European Bank Stress Tests
I have proposed the alternative of share economy to our present banking
and debt system. And Ann Pettifor showed how the finance system
is a parasite creating money in a leverage.
And Nassim Taleb, of "Black Swan" fame, decries debt.
The Europeans, and similarly the United States of America Government,
is having "stress tests" of the banks.
After the financial crisis, many governments go through this exercise to
prove that their financial system is sound.
Unfortunately the Europeans use rather bland assumptions for
worst case scenarios:
What if the United States Dollar falls eleven percent
What if theEuropean unemployment goes up a mere 0.5 per cent to 10.5 percent.
if stocks drop 15 percent
gdp goes down a mere 0.4 percent
And banks include assumptions over how much revenue their "trading desks" would generate.
Source: Page C1 and C2, Wall Street Journal July 14th 2011, "Late Stress Over Tests". Volume CCLVIII Number Eleven
Arab UnemploymentI pointed out in June 12th's Miscellaneous category the unemployment among educated Arabs. The IEEE Spectrum pointed out this issue. Sixty percent of college graduates do not find jobs in their fields. Engineers still face bleek prospectsd, but fortunately Egyptian Engineers are doing better, particularly electrical engineers. ("What Young Engineers Want Out of the Revolutions" Prachi Patel, June 2011, Pages 11 and 12, Volume 48, Number Six)
The Bond Market"James Carville, Bill Clinton's political adviser, once said he wanted to be reincarnated as the bond market so that he could 'intimidate everybody.'"
Global Markets: A Wild Ride, The Economist January 26th 2008, page 70, Volume 386 Number 8564
We are now so accustomed to governments running up billions of dollars in deficits every year that we take it as normal, even to people outside the country. "But it is insane to think that a country can run up such debts for years and not have it affect their fiscal autonomy." (Will Kymlicka, "Citienship in an era of Globalizstion: commentary on Held" Page 112 to 126, Democracy's Edges, edited by Ian Shaipro & Casiano Hacker-Cordon Cambridge University Press 1999.
Dr. Kymlicka went on to say that when Canada, which he discusses in the article, will soon be running a surplus and this will test whether it has more power.
But a share economy would deal with this appropriately--one would sell the bonds not at an interest rate but as a share of the income or tax revenue or imports or exports of the country. (I would argue that a country would be better to make it a share of imports so as toimprove its international competitiveness.)
And to be explicit, a bond holder gets a vote proportional to the amount of their share. So if two percent of the country's GDP is contracted away in lieu of interest. Then, the Currently the United States Public debt interest cost is 1.6 percent of GNP of 212 billion per year.
I propose to replace that by a share of the GDP instead of bonds. But the new debt would also include a vote--thus bond holders would together have voting power equivalent to 2% of the population.
In a share economy, the interests of the bondholders would be pretty much aligned with that of the citizens, although perhaps with a some difference in time preferences, but neither would really want to sacrifice long-term growth for a larger payment now.
In the United States, we talk about not saddling our unborn children or children with these debts. Make our bonds payable at a certain percentage of the income of all people who were of voting edge at the time the debt was contracted. The debt gets retired naturally as these individuals die off.
More on the Financial Crisis
Michael Hudson on Democracy Now stated that at the time of the financial crisis and bail out:
There was enough money in the banks to pay the ordinary depositors. That is
the FDIC could liquidate the banks and pay the individuals. What there
was not money to pay is the "gambles" in derivatives and trading and exotic
financial instruments where the losing counterparty was broke.
Money is created on a keyboard, the FED did it, and the banks do it.
This echoes my review of Ann Pettifor's book
patents and patent trolls
On the pay everyone what they earned theory, I suggested that each individual and business pay a tax for intellectual property. They can then allocate this to the intellectual property they consider worthwhile, whether it be a drug, the result of scientific research, music, tv/memovies and services and content agregators like google npr or MSNBC, or the reporters who actually get the news. We would select a median amount to pay by a median process. Each person can then distribute their share to whichever intellectual providers THEY feel made the most contributions, whether it be Einstein, a researcher finding a great medicine, the latest Startrek movie, or google that provides a wonderful search engine.
When we have intellectual property or a public good as private property, one has problems. The most severe is determining who has worthy intellectual property. The worst of this is patent trolls, people who get me-too patents on obvious things. One example of the disfunctional system: someone in 2000 got a patent on toast. And the featured patent Chris Crawford for setting up internet backup or software refreshening softwares. There is a patent suit about the mouse bringing up a popup when it hovers over something. 30% of all U. S. patents are for things that were already known. And eighty percent of software engineers said that the patent system hinders innovation.
Intellectual Ventures, described as a largest patent troll, brought in two billion dollars. Nortels old patent collection sold for 4.5 billion dollars.
Unfortunately, it is difficult to define "Patent Trolls." using conventional statutes. "Under some definitions, the legendary independent inventor toiling in his garage could be a troll. Under other defnitions, well-known productive companies could sometimes be deemed to be polls, if they sue over a patent which covers a product the company does not currently sell." (Mechanical Engioneering, page 35 to 36, August 2011 Volume 133 Number Eight
The patent statute punishes companies who mark their item with a patent number, but the patent has expired or has been judged invalid. If a company marks their object with a patent number, then all companies are non notice about the patent. Otherwise, the company has to send a "cease and desist letter" to the infringer.
This kind of problem happens when a manufacturer still has usable molds, except that they have a patent number on them which is no longer appropriate. Do they make a new mold, or save money on molds but risk a lawsuit under the rule that one cannot put a misleading patent number on one's products.
All these things can be handled by sortiton juries.
An online method that can use both experts and individuals to determine difficult policy questions. It uses some crowdsourcing and feedback between the group's answers and seeing if people changed. This is a type of deliberative polling. (Source, Mechanical Engineering August 2011, Page 21-22. Volume 133 Number Eight.
Undergraduates were asked to rate five personality traits of Chief Executives of Fortune 1000 firms solely on the basis of their photograph. And found that these were correlated with the firm's profits. By the way, another set of researchers tried to look at actual chief executive personality. They found no correlation between that and how well the company did. (Perhaps more profitable firms are able to get chief executives that look competent, dominant and who have "facial maturity," i. e., not "baby-faced.")
"Face Value" The Economist Page 78, January 26th 2008, Volume 386, Number 8564.
The proposed design for a product included a particular safety features. Marketing wanted it removed to save money. The three engineers involved inthe design and a recognize testing laboratory stated that the safety device should be included (but no standard mandated the requirement). Marketing prevailed, but Eventually all the items had to be recalled because of the fire risk. It was of course much more expensive to do the recall than to have done it right the same time.
"Serving Two Masters" Brian porter, Mechanical Engineering August 2011, Volume 133 Number Eight
Freakonomics Radio just had a good show on Predictions. Tetlock did a twenty year study of political experts predicting political events. Most did somewhat better than chance, but no better than regression. The predictors who were dogmatic were not effective. And the predictors who might make the big prediction, say the person in 2006 or 2007 who predicted the financial meltdown, did worse on average than others.
Michael Hudson on Democracy Now pointed out tht the bond rating agencies do not want to be liable to their "opinions." Thus, those who bought AAA-rated mortgage banked securities that turned out to be "junk" could not sue the rating agency that gave it an AAA-rating Dodd-Frank made the rating agencies liable. Michael Hudson proferred that the rating agencies are threatening to downgrade the United States debt if they don't repeal these provisions of Dodd-Frank.
The Freakanomics radio programs
began with a new Romanian law that made "witches" liable for
their bad opinions with criminal fines and jail sentences. But Romanian
politicians were not liable for their bad predictions. We need to
track each predictor's predictions over a lifetime. Right now, predictors
have an incentive to make wild predictions because they can trumpet that
"they predicted the big one." There is nobody to day that 90% of that
experts predictions were wrong. In my
clawback tax and the "pay when we really know" proposals, we should only
pay people much later than the predictions and hopefully their lifetime
record will determine people's rewards.