Tag Archives: Global Financial Crisis

The Debt Jubilee: An Old Testament solution to a modern financial crisis?

Posted by on April 30, 2013 Comments Off

The overhang of debt in Europe and the US has made recovery from the global financial crisis particularly tenuous.

Is there a dramatic and simple way out of all this? Some argue that there is: a “debt jubilee”. Drawn from the Old Testament book of Deuteronomy, the concept derives from the biblical injunction for a day of rest one day out of every week, a “sabbath” day that reflects the teaching the God rested on the seventh day after creating the world in six.

There is another injunction for a sabbath year every seventh year, in which people are to not work and on the year after the seventh of those sabbatical years , i.e. the 50th, (one year after the 49th) there would be a jubilee year during which any slaves would be emancipated and everyone would return to their land and family to live off of natural providence. A clear implication of this teaching is that all obligations, including debt obligations, would be forgiven in the process.

The debt jubilee: an Old Testament solution to a modern financial crisis?

A debt jubilee is equivalent to democratic elections in the economy. Both represent controlled burns or controlled collapses. Since collapses will always happen in societies, the best way to handle them is regular controlled collapses. In governance that would be elections. In the economy that would be automatic debt release at timed intervals.

I cover this issue in more detail here: How to Build a Better Economic Model | 1913 Intel.

Why China Behaves So Badly

Posted by on April 20, 2013 Comments Off

This raises the question of why Beijing keeps acting this way. Doesn’t it realize that forcing Southeast Asian countries to choose between China and ASEAN is a losing battle? Isn’t its illegal occupation of Scarborough Shoal a daily reminder of China’s willingness to bully the states that claim disputed territory in the South China Sea? And how should Vietnam or the Philippines interpret Beijing’s recent decision to make incursions into Japanese-administered airspace over the Senkaku Islands for the first time in 55 years?

It was previously thought that bureaucratic politics were to blame for Chinese adventurism.

While Chinese foreign policy is undoubtedly growing more pluralistic, bureaucratic explanations are less convincing now given significant efforts to better coordinate China’s actions in its near seas. President Xi Jinping himself leads China’s new maritime policymaking body. Rogue ship captains can always create incidents and accidents, but patterns of incrementally assertive behavior would not be occurring today without top-level guidance.

More insidious explanations remain. One is that a noxious combination of economic growth, military modernization, rising nationalism, and China’s perseverance through the global financial crisis has created a sense of outsized triumphalism.

The most likely — and worrisome — explanation is that domestic priorities drive China’s foreign policies, which are therefore often formulated at the expense of strategic and diplomatic considerations. And while the implications of coercing neighbors and illegally seizing territory are not necessarily desirable, they pale in comparison to the consequences of failing to confront the regime’s existential domestic challenges: economic slowdown, energy insecurity, and the growing political instabilities associated with dead pigs floating in rivers, a potential nationwide outbreak of avian flu, terrible traffic jams, sky-high real estate prices, and unbreathable air. No wonder the Chinese Communist Party works hard to keep populist foreign-policy issues in the headlines.

China’s Victim Complex – By Ely Ratner | Foreign Policy

China is ripe for a revolution. The communist party is no longer legitimate. An aggressive foreign policy may be one of the last tricks in its bag to hold onto power.

Related articles:

Is China Ripe for a Revolution? – NYTimes.com
China academics warn of “violent revolution” if no political reform – Yahoo! News
The possibility of China facing a revolution in 2013 is pretty big
The Coming Collapse: Authoritarians in China and Russia Face an Endgame

How Russia Mismanaged the Financial Crisis | Opinion | The Moscow Times

Posted by on February 27, 2013 Comments Off

One of the least understood aspects of Russia’s economic policy is how badly the government managed the global financial crisis.

The country had the biggest fiscal stimulus of all G20 countries, of no less than 10 percent of GDP, as the budget balance swung from a surplus of 4 percent of GDP in 2008 to a deficit of 6 percent of GDP in 2009.

This was a sensible Keynesian stimulus, but the outcome was meager. Russia had the biggest output fall of all G20 countries, of no less than 7.8 percent, marking the most inefficient anti-crisis policy in the G20. The main reason was that the government bailed out inefficient state corporations and billionaires.

Bailout money was used to help the weak and ignore the strong.

What is wrong with that strategy?

Weak companies are the most mismanaged. Throwing money at these enterprises is very inefficient. It is the strong companies who are the best managed. The money should have been thrown at the strong enterprises. The weak ones should be left to die.

China And The Upcoming Global Financial Crisis

Posted by on January 24, 2013 Comments Off

China’s financial system is not as solid as it seems, and the weakness of the system may result in a serious shock to the global financial system.

…

However, there may be trouble brewing in East Asia. If China undergoes a serious financial meltdown, the entire globe could enter into a second period of deep recession; According to some analysts another deep recession could  eliminate the gains made in the last five years. Where exactly could such a catastrophe come from and is there anything that can be done about it?

GMO LLC  recently created a A new white paper examining the country’s financial system and identifying its weaker points; the conclusions are worrying. One of the central points of the paper’s thesis is that our methods for predicting a bubble may be wrong and we may have learned the wrong lessons from the 2008 crisis. China may be on the very edge of collapse.

China And The Upcoming Global Financial Crisis

Another global financial crisis may be on the way | FT.Com

Posted by on December 25, 2012 Comments Off

Look around the world and big risks abound. One or more countries may drop out of the eurozone. Violence may spread across the Middle East. The US Congress may yet drive the country off its fiscal cliff and into recession. An island dispute between China and its neighbours may flare up, provoking the US to intervene in the Pacific. But in my view, the single greatest risk is that one of these events or some other throws the world into another global financial crisis, a “GFC II”.

This is a possibility for three reasons. …

Another global financial crisis may be on the way | The A-List

Sorry World: What Happens in Beijing, WON’T Stay in Beijing – The Diplomat

Posted by on October 22, 2012 Comments Off

While many have feared its rise, a weaker China struggling with economic and political challenges at home may present an even greater challenge.

…

If we apply this insight to speculating about Chinese external conduct in the coming years, the only thing we are certain about is uncertainty.  The confidence derived from a strong economy and relative domestic stability will be gone, and so will be the self-imposed restraints on jingoistic rhetoric.  Multi-faceted challenges to the new leadership — possible economic stagnation, social unrest, elite disunity, and a revival of pro-democracy forces — will make it more distracted and less politically capable to maintain discipline on numerous actors now involved in China’s foreign policy.  The effects of such accumulated internal woes, while not necessarily aggressive, are certain to be an erratic pattern of behavior that both worries and puzzles China’s neighbors and the rest of the international community.

Sorry World: What Happens in Beijing, WON’T Stay in Beijing – The Diplomat

It is here that we see China is starting to change. It has reached a tipping point where its path over the last 30 years is no longer sustainable. The global financial crisis has made China’s economic growth model not longer workable. The same crisis has caused the decline of the US and is putting stress on Russia.

When do you think great change is possible in the world today? Does it occur when everything under the hood (of the car) is going along just great? Or would one expect it to occur when peeking under the hood one finds a lot of problems?

When any system reaches a tipping point (assuming you recognize it), then small changes can have a big impact. The world has arrived at this point today. Time to start expecting the unexpected.

Colonel’s class on radical Islam leaves career in limbo – Washington Times

Posted by on October 15, 2012 Comments Off

When ArmyLt. Col. Matthew Dooley last year began teaching a class to fellow officers on the dangers of radical Islam, he seemed to have landed in a perfect spot.

A highly rated armor officer who saw combat in Iraq, Col. Dooley planned to instruct for several years at the Joint Forces Staff College within the National Defense University, then seek command of a combat battalion – a ticket to better postings and higher rank.

Today, Col. Dooley finds himself at a dead end while being targeted for criticism by American Islamic groups, at least two of which are linked to the Muslim Brotherhood, which advocates universal Islamic law.

…

“What happened here was this whole idea of political correctness deterred the ability of our military to speak frankly about the identity of the enemy,” Mr. Thompson said in an interview. “Once you allow political correctness to overwhelm our military, then we are really going to have an impact on our national security.”

Colonel’s class on radical Islam leaves career in limbo – Washington Times

This is an example of the bad thinking I’ve been writing about for several years. The global financial crisis represents a build-up of bad ideas (thinking), bad decisions and corruption, and runs through all of society. It is not merely limited to the financial sector. This article shows how these bad things have spread all throughout society. The national security of the US is in grave danger because of this thinking.

Not being able to identify a clear enemy of country – radical Islam – means that other enemies can’t be clearly identified either. I am referring to Russia and China. Also, the idea that a great power nuclear war is impossible has sent the US down the path of nuclear disarmament. It has already gone too far and has put the US in grave danger of a nuclear Pearl Harbor by the combined forces of Russia and China.

In my modeling career – not a real model, but an actuarial mathematical modeler, I have seen over and over that a small unexplained disturbance in an area out to left may very well mean a giant problem lurks in the dark out to the right. And your model is just waiting to blow up. Stupid decisions concerning Islam may not mean a lot to you, but the rest of the iceberg you cannot see. Better take these things seriously.

Warnings That A Massive Stock Market Crash Is Imminent

Posted by on October 4, 2012 Comments Off

Peter Schiff

Peter Schiff, the CEO of Euro Pacific Capital, has been one of the leading voices in the financial community warning people about the crisis that is coming.

During a recent interview with Fox Business, Schiff stated that the massive financial collapse that we witnessed back in 2008 “wasn’t the real crash” and he boldly declared that the “real crash is coming”.

So is Schiff right?

We shall see.

Robert Wiedemer

Economist Robert Wiedemer warned people what was coming before the crash of 2008, and now he is warning that what is coming next is going to be even worse….

Warnings That A Massive Stock Market Crash Is Imminent

Imminent does not mean tomorrow, but probably in the next year. There are signs we are already in a recession. Check out the articles here.

How to Build a Better Economic Model

In the summer of 1988 Yellowstone National Park experienced a fire unlike anything ever seen before in that park. Initially, there was no indication that this fire was going to be exceptional. It started off like any other fire, but by the time the fire was ultimately put out over 1.5 million acres of land was burned. Prior to that fire the biggest fire ever recorded in Yellowstone was in 1886 where 25 thousand acres burned. Between 1886 and 1988 the policy of the forestry department was to put out or mitigate every fire (stabilize the forest). Paradoxically, this policy pushed the park into complete collapse.

In 2010 economists are trying to figure out how they can prevent the next collapse. When the U.S. financial system was prevented from collapsing in 1997 (the Long Term Capital Management collapse), we got the tech market collapse of 2000-02. When the Fed did everything to mitigate the collapse of the tech market, we got the housing bust of 2007-09. When the housing bust turned into the global financial crisis, the government did everything it could to mitigate the collapse. Now many are wondering if we will experience a double-dip recession in 2011-12.

How to Build a Better Economic Model

 

How Politics And The Government Caused The Financial Crisis | Getting Real

Posted by on October 3, 2012 Comments Off

The author lays the blame on both the Clinton and Bush administrations so there are no partisan politics at work here.

Gene Epstein goes on to point out that, starting in 1996, the Department of Housing and Urban Development required Fannie and Freddie to buy specific percentages of low and moderate income family mortgages, starting at 40% and rising to 57% in 2008. According to Epstein, “Over a 16-year period, the U.S. government promoted subprime and other nontraditional mortgages, degraded mortgage-underwriting standards, and caused both the mortgage meltdown and the global financial crisis that resulted from it.”

How Politics And The Government Caused The Financial Crisis | Getting Real

CREWS: Homosexuals in the military demand special privileges – Washington Times

Posted by on September 26, 2012 Comments Off

Think of the problem concerning homosexuals in the military as one of poor decision making that is endemic throughout society. This is just another sign that the US and the West are in trouble. 9/11 was a sign of thinking problems. The global financial crisis of 2008 was a sign of thinking problems. The massive elimination of nuclear weapons was another sign. Now the problem of homosexuals in the military is another sign.

A general build-up of bad thinking and bad decisions will bring down the US and the West.

I think homosexuals can serve in the military, but they need to keep their mouth shut. Nobody in the military should know that they are gay. I served in the Air Force and lived in the barracks. I certainly would not want to room with someone who is gay. That’s why they need to keep their mouth shut or don’t go into the military.

Gays make up less than 3% of the population. Should we wreck everything for that 3%? Apparently, the answer is yes.

The American armed forces exist to defend our nation, not to conduct social science lab experiments in which our troops serve as human subjects. Try telling that to this administration.

The first anniversary of the repeal of “Don’t Ask, Don’t Tell,” Sept. 20, has come and gone. Now, there is mounting evidence that proves our warnings were not idle chatter. The threat to freedom posed by this radical sexual experiment on our military is real: It is grave and it is growing.

Activists inside and outside our government who pushed the repeal have deployed a smoke screen around the fact that once the military was forced to exalt homosexuality in the ranks, the all-too-foreseen consequence reared its ugly head.

CREWS: Homosexuals in the military demand special privileges – Washington Times