i agree to a certain extent, at least for businesses... there will always be a need to have borrowing and that is healthy for the economy. it is also somewhat okay for private citizens to borrow, provided that the lenders aren't being predatory and that debtors aren't biting off more than they can chew. again, notwithstanding personal calamities, that ought to work fairly well. and in an economy where a person (meaning a working person) has as much market confidence as our businesses are demanding for themselves, one should be able to determine how much debt-load and therefore risk they can take on. the banks were supposed to be able to help in determining that, and used to be quite good at it back in my early days of home-buying. a lot of those rules went out the window.
that the financial industry - actually the entire FIRE sector - had gotten fat was due to the increased spending habits of workers and the retired. add to that an enormous cost for healthcare (coming and going, meaning the insurance policy and the medical bills), it was a recipe for disaster. off-shoring jobs, de-regulating sectors, university system taking on every applicant with govt loans, blah-blah-blah. now we are, in the western world, full of aging people. that's not a cheap adventure.
so, yeah, had average workers not gone into so much debt, the FIRE sector would not have gotten so fat so soon and would have had no better way to rape the public except to privatize social security... which they tried and failed, so lo-and-behold, instead they were given the keys to the credit factory. and a ticker-tape parade for the Dow Jones.
look, we wanted clean air. so instead of figuring out how to do that, or even still, take losses for that, companies went where the govts don't give a fuck about ecology. but the public got drunk on cheap goods too, long before the credit bust. how nice that this worked out well, since we are accessories to the crime of off-shoring.
i don't pretend that we are not in this with blood on our own hands. should the keystone pipeline be built through the USA? you and i know that this is BS and that much of that oil and gas will be sold elsewhere. we also know the enviromental risks involved. but the alternative is not going to be free energy or safe nuclear power just around the corner. meanwhile, i guess it's okay to fuck up other people's landscape in order to drive some fat-ass to the McDee's drive-thru in his or her escalade.
leon, you give the average person more credit than they deserve in making rational decisions all the while you blast them for being idiotic.
we simply cannot force people to be practical and wise much less force them to be free or force them to be perfectly regulated. we have all made choices which are now in play, for better or worse. in another 10-15 years, as cycles go in economies, people will forget and all this will again be another repeat. i realize each time it happens, this repeat gets somewhat worse. at what point do people learn? they can't without strict regulations upon private individuals, more so than upon business practices. no regulations at all makes this world a complete wild-west, so that's not good either. so far, no happy medium is acceptable either.
people are opportunistic. even the lazy ones.
red _________________ just cos things are fucked up doesn't mean it isn't progress...
"They have invested in the markets via dividend-paying stocks. Obviously, they trust their blue stocks and for the most part, those have performed relatively decently and what losses happened in 2008 have somewhat corrected, nevertheless, their shares still pay the nice divs. "
This is an assumption, but is it right, or was it all an illusion?
If offered a choice between 100 today or 100 in one year and there is a positive real interest rate throughout the year ceteris paribus, a rational person will choose 100 today. This is described by economists as time preference. Time preference can be measured by auctioning off a risk free security - like a US Treasury bill. If a 100 note, payable in one year, sells for 80, then the present value of 100 one year in the future is 80. This is because money can be put in a bank account or any other (safe) investment that will return interest in the future."
THEY ARE ACTUALLY IMPLYING WHEN REAL INTEREST RATE IS NEGATIVE (INFLATION > RISK-FREE INTEREST RATE) THEN PEOPLE WILL NOT PREFER MONEY TODAY VS. NEXT YEAR.
IT IS THE OPPOSITE, in an inflationary environment (inflation > risk-free interest rate = negative real interest rate) people will prefer money today rather than next year, and in a deflationary environment it does not matter or money next year will be better.
The formula for Present Value of capital as it is presented here is nonsense.
Last edited by Rom on Wed Feb 01, 2012 4:26 am; edited 3 times in total
Joined: 22 Aug 2008 Posts: 1046 Location: 3d-rate nation
Posted: Tue Jan 31, 2012 2:11 pm Post subject:
"we simply cannot force people to be practical and wise much less force them to be free or force them to be perfectly regulated"
We don't have to. All we really have to do is simply have a critical mass in the society of people capable of critical thinking - may be 15 - 20% of the population. People who won't fall for idiotic ideas of single-commodity backed currency or balanced budget of the Federal Government.
It is not really that hard to understand the fallacy of the present unfair monetary system that gives arbitrary advantages to certain private institutions (mostly banks) at the expense of the rest of the population.
It is not much harder to see the real solutions rather than fall for the propagandized idiocy of "Sound money" or "Balanced Budget" especially for Americans - all they have to do is to study their own recnt history.
When we (or Chinese or Russians) will be back on fair real-production value based money system, a lot of stuff would fall into place, no need for micromanaging.
Joined: 22 Aug 2008 Posts: 1046 Location: 3d-rate nation
Posted: Wed Feb 01, 2012 2:08 pm Post subject:
Putin’s Technological Industrialization
Vladimir Putin has outlined his economic strategy in a recently published article which essentially focuses on technological industrialization. Political scientist Igor Panarin believes the policy objective fits into Putin’s overall New Ideology.
In the article below, Panarin explains his view.
Vladimir Putin’s third article outlining his electoral agenda appeared in Vedomosti daily this week and focused entirely on economics. The article was timely, coming as it did against the background of continuing gloom in the West, which faces the social implications of a global economic downturn. This was vividly illustrated when Belgian trade unions greeted an EU summit in Brussels by holding a general strike to protest at the bloc’s austerity policies, and Occupy protesters burnt an American flag in Oakland, California.
Unlike Mr. Putin’s previous two pieces, his economic agenda has not drawn widespread criticism from either the opposition parties in parliament or the non-system or “street” opposition represented by the Bolotnaya Square protest in Moscow last December.
Putin’s economic policy statement starts with a scathing evaluation of Russia’s economic performance in its first post-Soviet decade in the 1990s. In what I see as Putin’s most stigmatizing assessment of Russia’s early democratic period published to date, the prime minister essentially argues that the national economy was de-industrialized in the 1990s, and denounces the initial privatization process as unfair, citing ethics and moral standards.
Although Russia has managed to regain its economic power and reinstate itself as the world’s sixth largest economy in the first decade of the 21st Century, this was predominantly thanks to its soaring commodity exports such as oil and gas, metals, timber, etc. According to Putin, now is the time to devise an efficient mechanism for upgrading the national economy by launching a New Industrialization plan based on sophisticated technologies.
Mr. Putin’s strategic economic objective, therefore, is administering an innovative technological breakthrough that would propel Russia into the so-called Sixth Technological Cycle alongside the world’s most advanced economies.
Putin’s economic policy outline proposes raising the necessary funds to finance a technological industrialization effort by developing Russia’s domestic market, making it attractive for direct investment. I regard this as a highly expedient idea, considering that the past year was marked with Russia’s significant progress with regard to establishing a Customs Union and a free trade area with some of its CIS partners, and the overall trend for fostering a Common Economic Space in line with the fundamental logic of Eurasian integration.
“Russia has been consistent and committed to establishing a common market with its neighboring states – a market where goods and services would travel unimpeded by any barriers or incoherent regulation. A large market formed within a Common Economic Space would make each of our respective economies more competitive,” Putin argues.
The New Technological Industrialization objective requires a “diffusion of innovations” to be enabled with regard to the Russian economy. The presidential candidate proposes employing the late Soviet Union’s formidable scientific legacy to that end, primarily its fundamental science and the remaining research and development and pilot-production facilities. That is evidently a difficult task, however, as Soviet expertise is largely inapplicable for purposes of a groundbreaking technological upgrade.
I happen to have authored a thesis on the process of introducing innovations in national economies. The USSR’s major economic weakness was exactly the fact that it tended to embrace and apply far fewer innovations than Western economies. The school of scientific research focusing on innovation emerged in Russia some 15 years later compared to advanced market economies. In the late 1980s, Soviet analysts came to the same conclusion as their Western counterparts, namely that innovation was not solely driven by economic incentives, but also by a combination of social and psychological factors including personal motivation, etc.
What makes Mr. Putin’s strategic economic objective even more challenging is the fact that Russia’s modern-day economy is even less disposed toward innovation than the USSR used to be. The disparity in innovation between Russia and the world’s most advanced economic powers has not declined, but rather increased in the past two decades. The prime minister reasonably points to the inertia displayed by Russia’s big industries in his article, citing their reluctance to introduce innovation in their line of business. Russia’s big businesses keep using the outdated Soviet industrial facilities until they crumble, rather than upgrade production with a view to prospective development. The nation also lacks well-managed and efficiently marketed innovative research that would produce Russian-made intellectual property.
Vladimir Putin believes it is up to Russia’s universities and scientific think-tanks to act as the driving force for innovative development. To that end, the prime minister reasons, government-provided as well as private funding for these institutions should be fundamentally increased. While this notion is hardly debatable, there remains a more challenging question: Who shall take care of motivation? Whose responsibility shall it be to channel the creative energy and involvement of the Russian middle-class, currently fixated on political protest, toward innovative development?
Regrettably, Mr. Putin leaves this question unaddressed in his present strategy outline. He does introduce some benchmarks for upgrading the national economy, however, such as increasing Russia’s hi-tech exports twofold by 2020, and expanding the share of cutting-edge industries in Russia’s GDP 1.5 times within the same timeframe.
This ambitious task requires a crucial adjustment of the government’s media policies. Russia’s mainstream airtime and popular media images remain dominated by entertainment, celebrities and pop culture rather than innovative industrialists and research scientists. Unless the trend changes in public perception, the motivation for Russia’s industrial and technical upgrade will remain elusive.
It is crucial, therefore, that research and engineering jobs should be comprehensively promoted and popularized in Russia. This is what the Kremlin’s political consultants should be primarily tasked with. Making Russia’s system of education more competitive is another task that deserves to be promoted as a national policy objective. Finally, a new, innovation-friendly corporate and industrial environment professed by Mr. Putin requires a profound adjustment of the government’s media policies.
A New Technological Industrialization is a golden opportunity for Russia. It would provide a fighting chance for Russia’s innovative scientists and industrialists, as well as for the patriotically-minded business community that was not involved in the unfair privatization of state industries in the 1990s. Moreover, the Russian economy stands far greater chances of success this time compared to the early 2000s.
As the world finds itself fundamentally reshaped and reclassified by the oncoming advent of the Sixth Technological Cycle, an innovative Technological Industrialization is Russia’s only sure bet for assuming its due competitive position in the world of tomorrow.
Prof. Igor Panarin, Doctor of Political Sciences, special to RT
There seems to be no solution that is going to come about any time soon.
We have probably come to the end of the bailouts but I was thinking.
The FSA has probably made the Financial industry who deal with the public extra careful with what they promise the customer and one area they have probably brought in is to warn the customer that investments may go up and they may go down and you may end up with less than you put in.
I notice that even those offering to deal with peoples debt have to warn of fees and no guarantee of a benefit.
So what warnings are given between companies of equal standing [the public are not of equal standing] - is there a disclaimers or similar warning given akin to what they have to give to the public.
For instance, what was the formal warning given with these subprime mortgages. On the other hand were promises made about them to make them more attractive?
The FSA seem to have tightened up the system when dealing with the public but has anything similar regulation drifted over to the real speculators.
You can almost hear the judge reading out such a warning to an individual shareholder if they complained of a bad investment.
Wouldn't have been music to our ears had anything been used, like this, when they came begging for a bailout.
Tough with the public - tough with the speculators.
It's too late now but will they have the nerve to come begging for another bailout? Is this why QE has taken over?
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