Yes, it's a bit too late for Europe now, but moving forward this could be a useful bit of financial innovation.
Greece and Ireland need to depreciate their currencies, but exiting the Euro is unworkable for either of them. Extraordinary times call for extraordinary measures, so they could both temporarily introduce import tariffs for EU products, as well as potentially recycle some of the money generated to export tariffs.
Imports go down, exports go up, GDP increases, deficit goes down. Of course this doesn't work in the long-run the way depreciation would, but it would work a treat as a short-run stimulus and deficit-reducing measure.
Whether you believe aid is effective or not, it has always struck me that, as a quantitative matter, it is a drop in the ocean. I am not saying that we should abandon aid; I am convinced it mostly makes things better. What I am saying, however, is that given how little it is and how widespread poverty is, the effect on national-level indicators can only be very, very small.
While aid can realistically only ever be a small part of the solution, other policies pursued by rich countries can have very widespread effects, and have perhaps received less attention than is warranted. In other words, we may be giving x euros in aid, but how much are we taking back by pursuing a Common Agricultural Policy? How much aid would a country have to give to make up for the effect on the poor of tight immigration policies?
The excellent Owen Barder links to a worthwhile attempt to rank rich countries according to how well they perform on development along these dimensions:
Though the effects of aid on development are uncertain, there is a huge amount that industrialised countries can do – or not do – which affects how quickly countries develop. The policies of rich countries on trade, investment, migration, the environment, security and technology can make a huge impact on how quickly poor countries are able to develop. Yet we tend to judge industrialized countries too much according to how much aid they give, and too little to how they behave in all these other ways.
The Center for Global Development provides an essential service by ranking the rich each year so we can see how we are doing. They use a series of quantitative measures on all these dimensions to create a composite picture of how a country’s policies affect development.
The 2010 results are now in. An excellent effort; I hope the next step is an attempt to monetize the value of the different policies pursued. However arbitrary this exercise may be, it will be another step in going beyond a qualitative understanding of the effect of aid, trade policies, etc, allowing us to better focus our collective efforts.
A beatiful presentation by Jeremy Rifkin:
Eat your heart out, Powerpoint.
A Nicaraguan military commander recently invaded Costa Rican territory, and ordered troops to take down a Costa Rican flag and replace it with Nicaragua's. Was this the work of a brash commander, going rogue on his superiors? A new policy of Nicaraguan imperialism? Neither. The incident was caused by an error in Google Maps. [...] commander Eden Pastora blamed the incursion on a misleading border on Google Maps that was off by some 3000 meters.
La Nación points to a disparity between the borders on Bing and Google. We've highlighted the area in question:
Thanks Austin Carr.
As I've noted before, one thing I've learned from this recession is that it's not as easy to increase the money supply as I thought.
This is Mark Thoma. But how about a big bond bonfire? (call it a bondfire if you must) How about direct financing of government debt?
I never got why Japan's lost decade was accompanied with such an explosion of government debt. The way I see it, below target inflation (let alone deflation) is a license to print money, and if the banks will do nothing with it, then the government should.
We seem to have forgotten the oldest trick in the book.
Joe Wight has created the Kawaii Star Wars alphabet, with a different character for each letter of the alphabet. D, of course, is for that mean-looking fella above.
HT (and a full list of the letters in alphabetical order) Designers Couch.
I quit smoking four days ago. I am (was?) a very keen smoker, but after ten happy years of inhaling burnt tobacco I felt that the risk of cancer was starting to outweigh the pleasure of smoking.
Well, I said I quit, but I need to qualify that. I have not decided to quit for ever; I have only decided to quit for three weeks, and I will then evaluate whether I want to continue abstaining from smoking. This helps for two reasons:
- Quitting for three weeks is easier than quitting for ever. The former is a project I was willing to undertake; the latter sounded (and still sounds) too daunting to attempt.
- My nicotine addiction has already subsided somewhat, and will have subsided a lot more by the end of week three. So when at the end of week three I pose the question of what I want to do next, I'm more likely to opt for the 'quit' than the 'restart' option compared to making that decision at the height of my addiction.
Trick number three, I've started telling people - I find it hard, and painful, to break commitments and go back on my word, and even though I'm not really making any explicit commitments or promising anything to anyone, announcing that I'm undertaking this project creates expectations and I do not want to disappoint. Trick number four, I'm buying myself an iPad for Christmas, but if and only if I am still a non-smoker in two months' time.
The self-deception is, of course, crystal clear. But so far it's working.
When inflation is too low and you've hit the zero bound on the monetary side, and debt is too high to do anything on the fiscal side, you need to break the last taboo: direct financing of government debt by the Fed.
The only thing the Fed needs to do is to announce it fully intends to keep x amount of government bonds purchased under QE in its books till maturity - with the benefit naturally accruing to the Treasury. There would need to be some clarity on exact numbers so that nobody panics, but that's basically it.
A crazy idea - but note that this is merely a quantitative, not qualitative, deviation from the standard arrangement (even in normal times).
That's US debt held by the public tracked in real time since 1993, and it stands at 9,017,482,214,669.27 as of two days ago.
The Chinese seem to be holding about 10% of that, although the true figure may be somewhat higher - according to the table, the per capita holdings of Luxembourg stand at an astounding $200,000.
Markets play a simple yet crucial role: they price (or 'rate') assets, so as to ensure societal resources are allocated efficiently.
Markets do this better than any other institution yet devised because people need to put their money where their mouth is; it is not enough to say 'I think Greece will default' - if you are going to have an influence on the price, you have to be willing to take the risk of losing money if your opinion turns out to be wrong, and you would only do that if you have confidence in your information and analysis. That way, the price of different assets, including sovereign debt, is determined by the people with the best information (or, as is the case when it comes to extremely deep and liquid markets such as sovereign debt, the best ability to process the information that is freely available to all).
So, it is a serious perversion of this basic principle when the credit ratings agencies spend 60,000 dollars a year (that's the annual wage of a junior analyst) on analyzing Greek debt while investing exactly $0 on it, yet the effect they have on the price of that debt is equivalent to their controlling billions in funds. What the hell does it mean to 'rate debt'? Isn't this what the market is supposed to be doing by setting the price?
This state of affairs is so striking that I have to repeat this again. Markets work because people put their money on the line: ratings agencies don't. Furthermore, information on sovereign debt is abundant and the agencies have no informational advantage whatsoever (not to mention an appalling ratings record). Giving dodgy ratings to obscure CDOs is one thing, but rating sovereign debt should have had no effect on its price - information is aplenty.
I'm trying to work out a model as to why real market participants (you know, the ones with money on the line) don't completely discount the agencies' credit ratings of sovereign debt. Where I've got to so far implies that ratings agencies can only have a destructive effect, leading the market away from the efficient price: since the ratings do not reveal any new information (as I said, info on sovereign debt is abundant), the only reason they can move the price of debt is because they give an opportunity to smart money to profit at the expense of dumb money - money that is too stupid to rate sovereign debt independently, or is restricted from investing in debt below a particular rating.
I repeat: this is seriously messed up. Do the credit agencies have access to superior information on Greek debt compared to everyone (indeed anyone) else? No. Does the $60,000/ year S&P team analyzing Greek debt have such amazingly better insights than the collective might of analysts of hundreds of funds and banks across the globe? Hell no. Then why in the name of all that is folly does what S&P say affects the price of sovereign debt to such an extent?
And let me repeat a crucial point in case it wasn't made clear (a lot of repetition in this post, but this is what happens when your blogger starts getting a distinct feeling that either he has gone crazy or the rest of the world has). Don't try arguing that even if the credit ratings agencies don't have their money on the line they have their reputation to worry about - in case you just arrived on our beautiful planet from somewhere in the outer universe, they seriously messed up with CDOs with no effect whatsoever on their credibility and their ability to make money (there is a word for companies that can provide a crappy service and stay in business: they are called monopolies).
All in all, credit rating agencies have a destructive influence. They facilitate speculation at the expense of market efficiency, creating or reinforcing herd effects where market participants try to outfox the 'bigger idiots' rather than aim for the efficient price, seriously distorting the essential role of the market in accurately pricing assets. They risk nothing when pontificating on the value of different assets, and they add nothing real to the stock of available information - just a focal point for speculation. Furthermore, they are so embedded in the system - with funds having restrictions in their constitution restricting what they can invest in depending on its credit rating - that it's difficult to see a way forward.
We can start by pointing out the absurdity of the situation.
George Soros Speaks at Hong Kong University
Explore our Galaxy (the Milky Way) and the distant Universe in a range of wavelengths from X-rays to the longest radio waves.
Daylight Hours Explorer shows the hours of daylight received during the year for an observer at a given latitude
Introduction to Peak Oil
No one disputes the fact that oil production will peak some day; the disagreement usually revolves around the timing of the peak. It goes from the most pessimistic Prof. Ken Deffeyes, who believes that peak happened in 2005 to the most optimistic USGS which predicts a peak 3 decades from now.Solarbaeat ambient musicbox, with sounds generated using the orbital frequencies of our solar system.
Warren Buffett rocking as Axel Rose in new Geico commercial
A neat flash shooting game for Friday's lunchbreak
What good had Wall Street ever done for America? “There must be something useful in there, but it is really hard to see what,” he says. “That’s everybody’s challenge: come up with a clearly beneficial example of financial innovation without mentioning A.T.M.s, and no one can do it."
The first thing to note is that Greece collapsed [...]A 2% increase in VAT and 5% cut in public sector pay is NOT a collapse. Neither are single-digit percentage decreases on GDP, or a spread of 300bps on government debt.
Now it all makes sense: it's the wife.
Sorry, I don't know the source for this one - Frag just sent it in an email.
I think the image is more prophetic than funny, even if the dates are probably a bit off. I can see the iBoard in classrooms, in offices and on fridges by 2015, and iWalls (OK, iMat may be pushing it) in high-tech offices and homes by 2020. And everywhere by 2030.
It happens all the time: a guy fails to stop at a red traffic light and crashes into another car, causing massive damage to the vehicle and serious injury to the driver.
Now, imagine a world where the offending driver had no responsibility to pay any form of compensation to the victim, and - no matter how substantial the damage - his only punishment was to have his driving license revoked for three weeks.
Crazy? Welcome to the world of professional sport.
Last weekend, Gunners watched in horror as Aaron Ramsey suffered a terrible injury at Stoke. As a direct result of this, he is likely to be unable to play for months, at immense financial cost to Arsenal and the player himself.
Arsenal is prohibited from filling the vacancy quickly by signing a player from another club, and this could well cost them titles and the financial benefits that come with them. Furthermore, players are a football club's most valuable assets*, and in a very direct sense: Ramsey is worth a lot of money to Arsenal, and the club could have even chosen to capitalize on that by selling him to another club. Ryan Shawcrass caused damage to Arsenal's assets much the same way as having taken a baseball bat and wrecked their offices.
Aaron Ramsey seems to have escaped relatively lightly this time, but of course there's always a chance he will never fully recover, losing out on millions of pounds he has been expected to make as a top-flight footballer. And of course there's the psychological trauma he has to go through.
The punishment for the offending player and team? A three week ban on the player participating in club games (ironically, Ryan Shawcross learned of his first England call-up on the very day of the incident)
In econ-speak, this is a classic case of an externality: players and clubs hardly have any incentive to play less agreesively, as they don't have to suffer the consequences of their playing style to the opposing team and its players. Since they don't face the cost, they end up playing more aggressively than is optimal, leading to an inefficiently high level of injuries.
Some people may protest that no player ever intentially injures another, and they would be right. But whether injury is caused intentionally or not is largely irrelevant: it is also the case that no driver ever intends to cause an accident. He merely chooses to take on additional risks by ignoring a stop sign or by driving above the speed limit. Similarly, clubs and players choose to play more aggressively, increasing the probability that any given tackle will cause injury.
FIFA, UEFA and the FA must take action now: any injury caused as a result of foul play should be costed, with the offending club having to pay appropriate compensation to the injured player and his club. This will bring injury rates down, and make the beautiful game better and safer. The current situation is madness.
* Professional sport is really the last example of a labour market where is it OK to buy and sell people; in other areas, such arrangements are strictly illegal: it's called slavery. Even though the status quo is beneficial to both clubs and players, I am deeply perplexed that this is a stable equilibrium, given that all it should take for it to unravel is a single player wanting to declare his contract null and void and bringing the case to a court of law. But this is the subject for a future post.
If present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time.
And there's more, from a new NBER paper by Sala-i-Martin and Pinkovskiy entitled AFRICAN POVERTY IS FALLING...MUCH FASTER THAN YOU THINK!(I covered their previous related paper here):
1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic.
And there's some lovely graphs too - the style is unappealing, but the content is so sweet it's worth framing them and hanging them on every wall you can find:
And here's where I'll be going in a month's time:
Yes, there is such thing as an uplifting economic paper.
On the tight confidentiality of Apple products throughout the supply chain network
Paul Krugman has a number of posts on Spain, Greece, et al, and specifically how being part of EMU means they won't be able to depreciate to avoid crushing recessions. The point he is making is of course perfectly valid, and he is - as usual - ahead of the pack in correctly perceiving the real problem as being loss of competitiveness in the PIIGS and the need for substantial deflation, potentially crippling growth for years.
His conclusion is also the correct one:
Am I calling, then, for breakup of the euro. No: the costs of undoing the thing would be immense and hugely disruptive. I think Europe is now stuck with this creation, and needs to move as quickly as possible toward the kind of fiscal and labor market integration that would make it more workable.
First of all, I was, and still am, a strong supporter of the Euro. The common currency is more than anything else a step towards the dream of political integration, a sceptical Europe of nation states moving towards a post-nationalistic era of many cultures but common political goals and aspirations, based on respect for human rights and the rule of law, a belief in the power of free trade and the absurdity of borders, and a desire to for ever leave behind the madness of the past and other petty differences. No-one in their right mind can possibly argue that the demons haunting Spain and Greece today are scarier than the demons that political union can forever banish.
A common currency brings with it not only disadvantages but also advantages, but whichever way you cut it it was never meant to be a brilliant economic idea, even if reasonable people can claim it is a good one. It was meant to be a trojan horse leading us to closer and closer union: not a superstate, but an unbreakable union of culturally diverse nations living together in peace - and if this political experiment is to succeed in Europe, why not the world?
This crisis may yet bring people to their senses - what was everyone thinking when they picked Van Rompuy? - and remind them what the Euroland is all about; if this happens, the current mess may well lead to a better Europe and a better world.
So, the first thing bothering me about Krugman's analysis (and the debate more generally) is a lack of perspective. It is the same thing I talked about when I posted on the misguided economics of Scottish independence.
The second thing that bothers me is Krugman's style. Krugman is always right; and I really mean that. On top of that, he is incredibly good at homing in the most important aspects of every issue, as he did in this case by focusing on the prospect of deflation in the PIGGS rather than the state of public finances. But not being wrong is a good thing, right? It would be if he then didn't push his case to the extent that he paints a misleading picture. In the words of Vladimir Nabokov, Krugman deals in doughnut truths: only the truth, and the whole truth, with a hole in the truth.
First of all, he posts this graph to support his thesis:
The divergence in price appreciation between Greece and the EMU average is about 10%, which could go away with only moderately lower inflation in Greece compared to the rest of the Euroland over the next, say, 10 years. [Addendum: to his credit, Krugman also posted this after I'd written this post, which paints a more balanced picture, if only by including France. And yes, he is absolutely right again in calling for higher inflation for EMU as a whole.]
Even more importantly, by posting this graph he is strongly implying (although not quite saying- that same irritating 'he's never actually wrong' thing again) that these discrepancies need to go away. But it is not so: between 2000 and 2008 Germany's real GDP grew by about 13%, Spain's by 33% and Greece's by a whopping 40%. Yes, some of this is illusory, 'debt-driven bubble growth'; but the biggest part is probably pure Solow coupled with a speedier institutional reform in the poorer, more backward PIIGS compared to Germany. And guess what: even after this decade of strong gains, employment as a percentage of the working age population is 70% in Germany (from 65% in 1998), in Spain it is 65% (from 52%), and in Greece 62% (from 56%). Hourly wages in the latter two countries remain a fraction of German levels, and I'm sure there is a similar picture when it comes to unit labour costs (sorry, can't find the relevant data).
A large part of this capital inflow and price appreciation is here to stay: As Spain and Greece have become richer, with the potential to grow even more in the future, you would also expect the price level to go up. If country A has half the nominal GDP of country B, you would expect the price level in country A to also be lower; if country A grows to have the same level of GDP as country B, you would expect price levels to be the same. Things are expensive in France and cheap in Algeria.
So, would Spain and Greece benefit from being able to depreciate? Yes. Should EMU move towards more fiscal integration? Hell yes. Would EMU benefit from more inflation? Yes indeed.
Does the price level in Greece need to fall by 30% so that Greece can be competitive and grow again? Most definitely no. The imbalances are simply not as great as Krugman presents them to be, and he is being disingenuous, if not outright mistaken, by presenting growth in GDP deflators since the formation of EMU to support his (basically valid) main points. Growth in GDP deflators in itself is irrelevant to the point he is making.
Addendum: Why are poor countries cheaper than richer countries? The answer lies in the existence of non-tradable goods: things like haircuts and doctor visits. The price of tradeables (grain, plasma TVs, cars, etc) is common across the EU since there are no barriers to trade, but it costs much more to get a haircut in Germany than in does in Portugal. If Portugal becomes richer and Germany stays where it was, the price of TVs will still be the same in both countries, but the price of haircuts in Portugal will no longer be as low relative to Germany as it used to be. With Germany and Portugal sharing a common currency, higher real GDP growth in Portugal means the price level in Portugal will increase relatively to Germany - and there's nothing weird about that. Simply pointing to divergence in GDP deflators between countries with no reference to real GDP growth (or growth prospects for that matter, as this is also about current account deficits) is silly.
Across town at the nearby Pyongyang University for Foreign Studies, the staff were much more progressive. The students were sophisticated, knowledgeable and engaging.
"It helps us a lot learning English. I so much want my country to be one of those leading in the economy. We're already a leading nation in politics and other stuff. Well, it's no offence but I want to learn English so that the other people get to learn [about] Korea."
The BBC visits Pyongyang.
Russell Brown (@publicaddress)
Herald asks readers why autism diagnoses are rising. "Why ask us, you clowns?" say readers.
[Embedded music video]
'You don't need to be born Greek to be Greek' - Έλληνας και γεννιέσαι και γίνεσαι.These are the words of Greek Prime Minister George Papandreou in Parliament yesterday. They make me proud to be Greek.
If we really love our country, we have to help make their (immigrants') dreams the dreams of our country. Why raise the ghost of 'dilluting the purity of the nation'? After all, what does it mean to be Greek? Democracy, equality, humanism. Is our faith in Greece and our ideals across the centuries so weak and shallow?
We can't be fooling ourselves; we can't keep denying them a voice.
There are no perfect solutions, but there are better solutions. (This law) gives us new opportunities: to see Greeks of Indian ancestry, of Albanian ancestry, proud of our common Greek nationality.
And all this while the main opposition party is promising to repeal the law if elected (their plan is to only award Greek citizenship to children born in Greece when they reach adulthood and provided they have a full Greek education and they relinquish their parents' nationality) and with large segments of the Greek public - perhaps a majority - being sceptical or outright hostile.
This is a true moment of greatness, all so rare in politics.
In Greece, there is history in the making. Εύγε!
Just needed to say this.
In January 1943, Churchill and Roosevelt agreed that after the successful North Africa campaign, the next target would be Sicily. The island was the logical place from which to deliver the gut punch into what Churchill famously called the soft “underbelly of the Axis”. But if the strategic importance of Sicily was clear to the Allies, it was surely equally obvious to Italy and Germany. Churchill was blunt about the choice of target: “Everyone but a bloody fool would know it was Sicily.” This presented the intelligence chiefs with a conundrum: how to convince the enemy that the Allies were not going to do what anyone with an atlas could see they ought to do.
The result was “Operation Barclay”, a complex, many-layered deception plan to convince the Axis powers that instead of attacking Sicily, the Allies intended to invade Greece in the east, and the island of Sardinia, followed by southern France, in the west. The deception swung into action on a range of fronts, and Montagu and Cholmondeley went looking for a corpse.
The Second World War may have been responsible for the deaths of more people than any conflict in history, yet dead bodies of the right sort were surprisingly hard to find. What was needed was a discreet and helpful individual with legal access to plenty of fresh corpses.
Montagu knew just such a person: the coroner of St Pancras, who went by the delightfully Dickensian name of Bentley Purchase. For a man who spent his life with the dead, Purchase was the life and soul of every occasion. He found death not only fascinating, but extremely funny. When Montagu dropped him a note asking if they might meet to discuss a confidential matter, Purchase replied with directions, and a typically jovial postscript: “An alternative means of getting here is, of course, to get run over.”
Operation Mincemeatis a new book on a little known (i.e. I didn't know about it!) WWII incident, featuring a dead body with an assumed identity, deception, and even Ian Fleming himself as the inspiration behind it all (007 would be jealous). The extracts are from the Guardian (part 1, part 2).
Let's say you own a bond you are not allowed to sell that pays you £100 a month. Even though you can't sell the bond, it is silly to say that you have zero savings; your savings are given by the value of the bond even though you can't just sell it now and collect the money. A guy that has a bond with the same characteristics which pays £1 a month has much, much lower savings than you do, even though none of you has any money in the bank right now.
Now we got this out of the way, think of these two scenarios:
Scenario 1: You have £50,000 in the bank and use them to pay for a university education that will help you make much more in the future. Your measured savings have gone down by £50,000; your effective savings - your wealth - has gone up. Saving rate statistics will look at the fact your bank balance is down but will ignore the fact you will be earning much more in the years to come.
Scenario 2: There are two men, same age, each with zero money in the bank and no assets to their names. One has a university education, earns £30,000 a year and has experience managing a company. The other has only finished primary school, earns £3,000 a year and has experience assembling parts in a factory. Who has more savings?
Now let's say that the latter man starts saving 20% of his salary and lends the money to the first guy. Who has more savings (wealth) now? If the second guy uses the money to get an MBA that will bring him even more money in the future, has his saving rate gone up or down? How meaningful is it to say that the first guy saves 30% of his income and the second guy -3%?
And does this story change if the first guy is Chinese and the second guy American?
So he and his colleagues set up an experiment where they laid out 36 bits of food in a pattern corresponding to cities in the Tokyo area and put a slime mold, Physarum polycephalum, at the spot corresponding to Tokyo.
As they report in Science, after 26 hours the slime mold had created a series of tubular connections that matched, to a great extent, the rail links among these cities. The researchers found that the slime mold network was as efficient as the rail network, it tolerated breaks in the connections just as well, and it was created at reasonable cost to the organism.
Tim Harford is outclassed by none when it comes to expressing important ideas simply yet forcefully:
I have been as guilty as anyone of being fascinated by behavioural economics. But the financial system did not fail because of some psychological trait, but because it was riddled with damaging incentives that were hard to spot because the system was complex and changing quickly.
In other words, let's get over evil bankers and the belief that moralizing will change the world, and let's focus on incentives.
Read the whole article, which discusses changing British thinking and practice on counter-insurgency in Afghanistan.
And yes, rightsizing is a real word, apparently.
POST UPDATE, 14 Feb 2010: I have just - mysteriously, and after more than a week since I spoke with either Amazon or Natwest - been refunded the charge, but it's unclear whether it came from Amazon or Visa/ Natwest. Natwest kept insisting that they won't be giving me the money back, because 'it is Amazon that is at fault for routing the transactions via Luxembourg'. The Natwest people were pretty nasty and rude, time and again, in contrast to the Amazon folk which were very nice and polite (albeit equally unable to provide any help or even to respect my time and not ask me to call my bank to clarify). I'll keep shopping from Amazon (great prices too), but I'm now determined to move banks. I'm not under any illusions that the new bank is going to be better (although I can't see how it can be any worse), but I've really had it with Natwest; even the iphone app sucks. I'll also stick with Mastercard credit cards - dear Visa people, screw you too.
I'll be posting more updates if I get more info, and do leave a comment if you have been refunded (or not). There's quite a few people reaching this post via Google, so any comments with info could be quite helpful.
I bank with Natwest, and they recently switched every customer from maestro to visa debit - a card 'with many additional advantages'. Anyways, I just found out - on my statement - that they charge £1.25 for each and every transaction on amazon.co.uk. Needless to say, there's NO NOTIFICATION WHATSOEVER about this on the amazon site. £1.25 is the 'foreign transaction' charge, and from what I can gather it may apply because amazon routes the transaction via Luxembourg.
Right now, there's a couple of threads elsewhere on the web discussing the paypal charge (I couldn't find anything on the amazon charge), with some customers apparently being refunded (but not everyone), so be careful. I contacted Natwest who 'will process this and get back to me in the next 7 working days', as well as amazon who apparently have no idea about this at all. This is all the more worrying because all banks in the UK are in the process of adopting visa debit:
Since June 2009, all of the major banks in the UK have begun - or will in due course - issuing Visa Debit. Barclays, Abbey, Halifax/Bank of Scotland and Lloyds TSB have already issued the card.
I had recently read this article on visa's 'interesting' practices, but charging people without any warning is on a whole new level. Boo Visa, and boo banks. Shame on you.
I'll give this another try, demand I get refunded for the principle of it (charging me without telling me?), and if this is not rectified in the future I'll switch banks and cards to make sure this doesn't happen again.
I'll be updating this post with new information as it arrives. If you had the same experience of have any additional information, comments are open and welcome.
Conan O'Brien ends 17 year success story with NBC
A universal testimony of the word of Man in 13 Billion Others
Second highest grossing film of all time in just 20 days 6 weeks
Update (25.01.2010): "Titanic" just hit an iceberg named "Avatar."
Regulation of economic activity is ubiquitous around the world, yet standard theories predict it should be rather uncommon. I argue that the ubiquity of regulation is explained not so much by the failure of markets, or by asymmetric information, as by the failure of courts to solve contract and tort disputes cheaply, predictably, and impartially.
The case against regulation relies on well-functioning courts. Courts are needed both to enforce contracts and to provide remedy for torts, and hence are central to the basic private mechanisms for curing market failures. In so far as courts resolve disputes cheaply, predictably, and impartially, the efficiency case for regulation is difficult to make in most areas. Efficient regulation would be an exception, not the rule. But when litigation is expensive, unpredictable, or biased, the efficiency case for regulation opens up. Contracts accomplish less when their interpretation is unpredictable and their enforcement is expensive. Liability rules would not cure market failures if compensation of the victims is vulnerable to the vagaries of courts. In short, the case for efficient regulation rests on the failures of courts.
This is Andrei Shleifer, from a new NBER working paper. He makes a number of persuasive points backing his case:
- Regulation is more pervasive when it comes to complicated activities, where generalist judges have particular difficulty arbitrating predictably
- Regulation has grown over time, which might have to do with the growing complexity of activities
- Societies that exhibit high level of trust have less regulation
- Common law countries tend to rely less on regulation than civil law countries
- With the rise of corporations, inequality between the injured plaintiffs and the injurer is too vast to allow for fair arbitatration in courts
Of course, just because expensive courts could explain regulation doesn't mean they do so fully; yet this is a deep and important insight which, as they say, changes everything. This is a very important paper.
Additional extracts, including killer arguments, under the fold.
I've been meaning to write about Greece's fiscal situation for a while, and still intend to publish a comprehensive post on the matter soon.
But since this might be a while, I thought I'd post the forecasts from Greece's hot-off-the-oven Stability plan anyways together with some random, and - in the grand tradition of macroeconomics - not necessarily terribly well thought-through opinions:
1. Thinking mostly about 2011 onwards, I think the growth forecast might be a bit on the conservative side.
2. The unemployment forecast is definitely on the optimistic side; that said, it's worth noting that they have reasonably forecasted unemployment not falling until 2013.
3. Who on earth knows what the deficit or debt are as a percent of GDP. They are OK ball-park figures though, and in any case they are not very relevant at these levels.
4. The probability Greece will be defaulting is extremely low. Buying Greek debt now (if you are willing to hold to maturity) offers juicy returns with very little risk. Btw, this is not investment advice, the value of your portfolio can go up as well as down, you invest your money at your own risk, etc. (isn't there a law that requires me to say this?)
And a question to everyone out there: If Japan - which at the end of the day can always inflate the debt away (yes, they really can!) - comfortably holds debt at 170%-200% of GDP, why can't Greece?
I loved these images of species recently discovered in Ecuador, with more at the Guardian website - thanks Al.
The Earth Book: A symbiosis of Google Maps and Flickr
Paul Krugman's AEA lecture contains this little gem:
Back in 1976, a group of MIT graduate students was working at the Bank, thanks to a personal connection between the governor and Dick Eckaus. Portugal at the time was a bit of a crazy place, still suffering from the mild chaos that followed the overthrow of the dictatorship the year before. The economy had stabilized after an initial slump, but the currency was under pressure, with reserves rapidly dwindling. It turned out later that most of the reserve loss was due to foreign exchange hoarding by commercial banks – which was kind of funny, since at the time those banks were state–owned.