There is a fascinating game of 3-cornered chicken being played by the political classes of Europe, the UK and the US, which will probably end with all three of our economies going off the cliff, James Dean style at some point in early 2012.
Europe will be the first to go. It’s already driving a car with no brakes. Germany is the only country with a plausible credit rating, which it will lose if it comes to the rescue of Greece, Italy, Spain, Ireland and — eventually — France in a serious way. It won’t do that, and niether will it allow the European Central Bank (in name only) to put enough dough behind the Euro to prop it up over the longer haul. It pretends that if the GISI countries make enough sacrifices they can put things right, even as they know by so doing they will fall deeper into recession and drag Germany with them. As a result, you have a situation where only the “shorts” benefit: Every time the bonds of the GISIs exceed the “default threshold” (7%), the ECB does a timid intervention to push them down a bit, at which point the short selling goes on until they pop back up again. And again, and again….
Meanwhile, in the UK, Cameron and co. have realized that they went too far on deficit cutting, and unemployment is growing and will get worse once the Eurozone goes into deep recession. In the U.S., the Republicans desperately hope Obama will fall into this same deficit reduction trap and do all cost cutting and no further stimulus. They call Obama’s stimulus thus far a “failure”, ignoring the fact that, unlike in the UK and Europe, the economy is beginning to create jobs here and might actually avoid recession if we play our cards right.
To ensure that doesn’t happen, and confidence isn’t restored, the Republicans are torpedoeing the deficit talks as we speak, and praying for a second downgrade — for which they will blame Obama.
Is this a great country or what?
Wow, I write a blog about Oswald Gruebel, the CEO of UBS, and two days later he’s gone. That opens up a world of possibilities. “In other news, Perry, Bachmann and Palin sailed into a hurricane off the coast of Florida……”
Gruber “resigned”, after calling his board out and saying they had to “back me or sack me.” Apparently the board deliberated all of a day (“Well, if those are our choices….”) and the man who flew into Singapore in the front of the plane departed the next day pulling a long oar in steerage. The official statement by UBS Prez Kaspar Villiger praised Gruebel for feeling it was “his duty to assume responsibility for the recent unauthorized trading incident.” Whaaaaaaaa??????? Just last Thursday Gruebel said publicly he didn’t think he bore any responsibility in the matter. Oh….I see. It was the PR team putting words in his mouth. Villiger went on to say that he did not see any reason to “doubt the future of Carsten Kengeter (chief of UBS’ investment bank).”
Carsten, put your resume out NOW!
The odds of getting konked on the noggin by a piece of falling space junk — in this case a “dead” NASA satellite weighing 6 tons — are, per the Post, 3,200 to one. Is it seriously Okay just to shoot this stuff up there and then, 20 years later, shrug and wash your hands of it? If it hits me, I can guarantee you, Lorraine is going to sue NASA for big dollars.
Nota Bene: Does NASA still have a budget?
Meanwhile, the mess in the Eurozone continues. Greece says may as well default, didn’t seem to hurt Argentina any, while the U.S. tells Europe to get its act together, and Europe tells the U.S., who are you to tell US to get our act together, etc, etc. But the most interesting message of all came from the Chinese delegation to this week’s IMF meeting: They think we should do away with our democracies, since it’s much easier to make decisions in dictatorships, like they have. They also criticized our work ethic and culture, saying that we had to change “your way of living and your way of spending.” The nerve! Okay, how about this: We won’t spend anymore money on imports from China.
I found myself on a panel yesterday here in Prague at the 14th Annual Conference of the Microfinance Centre, a grassroots network of 105 microfinance institutions from Europe and Central Asia, headquartered in Warsaw, Poland and ably led by Executive Director, Grzegorz Galusek.
The title of the panel was “Reorienting Microfinance: Generating New or Repairing the Old?”, but the real entertainment was provided by panelist Dr. Milford Bateman, Visiting Professor of Economics at the University of Pula, Croatia, and author of the seminal work “Why Doesn’t Microfinance Work? The Destructive Rise of Local Neoliberalism.” While I was constrained during the 2 hour panel by our moderator’s admonition to “remain civil”, I can exercise in this space my Freedom of Speech and state unequivocally that Bateman is living proof that when an industry Comes of Age, one sign is that it produces it’s own lunatics.
I don’t have the space here to recount the many silly things Bateman said, but can probably sum of his message thusly: Microfinance is the moral equivalent of pushing heroin, and it should be eradicated before millions more become addicted.
Giving Bateman his due, there are unquestionably problems in the industry, especially in South Asia. We know that some MFIs have scaled up too quickly, overindebting their clients, and pursued collection of delinquent accounts too aggressively, leading to the well-publicized, lamentable cases of client suicides. A number of Academics have produced studies calling into question the impact of microfinance, and accused practitioners of over stating the benefits.
But now we are slinging smack and crack cocaine? According to Bateman, we may as well be.
While some of Bateman’s criticisms have a basis in fact (some markets are saturated, and many microenterprises are experiencing diminishing returns to their income generating activities, as they face increasing competition from their peers, who also have access to easily obtainable credit), others suggest he may have first hand knowledge of the narcotics trade, as does not appear to be the case with his other “research”. He seemed to draw great umbrage from the fact that the microfinance industry had become largely self sufficient from its financial services and no longer relied on subsidies, mainly owing to its ability to scale up to over 100 million clients a fact which, Bateman declaimed “does not prove that people are benefiting from those services!”
More on this later. I need to get back to serving those 800,000 FINCA clients who are all acting against interest.