Fixed Point

Over at the DT, Pritchard gets it bang on:

It is not remotely a fiscal union. There will be no joint debt issuance, no EU treasury, no shared budgets, and no fiscal transfers to regions in trouble. “The agreement hard-wires pro-cyclical fiscal austerity into the institutional framework of the eurozone, with no quid quo pro to move gradually to debt mutualisation.” said Simon Tilford from the Centre for European Reform

And furthermore:

This is not at root a debt crisis. By endorsing fiscal fetishism, EU leaders are silently colluding in the Neo-Calvinist illusion that budget excess caused the debacle. They know this to be untrue. Ireland ran surpluses for years, reducing its public debt to 12pc of GDP at one stage (Germany is 82pc). Spain ran a surplus of 2pc of GDP. Italy has long had a primary surplus.

It is a trade and capital flow crisis, a regional variant of the US-China imbalance. The damage was hidden during the boom by cheap German, Dutch, and French capital — and cheap Asian and Mid-East capital rotated through London banks — flowing into southern Europe. It was cruelly exposed as soon as creditors shut off credit.

 The German’s have created a myth of Wagnerian proportions, and turned it into another act in their morality play against profligate spenders, whether it be the US or Southern Europe. There is abolutely NO hope of a resolution until either:

1. Germany inflates
2. Counter-cyclical fiscal transfers are introduced to offset the effectively different exchange rates between regions of Europe i.e. debt mutualisation as mentioned above

I might add that even this will do nothing to solve the structural and competitive problems at the micro levels, especially in countries like Italy who simply haven’t grown in a generation.

Read the whole thing

Economic recovery is doomed because consumers,

 are cutting back, paying off the credit cards, and buying less.

Yet the solution apprently is not further QE, or fiscal expansion but,

 to increase real household income is by letting people keep more of what they earn

Sp presumably they can pay down more debt…???

I asky myself why give this women’s economic views the oxygen of publicity, but then again, on this blog that is hardly a worry )

I converted to Apple products nearly 20 years ago at University when working in the student union. They weren’t my first computer by any means – I was part of that generation of BBC/Spectrum users and I went to a school that was enlightened enough to start teaching me BASIC when I was 11. That was 1981. But an Apple was the first computer I paid serious money for when, during my MBA year, my secondhand Panasonic “laptop” the size of a trolley-dolley case, sporting windows 3.1 on an orange screen finally bust.

Me and a friend went that weekend to get new computers and instinctively we went to the Apple reseller (no Apple store in those days) and bought little grey powerbooks. At the time my finance professor was an Apple nut – all his finance notes had been published on Apple hardware and software, and at a time when APPL was trading around $20, he thought they’d be a buy at just under that. That was about two years before Steve Jobs returned to the company.

The rise of Apple’s shares then has been meteoric and well documented, and in the midst of the outpouring of grief for Steve Jobs, it got me thinking about other great CEOs, especially Jack Welch of GE, who also presided over a period of stellar share price growth and was often feted as the “CEO’s CEO”.

Some important contrasts/similarities between the two:

1. Welch seemed very much old school CEO: Bottom line focused; obsessive about shareholder value (or he was then); presiding over ‘old’ industries and employing a seemingly archaic corporate structure that nevertheless worked.
2. Jobs stressed intuition and as far as finances go, he seemed to employ a “build it, and they will come” mentality.
3. Suits & Wall Street vs Turtlenecks and California.
4. Something of a cult following amongst the two companies. With Apple, despite Jobs’ charisma, I think it really was more bound up in the products. With GE it had more to do with Jack Welch (it is hard to get excited about vehicle finance or gas turbines, I admit).
5. A simple philosophy with Apple that is difficult to discredit, if only because it’s simultaneously vague and obvious. Of course we should all make great products, at a great price, that make us happy. That philosophy can live long after Jobs, and even if it isn’t as successful a company in the future, it will be hard to pin that on a failure of the existing philosophy (interestingly, I think Apple had that philosophy from the start and it clearly did change under Sculley…)
6. Jack Welch, on the other hand ended up renouncing the shareholder value philosophy that guided him during his tenure.

I doubt Apple lacked strict capital budgeting techniques but I bet they followed the philosophy; they weren’t the philosophy itself. This is precisely what I take from the above incomplete list: the need to define goals and objectives in terms of customer experience, access and then work backwards to whatever metrics are appropriate.

But isn’t that obvious?

Like probably hundreds of thousands of people yesterday, I watched a short video of Steve Jobs’ commencement speech st Stanford University in 2005.

What struck me was not really what he said – after all commencement speeches pretty much follow a typical pattern: be true to your heats; don’t compromise goals trust your gut; family is important etc. etc. In that sense Jobs’ words weren’t that original yet, nearly 20 years after graduating and hearing a similar message myself, i was hooked.

Why? Well, like with Apple’s products, it was not so much the content of the device but its appealing intuition, apparent customisation (“it does what I want it to do!”), personalisation (to wit stories from his personal life to underscore a point) and accessibility (he’s the guy that wears jeans to major corporate events and used to be a hippy).

Is that philosophy a recipe for business success, or is mere consistency of your philosophy with the corporate philosophy (even if that happens to be “evil”) what matters?

Great review from Bob Solow. Best line:

I remember thinking that, if Hayek were right, I should live to see Norway and the Netherlands at least halfway to tyranny. It seemed implausible then and it seems embarrassing today.

So in a few years, when we’ve sunk further into this mess, will the rentiers, with cheeky glint in their eye, tongue in cheek and a nod & a wink to Krugman, proclaim that we didn’t try austerity hard enough?

Given the fumes some convervatives have been sniffing over the last few years, I wouldn’t rule it out.

Why didn’t anyone see fit to fire a gun on the moon and film it. It strikes me that though the physics may have been understood well enough to render such an experiment completely useless, it nevertheless would have made for cool footage.

A small canon would have been even better. Would the canon ball have escaped the Moon’s pull just enough to start orbiting it?

Originality, said Goethe, is not advancing what is new, but saying something as though it had never been said before. By that standard, Tim Harford’s “Adapt” is highly original, and a departure for the Undercover Economist. In this ambitious work he has moved away from the cutesy popularization of economics towards Big Ideas. And the big, if not entirely novel idea here, is that the solutions to our problems are not be found by top-down planning, but by harnessing the power of experimentation. Continue reading →