Reading for the Weekend

There has been some really interesting articles this week (most from the FT but never mind):

•  Wolfgang Munchau thinks Merkel is living in a parallel universe.
• Colm McCarthy and Martin Wolf have both given great overviews on Ireland and what needs to be done with it's insurmountable debt.
• Crazy old  Axel Weber left the Bundesbank thus taking his hat out of the ECB ring and his name off the Merkels' Christmas card list. He then wrote an article opposing any plans to allow the European Stability Mechanism to purchase bonds and calling for the Stability and Growth Pact to be strengthened. Reinforcing the stereotype that most Germans think that all economic crises can be prevented by fiscal discipline alone.
• John Plender on the Credit Bubble's Comeback
• Roubini and Bremmer tell us that our G20 world has become G-Zero.

So, as you while away the hours this weekend, waiting to see who gets the position of being told what to do by the IMF and the Commission, and wondering which member of Vampire Weekend does Dylan Haskins look like, check out some of these articles, they give a flavour of the interesting times we live in.....
 

NOTE: For any of the FT articles, follow the link, you'll hit a paywall but the title of the article will appear above your address bar, just google the title of the article and click on the first link you come across and you'll be past the paywall.

Finance 101

Former UK Chancellor, Alistair Darling, has a short piece in Prospect Magazine (in addition to an interview with Prospect's editor) highlighting the lack of "financial literacy" in society. He calls for the basic concepts of finance to be taught at secondary level and for older people to have the opportunity to learn about the basic concepts of finance as well.

Furthermore, he notes that this is not just a problem for laypeople, senior board members of banks and other financial institutions appeared to be in the dark at times over the financial instruments they used and the strategies they followed. This is a defining feature in what caused the global financial crisis; the over-reliance on complex instruments and models by those who rarely, if ever, understood them.

Darling makes several good points, especially about the need for more clarity in the language used regarding finance. However, I would love to see him in the future expand on these issues. As a former Chancellor he would have a unique insight in to just how out of touch some of these people were and how relevant this was to the global financial crisis.

Article (including interview) available here

Dismal Scientists

The Economist asked some economists who they thought were the most important economists in the world today. Economist.

I'm ashamed to say I didn't know several of the names mentioned. I blame their PR guys rather than my academic skills...

Check it out here.

Tackling Future Food Crises in 8 Simple Steps

Olivier de Schutter, the UN Special Rapporteur on the right to food, wrote this great piece on steps G20 nations should take to break the cycle of shocks to the world-supply of food. Its a response to the measures suggested by the President of the World Bank, Robert Zoellick

Read it here at the brilliant Project Syndicate blog

Saving Microfinance from the wolves and vultures

There has been much criticism lately of microfinance and this has led to proposals for tougher regulation of microfinance institutions in India and other developing economies in which microfinance is operated.Some such lenders are acting increasingly more like loan sharks than community-based loan facilities for small, but significant, entrepreneurial activities.

A report by the BBC here shows that Indian officials are very concerned with these new microfinance groups  and their profit-driven agenda. These government officials have proposed setting a cap on the interest rates that microfinace groups can charge, a proposal which has been gaining support in recent months.

One particular reason for this is that "for profit" micro-finance institutions have been linked with with several cases of people who are unable to repay their loans committing suicide.Surely something needs to be changed so as to expunge organizations that act in such a bullying manner from operating under the banner of "micro-finance".

The Economist has a great article stating that better regulation and not a cap on interest rates may be the answer : Microfinance: Leave Well Alone.  

It's a very convincing argument and, for the most part, I agree. However, I think that any legislation should also re-emphasize the main aim of microfinance, which is to enable a person or a group to develop a business or project improving their standard of living and their community's well being.




NB. - Just noticed that, quite recently, one of the most criticized microfinance groups, SKS in India, had lowered its interest rates by a small amount following pressure from the Indian government and media.I wonder if several of these institutions will lower rates so as to allay any concerns about their practices and head off any new legislation.

National Recovery Plan 2011-2014

For anyone with a few days to spare here's how we're getting out of all that pesky debt we owe...apparently.

PDF file at : http://www.budget.gov.ie/The%20National%20Recovery%20Plan%202011-2014.pdf

Irish Lessons for China ?

Clifford Coonan wrote an article in the Irish Times last Saturday discussing how the small, but growing, middle-class in China have pushed up the demand for luxury goods and are starting to turn their attention to property. Sound familiar ? The ramifications of an overheated Chinese economy and an ensuing burst property bubble would be disastrous for a world economy coming out of recession, even with a restrictive environment for foreign investment and a more regulated banking sector than, say, Ireland

However there are many reasons not to panic just yet. China's potential for growth is immense, some analysts have their annual growth rate at between six and nine percent for the next decade. Furthermore it is taking unprecedented measures to allow its currency to rise even if they are still far from what is required to have the yuan trading at a realistic value.

It's a good article and the comparisons with Ireland are quite poignant, showing how people in countries flush with easy credit and a booming economy can behave in such a similar manner.

Article available here