July, 2011

29 Jul

Economists and Financialists

By Walter | 1 comment

1

Economics: “A social science concerned chiefly with description and analysis of the production, distribution and consumption of goods and services.”

Finance: “The science or study of the management of funds.”

Since every step in the production, distribution and consumption of goods and services involves the management of funds, the two sciences have become inseparably intertwined. This is unfortunate because the conflation of economics and finance only serves to obscure the ways in which the management of funds has taken precedence over the actual production and distribution of goods and services, to devastating effect. It would be useful to maintain a distinction between the two sciences. Call those students of the production and distribution of goods and services economists, and call those focused on the management of funds financialists. If you do, what becomes immediately evident is

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22 Jul

Beware of 4-page Agreements

By Walter

This past Tuesday, President Obama got all excited about the possibility of ending the budget/debt deadlock in Washington as the result of a four-page “Bipartisan Plan to Reduce Our Nation’s Deficit” prepared by a bipartisan gang of six senators. That same day the Dow Jones Industrial Average rose 202 points or 1.6 percent. Yesterday the leadership of the European Union announced in a four-page memorandum that an agreement had been reached on how to avoid a EU-threatening default by Greece. Accordingly, stock markets all across Europe rose in jubilation, with the most troubled countries feeling the greatest sense of relief: Portugal, 2.8%; Spain, 3.1%; Italy, 3.5%; and Greece, 3.9%. Germany, the country that will bear most of the burden of Greece’s bailout, not so much: 0.9%. In expressing sympathetic enthusiasm, on that same day the DJIA rose another 152 points, or 1.2%. However, such optimism, on both sides of the Atlantic, is unjustified, as will become clear as soon as the devilish details are revealed.

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21 Jul

Oh, the Drama!

By Walter

Could it possibly get any more exciting? The world’s two largest economic powers, the United States and the European Union, both on the brink of disaster. At the same time. And for the same underlying reasons. At the center of the drama is a concept called ‘default,’ generally defined as a failure to meet a financial obligation. In Europe, Greece is in imminent danger of defaulting on its debts, an event, if allowed to take place, is predicted to bring down the European Union and bring an end to the euro. In the United States, the government is in danger of defaulting on its debts, an event that would weaken the value of the dollar and tarnish the fiscal reputation of the United States as the world’s number one financial superpower and just might cause the collapse of the entire global financial system.

When individuals default on their financial obligations, the consequences can be dire. If you are one of the millions

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14 Jul

Tick-Tock

By Walter

Yes, time is running out. So says Timothy Geitner, US Treasury Secretary. Time is running out for efforts to save this country’s credit rating. Time is also running out for Greece, Ireland, Portugal, Spain, and now Italy. Time is running out for the European Union, and the entire global financial system. Question: Have you heard of any efforts to prepare for the time when and if time actually does run out? If so, please forward details. Meanwhile, may I be so bold as to suggest

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13 Jul

Behind Closed Doors

By Walter

What’s going on behind those closed White House doors when the President meets with Congressional leaders in an attempt to negotiate an agreement on the national budget and the debt ceiling? Obama says they will be meeting every day until they finish their job, but so far the reports emanating from those meetings indicate that no progress is being made. Today they met for two hours and reported “no progress.” So what did these people say to one another during those two hours? Here’s a suggestion:

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