Friday, 31 August 2012

A response to Protesilaos Stavrou’s “ is Euro area facing a balance of payments crisis”


I know and like Protesilaos personally for two years and I more often in agreement than not, but I must say that the following document (http://www.protesilaos.com/2012/08/euro-balance-payments.html) needed a response.

In the document Protesilaos criticised the obsession of many economists, including Krugman, of seeing the Euro crisis as essentially a balance of payments crisis that is made worse through the straightjacket of the Euro. He attacks the above by suggesting:
1) That the abstract of national trade is a statistical construct that is not very relevant to today’s G0 world of multinational manufacturing and services
2) That balance of payments are not linked to any socio-cultural characteristics
3) That imbalances within nations are frequent and they do not illicit such worries over the viability of a currency.

I disagree with all of the above.
a) This is not the first crisis that the EU has faced; in fact all European crises, whether triggered by exogenous factors (the oil price hikes in the 1970s) or by endogenous factors (Germany’s decision to keep interest rates high in the early 1990s) always end up becoming balance of payments problems as that is the essential weakness that underlines the European project. Although balance in trade was traditionally in surplus for the “core” of Europe and in deficit for the “periphery”, this was more than made up by the great migration of periphery workers to the core, whose remittances kept the balance. Where balance did not exist, nations would depreciative their currencies, hoping to remove balance of payment constraints, an option that is not available in the Eurozone. Depreciation was not necessarily a good option as it integrates a vicious cycle: “periphery” countries with limited raw materials found that a depreciation triggered another round of inflation (through the increase of the price of imported primary goods) leading to a further decline in competitiveness in the balance of trade, needing further future depreciations
b) No one claims that macroeconomics is not essentially an abstract idea, but its usefulness is not to be denied. National Accounts, trade statistics and others count what is going on in aggregate in an area defined by a set of rules where one authority holds power. It happens that we call this area a nation, and that since nations have their own set of rules for individuals, factories or companies, it is a very good summariser for economic vitality. Since a nation has substantial power over the individual then its decisions must be made while focused on the increase of the greater good – hence the need to think in terms of nations.
c) Just because there is a construct in creating a national level data the idea is still valid and useful. It enchases our ability to understand what is going on and perhaps find out what are the underlying causes a problem in a way that the microeconomics data might not be able to (people are not very good with data overload; machines are but are not very good on insight). Sure national data are a summary and as all summaries you lose detail but you gain insight – the long view. Yes the interactions of individuals across borders are not easily being pinpointed, but it is clear that if Greece fails to land a multinational firm making parts for a German auto company its balance of payments position will deteriorate over time, dampening the possibility of having economic growth (unless you have it on credit – and we all see the problems of that strategy).
d) Yes nations do have internal imbalances, and they rightly worry nations – they are not being as frivolous as Protesilaos suggests in ignoring their internal balance of payment problem areas. Italy is suffering from this problem through a North South divide, so in the US, and both have affected the political climate either through requests for limiting the national authority over the regional areas. Both countries a chucking huge sums of money on the problem, being aware that they risk having areas which are permanently in poverty who decide to undermine the national union.
e) I am afraid only with federation where they will be automatic aid to areas under deficit will the Balance of payment issues of the European Union will this problem cease to be so damaging to Europe, but since the mood in Europe is turning against a federation, I have to agree with Krugman and others that the Balance of payment imbalances between the “core” and “periphery” will remain one of the central weakness of the European Project.

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Tuesday, 21 August 2012

Things that are cheaper than the Laiki Bailout: No.8 Sending a rover to Mars


Ok we do not have the exact cost of the curiosity rover (somewhere from 1.6 to 2 billion euros) but it pretty amazing that what we will give to 1 bank in Cyprus is more or less enough to employ hundreds of scientists for years.

This video shows how amazing a technological feat is the curiosity rover more correctly known as the Mars Science Laboratory. It is a work that will defy our generation in terms of space exploration and has led to scientific discoveries and amazing leaps in science and technology, employing thousands of people. They developed a sci-fi sky crane to land it- how cool is that!

So would you prefer that the rover was Cypriot - broadcasting "Ta riallia Riallia Riallia" to Mars rocks rather than bail out bankers wealthier than us?


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Dom Mintoff 1919-2012


For a while back in the 1960s and 70s Malta and Cyprus were less recognisable as geographical places but as the birthplaces of 2 "larger than life" personalities: Dom Mintoff and Makarios.

Mintoff was a force of nature; The times of Malta was right to suggest that he was born in the right time for a citizen of Malta to be propelled in such heights of global recognition, but his quest for change and political skills can not be underestimated. The general secretary of the Malta Labour party at the age of 19 (?!!), Mintoff oversaw the huge reconstruction effort in terms of public works that was needed in Malta from his position as Prime Minister and Minister of Public Works and Reconstruction in 1947.

What stood out was his desire to play hardball with the British: the archipelago was effectively a dependency of the British forces, yet Mintoff realised the winds of change that decolonization was effecting. He had no problem in making U-turns in order to achieve what he saw as his main goal - rapidly increasing and equitable increase in standards of living within his generation and the transformation of what he saw as the "backward" societal norms of Malta.

After overthrowing the cautious Malta labour party leadership he ruled with an iron grip within the party, turning toward more radical demands: If Britain wanted Malta, it would have to integrate it within the UK; The UK would not use the Maltese base "on the cheap" - it should first ensure that the welfare state and society of the island would change the same way as the areas around bases in Scotland or elsewhere in the UK where benefiting. Although this sounds as pro-British policy it was actually a threat posed by Mintoff: If such demands were not met, Mintoff made it incredibly clear that independence was the only way forward, and for true independence to be achieved the military presence of the UK and the west had to be expunged. Like Makarios he played the hand of the East against the West in the cold war to get things done (a dangerous and complicated game that involved also the non-aligned movement and friendliness to dictators like Gadaffi), yet Mintoff was firmly attached to the west- his vision of Malta was of an industrialised nation of egalitarian principles and of redistribution of wealth.
Without Mintoff it is very unlikely that independence would have been achieved at the time it did, not that Malta's strategic role in the military world order would end.

Economically he presided over period of strong economic catch up growth that was redistributed quite evenly across society; yet he was set towards socialist type of industrialization projects that had no place in island societies- like Cyprus Malta is littered with bad idea manufacturing projects that began life under his reign.

He was also not koy in using any means to his disposal including electoral gerrymandering and even violence; He was supremely confident about his abilities and would dismiss even valid opposition out of hand. I am not so sure all would agree if he was a net positive for Malta, but he certainly was a huge shaper and mover of its modern history.
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Saturday, 11 August 2012

Rest in peace David Rakoff - Great orator and writer

I was moved this year by hearing David Rakoff talk how his battle with Cancer. He sounded frail, and the fire to live was burning through his voice. Funny, composed and always eloquent, I felt in the show "The Invisible Made Visible" it said a lot about pain, cancer and the will to live. His moving performance can be seen here:


He past away last night. Rest in peace, and thank you.
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Thursday, 9 August 2012

Bill Clinton Speech in the EUC: A great example of good oratory and common sense policies

I loved the Clinton speech in Cyprus in my university. It showed the attitude of "do it don't just talk about it" Which is missing in Cyprus- the island seems to be in the zone of "talk about it but don't do it".

My highlights were the three excellent questions of three of my students, George Tofa, Marios Papanicolaou and Nadira Slamova, which I felt that Clinton did not answer Nadira's question in order not to damage Obama.
Other highlights of the speech included his deep understanding of the interdependence of nations, a matter very dear to my heart after working in the Economic interdependence of all Cyprus.
Clinton highlighted the risks of greater interdependence (which he sees as a highly positive force)as environmental, unequal spreading of income and unequal spreading of risks. Very interesting was his innate understanding of rates of return - he suggested to get some unemployment down by painting roofs white in the summer and the rate of return in lower electricity bills will be almost immediate.


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Wednesday, 8 August 2012

Great Sources Unused in Cypriot Historiography No.2: The Cyprus Agricultural Journal


Thanks to fellow twitterers I remembered that I was supposed to make a series of Great Unused sources of Cyprus History. After a very long delay, I decided to restart this series.

The Cyprus Agricultural Journal is one of the first periodicals published in Cyprus. Introduced by a very forward thinking person,an Athenian educated Cypriot who came back in the start of the 20th century to bring some improvement to the miserable life of the Cypriot farmer. It was continued and expanded by the British Colonial Administration and was the main source of Farming information for the island.

It contains amazing information on many fields. Firstly it contains an overview of the farming situation in Cyprus per quarter. It then talks about the issues that could help farmers such as how to help combat pests. Most interestingly for me it describes costs and processes of Cypriot farms: It is amazing what it refers to - from the processes of making halloumi to the amount of milk per type of sheep. It is pretty amazing.

The best part it is that is has been mostly digitised by the Ministry of Agriculture and you can request it for research purposes in pdf format. The picture shows the huge amount data you could collect - it was pivotal for my research on Cypriot GDP.

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Wednesday, 1 August 2012

Feelgood listening of the summer

I am hooked on two podcasts and two experimental bands that really use technology and instrument modifications.
1) WBEZ-This American Life
An amazing radio show free to listen to online and with a really cheap itunes app. It focuses on one issue and does deep deep reporting, but with a very touching and human angle. It has impact: it managed to change policy both in economic and social issues, and still has the best explanation of the US recession.
2) WNYC-Radiolab
An amazing show on science and themes in Science. Produced by Jad Abumrad who mixes it like music and takes great care to make it into a experience. More than a radio show and more like a preform. Listen with good speakers and be amazed of the craziness of science.
3) Juana Molina
Juana uses her own voice in a voice loop and makes layers and layers until it transcends into another place. I love how she uses her own voice to go into places... Something that At least Freddy Mercury was aware of this - he did all the vocals in Bohemian Rhapsody. Enjoy

4) Buke and Gase
Two preformers who use their instruments in such a weird way. All the sounds are only from two people holding a custom Guitar that has base string and amp as well as guitar strings and amp, and a buke which is a base ukelele. They make wonderfull frustrated music with guitar innovations and a restless feeling that is catchy.

Have a good summer everyone!






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