Summary:
Devin Stewart on the nation-state myth. Whereas the idea of a state is useful and necessary, the idea of the nation-state is an illusion, and, like religion, requires a leap of faith. Identities within nations are often as varied as they are between nations. E.g. China's "Han majority" is linguistically, culturally, and even genetically diverse. China is much more than a nation-state. The concept “Chinese” is a meaningless word that was fabricated to justify rule over minorities. The Japanese are particularly keen to think of themselves as one "people" and talk of "Japaneseness", but actually comprise Ainu, Koreans, Chinese, Filipinos, and Ryuku. Closely related to the Nation-State Myth is the Origin Myth. The origin myth continues ad infinitum until we reach humanity’s common ancestor. The nation-state concept offers a way to consolidate and legitimize a state’s rule over a group of people, although the contours of a cultural community rarely coincide with a political entity. It obscures the fact that humanity's greatest threats are global and do not respect national sovereignty. If policymakers are to address today’s problems, they must think more broadly. An introduction to ethics in international affairs — moral philosophy, human rights, and the role of non-state actors — should be mainstreamed in international relations curricula. (Published: 03/09/08)
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Sunday, September 7, 2008
Ending the Nation-State Myth - Project Syndicate
Saturday, September 6, 2008
Quote of the Day
"This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down. Growth in the economy in this decade will be the slowest of any decade since the Great Depression, right in the middle of all this financial innovation. It is the most complicated financial crisis I have ever experienced, and I have experienced a few... Changes are going to have to be made to the global financial system." - Paul Volcker
Friday, September 5, 2008
Bob Farrell's 10 Rules for Investing - Market Watch
Summary:
10 Rules for investors by Bob Farrell (chief stockmarket analyst, Merril Lynch). Markets tend to return to the mean over time; Excesses in one direction will lead to an opposite excess in the other direction; There are no new eras -- excesses are never permanent; Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways; The public buys the most at the top and the least at the bottom; Fear and greed are stronger than long-term resolve; Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names; Bear markets have three stages -- sharp down, reflexive rebound and a drawn-out fundamental downtrend; When all the experts and forecasts agree -- something else is going to happen; Bull markets are more fun than bear markets. (Published: 11/06/08)
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War for Wealth and Supercapitalism - GlobalBiz
Summary:
Peter Day interviews Robert Reich (Berkeley) and Gabor Steingart (Der Spiegel). Reich believes we've entered an era of super-capitalism. Technology incubated during the cold war. Lowered cost of transporting goods and communication. Container ships and satellite communication. Led to globalization. Consumers and investors doing very well. No more job security due to this globalization and technological advances. Generates huge instability and upheaval, not seen since late 19th century. People need to understand the costs. We need to pay attention to how governments regulate and design markets and try to do a better job. Gabor Steingart believes our way of life and stability are under threat from the rise of Asia. Not a flat world because China and India are competing with our blue collar workers under a very different set of rules. E.g. child labour, no trade unions, environment. Free trade is not the answer for up to 1/3 of our workforce. Need political actions. Not tariffs and quotas, but heavy investment in education, trade agreements, informing consumers and pooling resources between Western countries. (Published: 02/09/08)
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Robert Reich
Gabor Steingart
The Dangerous Myth of Energy Independence - Informed Comment
Summary:
Robin M. Mills argues that the world is not running out of oil, that the current high energy prices are the result of a long period of low prices and under-investment, as well as irrational hostility between suppliers and consumers. Ideas about forestalling an oil crisis by ‘energy independence’, or by military action, are mistaken. The proper energy policy should be energy security, not energy independence. Objective profoundly harmed by climate, with elements of paranoia, racism and Islamophobia. Energy security is achieved when suppliers find markets, and markets find supply, at prices permitting both of them economic stability and growth, which requires a complex web of inter-relationships between producers and consumers. Policies to encourage US domestic production, increase efficiency and introduce alternative energy sources are desirable, often for environmental rather than energy security reason, but they have to be pursued with vigour and resolution. Promises to ‘jawbone’ OPEC into supplying more oil sit very oddly with the US’s uniquely comprehensive moratoria on offshore oil and gas production. Need a rational and balanced dialogue about how to co-operate on bringing that abundant energy to consumers. (Published: 02/09/08)
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Thursday, September 4, 2008
Globalisation as the great unbundling(s): What should governments do? - Vox EU
Summary:
Richard Baldwin describes the evolution of globalization in terms of stages in an unbundling process. The first and second industrial revolutions let to a spatial unbundling of factories and consumers. The social consequence were dire. Governments reacted by partially unbundling income and consumption. In the late part of the 20th century, as a result of ever-lower transport and labour costs, the factories themselves became unbundled as supply chains were internationalized. This caused relatively few problems as the manufacturing sector was greatly reduced by then. Around the start of the 21st century, the resolution of globalization increased further, as offices came to be unbundled next. Various service components are now being outsourced and offshored. This radically widens the circle of affected workers. The three key characteristics of this new wave of globalization are the unpredictability of its consequences; the suddenness with which it can affect jobs; and its greater resolution, acting on the level of individuals, rather than firms, sectors or skill groups. As was the case with the first unbundling phase, this latest wave of globalization will require a revamp of education policies, welfare states, and labour organisations. (Published: 04/09/08)
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Wednesday, September 3, 2008
Sterling takes a royal pounding - FT.com
Summary:
In the UK, high borrowing costs, a painful housing market correction and losses in the financial sector mean most of the UK's assets have been dramatically revalued down. Sterling has suffered as a result. However, was overvalued. Sterling s likely to fall further in the long run, as the North Sea fields wind down and the UK imports more oil and gas. Questionable government schemes have reduced confidence in the pound. Bank of England, needs to worry about weaker pound, not government. The MPC must now contend with rising import costs. Weakness of sterling means the Bank will need tighter monetary policy than would otherwise be necessary to bring inflation back down to the target of 2 per cent from its August level of 4.4 per cent. (Published: 03/09/08)
Summary:
Oil refining byproduct becomes a hydrogen goldmine - R&D Magazine
Summary:
A commercial-scale process to extract and reuse pure hydrogen from the hydrogen sulfide that naturally contaminates unrefined oil, including oil sands, has been developed by a collaboration between the U.S. Dept. of Energy's Argonne National Laboratory and Kingston Process Metallurgy Inc. (KPM) of Kingston, Ontario. It is less energy- and capital-intensive that existing processes, such as the Claus process. The reactions between the hydrogen sulfide and copper and the copper sulfide and air release energy that helps to heat the system. It produces sulfuric acid as a byproduct and is resistant to contaminants such as ammonia and various hydrocarbons, converting them to their elemental state instead. Thus far this process has only been demonstrated in the lab. A pilot scale reactor will be developed next. (Published: 03/09/08)
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China's next gold - FT.com
Summary:
China's rise as a manufacturing powerhouse should be no cause for hysteria. Above all, it is a story of human progress: millions of Chinese are being lifted out of poverty each year by the country's rapid economic growth. Furthermore, consumers in developed countries benefit from the "China price". Competition from China may lead to job losses, but so can competition from across the street or new technology. This merely reinforces the need for the governments of rich countries to help workers who have lost their jobs, just as they should also be providing business-friendly regulations and infrastructure, and an excellent education system. Bankruptcies and job losses are part of the incessant process of economic change. The developed world needs to continue to increase the quality and sophistication of its manufactured products. The true challenge posed by China as the workshop of the world is likely to be environmental: by buying so many products from China, we have moved greenhouse gas emissions to a place where they will not be curbed by the schemes of western regulators, and where they make a wonderful excuse for western inaction. China must be persuaded to play its part in global efforts to cut emissions. (Published: 12/08/08)
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Quote of the Day
“Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works”. - John Stuart Mill
Entrepreneurs versus corporate managers - IMD
Summary:
An IMD study looks at the main differences between entrepreneurs and corporate managers. Key differences: 1) Long-term/short-term decision making. Contrary to expectations, entrepreneurs proved to be the group with the greatest focus on building a long-term business. Corporate executives operated far more from a monthly or quarterly framework. The reason behind this difference is that an entrepreneur ends up creating an end result – a product, market or firm – which looks very little like what they started out to accomplish in the first place. The big difference is in the goal of trying to create something big and enduring. 2) Marketing information. Entrepreneurs tend not see the point of such information. To them, market research lies in the principle of the proof of the pudding being in the eating. Under this line of thought, positive market feedback consists of trying to sell something and being successful – and negative feedback the opposite - being unsuccessful at selling something which therefore requires some re-thinking. 3) Money. Entrepreneurs showed themselves to be far more cost conscious than their corporate counterparts – who were much more willing to throw big budget at things with uncertain outcomes. 4) Competition. Where corporate executives were seen to be highly focused on the competition, entrepreneurs are far more concerned with whom they can establish solid partnerships - almost to the exclusion of worrying about competition. (Published: August 2008)
Globalization: Where to from here? - Rogue Economist Rants
Summary:
Rogue Economist argues that global inflation is the result of the type of globalization that we witnessed in the past three decades, a very different from kind of globalization from what we have seen in previous periods in history. Whereas before, globalization was really nothing more than global trade among nations, in the last 30 years it also involved the outsourcing of businesses activities, from manufacturing to back-end processes. Initially this led to increased productivity for the developed nations: increased profitability for the firms, and lower prices for consumers. Newly created wealth looking for investments led to bubbles such as the sub-prime crisis. More recently, the outsourcing of back-end process led to higher pay for workers in developing countries, creating demand for the same goods (previously unaffordable). Governments started to invest trade surplusses in much needed infrastructure projects. Both the increased demand and the increased number of infrastructure projects led to globally inflationary prices. Developed countries have become consumerist economies, where outsourcing has led to stagnant wages for many. So far that has been mitigated by lower prices of goods. (Published: 20/08/08)
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The four horsemen of the market - MarketWatch
Summary:
Views of Jeremy Grantham, Bob Rodriguez, John Hussman and Steve Leuthold. Grantham believes the market fundamentals are very bad, in for two years of disappointment. No time to take risks. Reason is global economic growth is slowing under the weight of increasingly illiquid credit markets and inflationary pressures. Slashes corporate earnings, resulting in poor to middling for equities worldwide. Stocks in both developed and emerging markets are "substantially overpriced." Also concerned about sputtering growth of China. Rodriguez is on "buyer's strike" regarding high-quality bonds with maturities greater than two years. Believes that longer-term Treasury yields aren't substantial enough to compensate investors for inflation's eroding impact on purchasing power. Continues to focus on "caution and capital preservation." Hussman said he's looking for another shoe to drop once investors recognize that the U.S. has not avoided recession. U.S. is mired in recession, and once investors realize that earnings expectations are overblown, stocks will take another major hit. Leuthold is pretty positive. Believes bottom has been made. Economy is going to start showing some positive signs sometime in the first half of 2009. Iis getting in early: loading up on shares of biotechnology and alternative-energy companies in particular. (Published: 29/08/08)
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Tuesday, September 2, 2008
Quote of the Day
"A lot of people in the car industry - and this is a seachange since the 1990s - have come to see dependence on gasoline as the growth bottleneck in the industry's future. They think that the real constraint on the ability to grow the car market will be dependence on a fuel that causes global warming, that puts money in the pockets of dictators, that has enormous price volatility and so forth. So they want to get off gasoline, because they now see it as a limit to their future prospects." - Jonathan Rauch, in an interview with Russ Roberts on EconTalk discussing the Chevy Volt
Snake Oil and Deflation - RGE Monitor
Summary:
London Banker argues that the core problem leading to the current seizure of the credit markets is the misallocation of credit into unproductive works during the boom years. Markets all over the world carelessly followed the path of under-production, dis-savings and over-consumption as the path to prosperity. No amount of new credit will solve the problem unless the distortions promoting misallocation are redressed through fiscal and regulatory policy changes. Bailouts and recapitalisation of failed policies of the past are only digging a deeper hole, betraying more capital of younger generations into the unproductive works financed by the current generation. Correcting the bias toward betrayal of capital will not be popular or easy. Correcting the bias toward unproductive investments will require a massive change of political structures, financial intermediation channels, savings and consumption habits, and economic incentives. Savings must be encouraged and must be allocated to productive investments that will yield not just future prosperity but social equity to minimise political conflicts. But those who sold us or imposed on us the current set of policies and practices will be re-bottling their snake oil under new labels. (Published: 08/08/08)
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Monday, September 1, 2008
Too much risk? - Interfluidity
Summary:
Steve Waldman argues against the conventional wisdom that the financial system took on "too much risk" in recent years. Hundreds of billions of dollars were poured into new suburbs, while very little capital was devoted e.g. to the alternative energy sector. Capital was withdrawn from a variety of industries deemed "uncompetitive", because to gamble on recovery is far too great a risk. Big central banks, whose investment largely drove the credit boom, were (and still are) seeking safety, not risk. The housing boom was born less from inordinate risk-taking than from the unwillingness of investors to take and bear considered risks. Huge institutions are treating the financial system like a bank: depositing trillions in generic "safe" instruments and expecting wealth to somehow appear. A generation of professionals were trained to forget that investing is precisely the art of taking economic risks, then delivering the goods or eating the losses. Investors' childlike demand for safety has made the financial world terribly risky. We must not pretend that risk can be regulated or innovated away. (Published: 07/08/08)
Makeover Mandated for U.K. Life Science Sector - GEN
Summary:
UK Trade and Investment (UKTI) believes that the UK biotech industry’s recent battering by the press gave a very one-sided view of the true international potential of the country’s life science sector. Not only is the UK second to the U.S. in terms of biotech industry size but it leads Europe with its pharmaceutical exports. But the U.K. has been slow in publicizing its strengths. Therefore, the UKTI was charged by the government with marketing the U.K.’s life sciences internationally. The result was the UK Life Science Marketing Strategy which was drafted earlier this year. Workstreams aim to optimize how U.K. academia and industry sells itself internationally, in terms of comprehensive and consistent messaging, financing (using marketing to increase the amount of international VC funding in the U.K.), and also how best to communicate with potential partners and investors in key countries. A tool kit has been developed that will allow any UK life science company to access and take the most relevant messages with them in terms of UK innovation, support industry, tax incentives, and academic background. UKTI and the Strategy Implementation Board hope that executing and further developing the U.K. life science market over the next five years will significantly boost the country’s standing within the international arena, increase inward investments, business, and collaborations, as well as make the U.K. industry a more cohesive force. (Published: 01/09/2008)
VC Funding for Biotech Companies Withering - GEN
Summary:
Despite an abundance of funding as well as scientific and technological progress, the environment for investing in the life science industry seems to have changed dramatically. The change has been most dramatic for the biotech sector. In theory, the level of VC investments made in life science at any time should not be significantly affected by short-term fluctuations in stock market activity or the economy. Drought of new public money coming into venture-backed companies through IPOs, however, as well as increasing caution on the part of acquirers have biotech venture investors hanging on tighter to their wallets and checkbooks. Money is still there but it is going to be harder for biotechnology companies to obtain. Particularly true given the increased competition for investment with medical device and equipment companies as well as new competition from biofuels and alternative energy companies for investment dollars. (Published: 01/09/2008)
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Asia and Global Stagflation - Vox EU
Summary:
Barry Eichengreen argues that Asia needs tight money, appreciated exchange rates, and fiscal stimulus. Despite the growth of inter-Asia trade, Asian economies are not decoupled from the West, as latter is buyer of final product. As growth in Europe and US is coming to standstill, will have impact on Asia. Nor is Asia being spared from turbulence in credit markets. In addition, Asia has imported inflation from the US by following the Fed's rate cuts. Asian economies need demand restraint but got demand stimulus instead. Inflation rates at 10 year highs. Now negative real interest rates in many Asian economies: unhealthy subsidy for borrowing by households and firms, artificial stimulus to consumptioin. Caused Asian crisis 10 years ago. Central banks need to increase interest rates. Alternative will be even more painful increases later. Will push up exchange rate and slow down economy. Asia can sustain demand under these circumstances by means of fiscal policy: tax cuts and increases in public spending on locally-produced goods. (Published: 19/06/2008)
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Sunday, August 31, 2008
The sacred mystery of capital - Prospect Magazine
Summary:
Julian Gough compares capitalism and modern economics to religion. The advance of science has removed the divine mystery from much of life, but in the past 30 years, the advance of free market capitalism has put it back. Only modern economics can now provide forces that we don’t understand. Modern high finance, like the Latin of the Christian Church, has profound mysteries at its core. Not even bankers know what a collateralised debt obligation cubed really is. The abandonment of the gold standard in 1971 was the crucifixion and resurrection of capitalism; the traumatic and liberating event which allowed capitalism to be purely religious and entirely driven by faith. As with all religions, once its link to the physical world was severed, free market capitalism mourned briefly, then experienced a surge of energy and expansion. From "fiat lux" to “fiat money.” But as with all religious expansions, success bred hubristic dementia. The elevation of metaphysical above physical turned into a kind of contempt for the physical. (Published: July 2008)
Tuesday, August 26, 2008
Five most important lessons I've learned as an entrepreneur - Guy Kawasaki
Summary:
Guy Kawasaki gives a list of five things he learned from being an entrepreneur: focus on cash flow; make a little progress every day; try stuff; ignore the schmexperts; never ask anyone to do something that you wouldn't do. (Published: 18/08/08)
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Lessons from a “lost decade” - The Economist
Summary:
Some major differences between the US housing bubble and Japan's bubble in the early 90s are overstated. They were comparably severe, and the Japanese policymakers were not slower than American ones to cut interest rates and loosen fiscal policy after the bubble burst. In a way, the US is even more exposed than Japan was, due to a much lower savings rate among the population (more difficult to prop up consumer spending). There are a number of advantages the US today has over Japan back then. The US regulatory system, financial markets and political structure are more transparent, pressing banks into recognising losses and repairing their balance-sheets quicker. The cost of its housing bust is spread across other countries, with foreigners holding a large slice of American mortgage-backed securities and sovereign-wealth funds have provided new capital for American banks. American exports are booming, thanks in part due to a cheap dollar. (Published: 21/08/08)
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