I have lived in Ireland for ten years. I would have lived for the rest of my life if things hadn’t gone wrong and I hadn’t been forced to go back home and as I say “back to the old thing” 

In those years, I learnt few things that I didn’t know about Ireland, although, I had been there for brief holidays when I was living in the UK, but those were brief holidays and these won’t tell us much about a country, except for monuments to see and breathtaking landscape.

GOOD TRAITS OF IRELAND

It is a most beautiful land and nobody can deny this. 

Its people are truly friendly to the extend of being the land of welcomes. 

Its Celtic origin gives them a charm and makes them different from other countries in the Continent.

Whoever thinks that they look like the British, they are wrong or they don’t know much about the Irish as they don’t have much in common with those. In fact, they are very similar to the Spaniards, because and according to Dublin born historian Ian Gibson (now settled in Spain) the Irish were a bunch of Spaniards left on an isle in the ocean (his phrase)

Even when one may be a truly urban person, as I am one, can feel very well and very carefree wandering about its stunning spots. I seldom missed the “joys” of urban living while I was there.

Bantry House, home of the annual festival of Chamber Music.  

It is really a place apart.

BAD TRAITS OF IRELAND

As we say all has good and bad traits and nothing or nobody is perfect.

If it is a most beautiful country, but it is also quite a backward one.

With the Celtic Tiger, that is, Ireland’s economic boom, many people forgot their past as a poor country and set themselves to live a new rich lifestyle, purchasing big houses with even bigger mortgages, celebrating posh and expensive weddings in luxurious hotels and going to New York City for shopping just before Christmas, etc., etc. In fact, it’s been quite the same in Spain.

I was amazed and perhaps annoyed to read that out of the 3000 primary schools in the country, only 200 are State controlled ones. The rest are under the ever-lasting rule of the Catholic Church. It doesn’t make sense at this time and age.

Abortion is forbidden when in fact hundreds of Irish women travel to the UK every year to have one, to the extend that they call it “the abortion ferry”. this shows the also ever-lasting double standards taught by the Church. 

They had an economic boom, right. As I toured in the country quite a bit, I always think that they could have used this good economic situation to improve roads and public transport as it doesn’t make sense that to go from Cork (second city of the country) to Dublin (the capital of the State) on a bus, it takes nearly four hours when it’s only 298 kilometres. 

Drinking in public at Easter or Christmas isn’t allowed, but one can get blink drunk in the privacy of its own home or in a room hotel. This also shows double standards. 

Now it seems they are having a referendum on the so called financial pact of the EU. Some will say NO, but it seems that the majority will say YES, because they fear that if they oppose this pact, they won’t get any more funds from EU in case they need to be rescued again. 

They were very much in favour of EU membership, because according to their  former President this sets them apart from their neighbours and I understand. They embraced the Euro, saying good bye to their currency. Now that things are bad, or worse than bad, they wish to leave. 

I am not against Ireland, because I have lived there and I really love it, but it doesn’t mean that I’m going to see only one side of the photograph, in the same way that Spain has also bad traits and if there’s someone to point out at them and strongly criticize them, it will be me!

Only in Madrid police reported that there were about 45 000 protesters, while organizers claimed that at least a hundred thousand people.

Police disperse thousands of protesters on the streets of Madrid

Several tens of thousands of people in eight cities across Spain gathered on Saturday to protest the poor economic situation in the country. Police reported that only in Madrid there were about 45 000 protesters, while organizers claimed that number is much bigger, around a hundred thousand people. Indignados movement, which is responsible for the protests in Spain and elsewhere in the world, was launched a year ago, so this year’s protest are in some kind marking the first anniversary.

During the demonstration pretesters was shouting slogans: “They say that it is democracy, but it is not.” and the streets of Madrid were blocked as the protesters went to the Puerto de Sol square which they planned to take, but after midnight, police managed to chase them. The protest was guarded by about two thousand policemen.

Indignados Movement was formed as a reaction or riot due to the economic crisis in that country. Remember, the youth unemployment to 25 years in Spain amounts to fifty percent, the highest rate in the eurozone.

Smaller protests were reported in London, Lisbon, Frankfurt and Tel Aviv.

Was scientism – understood as the scientific demand for rigor and intolerance of ambiguity and uncertainty – the ultimate cause of the economic crash of 2008? Nassim Nicholas Taleb, an “essayist and mathematical trader,” certainly thinks so. Reacting to an essay proposing that the deficiencies of mainstream neoclassical economics that is the theoretical scaffold of the market be supplied by complexity science so that future economic crashes could be averted or at least mitigated, Taleb largely absolved economists and finance practitioners of being guilty, if at all, of scientism (because of their greater tolerance for “ambiguity and uncertainty”) that he leveled at the mathematical adepts of the natural sciences who, in union with more contrite members of the finance community, were behind the essay and its proposal.

How Taleb could possibly maintain such an assertion escapes comprehension. Mainstream, neoclassical economics that is the theoretical basis for the market is constitutionally intolerant of ambiguity and uncertainty. As ecological economist, Charles Perrings (1987: 139-140), writes in connection with environmental uncertainty:

“[T]he greater the uncertainty, the greater the temptation to discount the future more heavily. The more the future is discounted, the fewer the effects that are relevant to the optimization problem and the fewer the data that will be sought in its solution. …”

“The market solution represents an approach to the uncertainty of an evolutionary system that ultimately depends on flexibility of response, and the ability to rewrite the programs [i.e. algorithms] of production that are in part the cause of the uncertainty. That is, after all, what the market is supposed to be good at. But there is a certain irony in this, given that the decision-making models underpinning the approach assume an omnicompetence on the part of the decision maker that makes no allowance for uncertainty. The result is that such models have to be restricted to what has been termed here the environmental short period. They have to exclude surprise. They must be myopic, ignoring the fact that myopic behavior is a magnet for unexpected effects.”

To discounting the future, with the end of expunging uncertainty and ambiguity, must be added ignoring hysteretic effects from the past exemplified by the financial instrument of derivatives in which  “a transaction can make money based on how it interacted with the other transactions it referenced directly, while having no relationship to the real events on the ground that all the transactions are ultimately rooted in” (Lanier 2011). In other words, derivatives only consider the immediate, local past, not the comprehensive, global past and therefore ignore hysteretic or cumulative effects of distortion in the transmission of information. This is in keeping with and indeed the ultimate logical conclusion, with reference to the past, of the research program of neoclassical economics to treat the economic process, not as an evolutionary process, but as a mechanical process not sensitive to initial conditions in which, therefore, where the present is situated in time is irrelevant.

This fundamental analytic simplification and liberty taken by neoclassical economics of essentially treating the economic process as transpiring in dynamical or mechanical time rather than in chronological or historical time in order to achieve the status of a reductive science of reproducible phenomena (along with other such intentional mutilations of reality listed by the essay to which Taleb is reacting to) show in no uncertain terms that, if anyone is intolerant of ambiguity and uncertainty, it is the neoclassical economist. Further, the correctives to these assumptions that complexity science recommends and which was also listed by the essay to which Taleb is reacting to shows clearly that complexity science is more comfortable with (surprise, surprise) the complexities (and therefore, ambiguities and uncertainties) of the real world than the neoclassical economist. Representative examples of these correctives follow below.

The neoclassical economic penchant for modeling “real economies with millions of participants and thousands of goods” with models of “two traders and two goods (or similar simplifications)” should be abandoned because “the qualitative features of real economies cannot be correctly captured by such simple models.” Instead, those qualitative features can only be captured by models of corresponding size and complexity not amenable to pencil-and-paper analytic operations favored by the neoclassicals but only through computer modeling.

Heterogeneity, not uniformity, prevails in the real world. Neoclassical economics should acknowledge that real-world “participants” are liable to have “very incomplete knowledge of markets.” Further, there is heterogeneity in what the various economic players know and therefore corresponding differences in their strategies that moreover “persistently co-evolve and change as the market, partially engendered by those changing strategies, itself changes.” Risk assessment in financial instruments is rendered problematic by these heterogeneous conditions.  Such conditions defy modeling by the pencil-and-paper operations of neoclassical economics. They rather invite “new techniques” from complexity science capable of modeling them through the power of the computer.

Time scales, especially as concerns cash-to-cash cycles, should be recognized as process-specific. [Thus logging, agriculture, manufacturing, finance, and government have different cash-to-cash cycles. To subordinate everything to the cash-to-cash cycle of finance and thus strongly couple those cash-to-cash cycles, as has been done in the Anglo-Saxon economies,] is liable to cause “instabilities.”

The functioning of complex systems, such as economies, displays different phases “analogous to the different phases of matter: solid, liquid, and gas.” Paying attention to these different functional phases is important because “some” are “more hospitable to us than others.” Further,  phase transitions “can be abrupt and disruptive.” It is therefore advisable that “[r]egulators of economic systems” vigilantly follow indicators of “proximity to phase transitions” so that they may accordingly “act to avoid them.”

Novelty, leading to genuine innovations and diversity in the economy, it should be acknowledged, are not amenable to reliable prediction, if at all. Accordingly, the best one can do to is to make the “economy more or less hospitable to them” [rather than pretending omniscience by contracting one’s time horizon of consideration to the foreseeable future].

References:

Brown, Mike; Kauffman, Stuart; Palmrose, Zoe-Vonna; Smolin, Lee. 2008. “Can Science Help Solve The Economic Crisis?” http://www.edge.org/3rd_culture/brown08/brown08_index.html

Lanier, Jaron. 2011. “Cumulative Error.” http://www.edge.org/q2011/q11_5.html#lanier

Perrings, Charles. 1987. Economy and Environment: A Theoretical Essay on the

Interdependence of Economic and Environmental Systems. Cambridge: Cambridge University Press

Is it possible to scientifically manage the economy so that it avoids another economic crash if it is to be understood by science that what is meant is a reductive enterprise capable of approximately repeatable experiments? Physicist and quantitative analyst, Emanuel Derman, answers: “No.”

For experiments “to be approximately repeatable”, the systems or processes that are the objects of inquiry must not observe historical or chronological time – with the implication that they must be weakly coupled to the rest of the universe. Economies, however, Derman points out, are anything but ahistorical. As he elaborates: “History is important in economics, and in human behavior in general. You cannot replicate the initial conditions over and over again, as you can with a coin flip. Credit markets tomorrow won’t behave like credit markets last year because we have learned what happened last year, and you cannot get back to the initial conditions of a year ago. Human beings and societies learn [would that this were so, given repeated human folly]; physical systems by and large don’t.”

So what does Derman propose to do about economic crashes? His advice is engineering or social engineering. He advices this because, as Derman points out, it is possible to do good engineering even when denied extensive theoretical, foundational knowledge afforded by science. This one can do by simply achieving a good understanding of empirical  relations in the system or process. Accordingly, by achieving a good understanding of empirical relations in the economy, Derman’s implication is that we might mitigate the incidence of economic crashes by appropriately engineering the economy.

A problem with Derman’s proposal, however, is that engineering, as with reductive science, also excludes historical time in the treatment of systems. As Derman instructs us, engineering concerns itself with building “almost-isolated universes (usually called machines) …” Derman would therefore have us treat the economy as weakly coupled to the rest of the universe and therefore, as per the distinctions he himself makes, as an ahistorical system capable of reproducible or mechanical behavior.

This exclusion of the historical dimension in the economy, however, is the crux of the problem. What, after all, is historical time but a chronology of qualitative transformations in the relations of a system or process with itself and with its environment? It is precisely because economists and practitioners insist on treating the economic process as a mechanical, “isolated, self-contained, ahistorical process – a circular flow between production and consumption with no outlets and no inlets …” that “neither induces any qualitative change nor is affected by the qualitative change of the environment [both, natural and social] into which it is anchored” (Georgescu-Roegen 1971: 1-2) that we visit upon ourselves punishing qualitative transformations in living conditions for the simple reason that there are simply more ways for things to go wrong than to go right.

By contrast, if we admitted corrective instruction from historical time into the economic process through the selective effects upon economic dynamics of “macro-level sustainability and ethico-social boundary constraints” (Velasco 2011: 80) – in exact analogy with measurement or selective processes in physics in which the ahistorical character of physical law is broken – we would gain protection from entry into the vast preponderance of conditions corresponding to punishing states. Nor would the admission of historical time into the economic process mean that the economic process could not be treated scientifically. All it means is that reductive science and engineering are not what is indicated with the management of the economic process. What is indicated is non-reductive science: complexity science (Barrow 1991: 124-125; 140-141).

References:

Derman, Emanuel. 2008. “Response to ‘Can Science Help Solve the Economic Crisis?’ ” 23 October.

http://www.edge.org/3rd_culture/brown08/brown08_index.html

(Barrow, John D. 1991. Theories of Everything: The Quest for Ultimate Explanation. London: Vintage, 1992; Georgescu-Roegen, Nicholas. 1971. The Entropy Law and the Economic Process. Cambridge, Massachusetts: Harvard University Press; Velasco, Horacio. 2011. “Nurturing Life: From Economic Dynamics to Economic Semiotics.” Environmental Philosophy, Spring 2011, Volume 8, no. 1, pp. 63-82)

The introduction of some critics to bad business failures in power   by misapplication of risk controls for bad debts, a guarantee of debt insurance and fraud, large financial institutions in the U.S. and other countries around the world face a credit crisis and a slowdown in economic activity. The effects quickly promoted and distributed ranged from a global shock resulting in a number of European bank failures and the decline in various in-dices, along with many reductions in fair value of stock and raw materials held. The sub prime mortgage crisis reached a critical stage in the first week in September 2008, presented by the contracted sharply on liquidity in global credit markets and insolvency threats to investment banks and other institutions. Observed by a critical analysis of the position with regard to the order of the Federal Reserve Bank began to raise the required level of about $ 10 million in early September 2008, just after the Democratic and Republican national conventions, and just before the stock market crash and the presidential debates.
Involvement of accounting for the financial crisis. Because of the global financial crisis, there was a major influence on the participation of the accounting and refer to the economy in world trade, there was no shortage of resources to measure the strength of the current position of Financial Institutions.

Negative connotations of the International Accounting Standards Board Accounting and Financial Accounting Standards Board (FASB) today announced further steps in response to the global financial crisis following their joint board meeting held in London on 23 and 24 March, 2009. These principles have helped establish the original form of financial statements. In the old format of the strategy of balanced sheet, there was no place to reflect economic events such as inflation / deflation, growth equity, currency fluctuations, interest rates and low mortgage   questions, but in the current strategy of reform, changes have sufficient on the basis of the involvement of accounting has been so many riots revolutionary. With reference to the global financial crisis, the IASB has been accepted in 2001 and is part of the establishment of standards by the International Accounting Standards Committee (IASC) Foundation and self-regulation of the private sector, non-profit.

IASB is firmly in the church, in the public interest, a single set of high quality, global accounting standards that provide transparent high quality glass and similar in order in the general purpose financial statements. With regard to the objective, the IASB approach wide public consultation, and seek cooperation of national agencies and intercontinental worldwide. Members come from nine countries and 14 has a range of professional experiences. They are appointed by and responsible to the Board of IASC Foundation, who are required to choose the best combination of technical expertise and diversity of international business and marketing experience. Since 1973, the U.S. Financial Accounting Standards Board, the selected organization in the private sector for establishing standards of financial accounting and reporting. The rules for the handling of financial information and is recognized as an authority empowered by the Securities and Exchange Commission and the American Institute of Certified Public Accountants.

These standards are important resources for operational cost reduction goals for the simple reason that investors, creditors, auditors and others rely on credible financial information, transparent and comparable. Structuring of work in progress, the two boards agreed to work together as soon as the common standards that deal with off-balance sheet activity and accounting for financial instruments. They will also work to analyze the accounting for loan losses in the financial instruments project. In addition, the municipalities have agreed to issue proposals to replace its standards on financial instruments with respective common standard for months and not years. As part of this project the boards will review the accounting for losses on loans, including models and expected losses. The meetings will continue to rely on the expertise offered by the financial crisis of the Advisory Group (FCAG), a high level advisory body formed to guide the boards in their joint response to the financial crisis. Composition of FCAG includes current and former investors, regulators, central bankers, finance ministers and others in the industry and the private sector.

Source: http://www.shvoong.com/business-management/management/1883273-accounting-implication-global-financial-crisis/#ixzz1ih476j3Z

Death of a Fruit Vendor Ignites a Chain of Public Protests across the Globe

On January 4, Mohammed Bouazizi, a 26 year old fruit vendor in Sidid Bouzid , a small town of Tunisia who had tried to self immolate himself  on December 17 earlier, died of his burn injuries. His death ignited wide spread public protests in Tunisia against the corruption ridden governance and finally led to the fleeing of its President, Zine El Abidine Ben Ali 10 days later. The success of public protests in Tunisia, fuelled and often coordinated by social media, inspired similar protests in Egypt soon thereafter, leading to a cascading chain of similar protests not only in the Middle East, but across the globe, including Europe, India, China, United States and Russia.

Bouazizi used to earn around $3-4 every day by selling fruits, an activity which was frowned upon by the Municipality officials. On Dec 17, 2010 as he brought fruits for trading with a debt, his fruits and his electronic scale was confiscated by Municipality staff, led by 46 year old Inspector, Ms Faida Hamdi, who slapped and abused him on the site. Bouazizi then went to the Municipal office to request the return of his goods, but was pushed back from the gates by the guards who mocked and laughed at him. Unable to take his frustration and insults, Bouazizi douzed himself with gasoline and immolated himself. He was admitted to a nearby Hospital where he succumbed on January 4.

Bouazizi’s self immolation had aroused local protests, and his story had been posted on the internet. His plight was already making rounds in the social media when he died. It was his death that suddenly triggered protests across Tunisia, largely from participation of unemployed youth, comprising nearly one-fourth of the working age poluation. Fuelled by the shock waves that spread with his funeral, mobs swelled and people, frustrated with corruption and poor governance, began to direct their ire against the dictatorial president Ben Ali, who fled soon thereafter, paving the way for democracy in Tunisia. Soon, the success of public protests proved to be highly contagious in a world, where large masses of people were fed up with a lot of things, across all political boundaries.

The public protests that followed made 2011 an year of protests. Biggest public triumph came in Egypt, where people fought a non-violent war with President Hosni Mobarak and won. Soon protests swelled across the Middle East and beyond, affecting places as far and wide as Europe, India and China. While protests outside the Middle East may not directly be a result of what happened in Tunisia, there was no doubt a great element of inspiration that they gathered from protests elsewhere.  

2011 was marked by hardships for the common man, as the long term impacts of past financial stress began to take their toll. 2011 began with busting of many asset bubbles, a sense of crisis, unemployment and rising food inflation. Unresponsiveness of dictatorships made them the target of people’s frustration setting up the stage where pent up anger was just waiting to find a target. What started with the self immolation and death of Mohammed Bouazizi actually became a showcase of public power in the age of social media sharing, making everyone to sit and take note.

Rulers across the world will fear the people’s power from here on and that may be greatest change brought about by Mohammed Bouazizi’s untimely and tragic death. The Times magazine named ‘the protestor’ the person of the year in 2011. Its editorial stated,

“Mr Bouazizi takes his place with other figures whose willingness to see through the charade of oppressive rule elevated them beyond the drudgeries and petty humiliations of commonplace existence.”

Event  # 2

Return of Muslim Brotherhood in the Middle East

More than seven decades after its creation, Muslim Brotherhood acquired the centre stage of Middle East political map after the public protests deposed some of the veteran dictators, while others were shaken and stirred into adopting a more tolerant stand. To many, this may be the real turning point of our history, and what happens next will be keenly watched by many observers.

Muslim Brotherhood is a highly fluid network spread across the world in different forms, formal and informal, that work with a common motive of restoring the status of Islamic community in global politics through all possible means. Its creation in 1928 by Islamic scholar, Hassan Al Banna,  was largely a response to the dissolution of Ottoman Empire in the First World War, that caused heartburn among the global Islamic community and dented their pride, leading to a reactionary pan-Islamic aspiration for dominance. Its motto says, “God is our objective; the Quran is our constitution, the Prophet is our leader; Jihad is our way; and death for the sake of God is the highest of our aspirations.” Its main objectives are introduction of the Islamic Sharia as “the basis controlling the affairs of state and society;” and unification of “Islamic countries and states, mainly among the Arab states, and liberating them from foreign imperialism”. In many ways, it is synonymous with pan-Islamism.

After the Second World War,  the Brotherhood was largely contained by the dictators of Middle East. It was banned and faced severe repression in Egypt after its failed coup in 1954 and has not been allowed to exist openly since then. From the 1980s onwards, it shunned violence and adopted a liberal attitude, often seeking the democratic route to its resurrection. Many feel that it played a very important role in public protests, not only in Egypt, but everywhere else in the Middle East. Some view its adoption of democratic card as a tool to gain acceptability among masses and make use of public anger against the dictatorial regimes. After deposing Mobarak, it has openly held to an alliance with the Military, reminding one of its similar alliance with Nationalist Military Officers in overthrowing Egypt’s monarchy in 1952 and its subsequent opposition to the secularist constitution, just prior to its failed coup and repression.

Muslim Brotherhood is also the biggest beneficiary from the events of 2011, throughout the Middle East, including Tunisia where it has already forced a return to Sharia as the state law. In Jordan, it has adopted a hostile stand and is in a state where it can bargain with the King. In Bahrain, Syria, Palestine, Kuwait and Oman too, it has strengthened its position.  How the future of a Middle East governed by Muslim Brotherhood unfolds, is for time to tell and world to watch. It can either go the way of Sudan, which has been ruled by Muslim Brotherhood proxies for a long time, or it may result in its modernisation and moderation, which will be the best news for people in a long time.

Whatever may happen, it is bound to be a different world henceforth.

Event # 3  

Greece Triggers Euro Crisis, Sends Shivers across Global Economy

The month of May saw angry Greek protestors running riots in the streets, vehemently rejecting the austerity measures proposed by the government to tackle its debt crisis. The Greek debt had risen to unsustainable proportions leading to speculation about possible defaults. S&P downgraded its credit rating to CCC, the lowest in the world. Along with similar concerns in Ireland and Portugal, it raised question marks over the financial stability of Eurozone itself. As European Union was unable to commit its resources to the vulnerable states in time, and the public protests grabbed more and more attention, the shivers sent stock markets crashing across the globe in one of the worst falls since 2008.

The European crisis resulted from two factors. The first was the rupture of the global asset bubble in 2007-08, resulting largely from investments from trade surplus nations, the Oil exporting countries and China. The second was the monetary union which was divorced from the fiscal policy, thereby preventing Eurozone countries from printing money and devaluing its currency, which could have countered their burgeoning trade deficits. By the end of the year, there were signs of another massive bail out, involving European Financial Stabilisation Mechanism, the European Financial Stability Facility, and the International Monetary Fund, but the crisis is far from over and its outcome will shape the world in future.  More importantly, both the underlying causes still remain and can spoil the scene in coming months and years.

However, in a world that is becoming more and more used to crises, especially of financial nature, what brings this event in this list, is its political aspects. Some Economists are already suggesting that affected countries may be allowed to return to their currencies and even default on their debts. The crisis has seriously undermined European unification plans, with many people in countries like Germany and Britain questioning the wisdom behind it. The prospect of citizens of these countries having to bear the cost of mess in other countries will not auger well for the stability of Eurozone. Worse, proposals like European Financial Transaction Tax, whose economic logic is highly doubtful, can worsen the situation by alienating certain countries even further.

Four years back, Euro was seen as an alternative to the monopoly of the dollar. Today, in spite of the crushing impact of four years of financial mess in United States, it is the Euro which is struggling to survive.

2012 may decide its fate.

Event # 4

The Unthinkable: S&P Downgrades US Credit Rating

A few decades from now, August 5 might be remembered as the Black Friday in the economic history of the United States. The global history, could however, have a different description for it, depending upon who is in the writer’s seat at that point of time. The unthinkable, that happened that day, was downgrading of US sovereign debt by Standard and Poors, one of the three top credit rating agencies. It was an appropriate climax after the week long political drama wherein the White House and the Congress were locked in an ugly stalemate over the reduction of fiscal borrowing and cutting of expenses.

Many argue that for all practical purposes, it was an inconsequential event. Similar downgrades in case of Australia, Canada and Japan had made little difference to their fortunes. It is true that heavens are unlikely to fall if one of the three As are removed from credit rating of US. In any case, all the three agencies had been talking about it since April, and to be fair enough, skies actually did not fall after the downgrading.

Yet, the event is a game-changer because it signals the onset of what had virtually become inevitable at least half a decade ago. The massive trade deficit, approaching a trillion dollars p.a., had become unsustainable long back, and was sustained only in the hope that the main creditors, notably China and oil exporting countries, were bound to lose as much if they ever tried to pull the rung under the feet of US economy. What August 5 demonstrated that you do not need them at all to do such a thing. The increasing unsustainability has not only become too prolonged and too obvious to trivialize, its insurmountable economic impacts are already there for all to see.

Fifty years from now, US credit downgrading will be remembered as the first formal sign of an end of a golden era of economic  growth in the United States. It is not the downgrade that matters, it is what it signals that will change the world in just a few decades to come.

Events # 5

China Lambasts US after Downgrading

Within hours of the S&P downgrade, China came out with its first attack on the US economic policies, a move that is significant from the point of view of changing Chinese assertiveness viz a viz the United States, and indicates a paradigm shift in Chinese stand. It signals China’s newfound confidence with which it is ready to assert itself and challenge the United States in its struggle for global ascendancy.

Xinhua , the official Chinese news agency wrote that China had “every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets. International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country.”

For over a decade now, United States has been trying its best to pressurise China into freeing its currency from the fixed exchange rate that is has maintained in spite of massive trade surpluses and an unprecedented foreign exchange reserve. Economists tell us that it is impossible to have a fixed exchange rate, capital mobility and monetary autonomy.  China has defied this principle in real life by adopting complex capital control policies that allows free capital inflows , relatively free remissions but very strict control over outflows of indigenous capital coupled with an undervalued currency that ensure huge trade surplus. What is more important, though, is that with its deft diplomatic handling of US policy of engagement, it has been able to successfully prevent any fall out of its clever currency manipulations, for almost a decade.

Since the seventies when the Nixon-Kissinger initiatives, often termed as the ‘policy of engagement’ allowed it to get away with its stubborn policies in a way not even the best of US allies could hope to get away with. Since the beginning of the last decade, as its economy finally began to function in full gear, it hardened its stand over the exchange rate probably after realizing that any compromise then would allow its advantages to fizzle out, just as it happened with Japan in the 1980s. The Japanese Yen which was at 240 to a dollar on September 22, 1985, on the day of Plaza Accord, appreciated to 200 yen to a dollar by the year end and further to a level of 155 yen/dollar by August, 1986. US Government tried the same tactics with China, but China withstood all its pressure tactics. Ten years hence, United States has lost the sting in its economic tale, and China knows its time is just round the corner.

Chinese call for a new reserve currency of the world was hardly taken seriously by Western analysts. The next couple of years may well force them to change their opinion. That day, they will understand the significance of Chinese statement on August 6.

Event # 6

Anti Wall Street Protests Shake the Global Capitalist Empire

Ten years back, if somebody had wondered whether capitalism will survive, people would have laughed at him. They might have laughed him off on September 17 too, when led by Canadian based Adbusters Foundation, a thousand Americans gathered in Zuccotti Park to march towards Wall Street for a peaceful occupation against the injustices caused by the modern economic order. However, within a few weeks it was clear that it is not a matter that can be laughed away.  Over the period of next few weeks, the movement became widespread across the developed world, with the popular slogan of “We are the ninety nine percent”.

By October 5, the number of protesters had swelled to over 15000. On October 15, tens of thousands of protesters were swarming through 900 cities across the world. The protests targeted London Stock Exchange, Times Square in New York city, European Central Bank in Frankfurt and Switzerland’s financial hub in Zurich. There were also protests in Tokyo, Sidney, Hong Kong, Taipei, Hamburg, Madrid, Paris and Sao Polo. By October 29, over 2000 cities were witness to the largest ever public show of dissatisfaction with unbridled market freedom – the very pillar on which whole capitalist ideology is based. 

Mikhael Gorbachyov, compared it with Perestroika and the dissolution of Soviet Union, but it will be too premature to write an obituary of capitalism as yet. What may have happened however, is that the halo around the market has been broken. One hopes that from here on, markets will be treated just like markets – nothing more and nothing less. One also hopes that removing that almost religious veil around them will allow analysts to understand the pros and cons of market more objectively, make allowance for their failures and plan for them in advance. Lastly, one hopes that economists around the world will finally understand and appreciate that very basic difference between a consumer market and asset market, and realise that asset markets, governed by expectations are always prone to failures and always do so in a cyclical manner, that in a world of surplus production, asset bubbles will always happen the moment public memory of earlier bubble and bust begins to fade, and that with time, asset markets will govern our economy far more than the consumer markets.

One hopes that the wake up call given by the protests will bring revolutions in economics, finance and management rather than the politics of the world.

Event # 7

Osama Killing in Pakistan Blows the Lid off a Generation of Lies & Deceit

On May 2, 2011, a joint covert operation by US marines and Central Intelligence Agency, in a small town of Abbottabad in Pakistan ended in the killing of world’s most wanted fugitive, Osama Bin Laden. The event should have been a signal for the return of peace, particularly in the subcontinent. Instead, it had only made the situation more unstable, volatile and unpredictable. Maybe after a few decades, someone would ask as to whether it might have been better to leave the poor assassin in his hole, retired as he was, instead of blowing the hornets’ nest with all its consequences.

It has been an open secret for over two decades that Pakistan has become the terrorism capital of the world, aided by a complex interplay of forces, both internal and external, that thrived by its status and made the best of it for their own narrow interests. Ever since Osama disappeared from the bombed sites of Afghanistan, there has always been speculation that Osama had found shelter in Pakistan.  In an extremely complex set of loyalties and massive double agent-ships or even multiple agent-ships, it is impossible to say who knew all that and who did not. From Islamabad to Kabul to Saudi Arabia to Washington, nobody may ever know as to who was doing what. Most scaring, probably, is the apprehension that even the people who were protecting or targeting him, had no idea on whose side they might have been working for. It is equally difficult to say whether Osama was found by his killers, or sacrificed by those who promised to protect him, and with whose knowledge, or without it.

The killing of Osama became an event worth this list, not because it will close the Al Qaida chapter, but because it bring to fore all the lies and deceits that were always part and parcel of the United States – Pakistan alliance, and not necessarily from one side. It was by and large the turning point in their relationship that perhaps both have been anticipating to happen any moment. Several subsequent events, like the memogate and the NATO attack that killed 24 Pakistani soldiers are only a manifestation of what had become inevitable with Osama’s killing in Pakistan. From here on, diplomatic relations may soon be mended, but the blind alliance that once existed is unlikely to get resurrected in near future. The events of the last two decades only confirm the theory that Pak-Afghan corridor has always been one of the most stubborn ones to be subjugated, throughout the history of mankind.

History may just repeat itself. If it does, repercussions are likely to be felt far and wide.

Event # 8

Saudi Arabia Grants Women the Right to Vote

In a speech broadcasted on television on September 15, King Abdullah, the absolute monarch of Saudi Arabia, granted women a right to vote in the next municipal elections, which are scheduled in 2015. The event may not be of any importance directly to the world, or even to the women of Saudi Arabia, who must travel with a male sponsor called “mahram”, must always be segregated from males other than family and do not yet have a right to drive.

Still, it is an event worth recording for posterity, as it happened in the centre of Wahaabi fundamentalism, and was announced by the only person in this world who has the power to control it. Ever since the discovery of gas in the deserts of Arabia and the steady flow of petrodollars there from, the Islamic ideologies are interpreted and dictated around the world, through a Salaafi-Wahaabi prism that is intolerant to every other version of Islam. King Abdulla’s insulation from it is derived from the historical bond that his family shares with Wahaabi ideologues since 1744, when his ancestor Mohammad Bin Saud made a pact with Mohammad Ibn Abd-Al Wahaab, the founder of Wahaabism, whereby they promised that Saud’s family will hold political power, while Wahaab’s family will be in-charge of religious hierarchy of Islam. Notably, that happened at a time, when even the family of Wahaab had expelled him and refused him support or sympathy, while other Muslim scholars were literally asking for his head.

If there is someone that can bring changes to the fanatic Muslim orthodoxy across the world, most of which is sponsored, supported and enforced by Wahaabi ideologism powered with petrodollars, it is the King of Saudi Arabia. With Arabic spring lurking in its background, one hopes that more good news will flow from the kingdom soon.

Who knows….. 2012 may see Saudi women driving, even if it is necessarily under supervision of a mahram. That  small step can bring about changes that the whole armed forces of NATO will never be able to dream of.

Event # 9

Durban Climate Conference Celebrates Extension of Status Quo

After two weeks of hectic negotiations that almost ended in disaster, last minute hectic negotiations saw the global community finally arrive at a deal that was considered a success, if only because it averted the disaster of total disagreement between developed and developing countries. On December 10, the conference finally concluded with three major agreements. The Kyoto Protocol, expiring in 2012, got a new lease of life, this time for five years. There was an agreement to establish a Green Climate Fund for $100 billion for aiding developing countries, and lastly, there was a general agreement to seal a new agreement by 2015 that would impose responsibilities not only on the developed world, but also the developing countries like China and India, and become implementable by 2020.

These outcomes are little more than an extension of the status quo because of the devil in the details. The differentiation of developed and developing country has again been associated with historical responsibilities and cumulative contribution to pollution. It is an issue where countries have gone back on their word earlier. United States signed the convention in 1992, but went back on its commitment later citing it undemocratic, as the legally binding targets did not include developing countries. So far as Kyoto Protocol is concerned, United States is out of it, as is Canada. Japan and Russia are against it, and emerging states like China and India are not covered by it.

Not much to cheer for then, except that they agreed to agree some other day.

One hopes that day does come in our lifetime. If that happens, we will fondly remember the crisis management of December 10 and credit those who were involved with saving the planet.

If it does not, then god save us.

Event # 10

South Sudan Finally Secedes – After Over 2 Million Casualties

On July 7, South Sudan finally broke off the union that was forced upon it in 1956. During the intervening period, all except a decade has been consumed by a never ending civil war between the North and the South. The Second Civil War, that broke out in 1983, had already consumed more than two million lives, while more than double that number were forced to take refuge. With secession and independence, probably there will be an end to killing and other human right violations that have become a norm rather than an exception during the last three decades. However, there are many signals that do not bode well. Already there are clashes between tribal fraternities, and there is a real possibility that they may become worse.

While for the rest of the world, most of the events on this list are not exactly a matter of life and death, for the people of South Sudan, it is an event which will decide their longevity and survival. If the new country is able to embark on a sensible path with certain degree of harmony and peace, it can reap very rich dividends, thanks to its rich oil wealth. On the other, if its internal strife continues to take its toll, it may deteriorate into yet another nightmare – this time even without the massacres of Arab Janjaweed.

On a more optimistic note, South Sudan’s independence may be the most promising event of the year that was 2011.

There is always a silver lining among the dark clouds!

Madoff tried to protect his family from publicity by pleading guilty, but, instead it has had the opposite effect.  Two books were written, including a memoir by his wife, entitled The End of Normal.   Ruth Madoff recounts her troubled relationship with her husband.

The loss of billions of dollars has been the main cause of the economic crisis in the United States and throughout the world and has had a devastating effect on many families, causing them to lose homes and entire life savings.  While some of the victims have been compensated for their losses, some may never be compensated.

The Ponzi scheme holds many lessons for mankind, but sadly, even the size of the losses and the untold damage to the families involved, will not turn many people away from investing their money unwisely in the future.  This has been true throughout history as people seem to be entranced with get-rich-quick schemes.

The reason for losses include failure to properly investigate the structure and method of investment, failure to investigate the parties who offer the investment, the failure to understand how the money is invested, and the failure of the investment professionals to disclose all of the risks involved in investing money with them.

Other famous money scandals over the years include the Tulip Bulb Bubble, the Tyco and WorldCom scandals and the Charles Ponzi schemes, after which the “Ponzi” scheme derived its name.   Here is the definition of a Ponzi scheme from Wikipedia:

 “A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.”

In conclusion, despite the warnings of investing in Ponzi schemes, individuals may overlook the risks in favor of the possibility of the high returns.

Bibliography

“The Lasting Shadow of Bernie Madoff,” The New York Times, 25 December 2011 <http://www.nytimes.com/2011/12/11/business/bernie-madoffs-lasting-shadow-3-years-after-his-arrest.html?pagewanted=all>

“Fink Still at Large,” Clinical Psychiatry News, 25, December 2011, <http://www.clinicalpsychiatrynews.com/views/fink-still-at-large-by-dr-paul-j-fink/blog/people-who-suffer-losses-as-a-result-of-affinity-fraud-often-struggle-with-the-psychological-ripple-effects-of-such-betrayal-what-strategies-can-we-use-to-help-victims-move-fo.html>

Farmville

In August, Adam Hamnett of Greater Manchester went on trial for robbing a blind man so he could afford to buy virtual animals on Farmville before murdering a friend who threatened to report him.  The nonsense surrounding Farmville, however, doesn’t stop there.  Take CEO Mark Pincusof Zynga, the company behind Farmville, who will ‘Pass Go’ and collect nearly $1 billion dollars in revenue at the end of this year.  Pincus is the Scrooge behind a series of shady money plays in Zynga.  Back in March, he walked away with $109 million dollars when he sold nearly 8 million shares back to the company at a rate of 40% higher than the set IPO.  Sure, entrepreneurship should be awarded, but I’m not quite sure virtual farming falls under that umbrella. 

Alec Baldwin

Baldwin’s petty circus act on American Airlines wasted fuel, cost time, hampered others’ travels, and, not to mention, was downright childish.  Lil Wayne finally got nailed with a $1.1 million dollar tax lien for dodging the IRS, as if he can’t afford a small cut.  The list goes on and on when it comes to celeb idiocy.  Why celebrities continue to get away with absurdity and still make millions a year off of pretending to be someone else on the big screen is beyond me.  Perhaps Occupy and everyone else complaining about the economy should start boycotting films and albums produced by and involving celebrities who do just as much damage to our economy as Bush did to our national reputation and Unsolved Mysteries to our trust in strangers. 

Girls Gone Wild

Sexis an old, booming industry.  Funny thing is, during bad times, it’s industries like booze and porn that flourish. Sad fact.  Estimates put the porn industry at a total value of around $10 billion dollars annually.  Big hotels like Hilton and Marriot reported last year that 50 percent of their guests purchased pay-per-view adult entertainment, totaling nearly 70 percent of in-room profits.  Sites like XTube rake in about $150,000 dollars in cuts and fees (not work- cuts and fees) monthly from amateur porn flicks.  Next take billionaire Joe Francis, godfather of Girls Gone Wild, who owes 30 million dollars in taxes and by now you should be wondering what the hell is going on.  Americans are busy whining about the economy (with 50% in the low-income bracket) and how they can’t afford basic necessities but it looks like they’ve got enough fiscal padding to afford a nightly coach-down.  Occupy the peep show maybe? 

Animal Inheritance

You’d think people would start second-guessing the way our entire world works when you read up on animal inheritance.  In 2007, billionaire Leona Helmsley left $12 million dollars to her Maltese.  Oprah Winfrey has reportedly left $30 million dollars in care to her dogs when she kicks the bucket.  Drew Barrymore willed a $3 million dollar house to her dog when it apparently saved her life in a house fire.  We have poverty and economic issues everywhere but tolerate people turning their pets into millionaires… what gives.

Comfort – Need Vs. Want

American society is litigious because people have become increasingly whiney. Why? Because comfort is an assumed right, no matter affordability or excess.  If comfort was meant to be an inalienable right the weather would have come with an HVAC system.  Comfort is fine and dandy, but wasting money on massaging mattresses, 30 minute hot showers, and big screen TVs so one can feel like a feudal overload is overkill.  Even Darth Vader didn’t have that kind of luxury on the Death Star.  Senior Magazine contributor Craig Nathanson makes a brilliant point in the difference between ‘need’ and ‘want’. 

“We need food, clothing, shelter, reliable transportation, education, enrichment, and the technology necessary to do our work. Also, we need the occasional small indulgence to treat our children and ourselves.

We do not need 500 cable TV channels, brand new luxury cars, 5,000-square-foot homes in exclusive neighborhoods, lavish ski vacations, and smart phones that do everything but think for us.”

Bad Habits

I’m a dipper, but I’ve got no sympathy for tobacco users.  Wasting money on a product that increases your chances of cancer falls under plain stupid.  According to the ACDE, more than 47 million people in the US smoke.  That’s roughly 1 in 4 people.  Yet at the same time, Americans want affordable health care for everyone.  Hard to provide affordable health care to anyone when a quarter of your population intentionally adopts bad health habits.  According to the Gallup-Healthways Index, 63% of adult Americans are overweight or obese.  Again, what makes you entitled to affordable health care if you don’t bother taking care of yourself?  Plus, if Americans can afford to indulge, economically we’re truly not hurting, now are we…  Occupy should consider moving out of Freedom Plaza and into buffets and stores that sell XXL. 

-         The situations are worsening;

-         High government borrowing

-         High inflation

-         Extra subsidy for buying electricity from the quick rental power plant

-         Electricity price increasing to cover up high price which is due to high oil price

-         Budget subsidy.

These problems are identified by the experts from the point of views they belong to. Not explaining the total situation is not complete economic analysis, as the blind man’s identifying the animal by touching a specific part.

Why and how individual people in Bangladesh have been living with such a poor income- could be the clue of the answer. This is genetically or cultural or habitual matter of fact that Bengalese people are savings prone, whatever they earn, some part of it must go for savings. That’s why if macro economic inflation could be checked country’s people would never know what a bad economy is going on overseas. Even this time, when Americans have suffered so much; we were relatively less affected. But when the inflation now increasing breaking all the records due to ill management of the government the bite seems deeper to feel the commoners.

The same could be true if the government had saved some resources of good times. For the current problem, rather crisis is due to private and public over expenditures. So, the solution lies how efficient and effectively the stakeholders could squeeze the spending horse. We all know the subsidy would be made up by two options- either selling off properties and assets, or borrowing from outside. The continuous subsidy made us all in trouble and best example USA and Greece. And rectifying this super subsidized economy would automatically creates havoc on the regular standard of living, for which people are not responsible in any way.

Tragedy is that although the country’s people suffer, corporates not affected, rather got benefits from both the businesses (Bonuses and benefits) and governments (Bailout package). Americans protested against it in such a big size, which is historically second to Vietnam War protest. For Bangladesh, though the public spending information is available somehow, but the private spending nature is difficult to identify. Though there are tools in economics to calculate it approximately, which says the public subsidy or budget subsidy and private subsidy equal to current account deficits? Meaning the current accounts deficit conforms of the amounts that private citizens lost in the way of subsidy which is saved from the surplus income. In Bangladesh’s case this subsidy is derived from the over investment to Quick rental power plant (QRPP). Government while failed to meet the continuous and uninterrupted supply of electricity allowed private investors to set up QRPP, which boosted the oil import with World market of oil prices going up and subsidy increased almost non-stopping.  At the same time the required investment to other sectors were lagging. Since the power problem will not be finishing soon, we can be sure that the other sectors will have dry investment; consequently, other industrial growth and employment will be less hopeful.

A big chunk of subsidy is going to gas and oil sectors to show them profitable, hence, the subsidy figure would be many millions more in the coming years, experts believe. Meanwhile World Bank and International Monetary Funds suggest cutting more budget subsidy and zeroing subsidy on the oil, gas and power. It means rise up prices of that items that would be boomerang and uncomfortable for the government politically.

More danger is foreign remittance flow is drying out quick which growth rate was 33% in 2008, 19% in 2009, now 2% in 2010. In 2011 it could be a little bit higher as expected but it is doubtful it would be able to cope up with the increasing import expenditure. Meaning this year’s current account subsidy would be increased again. The financial discipline that was built up in this last seven year would be in jeopardy.

This seems like irrelevant which way the expenditures are going- power, food importing or something else, but matter is whether expenditure exceeding income or not. Coat must be cut according to cloth. Obstacle is the Revenue department has done their excellent job lately increasing the revenues by collecting direct and indirect taxes. So, more increasing of income would not be possible as it is overstretched, and people are over taxed. The rest is government expenditure, how wisely it could be controlled, that is austerity measures is the ultimate panacea. Meaning cropping the ambitious big budgeted projects, resource allocation is an important element in macro economic management. Economic and fiscal policy is needed to be well synchronized and integrated.

Again government is doing it by borrowing funds from the central bank, which is more devastating and intriguing factor to inflation surge, and loan to private sector diminishing gradually, and rate of interests increased. When private businesses cannot borrow, central bank increase the money flow which means adding to inflation rate further. It’s a vicious circle scenario that Bangladesh is in.

To rectify, government is needed to take steps carefully, shunning the ambitious projects and good wills are important. Time is important and running out to wake up and act, for that political compromise and joint actions is more important than ever.

 It was first the idea of home ownership. As the mortgage crisis began to occur, the dream of owning a home seemed more and more impossible. Than the idea of being middle class has become more and more impossible. Growing up, there was not a wide expansion between upper class and lower class. If you were in between the two you were considered middle class. Being middle class was not a bad thing, as you were still able to make it financially and still be able to have sight of the American dream. As I have gotten older, that idea of the middle class has slowly depleted. People who were rich to begin with have gotten richer and hard working Americans have gotten poorer. The people who are supposed to be the backbone of our society are being used by the Upper class to make them advanced in society. It has become quite an embarrassment and exact example of the greed our country is capable of.

Somewhere along the lines of attempting our own American dream, many Americans have become obsessed with greed. It seems to have taken hold in the 1980’s, when American excess was the norm. Here, our stock markets soared and we were seen as the country of excess. Everything had to be bigger. We needed the best cars, and the best homes. We didn’t just need one home either. Oh no. We needed a vacation home and a home away from our vacation home. Just watch some of the latest reality shows to see how insane our meaning of living has gone. Do we really need four different cars to feel special about ourselves? As this idea of greed took hold of the American psyche, we lost touch of out innate human ability to treat others with respect and help those less fortunate.

The American public today does not want to help others. The news is more concerned when bad news happens, because it’s a ratings boost. What has happened to this country? Are we are so fickle and angry at ourselves that we feel the need to make others do the same. Do we really have no confidence in ourselves that we feel we have to flaunt our own self worth? It appears that as the American super power has soared, we have become victim to our own self worth. We struggle as a nation to discover that line between ultimate greed and our own pursuit of the American dream. The difference that today has is that it has become the norm to step on the poorer communities in order to achieve your own financial gain. In the fifties, this would have never happened.

We are unable to go back to the fifties and have that great American Dream ambiance. What we can do, as a nation, is include everyone in all decisions. That is hard with six million and counting individuals, but politicians need to be more open to not just helping poorer individuals but also helping to advance people from poverty. A country is only as strong as its own people are. If there becomes a larger gap between upper and lower class, than America, as a country has begun to look more like a monarchy than democracy. True, we do not have a monarch, but it begins to look that all favoritism for individuals begins to go towards upper class. This is a very difficult economy to survive in currently, and we all need to work together for the better good of the country. This country was founded for the people and by the people. It’s time the people took back this country.