-Observations From Today's Simulation-

~ Nobody likes Greenpeace. That said, Greenpeace is not particularly fond of anyone else. Except, perhaps, the bugs and animals and such things that I suppose it is trying to save from "the bad guys."
~ China needs to be schooled. Subsidies bad. How to brainwash?
~The EU, in reality, seems to be for the abolition of subsidies. It is only France, with its veto power,  that is keeping it back from this (as told to me by someone from an EU country).

Immigration / Europe

Europe is in a bit of a fix. Jobs are scarce. In some countries it is much worse than in others. Spain is particularly bad. The unemployment rate is 25%. This is creating an an outflow of young, educated people to other places. I recently had an opportunity to speak with the Spanish TA at W&L about this. She herself is one of these people, having been educated in Spain and now come to America to work and get a PhD. She told me she had recently spoken with her friends back home and they had told her they were all moving to Germany in search of work. They didn't speak the language, they didn't have a job waiting for them, but they thought anything was better than sitting and doing nothing in Spain. She said she was sad about this; what will be left of Spain when all the young people have left? Will they ever move back, or will they begin new lives somewhere else? But she also said that she is not likely to go back to Spain. If she can't find work in America she will probably join her friends in Germany. She may not like the situation but people have to work to live.
This points to an interesting immigration pattern; it will be fascinating to see how it changes Europe going into the future.

~ a lovely word used in class that I had to look up ~

exogenous [ɛkˈsɒdʒɪnəs]

adj

1. having an external origin

2. (Life Sciences & Allied Applications / Biology) Biology

a.  developing or originating outside an organism or part of an organism

b.  of or relating to external factors, such as light, that influence an organism

3. (Psychiatry) Psychiatry (of a mental illness) caused by external factors

exogenously  adv

Alamo Controversy

This is about Texas. It must be included. Connection to IPE? None. Connection to awesomeness and Texanness and the best place in the world? Definitely.

http://online.wsj.com/article/SB10001424052970203961204577269800472743824.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsSecond

Globalizing Capital

Globalizing Capital, by noted economist Barry Eichengreen, is a book with a very ambitious goal.  It attempts, as its subtitle indicates, to provide a “History of the International Monetary System.” This is quite a task, but one that Eichengreen lives up to admirably.

            The book is broken up into five parts. Each represents a separate phase in the history of how our monetary system has come to its present state. It begins with the gold standard. The gold standard was in effect basically from 1717 until the Great War. Many consider it the greatest monetary union the world has ever had, only rivaled by the union of the present day. Still, gold has its problems. In order to keep money at the same value, individual countries had to impose measures on their populace that often adversely affected them. Yet at this time the populace, labor, did not have the voice nor say in government to oppose these measures.

 What finally killed the gold standard? The Great War. In the time directly after WWI, for a few years only, a floating exchange rate was in place. But because of various factors outside of the monetary systems purview it operated badly. The gold standard was resurrected. This proved to be a bad move, as it helped lead to the Great Depression.

World War II finally broke the cycle of the Depression and, at its completion, ushered in a new period of monetary policy. For the next 30 years the  world was ruled by something called the “Bretton Woods” system. It was a period of great peace and prosperity. Some thought the system would continue indefinitely. Yet in the early 70’s cracks began to show. The Bretton Woods system featured a pegged currency which the IMF would regulate, to provide for discrepancies, by using its reserves. But the technological changes that had changed the world so much by the 70’s were not compatible with a fixed exchange rate.

So, in 1973, the world agreed to let their exchange rates float. This has given rise to the present system.  What it loses in reliability and predictability it gains in ability to adapt itself to a particular situation. This is good in our fast-paced and often changing world of today.

Eichengreen writes a book both well informed and well written. While someone unknowledgeable about basic economics might have trouble grasping all the details, it provides enough background for the basic student of the discipline to understand. What Eichengreen does so well, and what I find to be the greatest strength of the book, is that he puts many things into one place. He creates a timeline, guiding the reader to exactly where we are, monetarily, today. He links great phases in monetary history into one succinct story.

A small but important critique of the book that I would offer comes in its great concentration on the gold standard. Yes, this was an important part of monetary history. But with the level of detail that Eichengreen goes into the bigger picture occasionally gets obscured. Yet, this fault realized, Globalizing Capital is all in all a compact and fascinating look into the building blocks of our present International Monetary System. 

Greece --- Vacation Spot of Europe?

Greece seems to be in a bit of a bind. One bailout, two bailout, austerity. The situation rather sucks. The Greeks don't seem to be helping the matter either. Taking to the streets in demonstration because your welfare is being squeezed isn't going to solve the problem. This is unfortunate, as Greece has some of the best food ever (baklava, etc.) and certainly some of the best sights (see: Akropolis, Delphi, etc.) and the  most important to Western people's heritage. Perhaps Greece should become the backyard vacation spot of Europe? This is what some have suggested. After these massive bailouts it will practically be owned by the rest of Europe anyway. Is this bothersome? Perhaps. But Greece has been a bit of a vacation spot ever since its one "Golden Time" way back when, from which it has basked down the centuries. Perhaps Now it will be a bit more, shall we say, "user friendly."

America --- the New Minotaur?

"Improbably enough, a Greek economist named Yanis Varoufakis has been drawing attention in many of the hot spots of global finance lately, offering the Minotaur myth as a metaphor for understanding recent macroeconomic events. As Varoufakis writes in his recent book, “The Global Minotaur,” the world in which we have been living until recently functioned thanks to the voracious consumption of a different kind of beast. After World War II, the U.S. built up the infrastructure of its European allies as well as its former enemies, all of whom became trading partners. The U.S., with its great industrial and financial might, became the world’s surplus nation: its profits flowed out to its allies in the form of aid and investments. By the early 1970s, however, other countries had robust economies, and the U.S. was a debtor nation. “At that moment, certain very bright men within the American financial hierarchy made a stunning realization,” Varoufakis told me. The realization was that it didn’t matter if the U.S. was the biggest surplus or biggest debtor nation. What mattered was controlling the world’s primary currency, which would allow the United States to continue to recycle the global economic surplus. The idea was not unlike the thinking behind a casino — whichever gamblers are winning or losing, the house, which sets the terms and takes its cut, always wins.

So a new system came into being, in which a huge part of the world’s capital flows went to service debt originating in the United States. American debt, and the need to feed it, would be the modern Minotaur. The Wall Street financial houses became the handmaidens of the Minotaur. “The massive flow of capital into Wall Street gave it the impetus for financialization,” Varoufakis said, referring to the creation of derivatives and other risky financial vehicles. “And so Wall Street created a great deal of private money, with which it flooded the world and created huge bubbles, in the U.S. housing market and elsewhere.”

When that system came crashing down in 2008, Varoufakis says, “it was then only a matter of time that the euro would come into crisis.” Europe’s powerhouse economies — essentially, the northern countries — no longer had a place to sell their goods." ~ Russell Shorto, The New York Times.

This was so interesting I had to post it in its entirety.