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Thursday, July 7, 2011

Voluntary Greek-Debt Maturity Extensions: A Rush for the Exits?

As the E.U. was working out more loans for Greece in summer 2011, rating agencies looking at the state’s debt indicated that default would be pronounced should the decision of bond-holders to continue to hold Greek bonds be anything less than voluntary. Germany had been pushing for something less than voluntary so taxpayers would not have to bear so much of the risk and cost. France, doing the bidding of its banks, effectively used the rating agencies’ default-guidelines to insist that additional E.U. loans do not require then-current bond-holders to agree to later maturities. Given the extent of Greece’s debt-load relative to the state’s GDP, a private sector bond-holder, such as a bank, would naturally loose little time in getting out of holding Greek debt, even given the high interest rates (which reflect the risk).  



The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Wednesday, July 6, 2011

Gandhi as a Model for the Arab Spring

After two weeks in 2011 of mass protests in Egypt for representative democracy and the ouster of President Mubarak, the Egyptian government agreed to concessions including allowing freedom of the press, releasing of political prisoners arrested during the protests, and commencing a committee with the opposition to consider constitutional amendments. According to The New York Times, the "regime also pledged not to harass those participating in the anti-government protests." Gandhi would have been proud, though the protesters left room for improvement on this score. Understanding how they could have done so can be of use to pro-democracy protesters not only in the Middle East, but also around the world.

The full essay is at "Gandhi as a Model for the Arab Spring."

Tuesday, July 5, 2011

The Conflict of Interest in a Silent Oligarchy Being Engaged in Its Public Policy

Goldman Sachs, which had played a role in enabling Greece to hide its public debt, urged investors in March of 2010 to buy shares in two big health insurance companies, UnitedHealth Group and Cigna. The reason: their rates were sharply up and competition was down. According to The New York Times, the White House claimed, “ the Goldman Sachs analysis shows that while insurers can be aggressive in raising prices, they also walk away from clients because competition in the industry is so weak.” Rate increases ran as high as 50 percent, with most in “the low- to mid-teens” — far higher than overall inflation. 


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.
 

Monday, July 4, 2011

On the Aristocracy of Wealth

The "ardent glow of freedom gradually evaporates;—the charms of popular equality . . . insensibly decline; —the pleasures, the advantages derived from the new kind of government grow stale through use. Such declension in all these vigorous springs of actions necessarily produces a supineness. The altar of liberty is no longer watched with such attentive assiduity; —a new train of passions succeeds to the empire of the mind; —different objects of desire take place: —and, if the nation happens to enjoy a series of prosperity, voluptuousness, excessive fondness for riches, and luxury gain admission and establish themselves—these produce venality and corruption of every kind, which open a fatal avenue to bribery. Hence it follows, that in the midst of this general contagion a few men—or one—more powerful than all others, industriously endeavor to obtain all authority; and by means of great wealth—or embezzling the public money, —perhaps totally subvert the government, and erect a system of aristocratical or monarchic tyranny in its room. What ready means for this work of evil are numerous standing armies, and the disposition of the great revenue of the United States! . . . All nations pass this parokism of vice at some period or other; —and if at that dangerous juncture your government is not secure upon a solid foundation, and well guarded against the machinations of evil men, the liberties of this country will be lost—perhaps forever!"

The analysis of this quote is at "On the Aristocracy of Wealth."

Source:

The Impartial Examiner, Essay (March 5, 1788), 5.14.15, in Herbert J. Storing, ed., The Anti-Federalist (Chicago: University of Chicago Press, 1985), pp. 290-91.

Sunday, July 3, 2011

European Banks Ignoring the E.U.

As banks based in the E.U. state of Britain decided to pull back their operations around the world in mid 2011, the bankers may have overlooked key distinctions between their banks’ operations within the E.U. and internationally. Besides ignoring the converging impact of E.U. financial regulation within the E.U., the bankers were discounting the proposal of European Central Bank President Jean-Claude Trichet for a European rating agency. The proposal implies that certain advantages can be had for the E.U. as a whole—benefits that Lloyds, for example, implicitly discounted to the extent that the bank treated pulling back in the states of Ireland, the Netherlands, and Spain similar to pulling back in Dubai, which is not an E.U. state.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.