Something that came to mind while thinking about the global reserve system's effect on the dollar (and visa versa). I read Eric Schlosser's Reefer Madness this summer during my tour of the US for the JASC conference. An interesting point it brought up was the possible effect of the 500-euro note in the unofficial economy--the ever-popular $100 bill we see in neat stacks in the briefcases of movie criminals may soon be replaced with that 500 note, which is a tidy store of value. The excerpt can be read here.
Meanwhile, the ever-present talk of airlines and Boeing make me want to watch Casino Royale again.
Wednesday, May 9, 2007
Venezuela and others [May 10].
So, of course we've already talked about Venezuela's pending withdrawal from the World Bank and the IMF, but the Stiglitz reading really makes it relevant. Venezuelan Finance Minister Rodrigo Cabezas that there is absolutely no question that Venezuela will honor its debts, and of course bondholders will not rashly pull out as soon as the country breaks away from its international lenders. Well, Venezuela did pay its debt back early in 2006, so it seems like there's a good case to believe them here. On the other hand, they've also negotiated to reduce repayment before using the spectre of default, and this time, again, around $21 billion is at stake because of President Chavez's announcement, a not at all insignificant amount of money.
I always get the giggles when I find online articles from the 90s; here's one on the bailout situation in South Korea in 1997. The article details the strict policies IMF forces on borrowers, including the old-school classical practices of reduced government spending and higher taxes. Something interesting to note is that at the time, unemployment was only 2.5%, a figure we could only dream of--and the IMF's policies threatened to drive it up to 7% (that's only a little less than half the unemployment that led to the premise of Koushun Tamaki's 1999 novel, Battle Royale. How much effect did the economic crisis have on the creation of that work?).
Another point mentioned in Stiglitz: debt relief for Iraq. Interestingly, Saudi Arabia has written off around 80% of the $15 billion Iraq owes them; now we're in the symbolic paper-signing stages of additional debt relief, as well as whatever concessions anyone can ring out of the country. One individual from the omniscient Rand Corporation is quoted as saying that this agreement doesn't matter, as Iraq isn't currently paying back debts anyway--unsurprising, considering it's still an occupied nation with all sorts of violence still happening on its soil. Perhaps when it can manage a stable flow of crude oil out, it will be able to take advantage of some of that debt relief (though relying solely on oil could probably prove calamitous for them, what with the ever-shifting value of it).
An article from Reuters on Stiglitz offers his criticisms of the IMF and the World Bank in a nutshell; Europe needs to stop appointing the head of the IMF, and the US needs to stop appointing the head of the World Bank. The Wolfowitz debacle, according to him, is just one more log on the fire.
Yesterday, the Prime Minister of Macedonia announced that his country will be paying back its debts to the IMF early, which could save it up to $9.4 million this year alone, according to the article. It's interesting that the IMF, whose nominal goal is to help countries develop with repayable loans manages to lend in such a manner that debt accrues through that compound interest. Of course, on a scale of hundreds of millions to billions of dollars, such a burden metastasizes rapidly, and is only worsened by any whiff of crisis that causes all the fluid capital to flow out as through a bottomless bucket.
I always get the giggles when I find online articles from the 90s; here's one on the bailout situation in South Korea in 1997. The article details the strict policies IMF forces on borrowers, including the old-school classical practices of reduced government spending and higher taxes. Something interesting to note is that at the time, unemployment was only 2.5%, a figure we could only dream of--and the IMF's policies threatened to drive it up to 7% (that's only a little less than half the unemployment that led to the premise of Koushun Tamaki's 1999 novel, Battle Royale. How much effect did the economic crisis have on the creation of that work?).
Another point mentioned in Stiglitz: debt relief for Iraq. Interestingly, Saudi Arabia has written off around 80% of the $15 billion Iraq owes them; now we're in the symbolic paper-signing stages of additional debt relief, as well as whatever concessions anyone can ring out of the country. One individual from the omniscient Rand Corporation is quoted as saying that this agreement doesn't matter, as Iraq isn't currently paying back debts anyway--unsurprising, considering it's still an occupied nation with all sorts of violence still happening on its soil. Perhaps when it can manage a stable flow of crude oil out, it will be able to take advantage of some of that debt relief (though relying solely on oil could probably prove calamitous for them, what with the ever-shifting value of it).
An article from Reuters on Stiglitz offers his criticisms of the IMF and the World Bank in a nutshell; Europe needs to stop appointing the head of the IMF, and the US needs to stop appointing the head of the World Bank. The Wolfowitz debacle, according to him, is just one more log on the fire.
Yesterday, the Prime Minister of Macedonia announced that his country will be paying back its debts to the IMF early, which could save it up to $9.4 million this year alone, according to the article. It's interesting that the IMF, whose nominal goal is to help countries develop with repayable loans manages to lend in such a manner that debt accrues through that compound interest. Of course, on a scale of hundreds of millions to billions of dollars, such a burden metastasizes rapidly, and is only worsened by any whiff of crisis that causes all the fluid capital to flow out as through a bottomless bucket.
Monday, May 7, 2007
Another comment on service industry and technology.
I'm sure Mr. Ramirez can work from home by playing baseball online with the X-Box. Which begs the question: why not just hire a thumb-jockey in India to play baseball for your team instead? He won't ask you what the A button does.
Pray this doesn't become the cinematic manual your employers follow when they want to make sure they have a lean, mean workforce.
Pray this doesn't become the cinematic manual your employers follow when they want to make sure they have a lean, mean workforce.
FL [May 8]
I keep saving things as drafts instead of punching publish. Woops! Gotta stop that.
The Eichengreen article was interesting to me as someone who hasn't studied monetary exchange or bases much. From the start, I assumed the greater role of the hegemon in creating and maintaining an international monetary system would be more stick than carrot; it was interesting to note that very little of the stick approach came up in the case studies later. Mostly it was advantages to systems and side-payments. Of course, in an organized system, I still think that the hegemon's main role is to provide a credible threat to reduce the probability of less powerful countries defecting. It seems necessary that one great power, whose costs of carrying out the threat are or seem to be relatively lower than anyone else's cost of doing the same, be the one to maintain order. Any benefit, in my mind, should be something as a result of the system of exchange itself, rather than something the hegemon would be expected to maintain at a cost to itself (even if the long run returns are greater than the short run costs).
I am curious whether the hegemon's market power must exceed all "rival" countries' power together or individually/regionally. In the former case, this would create rather powerless dummies, while in the latter, the system may be slightly more collaborative. The Bretton Woods case seems to bear out the latter pattern of dominance; Britain, despite being weakened by war, still had significant influence over the formation of the IMF, even though some of their desires ran counter to what the dominant power (US) wanted.
The concept of the hegemon's influence and ability to maintain stability being something that decays over time was interesting; it seemed to me that the Krasner article didn't really discuss the issue of change, and the patterns of hegemons he set up seemed to be conceptualized as permanent. Obviously, the power equilibrium changes. Though, I think it's important to note that economic growth rather than economic collapse seems to be the more profound undermining force.
As a follow-up to my thoughts on copyrights, the encoding on the HD - DVD format has been broken. You can find the code all over the internet--all 32 digits of it. The NYT has some of the story of how Digg resisted; is it a backlash against lawyers or censorship?
And as for Cohen's writing on the Triad: all I have to say is that no one should expect any country to actively maintain an agreement that costs the country more than it benefits. Any alliance is null once it's no longer useful, and that's basically what G-7 cooperation agreements are. It's unfortunate that trade-offs must be made, but if the best alternative to a negotiated agreement is higher for a given country, it's naive to blame the regime that chooses noncooperation (after all, choosing the less beneficial option would be kinda irrational). Not to imply that regimes always make the most rational choices; we'll see how Mr. Chavez's game plays out in the years to come.
The Eichengreen article was interesting to me as someone who hasn't studied monetary exchange or bases much. From the start, I assumed the greater role of the hegemon in creating and maintaining an international monetary system would be more stick than carrot; it was interesting to note that very little of the stick approach came up in the case studies later. Mostly it was advantages to systems and side-payments. Of course, in an organized system, I still think that the hegemon's main role is to provide a credible threat to reduce the probability of less powerful countries defecting. It seems necessary that one great power, whose costs of carrying out the threat are or seem to be relatively lower than anyone else's cost of doing the same, be the one to maintain order. Any benefit, in my mind, should be something as a result of the system of exchange itself, rather than something the hegemon would be expected to maintain at a cost to itself (even if the long run returns are greater than the short run costs).
I am curious whether the hegemon's market power must exceed all "rival" countries' power together or individually/regionally. In the former case, this would create rather powerless dummies, while in the latter, the system may be slightly more collaborative. The Bretton Woods case seems to bear out the latter pattern of dominance; Britain, despite being weakened by war, still had significant influence over the formation of the IMF, even though some of their desires ran counter to what the dominant power (US) wanted.
The concept of the hegemon's influence and ability to maintain stability being something that decays over time was interesting; it seemed to me that the Krasner article didn't really discuss the issue of change, and the patterns of hegemons he set up seemed to be conceptualized as permanent. Obviously, the power equilibrium changes. Though, I think it's important to note that economic growth rather than economic collapse seems to be the more profound undermining force.
As a follow-up to my thoughts on copyrights, the encoding on the HD - DVD format has been broken. You can find the code all over the internet--all 32 digits of it. The NYT has some of the story of how Digg resisted; is it a backlash against lawyers or censorship?
And as for Cohen's writing on the Triad: all I have to say is that no one should expect any country to actively maintain an agreement that costs the country more than it benefits. Any alliance is null once it's no longer useful, and that's basically what G-7 cooperation agreements are. It's unfortunate that trade-offs must be made, but if the best alternative to a negotiated agreement is higher for a given country, it's naive to blame the regime that chooses noncooperation (after all, choosing the less beneficial option would be kinda irrational). Not to imply that regimes always make the most rational choices; we'll see how Mr. Chavez's game plays out in the years to come.
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