position a
firm can take during one day; </span><span style="font-family: 'Times New Roman', serif;"><o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><span style="font-family: 'Times New Roman', serif;">•</span><span style="font-family: 'Times New Roman', serif;"> </span><span style="font-family: 'Times New Roman', serif;">Profit-and-loss limits that restrict the dollar value that
can be lost.</span><span style="font-family: 'Times New Roman', serif;"><o:p></o:p></span></span></div>
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<span style="font-size: x-small;"><span style="font-family: 'Times New Roman', serif;"><a href="http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2012/cfloctober2012_303.pdf" target="_blank">Chicago Fed Letter: How to Keep markets Safe in the Era of high-Speed Trading</a></span></span></div>
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<span style="font-family: 'Times New Roman', serif;">Draft legislation on the matter was
approved by the German parliament. Proposed measures include requiring
that all high-frequency traders be licensed, clear labeling of all financial
products traded by HF algorithms without human intervention, and a limit to the
number of orders that may be placed without a corresponding trade.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif;">According to a press
conference by the German Finance Ministry, as much as 40 percent of all trading
sales can be attributed to HFT. Germany's goal in acting are essentially to
limit the identified risks associated with HFT. </span><span style="font-family: 'Times New Roman', serif;">If the bill becomes law, "excessive use" of trading systems would come with added fees. Traders also would have to maintain a balance between orders and executed transactions.</span></div>
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<span style="font-family: 'Times New Roman', serif;">While </span><span style="font-family: Times New Roman, serif;">France has already imposed a tax on high-frequency trades,</span><span style="font-family: 'Times New Roman', serif;"> legislation
is also under consideration at the European Parliament and may become the basis
for governmental legislation on HFT across the EU.</span></div>
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<div style="text-align: justify;">
<span style="font-size: xx-small;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
</div>
<div>
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com2tag:blogger.com,1999:blog-6581878909892933632.post-23964656559367172802012-10-11T01:02:00.000-07:002012-10-11T01:02:18.049-07:00Zero Lower Bound: When Interest Rates Can't Drop Any Further<div style="text-align: justify;">
<a href="http://www.princeton.edu/~ceps/workingpapers/201sims.pdf"><span style="font-size: x-small;">http://www.princeton.edu/~ceps/workingpapers/201sims.pdf</span></a></div>
<div style="text-align: justify;">
Recently, a new issue has emerged in the unfolding drama of the global financial crisis. After four years of reducing interest rates and increasing money supply at central banks of virtually all of the world's major economies, both academia and the media have started to mention a new obstacle, the <i>Zero Lower Bound</i>.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The underlying challenge of the Zero Lower Bound is that because interest rates are at zero, they cannot usually be lowered any further. Moreover, the context is typically one in which the economy is sluggish and stimulus is needed. In such circumstances, monetary policy has to proceed by unconventional means. Otherwise, a liquidity trap might develop along the lines of the situation Japan has been stuck in for nearly two decades. The question is of particular relevance today, since both the ECB and Fed have had their policy rates hovering around zero since 2008-2009. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<b><u>The Policy Alternatives</u></b></div>
<div style="text-align: justify;">
In 2010, the ECB published a working paper outlining the two ways that ZLB can be confronted are via a change in the way monetary policy is conducted, or via stimulatory changes in fiscal policy. </div>
<div style="text-align: justify;">
<a href="http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1254.pdf"><span style="font-size: x-small;">http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1254.pdf</span></a></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In any case, whenever ZLB has been confronted in the recent past, some unorthodox monetary measures have been tried, with varying degrees of success:</div>
<br />
<ul>
<li style="text-align: justify;">Quantitative Easing: This can always be done, no matter how low interest rates are. This has been recommended for the case of Japan.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Switching the way monetary policy is conducted. Switching to inflation targeting is the rhetoric of choice now. In the 1990s, it was exchange-rate targeting. The downfall of this approach is credibility. If markets don't buy the idea that the central bank will commit to either exchange rate targeting or inflation targeting, the plan will run into difficult terrain. Since it has taken central banks decades to build the credibility of their current low-inflation path, a change in course might be difficult to establish credibly. At least overnight. </li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Changing the distribution mechanism. Last year, the Fed engaged in "Operation Twist", an effort to engage in quantitative easing by injecting liquidity along various points on the yield curve. </li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Negative Interest Rates: During the Swedish crisis in 1991, the Swedish central bank forced policy rates into negative territory temporarily by charging banks a premium for storage of funds within the central bank, as well as for access to LOLR services. This encouraged banks to actually lend funds which they were being issued. </li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Reliance on Fiscal Policy: Market confidence can also be affected by changes in revenue and expenditure. Unfortunately, during hard times, the capability of the state to credibly increase its expenditure is limited. This is especially the case where central banks have the commitment not to monetize deficits. </li>
</ul>
<div style="text-align: justify;">
<br />
During the WWI and WWII eras the British tried a somewhat different take on this approach. In 1914, for example, Keynes recommended direct monetary intervention to compensate losses in the international trade finance sector caused by the sudden German embargo. In concept, the idea is similar to the US' Troubled Asset Relief Program, a fiscal measure to directly intervene in the failed derivative market in 2008-2009. </div>
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<br /></div>
<div style="text-align: justify;">
<b><u>Concluision</u></b>:</div>
<div style="text-align: justify;">
Regardless of the approach (or combination of approaches) used, the issue of maintaining an expansionary stance in the face of ZLB is one of the more challenging issues in monetary economics and central banking. It may be quite some time before a policy consensus develops in this area. One thing is certain however: central banks will all need to develop adequate ZLB tactics at one point or another. </div>
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<div style="text-align: justify;">
<span style="font-size: 7.5pt;"><br /></span><span style="font-size: 7.5pt;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
</div>
Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-57867128248850322972012-10-04T17:19:00.002-07:002013-03-04T05:44:43.936-08:00Middle-Class Squeeze: Wages are Down, but we Aren't More Competitive<a href="http://www.theatlantic.com/business/archive/2012/08/our-low-wage-recovery-how-mcjobs-have-replaced-middle-class-jobs/261839/" style="text-align: justify;"><span style="font-size: x-small;">http://www.theatlantic.com/business/archive/2012/08/our-low-wage-recovery-how-mcjobs-have-replaced-middle-class-jobs/261839/</span></a><br />
<div style="text-align: justify;">
American wages and labor conditions have been continuously deteriorated since the 1980s. Since the start of the 21st century however, this trend has become especially pronounced. Known as the Middle Class Squeeze, this phenomenon has been particularly pronounced in the US, while real wages expanded strongly in European OECD countries such as the UK, France, Italy and Germany, as well as in the BRIC countries since 2000. It has become a major issue in both the 2008 and 2012 presidential elections. In 2008, the House Committee on Government Reforms published a brief study which concluded that median real household income dropped by almost $1,300 while real household expenses increased by nearly $5,000 over the 2000-2008 period.</div>
<div style="text-align: justify;">
<a href="http://www.democraticleader.gov/pdf/MCS.pdf"><span style="font-size: x-small;">http://www.democraticleader.gov/pdf/MCS.pdf</span></a></div>
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<br /></div>
<div style="text-align: justify;">
<b><u>How it Happens</u></b></div>
<div style="text-align: justify;">
Essentially, the deterioration of incomes on the US labor market has emerged in two ways:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
1: The large-scale loss of high-skilled, high value added mid-wage employment, to be replaced by low skilled, low value-added, and low-wage employment. According to the National Employment Law Project, </div>
<div style="text-align: justify;">
sixty percent of of US job losses experienced during the recession, while comprising only around twenty percent of the jobs gained during the current recovery period. Low-skilled jobs meanwhile made up only around twenty percent of the jobs lost during the recession but nearly sixty percent of the jobs recovered thus-far in the recovery.</div>
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<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEganqlMNwX6I0y6GkQCVndDcYaneQmaZMrpmppIsLqgrbmmNIsvmBibTKQLUjIgTnBUVXzyjx947XRL2q6wx0UlxLpZJI9vBzGOjjP3uQZF6L7JXro0HZL8LuUTWcmvKHqaSOrKobNlJNc/s1600/120831035153-low-wage-jobs-story-top.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="191" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEganqlMNwX6I0y6GkQCVndDcYaneQmaZMrpmppIsLqgrbmmNIsvmBibTKQLUjIgTnBUVXzyjx947XRL2q6wx0UlxLpZJI9vBzGOjjP3uQZF6L7JXro0HZL8LuUTWcmvKHqaSOrKobNlJNc/s320/120831035153-low-wage-jobs-story-top.jpg" width="320" /></a></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
2: Declining real incomes: The maintenance of median wage and salary levels in the face of increased price levels and cost of living. Healthcare and energy costs have especially increased, as has education. To compound this trap, the new millennium has seen the rise of household debt to try to cover the difference. The debt-to-income ratio reached its highest level in 24 years for middle class households, while Bush-era bankruptcy reform has made the debt trap considerable more difficult to climb out of. In 2010, the Levy Institute published a study showing that both household debt and the US GINI coefficient spiked upwards since 2000.</div>
<div style="text-align: justify;">
<a href="http://www.levyinstitute.org/pubs/wp_589.pdf"><span style="font-size: x-small;">http://www.levyinstitute.org/pubs/wp_589.pdf</span></a></div>
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<br /></div>
<div style="text-align: justify;">
<b><u>Why This is Problematic</u></b></div>
<div style="text-align: justify;">
</div>
According to the standard ruling paradigm in labor market economics, low wages are helpful to a country's economic competitiveness. But, this only begs questions such as:<br />
<br />
<ul>
<li>How much wage deterioration is enough and when will the US's wage levels become "competitive"? Do wages and labor standards have to sink to those of China? </li>
<li>What will happen to consumer demand as a result of this trend?</li>
<li>If wages are supposed to equal the marginal productivity of labor, how can the replacement of mid-wage, high-skilled jobs with low-skilled Mcjobs possibly be a positive development for our labor market?</li>
</ul>
<br />
<div style="text-align: justify;">
Setting aside the ominous ethical significance to what is perceived as the US' core traditional values posed by the progressively increasing American wealth gap, there are long term economic side-effects which we have also seen emerge. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Among these are a weaker, more debt-dependent consumer market, lower growth in productivity levels within the American workforce. All of this will hurt the progress of the American economic recovery, and will undermine long-term economic health. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<b><u>What Can Be Done</u></b></div>
<div style="text-align: justify;">
Unfortunately, the Middle Class Squeeze has no magic overnight solutions. Addressing this issue would take a package of policy solutions. We can start by asking what the rest of the OECD countries have done in order to promote real income growth. We also take measures to counteract the primary immediate causes of the short-term squeeze.<br />
<br /></div>
<div style="text-align: justify;">
</div>
<ul>
<li>More attention needs to be focused on increasing our labor force's productivity level. This means not only improving the educational level, but securing access to mid-career and between job training as well. In policy terms, it means that our school systems must perform better, university education must be cheaper, and employer training has to be incentivized. </li>
<li>Healthcare costs have to be tamed. </li>
<li>Consumer debt markets have to be reformed and Bush-era bankruptcy reforms need to be scrapped. The growing debt-trap is a large component of the middle class squeeze. It also undermines both short and long term consumer confidence and household savings, two key ingredients to healthy, sustainable economic growth. Climbing out of the debt trap has got to be made easier if the American economy will continue to succeed in the long-run. </li>
<li>High-skilled employment clusters have to be constructed and defended. Essentially this means that the long-term survival of clusters such as Detroit and Silicon Valley have got to be treated as issues of national interest.</li>
</ul>
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<div style="text-align: justify;">
<span style="font-size: 7.5pt;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span></div>
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<br />Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-26886889557509142922012-09-10T05:04:00.000-07:002012-09-10T08:02:56.331-07:00ECB Swings into Action - Markets Jump Accordingly<div style="text-align: justify;">
<span style="font-size: xx-small;"><a href="http://www.bbc.co.uk/news/business-19499950">http://www.bbc.co.uk/news/business-19499950</a>
</span></div>
<div style="text-align: justify;">
<span style="font-size: xx-small;"><a href="http://www.nytimes.com/reuters/2012/09/06/business/06reuters-ecb-eurozone-seniority.html?_r=1&smid=re-share">http://www.nytimes.com/reuters/2012/09/06/business/06reuters-ecb-eurozone-seniority.html?_r=1&smid=re-share</a></span></div>
<div style="text-align: justify;">
</div>
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</div>
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<div style="text-align: justify;">
<b><u><span lang="EN-US"><br /></span></u></b></div>
<div style="text-align: justify;">
<b><u><span lang="EN-US">The </span> ECB Bond-Buying Plan</u></b></div>
<div style="text-align: justify;">
<span lang="EN-US">Last week, ECB chief Mario Draghi launched
and ECB bond-buying plan, sparking a dramatic rally in the world's financial
markets. "Economic growth in the Euro Area is expected to remain weak,
with the ongoing tensions in financial markets and heightened uncertainty
weighing on confidence and sentiment" said Draghi. Faced with pressure to
prevent the collapse of Europe's monetary union, Draghi finally launches a
monetary plan which amounts to more than merely a bandage has finally been set
in place. </span>Due to proximity of interest rates to the
Zero-Lower-Bound, further reduction of interest rates would essentially be of
limited effectiveness. More unorthodox monetary measures are therefore needed.
Unfortunately, since this move is late in emerging, potential costs are much
higher than they otherwise could have been. The bond-buying plan makes use of
Outright Monetary Transactions (OMTs) and focuses on sovereign bonds maturing
within three years. According to Draghi, OMTs will only be used in conjunction
with the EFSF or the ESM.</div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<span lang="EN-US"><b><u>Role of the Central Bank</u></b><o:p></o:p></span></div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<span lang="EN-US">Despite fears of inflation - and above the
opposition of Bundesbank chief Jens Weidmann (who also represents the German voice in the ECB's governing
council), the plan went ahead due to support from all other members of the ECB's governing council. During recessions, a focus on price stability is
not only of limited relevance but also wholly insufficient as a policy
response, given anemic growth prospects. Moreover, the nature of the ECB's delay to respond to turmoil in the markets had contributed greatly to the generalized lack of investor confidence and poor growth so far. A fact which will undoubtedly increase the cost of this maneuver to both the ECB and the European taxpayer. <o:p></o:p></span></div>
</div>
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<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<span lang="EN-US">While there are voices that feel that the
ECB should not be in the business of helping stabilize sovereign bond spreads
and foster growth, one must consider exactly where the sovereign interest of
the EU and that of most of the Eurozone members lies. "OMTs will enable us
to address severe distortions in government bond markets, which originate from,
in particular, unfounded fears on the part of investors of the reversibility of
the Euro" said Draghi. </span>It must also be remembered that this takes
place against the backdrop of Germany's role in the Eurozone. While it is the
single country which has benefited the most from the Euro given the currency's
boost for German exports due low low currency prices which Germany could never
enact on its own , it has also been the first -and most frequent- country
country to violate the convergence criteria. </div>
</div>
<div class="MsoNormal">
<br />
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<b><u>The Potential Downside</u></b></div>
<br />
<div style="text-align: justify;">
<span lang="EN-US">With all of the bond-buying plan's upsides, and its long overdue nature, the plan does cast a dark shadow for the economic sovereignty of the Eurozone member nations, as outlined in the UK press. In a structure similar to that of the IMF, access to potentially unlimited funding is likely to be made conditional on potentially severe austerity measures which will actually be monitored by the IMF. </span>In other words, as if it weren't bad enough that three years of austerity measures have already failed to reduce debt-to-GDP ratios in the PIIGS, the same failed model will likely be forced onto any member-nation which runs into economic trouble in the future. It paints a picture mimicking the worst days of the IMF.</div>
<div style="text-align: justify;">
<span lang="EN-US"><a href="http://www.telegraph.co.uk/finance/comment/9531764/Carthaginian-terms-for-Italy-and-Spain-threaten-Draghi-bond-plan.html"><span style="font-size: xx-small;">http://www.telegraph.co.uk/finance/comment/9531764/Carthaginian-terms-for-Italy-and-Spain-threaten-Draghi-bond-plan.html</span></a>
</span></div>
</div>
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<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<span lang="EN-US"><b><u>Market Response</u></b><o:p></o:p></span></div>
</div>
<div class="MsoNormal">
<div style="text-align: justify;">
<span lang="EN-US">Markets responded immediately, sending the
S&P 500 and the Nasdaq to multi-year highs not seen since 2008 and 2000
respectively, while the Euro climbed 0.3% against the US dollar in a matter of
hours. Yields on Italian and Spanish bonds also dropped dramatically. One can only wonder what markets might look like by now had the ECB only decided act sooner. </span></div>
</div>
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<div style="text-align: justify;">
<a href="http://www.reuters.com/article/2012/09/06/us-markets-stocks-idUSBRE88308620120906" style="font-size: x-small; text-align: start;">http://www.reuters.com/article/2012/09/06/us-markets-stocks-idUSBRE88308620120906</a></div>
</div>
<div style="text-align: justify;">
<a href="http://www.bbc.co.uk/news/business-19516323" style="font-size: x-small;">http://www.bbc.co.uk/news/business-19516323</a><span style="font-size: xx-small;"> </span></div>
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</div>
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</div>
<div style="text-align: justify;">
<span style="font-size: xx-small;">About the Author: </span></div>
<div style="text-align: justify;">
<span style="font-size: xx-small;">Max Berre is a financial-regulatory economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands. </span></div>
<div style="text-align: justify;">
<br /></div>
Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-80249805446819347262012-08-22T07:49:00.000-07:002017-05-02T01:36:24.020-07:00Hayek vs. Hi-Tech<div style="text-align: justify;">
<b><span style="font-size: large;">How Did we <i>Actually </i>Develop our Technology?</span></b></div>
<div style="text-align: justify;">
<br />
<div class="MsoNormal">
<b>Evidence from the <a href="http://www.npr.org/blogs/alltechconsidered/2012/07/16/156839153/in-q-tel-the-cias-tax-funded-player-in-silicon-valley" target="_blank"><i>US</i> </a>and <i><a href="http://web.mit.edu/ipc/publications/pdf/02-004.pdf" target="_blank">Israel</a></i></b></div>
</div>
<div style="text-align: justify;">
<br />
<div class="MsoNormal">
While the standard economic
paradigm concerning innovation is based on the Schumpeterian view that technological
advances are brought on by entrepreneurs and that this is best maximized by relying
on the private sector for innovation as much as possible. Another aspect of the
Austrian view on this issue is that the state is simply incapable of efficiently
developing new technology. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The fact is, despite what
established theories about technological innovation predict and recommend,
several of the world's most technologically advanced countries attained their
current technological level there by relying on taxpayer-funded R&D. While
the role of private industry cannot be denied concerning bringing to market recently-
developed technological leaps forward, nor in the micro-innovations which make
said technology more flexible and user-friendly, the underlying macro-innovations,
such as computers, mobile phones and the internet are based on state-discovered
innovations, funded at taxpayer expense. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As for the Austrian school's
views on the state, remember that Schumpeter, von Hayek, and von Mises came of
age during the Austro-Hungarian monarchy. In those times the state was a
bureaucratic instrument of the monarchy.
Autocratic, Arbitrary, Un-Democratic, and not a Meritocracy. It was only
natural not to want to have (that particular) state involved in anyone's lives.
Today however, most states have governments elected by the people on the
promise to improve people's lives in a number of ways. Most of today’s leading contemporary
states have a least some interest in pursuing policy which would improve
R&D and technology levels. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><u>In the US<o:p></o:p></u></b></div>
<div class="MsoNormal">
<a href="http://www.npr.org/blogs/alltechconsidered/2012/07/16/156839153/in-q-tel-the-cias-tax-funded-player-in-silicon-valley"><span style="font-size: x-small;">http://www.npr.org/blogs/alltechconsidered/2012/07/16/156839153/in-q-tel-the-cias-tax-funded-player-in-silicon-valley</span></a></div>
<div class="MsoNormal">
While the role of the US government
in developing the largest macro-innovations of our time, the computer and the internet
are widely understood, the role of the US intelligence community in the
development of Silicon Valley has just recently come to light. The support came in the form of a public
venture capital fund aimed at improving the survivability of technological start-ups.
Google Earth was among the clients. NPR covered the story last month.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><u>In Israel<o:p></o:p></u></b></div>
<div class="MsoNormal">
<span style="font-size: x-small;"><a href="http://web.mit.edu/ipc/publications/pdf/02-004.pdf">http://web.mit.edu/ipc/publications/pdf/02-004.pdf</a></span><br />
<a href="https://ipc.mit.edu/sites/default/files/documents/04-006.pdf"><span style="font-size: x-small;">https://ipc.mit.edu/sites/default/files/documents/04-006.pdf</span></a><br />
The story of Israel’s role in the
development of Israel’s technological level – particularly concerning the
country’s booming IT sector – has been more widely reported and is more openly
understood. The IDF’s role in particular has been documented as being a vitally
important source of innovations for Israel’s IT startups. In particular, a
disproportionately large share of Israel’s IT and communications technology
industries owe their heritage to the IDF’s School for Computer Related
Professions and MAMRAM, the IDF’s central computer unit.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
According to the 2002 MIT study,
these results have been achieved by the Israeli state primarily by providing a
semi-public good in the form of a mechanism for collective learning and diffusion
of IT knowledge, high-skilled training, fostering technological startups, providing
a tangible link between the IT sector, policy circles, and academia, in much the
same way as results achieved by the US state. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Israel’s story has nevertheless been
almost wholly ignored by the economics profession in its quest to try to
understand what sort of policy is needed to maximize a country’s potential for
technological innovation. It’s an unfortunate case of ignoring whoever does not
fit the ideological narrative. </div>
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<span style="font-size: 7.5pt;">Max Berre is an economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands.</span><br />
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Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-30242987879212343142012-07-07T19:13:00.002-07:002012-07-09T00:58:45.967-07:00Krugman and Layard Launch Manifesto for Economic Sense<a href="http://www.manifestoforeconomicsense.org/A-MANIFESTO-FOR-ECONOMIC-SENSE.pdf"><span style="font-size: x-small;">http://www.manifestoforeconomicsense.org/A-MANIFESTO-FOR-ECONOMIC-SENSE.pdf</span></a> <br />
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<div style="text-align: justify;"></div><div style="text-align: justify;">At the end of June, 2012, Nobel Laureate Paul Krugman and Richard Layard, a distinguished British economist launched a manifesto calling for a more rational policy dialogue with respect to the economic crisis and plans for crisis recovery across the major economies. </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;">In the two weeks that the manifesto has been in existence, it has been endorsed by economists from across academia in the US, Europe, and Canada, and from such established institutions as Cambridge, Yale, Oxford, Columbia, LSE, Sorbonne, Dartmouth, and Harvard. Economists from the IMF, World Bank, and several of the world's stock exchanges have also signed. With over 7700 signatures spanning 180 pages thus far, a large number of ordinary citizens from various walks of life have also endorsed the Krugman-Layard Manifesto for Economic Sense. </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;"><b><u>Let's Avoid Repeating the Mistakes of the 1930s</u></b></div><div style="text-align: justify;"></div><div style="text-align: justify;">The Manifesto calls for an end to the focus on austerity, asserting that in the case of most countries - but not Greece- public borrowing was not at the source of the crisis, nor the subsequent ballooning of public deficits across the OECD. Rather, the source of our massive public deficits was actually the collapse of output and then revenue, which followed the onset of the crisis. It would therefore be a mistake to try to address the problem by dismantling the part of the economy that isn't broken. The manifesto calls this failed policy a repeat of the the mistakes of the 1930s, when reductions in public spending lead to economic contraction in many of the world's largest economies, thereby exacerbating the crisis. In fact, the IMF has individually studied the national-level economic effects of budget cuts in 173 cases, and found that the consistent result is economic contraction. </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;">What is called for according to the manifesto, is counter-cyclical fiscal policy that would dampen then economic shock rather than exacerbate it. At the moment, the private sector is simultaneously trying to cuts its spending, lower its leverage levels, and reduce its borrowing. The manifesto also calls on governments to focus more attention on unemployment figures and loss on borrowing costs. At the moment, most major economies face high unemployment levels compared to the recent past, while borrowing costs are near all time lows for most major economies. </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;">The Manifesto concludes by saying that in order to be able to address our economic problems correctly, correct analysis of the problems will be necessary and indispensable. </div><div style="text-align: justify;">--------------------------------------------</div><div style="text-align: justify;"><span style="font-size: xx-small;">About the Author:</span></div><div style="text-align: justify;"><span style="font-size: xx-small;">Max Berre is a financial-regulatory economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) and economic correspondent for Capital-Life, who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands. </span></div>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com1tag:blogger.com,1999:blog-6581878909892933632.post-78670261590622107712012-07-06T12:10:00.001-07:002012-07-06T12:11:51.442-07:00For China, Trade is not Simply About FDI<div style="text-align: justify;"><a href="http://www.hiebs.hku.hk/events_updates/pdf/tongyueting.pdf">http://www.hiebs.hku.hk/events_updates/pdf/tongyueting.pdf </a></div><div style="text-align: justify;">An empirical study undertaken at the University of Hong Kong examining the phenomenon of trade and foreign direct investment in mainland China has demonstrated a key policy point of China's FDI policy. Namely, its not about how much FDI China can attract, but about maximizing productivity spillovers. Its about how much wealth actually remains in the domestic hands and how much productivity growth the domestically-owned Chinese economy experiences as a result of foreign investment.<br />
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Typically, when we talk of trade with developing countries and emerging economies, we think of a number of key concepts, all of which have their roots in western academia. Talk of trade-based economic growth and development turns to focus on Foreign Direct Investment, whose sheer volume is simply supposed to be broadly good for growth. Good policy would therefore focus on simply a maximization of FDI-lead growth. Or so we in the global north - two centuries removed from our own actual history of economic development during the industrial revolution - are told. </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;"><b><u>Necessary but not Sufficient</u></b></div><div style="text-align: justify;">For China however, FDI is not universally considered as unambiguously positive. While economic growth is certainly considered to be a positive aspect of FDI, this is "necessary but not sufficient" in determining whether or not foreign investment is actually positive for the country. After all, The question then, is what precisely would be sufficient? </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;">For China, perhaps the real question is not one of how much wealth can be generated in China with foreign investment, but rather, how much wealth actually remains in the domestic hands as a result of foreign investment. The key ingredient seems to be spillovers. That is, improving the productivity of the locally-owned economy. Presumably, this involves modernization in technological level, managerial practice, and employee know-how in the domestically-owned share of the economy. </div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;"><b><u>The Study and its Meaning</u></b></div><div style="text-align: justify;">This study is an empirical examination of the productivity spillovers at the firm level. The central question it asks its quite straightforward: Are domestic Chinese firms affected by the presence of international firms in China? The study finds evidence that the technology gap leads to large productivity spillovers. In fact, the larger the technological gap, the larger the potential spillover. What this all means of course, is that FDI policy is not really a question of quantity. Sound FDI policy should revolve around bringing the most sophisticated possible firms to China, then maximizing spillover effects on domestically-owned firms by maximizing capture of technology, know-how, and managerial practices.</div><div style="text-align: justify;"></div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;"><div style="text-align: center;"><b><u>Abstract</u></b></div>Foreign direct investment (FDI) is believed to bring positive spillovers to domestic firms in the host country. Empirical studies, however, have found conflicting evidence on the effects of FDI. In this study, we use a firm-level industrial census to estimate the relationship between the intensity of foreign presence and performance of domestic firms in China. More specifically, we attempt to answer the following questions. First, are Chinese domestic enterprises affected by the presence of foreign invested firms operating in the same industry which they do business in? Second, are Chinese domestic enterprises affected by the presence of foreign invested firms operating within related industries at the same locality where they conducted their businesses? It is a fact that a substantial portion of FDI in China are originated from neighboring economies, especially from the three most Chinese populated economies Hong Kong, Macao and Taiwan, that are technologically much less advanced than industrial countries. Finally, we examine whether foreign investment firms from these economies affect the Chinese domestic firms differently compared to those from other investing countries. The estimation results offer some support for the existence of positive spillovers. There seems to be stronger evidence that domestic industries benefit from foreign presence in the related industries within the province. Employment shares of foreign affiliates, especially those with investors from advanced countries, are associated with higher productivity. The impact of foreign presence within the industry is rather mixed. Employment shares of firms with investment from greater China area are negatively associated with domestic productivity while those with other foreign investment are positively associated with domestic productivity. It supports the argument that larger technology gap provides large potentials for technology spillover. For investment from greater China area, smaller technology gap present less potential gain. More over, they may be in direct competition with domestic firms and result in shrinking market share for domestic firms.</div>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-81011860989060681042012-06-22T15:28:00.000-07:002012-06-23T04:47:02.298-07:00How Portugal Found Itself in Crisis<div style="text-align: justify;">
<span style="font-family: 'Times New Roman', serif; font-size: large;"><b><u>Despite Being a Well-Managed Economy</u></b></span><br />
<a href="http://www.nytimes.com/2012/02/15/business/global/portugals-debt-efforts-may-be-a-warning-for-greece.html?_r=1&pagewanted=all" style="background-color: white; font-family: 'Times New Roman', serif;"><span style="font-size: x-small;">NY Times Article on Crisis in Portugal</span></a><br />
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<span style="font-family: 'Times New Roman', serif;"><a href="http://www.imf.org/external/pubs/ft/scr/2011/cr11363.pdf"><span style="font-size: x-small;">2011 IMF Country Report Portugal</span></a></span></div>
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<span style="font-family: 'Times New Roman', serif;">The story of Portugal is one of how a small, soundly run economy can be battered by unstable market forces in its immediate environment. Prior to the crisis, Portugal had a well-managed economy which had low debt levels, roughly in line with the Maastricht criteria, as well as economic growth rates ranging from 3-5% per annum. As soon as the crisis emerged however, Portugal became a victim of increased borrowing costs due primarily to panic on the European markets, as well as high levels of exposure to financial sector external shocks. </span></div>
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<span style="font-family: 'Times New Roman', serif;"><a href="http://www.chooseportugal.com.pt/files/1170_Economic_Indicators_March_2011_EN_4da32b6504500.pdf"><span style="font-size: x-small;">Official Government Economic Figures</span></a></span></div>
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<span style="font-family: 'Times New Roman', serif;">According to the New York Times, Portugal has reduced its budget deficit by more than one-third since this time last year. Furthermore, the IMF reports that contraction in output due to austerity measures has been milder than expected. Nevertheless, the IMF reports that the 2012 outlook for Europe has deteriorated substantially, affecting primarily the PIIGS economies. Essentially, Portugal's situation has been quite seriously undermined by continually deteriorating market sentiment, which is largely being driven by Eurozone stress (for which, Portugal is not responsible).</span></div>
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<span style="font-family: 'Times New Roman', serif;">To illustrate matters further, the European national debt graph below, originally published by the NY Times last quarter, outlines that Portugal began 2009 with debt levels equal to those of Germany and have faced an increase in borrowing costs only since the Greek situation -and resulting mismanagement of the crisis- unfolded.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjK5lRhbHM58_Kzuny8pGrsWMcnMIYHEL_XO9Kx-lWTeYwUMMG4pluRk76IevVTYbC3U5aEWWzXeLQmCph5e0Soc_0zOgOI8PA5E9qVZc8NAjztZzWSfrlgmkMQHOiIXlk2DrCC99AfIBw/s1600/Portugal+3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjK5lRhbHM58_Kzuny8pGrsWMcnMIYHEL_XO9Kx-lWTeYwUMMG4pluRk76IevVTYbC3U5aEWWzXeLQmCph5e0Soc_0zOgOI8PA5E9qVZc8NAjztZzWSfrlgmkMQHOiIXlk2DrCC99AfIBw/s320/Portugal+3.png" width="228" /></a></div>
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In other words, the IMF reports that while Portugal's fundamentals are fine in and of themselves, as is Portugal's management of the stormy economic climate thus far, Portuguese assets are being sold-off based on contagion fears stemming from the EU's (and Germany's) lethargic reaction to the crisis.<br />
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<b><u>What Should Be Done?</u></b><br />
In short, Portugal should be offered financial stabilization along the lines extended to Central and Eastern Europe under the auspices of the Vienna Initiative. In 2009, as the crisis swept through Eastern Europe, a coordinated crisis response was swiftly agreed and implemented primarily by the EIB, EBRD, The CEE region central banks, and the Austrian government. The Vienna initiative was a win-win response so effective in restoring confidence and avoiding severe economic contraction and austerity in Central and Eastern Europe that by 2010, the ECFIN Country Focus Report for Poland was titled “The Polish Banking System: hit by the crisis or merely a cool breeze?”<br />
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<span style="font-size: xx-small;">About the Author: </span><br />
<span style="font-size: xx-small;">Max Berre is a financial-regulatory economist at the EDHEC-Risk Institute (Ecole Des Hautes Etudes Commerciales du Nord) who has worked as a sovereign debt expert at the Inter-American Development Bank in Washington and has taught financial economics at Maastricht University in the Netherlands. </span></div>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-82821781235802878202012-06-18T15:51:00.001-07:002012-06-19T02:43:29.981-07:00ECB Study: Lack of Crisis Response Causing Contagion in Europe<div style="text-align: justify;"><b><u>Empirical Study on European Sovereign Spillover Risk</u></b></div><div style="text-align: justify;"><a href="http://www.ecb.int/pub/pdf/scpwps/ecbwp1419.pdf">http://www.ecb.int/pub/pdf/scpwps/ecbwp1419.pdf</a></div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;">An empirical ECB study published in February 2012 analyzing the effects of the sovereign debt crisis found that spillover from the economic situation in Greece is affecting risk premiums across the PIIGS countries, as well as in the Eurozone at large, to a smaller degree. In other words, the European Union’s inaction with respect the European sovereign debt crisis is making the situation worse. This is happening due to investor fears of contagion. The fear is that the longer European leaders remain inactive in attempts to contain the situation in Greece, the more afraid investors become.<br />
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</div><div style="text-align: justify;">This was determined empirically by testing European bond yield spreads for sensitivity to general market conditions, publication of the budget-balance-to-GDP ratio, sovereign credit ratings changes, and Greek, Irish, and Portuguese sovereign credit ratings changes.The ECB study points out that a lot of the movement in the market happens automatically, as large institutional investors fulfill their fiduciary obligations to dump their riskier investments as they rebalance the risk profile of their portfolios.</div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;">The study concludes that because of economic losses caused by the simple contagion fears, the Eurozone’s highest priority should be to reduce contagion risk in Europe. It’s just a shame that Angela Merkel doesn’t see things that way.</div><div style="text-align: center;"><b><u><br />
</u></b></div><div style="text-align: center;"><b><u>Abstract</u></b></div><div style="text-align: justify;">Since the intensification of the crisis in September 2008, all euro area long term government bond yields relative to the German Bund have been characterized by highly persistent processes with upward trends for countries with weaker fiscal fundamentals. Looking at the daily period 1 September 2008 – 4 August 2011, we found that three factors can explain the recorded developments in sovereign spreads: (i) an aggregate regional risk factor, (ii) the country-specific credit risk and (iii) the spillover effect from Greece. Specifically, higher risk-aversion has increased the demand for the Bund and this is behind the pricing of all euro area spreads, including those for Austria, Finland and the Netherlands. Country-specific credit ratings have played a key role in the developments of the spreads for Greece, Ireland, Portugal and Spain. Finally, the rating downgrade in Greece has contributed to developments in spreads of countries with weaker fiscal fundamentals: Ireland, Portugal, Italy, Spain, Belgium and France.</div><div style="text-align: justify;"><br />
</div><div style="text-align: justify;"><a href="http://www.ecb.int/pub/pdf/scpwps/ecbwp1419.pdf">http://www.ecb.int/pub/pdf/scpwps/ecbwp1419.pdf</a></div><div style="text-align: justify;">-------------------------------------------------------------</div><div style="text-align: justify;"><span style="font-size: xx-small;">The European Central Bank (ECB) is the institution of the European Union (EU) that administers the monetary policy of the 17 EU Eurozone member states. It was established by the treaty of Amsterdam in 1998 as the Eurozone's central bank. </span></div>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0tag:blogger.com,1999:blog-6581878909892933632.post-40097380719964816612012-06-09T14:04:00.001-07:002012-06-23T04:47:54.946-07:00The Economist Scolds Merkel's Obstructionism<a href="http://www.economist.com/node/21556577">http://www.economist.com/node/21556577</a><br />
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<u><b>Half-Baked Rescue Plans, </b><b>Overwhelming Focus on Austerity</b></u></div>
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In mid-June of 2012, the
Economist ran a piece scolding Angela Merkel for Germany’s obstructionism in the
face of organized efforts to address the rapidly forming European sovereign debt
crisis. In the view of The Economist, Germany’s
actions have done a great deal to turn a crisis in Greece – around 3% of the
Eurozone’s economy- into a crisis of the 17-member Eurozone at large. “The
overwhelming focus on austerity; the succession of half-baked rescue plans; the
refusal to lay out a clear path for the fiscal and banking integration that is
needed for the single currency to survive". The Economist points the finger
directly at Merkel’s government over these policy failures “Since Germany has
largely determined this response, most of the blame belongs in Berlin.”</div>
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<b><u>The Consensus in the Rest of Europe – and World</u></b></div>
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According to the economist, the
feeling in the rest of Europe, as well as in the US and China, a number of policy
measures could be put in place to respond to the crisis. They proposed measures
would help save southern economies as well as northern banks.</div>
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“Outside Germany, a consensus has
developed on what Mrs. Merkel must do to preserve the single currency. It
includes shifting from austerity to a far greater focus on economic growth;
complementing the single currency with a banking union (with euro-wide deposit
insurance, bank oversight and joint means for the recapitalisation or
resolution of failing banks); and embracing a limited form of debt
mutualisation to create a joint safe asset and allow peripheral economies the
room gradually to reduce their debt burdens. This is the refrain from
Washington, Beijing, London and indeed most of the capitals of the euro zone.
Why hasn’t the continent’s canniest politician sprung into action?” </div>
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For their part, southern Europe’s
banks have thus far proved to be considerably more resilient in the face of European
volatility than their northern counterparts. So far, Spain has only seen one
bank collapse… four years into the crisis at that. Compare this result with UK,
Ireland, Holland or Belgium. </div>
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<b><u>Why the Arrogance Then? </u></b></div>
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“She believes, first, that her
demands for austerity and her refusal to bail out her peers are the only ways
to bring reform in Europe; and, second, that if disaster really strikes,
Germany could act quickly to save the day. The first gamble can certainly claim
some successes, notably the removal of Silvio Berlusconi in Italy and the
passage, across southern Europe, of reforms that would recently have seemed
unthinkable.” </div>
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In other words, the Economist
accuses that the action of Merkel’s government are designed to override the
sovereignty of both the European Union’s 26 other member nations (and their
democratically-elected governments) and the European Union itself. Berlusconi notwithstanding,
the removal of foreign heads of state and the forcing of policy changes in
foreign countries is a direct affront to the idea that the affairs of a country
should be decided by that country’s voters: Democratic Sovereignty.</div>
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<b><u>What Should be Done? </u></b></div>
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First, the proposed measures
should be enacted. These are; the formation of a banking union, and the partial
mutualization of debt. Second, the democratic sovereignty and national interest
of the other 26 member nations should be defended as aggressively as is
necessary. Germany’s austerity-demand-based obstructionism can, for example, be
overcome by a series of bilateral agreements which simply exclude German
participation. </div>
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<a href="http://www.economist.com/node/21556577">http://www.economist.com/node/21556577 </a></div>
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<span style="font-size: 7.5pt;">Max
Berre is a financial regulatory economist at the EDHEC-Risk Institute (Ecole Des Hautes
Etudes Commerciales du Nord) who has worked as a sovereign debt expert
at the Inter-American Development Bank in Washington and has taught
financial economics at Maastricht University in the Netherlands.</span>Commission of Ideashttp://www.blogger.com/profile/12094091283732680969noreply@blogger.com0