Greece sentence of the day

July 18, 2015

From Tom Warner:

It will be interesting to see how long [Greek Prime Minister] Tsipras can last in this situation. …  His resounding victory in the July 5 referendum has proven that he is skilled at channeling the public mood into support for himself. The fact that he won the referendum completely dishonestly, by urging Greeks to vote for an anti-austerity option that he knew didn’t exist, doesn’t seem to have cost him much in Greek domestic politics, at least not yet.

No one likes this situation, but they don’t have any money. That’s true even if we wiped out all their debt today. See: primary deficit (government deficit excluding interest payments on debt).

All Greece, all the time

July 5, 2015

Our students are thinking: “At least it’s not Argentina again.” We’re thinking: “This is great, a real-world experiment we can talk about for years.”

Some things to think about as the Greeks vote “no”:

  • Anil Kashyap on how we got here, the best thing we’ve read on the topic. It’s like “Murder on the Orient Express,” everyone’s guilty. Here’s another one if you like this kind of thing.
  • This likely means more austerity not less. Without support from the IMF and EU, Greece will have to finance government spending with its own tax revenue. That’s true even if it pays nothing on its debt.
  • Kim Schoenholtz on the difference between Greece and Puerto Rico: PR’s banks aren’t supported by local deposit insurance, Greece’s are. If the banks go under, that’s bad for everyone. It will be interesting to see if the European Central Bank reverses its longstanding policy and supports the Greek banking system — or not.
  • Does a “no” vote give Greece more leverage, or is it a painful self-inflicted wound?
  • Can we drag this out until fall so we can use it in class again?

Stay tuned.

Soccer update: Pay attention, this is important to your education in things people care about in the rest of the world. Chile beat Argentina in the Copa America, the soccer championship of Latin America, when Alexis Sanchez converted a Panenka. If you can use the word Panenka in a sentence, you’ll be welcome in most of the world.

The Greek crisis for dummies

June 28, 2015

The drama is more complex than the economics. Our summary:  Read the rest of this entry »

Good news!

June 16, 2015

Bad news makes a better headline, but Bill Watson reminds us that things have been getting steadily better for 200 years or so:

Between 1820 and 2010, GDP per capita increased 17-fold in Western Europe, 23-fold in the “Western offshoots” (Canada, the US, and Australia), 17-fold in East Asia, 12-fold in Latin American, 10-fold in the Middle East, and 13-fold for the world on average. … If you don’t like GDP, how about the dramatic increase in life expectancy? From 33.4 years in Western Europe in the 1830s to 79.7 years in the twenty-first century. For the world as a whole, life expectancy is two and a half times higher now than it was in the 1880s.

So if you don’t think life is good, keep it mind it used to be a lot worse!

The quotation comes from a book — The Inequality Trap — due out in the fall. The numbers come from the OECD. My favorite version of the same thing is Gapminder World — click on the link and press play.

The death rattle of hyperinflation

June 11, 2015

Kim Ruhl passes on this evocative headline:  “As currency dies, Zimbabweans will get $5 for 175 quadrillion local dollars.”

Corruption in soccer, continued

May 31, 2015

A range of perspectives.  Read the rest of this entry »

The minimum wage in LA

May 28, 2015

For lovers of irony, here’s a good one. It seems LA, which is considering an increase in the minimum wage to $15, is now being pressed to offer an exemption — for employers of union workers. More here and here. Labor leaders, of course, have been “among the strongest supporters” of the policy, ostensibly because it would help poor people. As we noted in class, there’s a better way to help poor people: give them money. That’s more or less what the Earned Income Tax Credit does.

Corruption in soccer

May 27, 2015

You may have noticed that Swiss authorities arrested a number of people this morning in Zurich as part of a US/Swiss probe into corruption at FIFA, soccer’s governing body. The news isn’t the corruption — that’s been common knowledge for years — but the fact that it’s being investigated. We will surely find out more in the coming weeks, but the betting line right now is that FIFA’s head, Sepp Blatter, will be reelected on Friday. His public relations team released this wonderful statement earlier today:

FIFA welcomes actions that can help contribute to rooting out any wrongdoing in football. … We are pleased to see that the investigation is being energetically pursued for the good of football and believe that it will help to reinforce measures that FIFA has already taken.

One wonders if it was it these measures they had in mind. Or perhaps these.

Corruption in Brazil

May 18, 2015

Bloomberg has a great piece on Brazil’s massive corruption scandal [lightly edited for continuity]:

Prosecutors have named 16 companies that allegedly formed a cartel to fix [government-owned oil company] Petrobras contracts between 2006 and 2014. The list includes some of Brazil’s largest construction and engineering firms. [They] say the builders got away with it by paying kickbacks, usually 3 percent, on every contract. Petrobras estimates that the graft added up to at least 6.2 billion reais, much of which, prosecutors say, was funneled to [political] parties.

The authors argue that corruption has hurt Brazil’s economy, which is going through its “worst four-year slump in twenty-five years,” but they trace the system back to the 1960s:

Read the rest of this entry »

Justice in Egypt

May 17, 2015

My attorney points out: Egypt clears a former leader (Mubarak) who stole $70 billion, but sentences to death its first freely elected president (Morsi). I’m not saying he was a good president, but still.

Acemoglu and Robinson nailed this a couple years ago [lightly edited for continuity]:   Read the rest of this entry »


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