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Wednesday, August 7, 2019

Raising Retirement Ages in the E.U.: The Case of Spain

The New York Times reported in 2012, “Spain has a stubbornly high budget deficit, its banks require tens of billions of euros in rescue loans and the government may soon have little choice but to request bailout funds” from the E.U.’s “TARP” program. Nevertheless, the state government’s “budget would actually increase pension payouts 1 percent [in 2013]. The money includes not only pensions for former public employees, but also the social security payments that go to all retired [residents].”[1] Pension expenditures represented nearly 40 percent of the state's budget and 9 percent of the state’s economic output, so one would think that line-item would have been first up on the chopping block. To be sure, cutting sustenance programs such as pensions could actually exacerbate a government's debt because if a resulting decline in demand adds to unemployment. In this case, the politics in the state seems to have gone along with the economics. I submit that Spain could have gone further economically were it not for entitlement politics interlarding the retirement-age issue.

The full essay is at "Raising Retirement Ages in the E.U."

1. Landon Thomas, “Pension Dilemma in Europe’s Debt Crisis,” The New York Times, September 30, 2012.

Stock Market Efficiency: Regulating Speed Trades

A flurry of international activity aimed at putting limitations on computer-based speed-trading was striking during the Fall of 2012 in the U.S. because regulators had been slow to act. Typically, the NYSE has been viewed by the world as the Mecca of efficient investment markets. Paradoxically, however, efficiency may be improved by restricting—meaning regulating—the masses of computer-enabled quick trades that take advantage of momentary microscopic arbitrage opportunities that are too quick for the human hand. The American conventional wisdom seems to be that regulation and market-efficiency are inversely related, rather than complementary. This assumption might be overly simplistic, coming from an inherited ideology. Fortunately, the rest of the world has not been following the SEC.

The full essay is at "Stock Market Efficiency."