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Price adjustments! March 30, 2012

Posted by proeconomia in Main, News on Greece, On the crisis.
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Have a look at these two pieces and wonder about price adjustments on consumer goods…The first is about a well-known hard discounter super market and its price discrimination practices (in Greek); the second is about producer prices in Greece during February (read it through)…I wonder when are we going to see some competitive markets in Greece, where lower consumer prices stemming from competition will come to buffer the reduction in income and in demand…


Fire Up America’s Jobs Factory With Aid for Startups March 27, 2012

Posted by proeconomia in Main, News on Greece, On the crisis, Opinion.
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An excellent article about entrepreneurship and start-ups (in the US but still applies to us) by Edward Glaeser @ Harvard. Worth your time reading the whole thing and provides an interesting perspective for SMEs in Greece.  Here are two, relevant to us, excerpts:

“In every year since 1989, new companies have created more net jobs than the economy as a whole, which means that older companies are, on average, destroying more jobs than they create. In 2009, the latest year for which we have data, new businesses created 2.33 million jobs, while older businesses destroyed, on net, more than 7 million jobs. ”


“Neither elected officials nor bureaucrats are good at picking winners, and they are prone to choose the politically popular over the economically rational (remember Solyndra).”

This last one is particularly important for us, at this juncture and with elections coming up…We hope that we won’t get the “politically popular” over the “economically rational” yet again…




Austerity or Stimulus? What We Need Is Growth March 26, 2012

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis, Opinion.
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A very to-the-point article from Chicago professor John Cochrane. He is a supply-sider, and he does point against Krugman’s Keynesian arguments, but his arguments on taxation and efficiency are much valid for Greece. Here are (a lot) excerpts, you should read the whole thing:

“Austerity isn’t working in Europe. Greece is collapsing, Italy and Spain’s output is declining, and even Germany and the U.K. are slowing down. In addition to their direct economic costs, these “austerity” measures aren’t even swiftly closing budget gaps. As incomes decline, tax revenue drops, and it becomes harder to cut spending. A downward spiral looms.”

“Is it irrelevant that Greece is 100th on the World Bank’s “ease of doing business” list, behind Yemen; 135th on “starting a business” and 155th on “protecting investors?” Is it irrelevant that professions from truck driving to pharmacies are still rigorously protected, that businesses can’t fire people, that (according to a Greek colleague) you can’t even get a driver’s license without paying a bribe? Does it not matter at all that, as the IMF delicately put it in its latest report on Greece, the “structural reform program” aimed at “deeply ingrained structural rigidities in labor, product, and service markets” got nowhere?”

“Doesn’t it matter that Greece has a high combination of individual, corporate, wealth and social taxes? True, Greeks famously don’t pay taxes, but businesses that must operate illegally to avoid taxes are much less efficient. Money is fleeing Greece, Italy and Spain. Does talk of exiting the euro, followed quickly by devaluation, inflation (the IMF predicts 35 percent in Greece, should it leave) and capital controls, have nothing to do with lack of investment?”

“Keynesians urge devaluation to gain competitiveness. Greek wages have in fact declined about 10 percent to 12 percent, according to the IMF. Yet investment and production aren’t turning around. Greek “demand” needn’t matter — the whole point of the euro area is that Greece can sell to Germany, so long as Greece stays in the euro area. But it isn’t happening. Is that a mystery? Would lower wages compel you to invest money in Greece; surmount a thicket of regulation; and expose yourself to the threats of wealth, property and business taxation, currency expropriation and capital, or even nationalization? In sum, isn’t it plausible that a good part of Europe’s austerity doldrums are linked to “supply,” not “demand;” “microeconomics,” not “macroeconomics;” weeds in the economic garden, not a want of fertilizer? Isn’t it plausible that factors beyond simple declines in government spending matter in a debt crisis?”

“Rather than raise taxes further on the “rich,” driving them underground, abroad, or away from business formation, fix the tax code, as every commission has recommended. Lower marginal rates but eliminate the maze of deductions. In Europe, eliminate the fears of wealth confiscation, euro breakup and currency  devaluation that are driving savings and investment out of the south. Most of all, remove the profusion of regulation and (increasingly) direct government management of the economy.”

UBS says Greece will default and exit the euro… March 19, 2012

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis, Opinion.
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But you can only find this in the Greek news, could not cross-check elsewhere. Read it here (although the latest IMF report does state that without ECB funds Greece will probably have to leave the eurozone anyhow…). On the other hand, read this piece of news from a recent survey conducted by Barclays where it is found that “Fears of a disorderly euro-zone breakup have faded, the survey showed”…Who knows what’s what anymore…

The 1 percent recovery March 11, 2012

Posted by proeconomia in Fiscal policy, Main, On the crisis, Opinion.
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From Reuters’ Chrystia Freeland, an article about a recent work of Emmanual Saez @ Berkeley on the income distribution of economic recovery. Saez has done a lot of work on income distribution and taxation, and you can find many interesting papers in his website. The article is highly recommended, especially for those monitoring the U.S. election campaing and the implication of past U.S. economic policies on income distribution. In the end, it is this distribution that affects voters and determines political outcomes.

Greek Default Calls Into Question ISDA Process March 8, 2012

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis, Opinion.
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What’s the use of the CDS if you cannot get paid for them? Read this opinion article from Bloomberg as the PSI agreement deadline comes to a close.

Logic of Finance Can Banish Corruption March 8, 2012

Posted by proeconomia in Main, On the crisis, Opinion, Science and technology.
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There is, still, a fourth part from the articles by Robert Shiller from Bloomberg. Read this part here.

Don’t Resent the Rich; Fix the Tax Code March 7, 2012

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis, Opinion.
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A continuation of the earlier articles by Robert Shiller @ Yale. The source is Bloomberg. Its worth your time reading this, as the change of the tax code is something relevant for Greece too.

Goldman Secret Greece Loan Shows Sinners March 6, 2012

Posted by proeconomia in Fiscal policy, Main, News on Greece, On the crisis, Opinion.
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This just came out in Bloomberg. Of obvious interest so have a look…

Finance Isn’t as Amoral as It Seems March 6, 2012

Posted by proeconomia in Main, On the crisis, Opinion.
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That you will read! Two parts from Robert Shiller @ Yale, here is part one and here is part two. Here are some interesting quotes from the second part:

“When someone participates in a business that seems in any way sleazy, that person may experience the discomfort of what psychologists call “cognitive dissonance.” To maintain self-esteem in such circumstances, people may revise their beliefs. Hypocrisy is one manifestation of this; a person espouses opinions mainly out of convenience and to justify certain actions, while often at some level actually believing them. Social psychologists have shown how cognitive dissonance leads with some regularity to moral lapses — or, at times, to what we might call “sleaziness.””

“But the finance professions also attract people who are relatively invulnerable to cognitive dissonance: traders or investment managers who delight in the truth that is ultimately revealed in the market. Troubled by hypocrisy, they seek vindication not by sounding right but by being proved right. Many financial theorists have tried to represent people as merely profit maximizers, perfectly selfish and perfectly rational. But people really do care about their own self-esteem, and profit maximization is at best only a part of that.”

“The further success of financial capitalism once again depends on people adopting a more nuanced view of human nature as it is expressed in a financial environment. In an economic system that is essentially good overall, we have to accept that there will be some less-than-high-minded behavior.”


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