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Gene Ellis

The Morality of Amorality in Foreign Policy by Robert Cooper - Project Syndicate - 0 views

www.project-syndicate.org/...of-amorality-in-foreign-policy

morality foreign policy policy robert cooper project syndicate

shared by Gene Ellis on 19 Dec 12 - No Cached
  • Foreign policy is about war and peace. If wars are fought on moral or religious grounds, no basis for restraint exists. After all, to call something evil is to invoke a moral duty to destroy it.
  • The Thirty Years War, fought over religion, laid waste to the Continent, killing one-third of Germany's population.
  • As the Romanian philosopher E. M. Cioran says: "Once man loses his faculty of indifference he becomes a potential murderer; once he transforms his idea into a God the consequences are incalculable."
  • ...1 more annotation...
  • The objective of amoral foreign policy is to sustain order in an anarchic international system by ensuring tolerance and pluralism among a number of independent actors.
Gene Ellis

"Which Eurobonds?" by Jeffrey Frankel | Project Syndicate - 0 views

www.project-syndicate.org/...which-eurobonds-

jeffrey project syndicate

shared by Gene Ellis on 16 Jun 12 - No Cached
  • Any solution to the eurozone crisis must meet a short-run objective and a long-run goal. Unfortunately, the two tend to conflict.Illustration by Paul LachineCommentsView/Create comment on this paragraphThe short-run objective is to return Greece, Portugal, and other troubled countries to a sustainable debt path (that is, a declining debt/GDP ratio). Austerity has raised debt/GDP ratios, but a debt write-down or bigger bailouts would undermine the long-term goal of minimizing the risk of similar debt crises in the future.CommentsView/Create comment on this paragraph
  • it is hard to commit today to practice fiscal rectitude tomorrow. Official debt caps, such as the Maastricht fiscal criteria and the Stability and Growth Pact (SGP), failed because they were unenforceable.
  • The introduction of Eurobonds – joint, aggregate eurozone liabilities – could be part of the solution, if designed properly. There is certainly demand for them in China and other major emerging countries, which are desperate for an alternative to low-yielding US government securities.
  • ...12 more annotations...
  • But Germany remains opposed on moral-hazard grounds: a joint guarantee of Eurozone members’ liabilities would strengthen individual national governments’ incentive to spend beyond their means.
  • The German Council of Economic Experts has proposed a European Redemption Fund (ERF). The plan would convert into de facto 25-year Eurobonds the existing sovereign debt of member countries in excess of 60% of GDP, the threshold specified by the Maastricht criteria and the SGP.
  • But this seems upside down.
  • it offers absolution precisely on the 60%-of-GDP margin where countries will have the most trouble resisting temptation.
  • the main explanation for the absence of US moral hazard is that the right precedent was set in 1841, when the federal government let eight states and the Territory of Florida default.
  • Ever since 1841, the market requires that US states running up questionable levels of debt pay an interest-rate premium to compensate for the default risk.
  • Had the ECB operated from the outset under a rule prohibiting it from accepting SGP-noncompliant countries’ debt as collateral, the entire eurozone sovereign-debt problem might have been avoided.
  • the expansion in the US took place at the federal level, where spending today amounts to 24% of GDP, compared to just 1.2% of GDP for the European Union budget.
  • The version of Eurobonds that might work as the missing long-term enforcement mechanism is almost the reverse of the Germans’ ERF proposal: the “blue bonds” proposed two years ago by Jacques Delpla and Jakob von Weizsäcker. Under this plan, only debt issued by national authorities below the 60%-of-GDP threshold could receive eurozone backing and seniority. When a country issued debt above the threshold, the resulting “red bonds” would lose this status.
  • The point is that the enforcement mechanism would be truly automatic: market interest rates would provide the discipline that bureaucrats in Brussels cannot.
  • Of course, the eurozone cannot establish a blue-bond regime without first solving the problems of debt overhang and troubled banks. Otherwise, the plan itself would be destabilizing, because almost all countries would immediately be in the red.
  • But one thing seems clear. German taxpayers, whose longstanding suspicion of profligate Mediterranean euro members has been vindicated, will not be happy when asked to pay still more for the cause of European integration. At a minimum, they will need some credible reason to believe that 20 years of false assurances have come to an end – that this is the last bailout.
Gene Ellis

What if the Secret to Success Is Failure? - NYTimes.com - 0 views

www.nytimes.com/...ret-to-success-is-failure.html

Duckworth

shared by Gene Ellis on 15 Jan 14 - No Cached
  • In the winter of 2005, Randolph read “Learned Optimism,” a book by Martin Seligman, a psychology professor at the University of Pennsylvania who helped establish the Positive Psychology movement.
  • Seligman and Peterson consulted works from Aristotle to Confucius, from the Upanishads to the Torah, from the Boy Scout Handbook to profiles of Pokémon characters, and they settled on 24 character strengths common to all cultures and eras. The list included some we think of as traditional noble traits, like bravery, citizenship, fairness, wisdom and integrity; others that veer into the emotional realm, like love, humor, zest and appreciation of beauty; and still others that are more concerned with day-to-day human interactions: social intelligence (the ability to recognize interpersonal dynamics and adapt quickly to different social situations), kindness, self-regulation, gratitude.
  • Six years after that first meeting, Levin and Randolph are trying to put this conception of character into action in their schools. In the process, they have found themselves wrestling with questions that have long confounded not just educators but anyone trying to nurture a thriving child or simply live a good life. What is good character? Is it really something that can be taught in a formal way, in the classroom, or is it the responsibility of the family, something that is inculcated gradually over years of experience? Which qualities matter most for a child trying to negotiate his way to a successful and autonomous adulthood? And are the answers to those questions the same in Harlem and in Riverdale?
  • ...13 more annotations...
  • According to a report that KIPP issued last spring, only 33 percent of students who graduated from a KIPP middle school 10 or more years ago have graduated from a four-year college.
  • As Levin watched the progress of those KIPP alumni, he noticed something curious: the students who persisted in college were not necessarily the ones who had excelled academically at KIPP; they were the ones with exceptional character strengths, like optimism and persistence and social intelligence. They were the ones who were able to recover from a bad grade and resolve to do better next time; to bounce back from a fight with their parents; to resist the urge to go out to the movies and stay home and study instead; to persuade professors to give them extra help after class.
  • “The thing that I think is great about the character-strength approach,” he told me, “is it is fundamentally devoid of value judgment.”
  • Duckworth’s early research showed that measures of self-control can be a more reliable predictor of students’ grade-point averages than their I.Q.’s.
  • People who accomplished great things, she noticed, often combined a passion for a single mission with an unswerving dedication to achieve that mission, whatever the obstacles and however long it might take. She decided she needed to name this quality, and she chose the word “grit.”
  • Last winter, Riverdale students in the fifth and sixth grades took the 24-indicator survey, and their teachers rated them as well. The results were discussed by teachers and administrators, but they weren’t shared with students or parents, and they certainly weren’t labeled a “report card.”
  • Back at Riverdale, though, the idea of a character report card made Randolph nervous. “I have a philosophical issue with quantifying character,” he explained to me one afternoon. “With my school’s specific population, at least, as soon as you set up something like a report card, you’re going to have a bunch of people doing test prep for it. I don’t want to come up with a metric around character that could then be gamed. I would hate it if that’s where we ended up.”
  • She and her team of researchers gave middle-school students at Riverdale and KIPP a variety of psychological and I.Q. tests. They found that at both schools, I.Q. was the better predictor of scores on statewide achievement tests, but measures of self-control were more reliable indicators of report-card grades.
  • The CARE program falls firmly on the “moral character” side of the divide, while the seven strengths that Randolph and Levin have chosen for their schools lean much more heavily toward performance character: while they do have a moral component, strengths like zest, optimism, social intelligence and curiosity aren’t particularly heroic; they make you think of Steve Jobs or Bill Clinton more than the Rev. Martin Luther King Jr. or Gandhi.
  • The topic for the assembly was heroes, and a half-dozen students stood up in front of their classmates — about 350 kids, in all — and each made a brief presentation about a particular hero he or she had chosen:
  • I came to Witter’s class to observe something that Levin was calling “dual-purpose instruction,” the practice of deliberately working explicit talk about character strengths into every lesson.
  • It is a central paradox of contemporary parenting, in fact: we have an acute, almost biological impulse to provide for our children, to give them everything they want and need, to protect them from dangers and discomforts both large and small. And yet we all know — on some level, at least — that what kids need more than anything is a little hardship: some challenge, some deprivation that they can overcome, even if just to prove to themselves that they can.
  • The idea of building grit and building self-control is that you get that through failure,” Randolph explained. “And in most highly academic environments in the United States, no one fails anything.”
Gene Ellis

A Greek Morality Tale by Joseph E. Stiglitz - Project Syndicate - 0 views

www.project-syndicate.org/...-by-joseph-e--stiglitz-2015-02

shared by Gene Ellis on 15 Feb 15 - No Cached
  • In fact, creditors arguably are more responsible: typically, they are sophisticated financial institutions, whereas borrowers frequently are far less attuned to market vicissitudes and the risks associated with different contractual arrangements. Indeed, we know that US banks actually preyed on their borrowers, taking advantage of their lack of financial sophistication.
  • Every (advanced) country has realized that making capitalism work requires giving individuals a fresh start.
  • There is a fear that if Greece is allowed to restructure its debt, it will simply get itself into trouble again, as will others.
  • ...3 more annotations...
  • This is sheer nonsense. Does anyone in their right mind think that any country would willingly put itself through what Greece has gone through, just to get a free ride from its creditors? If there is a moral hazard, it is on the part of the lenders – especially in the private sector – who have been bailed out repeatedly.
  • If Europe has allowed these debts to move from the private sector to the public sector – a well-established pattern over the past half-century – it is Europe, not Greece, that should bear the consequences.
  • What makes Greece’s problems more difficult to address is the structure of the eurozone: monetary union implies that member states cannot devalue their way out of trouble, yet the modicum of European solidarity that must accompany this loss of policy flexibility simply is not there.
  • Gene Ellis on 15 Feb 15
     
    an excellent counterpoint to de Grauwe on this issue... both have good points
Gene Ellis

Euro crisis based on 'design flaws' in monetary union, conference told - 0 views

www.thescore.ie/r-banking-union-634618-Oct2012

euro crisis based design union conference

shared by Gene Ellis on 14 Oct 12 - No Cached
  • Euro crisis based on ‘design flaws’ in monetary union, conference told
  • The European Central Bank’s current status, where it does not act as a ‘lender of last resort’ in a similar method to other central banks, was particularly criticised.
  • He said the current version of the treaty establishing the ESM, the new permanent bailout fund for the eurozone, would also not function as such a lender – and said it was “incapable of ending the crisis”.
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  • “What I am proposing is a guaranteed yet conditional [lender of last resort] which can reconcile moral hazard concerns with the need to protect sovereign borrowers from the kind of solvency issues we have witnessed since the onset of the economic crisis,” he said
  • McDonnell also called for a full banking union within the eurozone, saying a deposit insurance corporation should be established to fill this gap.
Gene Ellis

Happy 2013? | vox - 0 views

www.voxeu.org/happy-2013

shared by Gene Ellis on 26 Jan 13 - No Cached
  • Hopefully the following ten observations are less controversial in 2013 than in previous years.
  • As long known by elementary textbook readers, austerity policies have contractionary effects.
  • Debt reduction is a very long process; we're talking about decades,
  • ...20 more annotations...
  • The debt-to-GDP ratio is best reduced through sustained nominal GDP growth.
  • Besides, having been there, no one really wants to unleash inflation anymore. That leaves us with real GDP growth as a necessary condition for bringing the debt-to-GDP down painlessly.
  • But in today’s world voters are angry at everything that is called Europe and will not back a fiscal union.
  • The crisis has delivered a surprising degree of wage flexibility and labour mobility.
  • This means that the need for dissolving the euro back into national currencies at almost any cost has evaporated.
  • Sustained real growth should be the number one priority.
  • In most Eurozone countries, structural reforms are as needed now as they were before the crisis.
  • Banks are at the heart of a diabolic loop: bank holdings of their national public debts (Brunnermeier et al., 2011).
  • Massive forbearance has allowed many banks to not fully account for the losses that they incurred in 2007-8.
  • For that reason, they deleverage, which leads to a credit crunch, which slows growth down.
  • The ECB is the lender of last resort both to banks and to governments.
  • This involves massive moral hazard.
  • The long-hoped-for awakening of the ECB has produced several miracles, especially a major relaxation of market anguish.
  • Austerity policies must stop, now.
  • Growth will not return unless bank lending is adequately available.
  • The ECB may act as lender in last resort to banks and governments, but who will bear the residual costs?
  • The only remaining option is public debt restructuring, a purging of the legacy.
  • This will lead to bank failures. This means that debt reductions must be deep enough to make it possible for governments to then borrow, to shift to expansionary fiscal policies and to bail out the banks that they destroyed in the first place, in effect undoing the diabolic loop.
  • Who will lend? Even the best-crafted bank restructuring will not allow an immediate recovery of market access. The ECB is the only institution in the world that can help out.
  • There is no easy option for the Eurozone after three years of deep mismanagement. Governments will not accept drastic action unless forced to. This means that we need another round of crisis worsening.
  • Gene Ellis on 26 Jan 13
     
    Good article by Wyplosz on ten observations and five consequences of Euro policy. 4 Jan 2013
Gene Ellis

Merkel's good politics and bad economics - FT.com - 0 views

www.ft.com/...ed-11e1-a6c2-00144feabdc0.html

shared by Gene Ellis on 06 Sep 12 - No Cached
  • the ECB gears up to go full throttle into a business that, according to its statutes, is verboten: buying the debt of member states.
  • Of course, Mr Draghi mumbles about conditionality: cheap cash only in exchange for deficit-slashing and market reforms. Sure. And when Mr Monti and Mariano Rajoy, Spanish prime minister, instead bend to the wishes of their electorates, what then? Will Mr Draghi stop buying and let their bonds go through the floor? Of course not. You do not have to be a central banker to predict the obvious: no market pressure, no reform.
  • The ECB is about to turn into a money machine, into a lender of last resort, and damn the treaties that mandate an inflation-fighting commitment to “price stability”. The magic phrase now is “capping bond yields”, meaning the ECB buys up the debt of Italy and others in order to depress their borrowing costs.
  • ...4 more annotations...
  • Look beyond the debt crisis and take the longer view. European growth has been slowing for 40 years. During this period its share of global gross domestic product has shrunk by 10 percentage points; that of the US has held steady.
  • Otmar Issing, the ECB’s former chief economist, recalls how, before 1981, “the Italian Treasury set yields for government debt. All the bonds that couldn’t be sold at that price had to be bought up by the Banca d’Italia.” Hence easy money, exploding debt, double-digit inflation – and no change in the country’s frozen politics. Why reform when you can always devalue?
  • After the fall of the Berlin Wall, chancellor Helmut Kohl offered the D-Mark to President François Mitterrand in exchange for French acceptance of German reunification. This noble gesture of self-containment was not, of course, an entirely selfless act. As part of a hard-headed bargain in return for giving up the symbol of German economic primacy, Europe’s monetary and fiscal policy would be “Germanised”.
  • Mr Weidmann is right to fear the moral hazard contemplated by the ECB and its lackadaisical allies from Madrid to Berlin.
Gene Ellis

Worried Banks Pose Obstacle to Forming Financial Union - NYTimes.com - 0 views

www.nytimes.com/...-push-for-financial-union.html

banks pose obstacle union nytimes nytimes com com

shared by Gene Ellis on 18 Jun 12 - No Cached
  • French loans to Spanish banks plunged 34 percent in the fourth quarter of 2011 compared with the previous quarter, according to the latest data from the Bank for International Settlements.
  • For Italian banks, French bankers cut their exposure by 16 percent. German banks have also been increasingly wary of their Italian and Spanish peers, reducing lending to them by about 19 percent last year
  • In the last six months, as fears about Spain and Greece have intensified, Spanish and Italian banks have been by far the biggest users of the European Central Bank’s program of cut-rate, three-year loans to banks that cannot find money elsewhere.
  • ...4 more annotations...
  • But instead of funneling that money back into the Spanish and Greek economies as loans to cash-starved businesses and individuals, these banks have become the primary buyers of their governments’ bonds.
  • Most delicate will be whether the Spanish banks receiving the largest cash injections, like the nationalized mortgage giant Bankia, will be forced to impose losses on holders of their subordinated bonds. Those are the investors whose bonds are not backed by collateral and are thus considered more risky.
  • In Spain, though, the problem is that 62 percent of the holders of Bankia’s subordinated debt are Spanish individual investors, not overseas hedge funds and investment banks. It is not likely that Madrid will be willing to hit those citizens with a 65 percent loss — the loans are currently priced at about 35 cents on the dollar — at a time of 25 percent unemployment in the country.
  • “There are compelling reasons for the euro zone to insist on losses for subordinated and even senior bondholders, the least of which is a reduction in moral hazard,” said Adam Lerrick, an expert on banking and sovereign debt at the American Enterprise Institute. “Losses for bondholders is now euro zone policy, so Europe’s credibility is also at stake.”
  • Gene Ellis on 18 Jun 12
     
    Good article on bank behavior
Gene Ellis

Why Is Zambia So Poor? And Will Things Ever Get Better? - 0 views

www.psmag.com/...zation-mining-corruption-66080

Zambia Why so poor?

shared by Gene Ellis on 09 Jan 14 - No Cached
  • Sixty-four percent of the population lives on less than $1 per day, 14 percent have HIV, 40 percent don’t have access to clean drinking water. Almost 90 percent of women in rural areas cannot read or write. Name a category—schools, health care, environment—and I’ll give you statistics that will depress the shit out of you.
  • For more than 150 years, the only reason to come to Kitwe—to Zambia, really—was the copper.
  • Most of the buildings in Kitwe, the roads, the health clinics, the schools, were built by the national mining company
  • ...25 more annotations...
  • At its peak, the Zambia Consolidated Copper Mines company employed more than 65,000 Zambians and carried out services like water delivery and waste collection for five cities in the Copper Belt Province.
  • Mining employment has dropped to just 30,000, half of its glory-days peak, and the job of maintaining all that company housing and infrastructure has reverted back to the government.
  • The stats identify Switzerland as Zambia’s primary export market. This is not an indicator that Zambia hosts a thriving chocolate and suspenders sector, but rather that its copper trades are booked in the jurisdiction where they are least likely to be taxed.
  • Many of the mining companies pay just 0.6 percent royalties to Zambia, far below the already-meager industry standard of three percent.
  • And then there’s the Chinese. They arrived like a well-packed picnic, everything in shipping crates ready to be unpacked. Their own materials, their own equipment, their own workers, their own fences. If you were designing a foreign investment not to benefit the host community, this is what it would look like.
  • This is Namwile Uzondile, the director of a rural health education project.
  • Last year Namwile conducted a survey of prostitutes here in Kitwe, and found that at least half of them had education certificates, but couldn’t find work. Most had been married off early, 15 or 16, and since then had either left their husbands or lost them to AIDS.
  • First, you go to the tribal chief. Ninety-four percent of the land in Zambia is customary or traditional, no one has a title to it. It’s not just sitting there, people are living on it, farming, grazing animals, it’s just technically under the control of a chief.
  • In Zambia most of the chiefs require a gift just to get a meeting. This might mean taking them lunch at a restaurant in Lusaka, or it could mean buying their daughter a car—it’s up to them.
  • Another reason Zambia lacks skills is that some parts of the workforce operate as cartels. Take lawyers. Zambia only has 1,000 of them, and they’re concentrated where the money is: Lusaka (government), Copper Belt (mining) and Livingstone (safari tourists).
  • Last year, only six lawyers were admitted to the bar out of 164 who took the exam. The year before that, it was 16 out of 145. Keep in mind, these aren’t people coming in off the streets. These are people who have a law degree.
  • More than 60 percent of Zambia’s government revenue comes from the copper mines.
  • Taxing all this informal activity would be costly in both resources and voter goodwill. In 2012, Zambia collected just $2.3 million in income taxes from its citizens.
  • It goes as high up as you want to follow it. Michael Sata, the president of Zambia, appointed his uncle the finance minister, his nephew the deputy finance minister, his niece the local government minister, and cousins as ambassador to Japan and chief justice.
  • Zambia’s cabinet has ballooned to 20 ministers and 47 deputy ministers, the largest in Africa. With salaries three to four times higher than opposition MPs and each ministerial post bundled with perks like a company car, free fuel, house servants, and mobile phone talk-time, you get the feeling politicians aren’t jumping from opposition into government on moral sentiment alone.
  • But even if Zambia was run by a coalition of charitable technocrats and Mormon philanthropists, that wouldn’t solve the most fundamental problem of all: There simply isn’t that much money to go around.
  • In 2011, Zambia spent a total of $4.3 billion running itself. Stretch that to cover every man, woman, and child, and it amounts to just $325 per person per year. That amount—less than a dollar per person per day—has to cover education, health care, infrastructure, law enforcement, foreign debt … everything.
  • Now she goes all NGO. “Little government capacity,” she says, is the nicest way to put it. “There are simply no systems for routine government services,” she says. Getting a license, a permit, certificates, approvals to start work, visas for expats to fly down here—nothing is in one place, nothing is fast or easy.
  • And that’s just the bureaucracy. Then there are the cops that pull you over to ask for 50 kwacha ($10); the schools with slots reserved for paying parents; the hospitals that swear the earliest appointment, the only available medicine, is six months away until you reach into your pocket.
  • “Sometimes we have to pay for the inspectors to come to our mines,” Jane says.
  • The conversation goes like this: Jane tells the local certification body that she needs an inspector to sign off for a permit. The local certification body tells her that they would be happy to come out to the site, but they don’t have fuel for their cars, or enough petty cash to pay per diems. Jane offers to pay their costs, but only their costs, and the payments aren’t related to clearing the inspection.
  • The company has even paid the police to follow up on complaints or to investigate thefts. “They say, ‘We don’t have this in our budget’ or ‘We’ll need you to pay for it,’” Jane says. So the company fixes the police cars, covers their travel expenses, treats them to lunch.
  • “We tell them, ‘The company I work for, we’re not going to pay up.’ But at the end of the day, they know you’re on a short timeline, and they aren’t.”
  • Thomas’ family told him his nephews didn’t need to be in school. From their perspective, that’s not totally irrational. In a country with so few formal jobs and so much competition for getting them, I can see how spending hundreds of hours, thousands of kwachas, on education would seem superfluous. Thomas’ daughter wants to become a lawyer. You could almost forgive Thomas if he told her that the bar exam failure rate is more than 90 percent, so what’s the use?
  • International investors pledged $750 million last year to build infrastructure.
Gene Ellis

Syriza and the French indemnity of 1871-73 | Michael Pettis' CHINA FINANCIAL MARKETS - 0 views

blog.mpettis.com/...he-french-indemnity-of-1871-73

shared by Gene Ellis on 06 Feb 15 - No Cached
  • Fundamental to the argument that Spain (or Greece, or anyone else) has a moral obligation to repay in full its debt to Germany are two assumptions. The first assumption is that “Spain” borrowed the money from “Germany”, and that there is a collective obligation on the part of Spain to repay the German collective. The second assumption is that Spain had a choice in what it could do with the German money that poured into the country, and so it must be held responsible for its having mis-used hard-earned german funds.
  • There was plenty of irresponsible behavior in every country, and it is absurd to think that if German and Spanish banks were pouring nearly unlimited amounts of money into countries at extremely low or even negative real interest rates, especially once these initial inflows had set off stock market and real estate booms, that there was any chance that these countries would not respond in the way every country in history, including Germany in the 1870s and in the 1920s, had responded under similar conditions.
  • The winners have been banks, owners of assets, and business owners, mainly in Germany, whose profits were much higher during the last decade than they could possibly have been otherwise
  • ...3 more annotations...
  •  Second, it is the responsibility of the leading centrist parties to recognize the options explicitly. If they do not, extremist parties either of the right or the left will take control of the debate, and convert what is a conflict between different economic sectors into a nationalist conflict or a class conflict. If the former win, it will spell the end of the grand European experiment.
  • First, as long as Spain suffers from its current debt burden, it does not matter how intelligently and forcefully it implements economic reforms. It will not be able to grow out of its debt burden and must choose between two paths
  • Most currency and sovereign debt crises in modern history ultimately represent a conflict over how the costs are to be assigned among two different groups
  • Gene Ellis on 06 Feb 15
     
    Highly recommended!
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