Tuesday, 30 August 2011

How bad public policy destroys growth and jobs

I have worked with the owners of quite a few SMEs and I have experienced first hand that they spend more time & energy understanding new regulations than complying to them!

This is also what a survey by the UK's FSB (Federation of Small Business) concluded a couple of years ago!

When an SME also exports, imagine doing that for more than 1 countries/bodies of law/regulationss!

That is one of the reasons why IMO the EU Single Market needs Political Union in order to "work" for the SMEs and micro firms. Instead of the Eurozone being a playground for US, Chinese and other multinationals due to the low prices of their products in the Eurozone due to the expensive Euro! But that is another post (or posts, see my archive and labels on this blog).






Monday, 29 August 2011

Show me your consumers and then I will show you mine!

The way things are going, it seems that the US may have to leave the WTO system (same for the EU).

Leaving the WTO means relying on existing and new bilateral agreements for trade with other countries. Avoiding the plenary negotiations by the WTO 153 country members (153 includes the EU 27).

Of course leaving the WTO is not in the best interest of US & EU firms that produce cheapo in China! They may have to focus more on the US and EU internal markets respectively. especially if the BRICs and other developing economies maintain the tariffs they impose (it is consistent with WTO rules) on US and EU industrial goods.

Complicated, interesting times. The Ancient Chinese were right, they are a curse for the average person. Are the modern Chinese right, actually their government, in not fostering domestic demand? How much longer are the US and the EU (with the exception of Germany) going to be offering access to their consumers to the exporters of the rest of the rest of the world who do not (like Germany in the EU) do not reciprocate? One way to be protectionist is to raise barriers to imports, official or sneaky/unofficial ones. The other is to have public policies that discourage domestic consumption.

In today's oxymora, net importing economies/countries are more rare than exporting ones. In supply and demand terms, that makes them more "valuable" than before. Will they negotiate using this extra value?



Friday, 26 August 2011

Thoughts on the current state of the EU: Alexander the Great, city-states, Cpt Kirk

The strategic mistake of Alexander the Great was that instead of uniting the 200+ Greek city-states into a permanent federal union, a kind of United City States of Greece, he decided to unite the world that was then known to him. and beyond

He thus embarked on a grand campaign that united Greece, Asia Minor, Egypt, creating a marvelous melting pot ("Hellenistic Times") and then some, continuing like a Cpt Kirk to uncharted territory, running out of steam and dying without ever returning home!

An epic of course. But what he left behind was a globalization of sorts (see my post "Globalisation, today and in 300 BC") that lasted for a while. But was not sustainable. Had he focused on uniting the 200+ Greek city states into a permanent entity, History could have been quite different (especially that of Rome).

Lessons for 2011 Europe?

Thoughts on the current state of the EU: trailer parks, China, greed, threats culture, parochialism, Babel, Socrates, national champions

This is my rambling about the sorry state of EU affairs, more or less as I tweeted to night (late Thursday night, early hours of Friday, August 26):

The EU reminds me these days of a trailer park. A building is needed to house the members but no one wants to pay for it. Some even want collateral. I like trailers and trailer parks. But not trailer park unions (eg current state of the EU).

Did you read that almost 50% of Chinese exports are made by Chinese firms? THAT is the Greed that US & Europe are already paying dearly for!!

When Europeans decide to unite I am afraid that it may be too late for Europe. But maybe that is the way things are meant to be, a stoic could argue.

Because for many centuries European countries have been grandstanding in the world, Europe is still acting like a spoiled child in spite of its age, while the rest of the world is turning, one way or another, Europe is asleep or in denial. I am afraid Europe may be beyond repair!

And that at the end of the day the average European is, alas, more parochial in thinking than a tea-partier! Europe is in urgent need of philosophical leadership ie of philosophers who like the Ancient Greek ones will speak to the people and help them THINK.

The Ancient Greek philosophers as well as the famous play writers (Sophocles, Euripides, etc) produced mass market intellectual products ie their works were not addressed to the elites! Same with Shakespeare! That did not prevent their work from being top quality. Analyse that!

Part of the European malaise is the "philosophy" that what is commercially successful & mass appealing is de facto low quality! That the less successful commercially something is, the more "quality" it has to be! A very "esoteric" approach to making anything! Having a linguistic Babel in Europe suits the mentality of the national champions in many fields b they from small, midsize or large states! That is my theory re why American pop culture has been dominating Europe for decades now! The left overs in each national European market seem enough for the native "industry" that even prefers, it seems, this situation than having to compete with other Europeans in a single European market! Am I wrong? I wish I am.

Europe is like a dys-functional family. Very LA!

A (European) management guru once told me in private that in Europe uncertainty is viewed as a threat, never an opportunity.

See how many European countries still cling to past glory (as colonialists, empires, etc)! Makes it, alas, hard for them to live in unison! We Europeans (a large majority of us), irrespective of nationality, are "united" (how ironic!) in thinking that we are so "sophisticated" compared to the US & others. So sophisticated that we can remain a trailer park of a (European) union and still be considered (so we think) "important" by the rest of the world. We better wake up!


Competition, pricing, inflation, interest rates and the EU SIngle Market

In business school I was taught that when a company is thinking of a new product or service, it must estimate costs, then research what the market is willing to pay, if larger, price at max. But many companies use a costs + % profit expectation = price system.

In Economics I learned that prices go up when companies see more demand and decide easier to raise price than expand capacity. Of course, in Services expanding capacity is ceteris paribus and in theory easier/cheaper than in Manufacturing.

In practice market structure (and enforcement or lack thereof, of competition law) plays key role in pricing decisions and in inflation. I suspect that is one of the reasons the Euro interest rate set by ECB is 1.5% in order to curb inflation compared eg to USA (0-0.25%): Less competitive markets than eg the US ones. That merely what I suspect. . As well as more regulations that tie the hands of business to adjust to the ups and downs. And of course a very imperfect 19 year old EU single market!

I even recall some analyses ib the last 2-3 years that said that EU single market works better outside the Eurozone than inside! Makes one wonder!

Cassandran Economy

They name storms. Why not name economic events too?

Cassandra (would be a good name for this economic crisis. So many prophecies



Thursday, 25 August 2011

Reminder:: Economics is a social science

At the end of the day (and the beginning actually) & in spite of fancy math & formalae, Economics was and is a social science.

The appeal of economic developments

Seems to me there are a few thousand people in the world who care too much about (macro) economics and the rest 6.9bn do not give a ....!

As per all that finance jazz, even fewer!

Merkel, CDU, Obama. East Asian Tigers, leadership, Political Union

Tuesday, 23 August 2011

The Achilles Heels of "Western Civilisation"?

Are determinism and low tolerance for uncertainty the Achilles Heels of the so called "western civilisation"? Is it the fault of the (Ancient) Greeks, the Romans or someone else?

See Max Weber, maybe?

Food for thought.

The TOS stu....! Fewer rules and better rules!

Think of a country as a social medium (used to call them online communities) and its laws as the terms of service (TOS) of that medium/community. Would you want to live in a SM/community with a 10000000 pages TOS?

Or a condominium with a 10000000 pages book of rules for its tenants?

Or buy a TV set with a 10000000 pages manual?

Now take 27 social media or communities. How can people through-out those communities when each has its own 1000000000 pages of rulesbook? Now assume that in some areas, the rules are common, some not, but each community transposes those rules that they develop and vote together on its own? Can you easily cross between each community/social medium?

Now take 200+ social media or online communities with each its own 100000000 pages rulesbook.

That's the world (planet) we average people and the average company (micro or SME) tries to live, work, venture, growth, do things in.

See the problem?

Fewer rules, better rules, and above all, common rules. For a planet we can all live better on it.

Sunday, 21 August 2011

Entrepreneurship in Europe

A few years ago I was participating in an online discussion (remember the online forums with the "threads" of topics?) about business and entrepreneurship.

I was arguing that the world, at least the western one, was from into a Services based economy (and intangible goods and knowledge, etc) and that unlike the manufacturing world, one did not need much money to start a company/business that dealt in either Services or intangible (aka intellectual or grey matter) goods/products.

Still, finding the money to get started in such a business is a problem argued one of other participants. I think he was from the UK but in any case from Europe.

Why don't you ask for family and friends to each either lend you some or become shareholders in your company, I proposed. I was not expecting the reaction I received, which I thought and still think is indicative of the problems of entrepreneurship and business culture in Europe.

"What, put my family's and friends' money at risk? You got to be joking, man!" was the fellow participant's reaction.

Analyse this.



Wotk in the present and future

Do not ask people what they do for a living.

Ask them how and why they do it.

The present and future of work

No work is shameful when done for the right reasons.

Every work is shameful when done for the wrong ones.

Saturday, 20 August 2011

Germany: Where is the grand coalition government of 2005-2009 now that Merkel needs it?

In recent days the FDP has continued to validate my view of many months ago that Merkel, Germany, Europe & the world would be better off with a German grand coalition government as in 2005-09!

Thursday, 18 August 2011

Euro: Reality and realities and other global dynamics

An analysis of current affairs issues.
In vlog format. 10 minutes.

Euro scenarios: The realistic option.
US downgrade, Merkel-Sarkozy, Bear markets, etc!




See also (in text): The real reality of the realities re the Eurozone


The real reality of the realities re the Eurozone

For quite some time now one can read or watch analyses, commentary, predictions about the Eurozone.

Here are some excerpts from my tweets today on the subject of all the doom and other jazz about the Euro or re exit of country X or Y or Z or XYZ or s splut in two Euros (!!), etc etc etc.:

The only realistic solution, albeit "controversial" is move to political union. That is the reality. All other solutions are not realistic.

The Euro is, by design and nature, like "Hotel California" (see Eagles' song). Ij other words, once there, there us no exit. It is technically impossible inter alia plus there is no provision is the EU Treaty for Euro exit, only EU exit.

Hence, the only solution left is political union.

Now, break up of the EZ or EU could be a realistic option only if WTO world trade was advancing. The opposite is the case. Thus no break up.

Thus: The reality, albeit hardcore, is that the EU or EZ have only one direction to move: Political Union. C'est la vie! Denial won't change it.

Exit of any country from the EZ is neither feasible nor technically & Treaty-wise possible. Thus discussing these options is a waste of time and energy.

It is high time the EU and the EZ face the real reality & not the one fabricated by financial market makers, populism, ad hungry media & sci-fi!

The Euro is not a straight jacket. And monetary, interest rate and currency policy that accommodates all members the best way possible is feasible. The only "straight-jacket" is ECB's unrealistic inflation target leading to overpriced Euro

In addition: There is no need for any exit (but which, remember, is technically infeasible & not in EU Treaties) eg if the ECB/Bundesbank adopt an interest rate that leads to a Euro below 1.2 USD.

PS1. Does anyone think that the German exporters like a Euro at 1.4 or more USD? See what the Swiss ones are saying about theirs.

PS2. The (financial) markets may or may not view a move to political union as a more stable "state". But reality is based on total systemics for what the financial markets think.


See also my vlog (10 minutes):
Euro: Reality and realities and other global dynamics

Which competitions do you watch? Barca vs Real or USA vs China or Markets vs Euro etc?

Barca vs Real
or
US economy vs Chinese economy
or
Agorocracy vs Democracy
or
Markets vs Euro
etc?

In the following video (in vlog format, 2 mimutes 33 seconds) I am making some analogies between sports and economic and political competitions that are "on" these days:


The American Dream: Employee, Corporate Executive or Entrepreneur?

I just read an August 8 article titled "The End of Jobs in America" in PlanetPOV.com. I recommend reading it.

Among other things, the article quotes a U.S. Commerce Department stat according to which "U.S. multinational corporations, which employ a fifth of all American workers, cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million. In contrast, in the 1990s, they added 4.4 million jobs in the U.S. and 2.7 million abroad".

Now, before I proceed to my comments, here is a prediction re jobs in America: See Table 1. in BOL's ((US) Bureau of Labor Statistics) "Occupations with the fastest growth in the Occupational Outlook Handbook, 2010-11: Overview of the 2008-18 Projections"
Note that occupations ranked No3 and 4 (in the Top 20) in predicted growth rate are:

At No. 3: Home health aides with an expected +50% growth 2008-2018 translating into 460,900 new (extra jobs) in 2018 compared to 2008 with a median 2008 annual salary of just USD 20,460 and short-term on-the-job training as an education/training requirement.

At No. 4: Personal and home care aides, with +46% translating into +375,800 jobs at mdian 2008 USD 19,180 (also "short-term on-the-job" education/training requirement).

These two occupations, which are valuable to Society (in my personal experience and view), no mistake about that, but alas fall into a wider low skill - low pay category that according to other predictions I have read in recent years constitute the bulk of new jobs expected in the US!

Noe that in 2008, about 1.74 million people occupied jobs of the above 2 types and another 847000 expected ti by 2018.

The list of largest % growth does include college degree or graduate degree requiring and medium and high pay occupations, but the volumes of these occupations are relatively low. Indicative: None of the 18 other in this list is expected to create more than 200,000 jobs by 2018. Only 3 had a 2008 median annual salary of more than USD 80k and none over 100k.

See also:


Thus, here are my comments:

The so called American Dream was not a dream of being a career employee or even a high flying corporate executive. It was of working hard upon arrival in the US (washing dishes, etc), often an employee but eventually starting your own company, ie being an entrepreneur.

There is a lot of fuzz as to what a multinational (or global or international or ....) company is. Does it really have a "nationality"? I mean, it has to have its global HQs in some country, but a real multinational is it a "national" of that country?

IMO, a genuine "multinational", not! It has to have a citizenship (aka HQs) in one country (there is no "global company statute" (yet at least) and I am not sure what happened to an old proposal for a "European company statute" that was caught in the EU's legislative pipeline for ages in the 80s and 90s). But its shareholders are from all over the world, the shares can be traded in many stock markets around the world, its board can include nationals from all over the world, so why would one expect that the mere HQ location of a multinational in the US (one of its states) or the UK etc makes it a "US or UK multinational" ie a contradiction in terms?

These days, having a multinational have its HQs in your country may give you the advantage of being able to tax a portion of its global income (via transfer pricing via HQ fees charged to its subsidiaries around the world, licensing and royalties etc) but a multinational to be a multinational has to spread its production and its employment around the world. It is an integral part of what makes it a "multinational". Otherwise, it is merely an American or British etc company with international sales! In other words, a bid difference from a multinational.

Thus the key statistic is how many Americans are employed in corporations that export (thus provide the US with revenue in addition to jobs).

So the US Dept of Commerce stats above simply reflect a transition of US corporations with international sales to multinational ones!

The bulk of US jobs should be expected and encouraged to come from companies that are dynamic, provide meaningful employment thus salary and, why not, are competitive by spreading their sales around the markets of the world. Multinationals will provide some jobs, but where and of what type, that is a matter of their multinational/global shareholders, board, stakeholders to decide or be concerned. No country owns a multinational corporation, many can benefit from its existence in different ways, but no "national allegiance" should be, rationally expected.

That is what makes the BOL predictions re occupations more relevant and puzzling.

PS 1. As I have argued in other posts (and tweets) the best way for the US and the EU to regain manufacturing in large numbers is via leaving the WTO. The EU and the US were losing manufacturing to the East before China joined the WTO (December 2001) but since it did, they kissed manufacturing capacity and jobs goodbye! Can green tech and emission trading schemes help them regain it? IMO, no.

Tuesday, 16 August 2011

Marketing analysis for the npthinking tweeting and blogging






Based on the programme twocation.com which calculates where the followers of a Twitter account are located, I received (16/8/2011, followers 1069) the following raw data which I then compiled as follows:

(%)

USA 29.50 (No. 1 overall)
Canada 3.20
Mexico 0.50
-----------
Total NAFTA 33.20%

Eurozone17:
11 of 17 reported followers:

Greece 12.30 (native) (No 3 overall)
Belgium 11.00 (No. 4 overall)

Ireland 4.00
Spain 3.20
NL 2.10
France 2.10
Portugal 1.60
Germany 1.30
Italy 0.80
Austria 0.80
Finland 0.50
------------
Total Eurozone 39.70%

EU27 - Eurozone17:
5 of 10 reported followers:
UK 14.20 (No. 2 overall)
Sweden 0.80
Denmark 0.50
Latvia 0.30
Hungary 0.30
------------
Total EU-EZ 16.10%

Total EU (16 of 27) = 39.70 + 16.10 = 55.80%

Other Europe (7):
Serbia 0.50
Jersey 0.50
Switzerland 0.50
Holy See 0.30
Russia 0.30
Turkey 0.30
Armenia 0.30
------------
Total Other Europe 2.70%
Total Europe (26 countries >0): 55.80 + 2.70 = 58.50%


Other countries:
18 more countries:
Australia 1.90
China 0.80
India 0.50
Japan 0.50
Pakistan 0.30
Singapore 0.30
Costa Rica 0.30
Panama 0.30
Paraguay 0.30
Argentina 0.30
Brazil 0.30
South Africa 0.50
Indonesia 0.50
Taiwan 0.30
Thailand 0.30
Tunisia 0.30
Greenland 0.30
New Caledonia 0.30
--------------------
Total 8.30%

The total is 97.30%, which leads me to assume that only 2.70% was not attributable to a country/location. 23 European plus 21 more countries (3 NAFTA plus 18 other) show followers of @npthinking.

Note also:
BRICs (Brazil, Russia, India, China) = 0.30 + 0.30 + 0.50 + 0.80 = 1.9%
PIIGS (Portugal, Ireland, Italy, Greece, Spain) = 1.60 + 4.00 + 0.80 + 12.30 + 3.20 = 21.90%
To adjust for native country effect, let's use for Greece the same as of Portugal (same population), then PIIGS(2) = 11.20%

EU Big 5 (Germany, France, UK, Italy, Spain) = 1.30 + 2.10 + 14.20 + 0.80 + 3.20 = 21.60%
1 of 5 followers are from the Big 5 EU member states, but 2/3 of that is from the UK.

Top 10 (excluding native country):
1. USA 29.5%
2. UK 14.20%
3. Belgium 11.00%
4. Ireland 4.00%
5. Spain 3.20%
5. Canada 3.20%
7. France
7. Netherlands 2.10
9. Australia 1.90
9. BRICs 1.90

Since 95% of the posts is all in English, let's see the native EN speaking share of the whole:
USA 29.50% + UK 14.20% + Ireland 4.00% + Canada 3.20% + Australia 1.90 = 52.80%

G7 (to be calculated)
G20 (to be calculated)
UNASUR (to be calculated)


Notably, these follower stats for @npthinking vary considerably from the page views stats of the npthinking blog (provided by blogger.com to each blog account for free).

Thus: To be continued!

Update 24/8 (+8 days)
1117 followers from 1069

Updated stats:
USA 31.10% up
UK 14.20% stable
Greece 14.20% up
Belgium 8.40% down
Canada 4.20% up
Ireland 3.90% down 0.10
Spain 2.40% down
Australia 1.80% down 0.10
Portugal 1.60% stable
Netherlands 1.60 down
France 1.60% down
Germany 1.30% stable
Mexico 1.10% up

---------------------------------------------------------

Update No 2 > 28/8 (+12 days, 4 since last)
1182 followers +65 since 24/8, +114 since 16/8 (+10.7%)
13 countries (same as 24.8) with shares >1% but most are down (as %) compared to 24/8.

Updated stats:
USA 33.90% up x 1182 = 400,6 followers
UK 13.70% down x 1182 = 161.9 followers
Greece 13.40% down
Belgium 7.80% down X 1182 = 92.1 followers
Canada 3.80% down
Ireland 3.20% down x 1182 = 37.8 followers
Spain 2.60% down
Australia 1.90% up 0.10
Portugal 1.60% stable
Netherlands 1.60 stable
France 1.10% down
Germany 1.60% up
Mexico 1.10% stable

Reminder, on 16/8, with 1069 followers, the % where:
12 countries had market shares higher than 1%
USA 29.50 x 1069 = 315,3
UK 14.20 x 1069 = 151,7
Greece 12.30
Belgium 11.00 x 1069 = 117.6
Ireland 4.00 x 1069 = 42.8
Spain 3.20
Canada 3.20
NL 2.10
France 2.10
Australia 1.90
Portugal 1.60
Germany 1.30
(Mexico 0.50)

That means
+114 followers from 16/8 to 28/8
+86 US followers, from 315 to 401
+10 UK followers from 152 to 162
-26 followers from Belgium based followed from 118 to 92.
- 5 Ireland followers, from 43 to 38.

I love maths, stats, the full monty. I miss it (used to do a lot of that number crunching in the old days). So I am going to input some of the data so far into a spreadsheet and take the marketing analysis 1 level up from this very basic one. Will be fun!

OK then, bottom line today, +10.7% followers in 12 days, the ranking of the top 12 has been the same in spite of changes in the market shares (Mexico went from 0.5% to 1.10 by 24/8, that making the number of countries with market shares above 1% 13)

In absolute numbers, USA+UK account for 96 of the 114 net gain in followers (on Twitter).
22% of the Belgium based followers have been lost in those 12 days. Potential causes? Could be the wider content of @npthinking since the revamping, approximately 1 month ago, that now includes not only EU and other policy but applied philosophy, music, poetry, etc. which was also communicated via the @change of the username from the old @nppolicyanalyst. In the 30 days since these changes, the pageviews for the npthinking blog have gone up (more stats on that in the coming days) and the volume of followers of npthinking on Twitter has jumped from approx. 820 to 1182, ie 362 (+44.1%!!). As you can see from the graph at the top of this post, this jump improved on an always significant rate of increase in the last 3 months. Eg from 665 on May 27.
In effect @mpthinking following has "naturally" (no "fertilisers") grown 77.7% in 3 months (May 27 to August 28)!

To some extent, the growth of @npthinking followers in the last 30 days is due to the attempted merger of two accounts which was not executed as well as planned and which led initially to a 20% or less move of the followers of the second account to @npthinking (note: there was though a significant number of overlaps in the followers of the two accounts). One week after the merger (via deletion of the second account and notices to followers to move to the other one), from Aug 24 to Aug 31 the following of @npthinking had increased by a less than 25% of volume of followers of the other account, ie from 825 to 964. A gain of 139 "only" (considering the merger). Now, a month after the merger, the gaiu stands at +362 (+139 + 223). And on non-systematic inspection of the usernames of the new followers, it seems that most did not come from the other account).

The US was and remains the No1 market not only for my tweets but my blog posts as well.
US has 34.9% of the pageviews in the last 30 days (according to free blogger.com stats that come with the blog). That share is close to the US share in Twitter followers (both around 1 on 3).
No2 share of pageviews comes from the UK, but with 4.6%. The spread in npthinking blog pageviews in the last 30 days is wider across countries than thar of @npthinking tweets.


Monday, 15 August 2011

The new capital? How and for whom?

Humankind that gone from real estate & farming land Capital to monetary Capital and now to patent & copyright (intellectual) Capital.

The US did not manage to convince the WTO members to do an agreement on it and tried in a much smaller ad-hoc group with the EU, Canada & 1-2 more (ACTA).

Will this new form of capital be the cause of future friction between countries?

In principle, intellectual capital (and intellectual goods) are one way for the US and EUrope to be able to compete in the international trade game. The other is to erect fortresses in manufactured goods trade. Many services are or can be traded (after all tourism related services count as exports ie they bring revenue to an economy that are equivalent to the one from export of goods).

But what types of "intellect" or "great matter" intensive goods (as opposed to labour or monetary capital) can act as an adequate basis for a modern economy? Can eg an economy live & prosper by producing music, films, TV series, pop art and pop culture, ibn addition or instead of more traditional forms such as traditional R&D "products" (high tech etc)?


Strategy: The relevant market(s)

Originally written: 11/2001
Updated: 15/8/2011

1) National/Niche:
Are some national markets too small for niche orientated strategies?

2) National/Mass:
What are the key corporate/business competences for succeeding in the mass market of a small as opposed to the key corporate/business competences for succeeding in the mass market of large country/economy?

Yet:

3) Existential:
Do the above questions make sense when there is "free" (near) global (WTO rules based) trade for most goods? When there is a single market exists in the EU for almost 20 years now?

(A: In spite of the above, a national market is still a national market, and in some cases a local market is still a local market, ie "native" companies still have concrete/real "advantages" over "alien" ones).

4) National champions playing in the EUropean or the world league:
How are the key corporate/business competences for succeeding as in a national mass market relevant to those needed for succeeding in a wider regional, European or global mass market? To what extent and under what conditions are they compatible? And vice-versa.


Global animal financial farm

So the moral of the story regarding certain ongoing events is that if you mess with the US you get ...., but if you mess with Greece, Portugal, Ireland ......

And the best version why that is so is that investors know the US economy well enough to defy ratings while downgrading GRE, POR, IRL sent them spiraling down on the basis (momentum) of that initial downgrade and on the basis of the (by comparison) very imperfect (and sometimes anecdotal) "knowledge" of these economies by the global financial community.

Oh what an "animal farm" global finance is!

Sunday, 14 August 2011

Which is the biggest market for Chinese goods (and services)? USA or EU?

I was watching a US TV anchor claim that the US is the No 1 market for Chinese products (as part of an argumentation he was making that "China needs the US", he even went on to suggest that it is the US that is doing China a favor by allowing it to "park" 1.2 trillion of its 3.2 trillion Foreign currency reserves in US T-bills!!!)

Is it, I wondered!

According to the European Commission's Trade pages, EU goods imports from China 2010: €281.9 billion (+31% on 2009). Add to that: EU services imports from China 2009: €13 billion.

According to the US Census Bureau, US good imports from China in 2010 were: USD 364.944 billion. As per imports of Services, according to the Office of the US Trade Representative U.S. imports of private commercial services* (i.e., excluding military and government) were $8.2 billion in 2009 (latest data available).


So 294.9 (EU) vs 373.1 (US)! The guy was right.

But wait! The EU imports are denominated in Euros. The US in USD!

Let's see what happens when we apply different USD/Euro rates to these 2 numbers:

1 Euro = 1.2 USD > The EU imports rise to 353.9 USD (20 billion less than the US ones)
1 Euro = 1.3 USD > The EU imports rise to 383.4 USD (8 billion less than the US ones)
1 Euro = 1.4 USD > The EU imports rise to 412.9 USD (30 billion more than the US ones)

The parity rate (at which the US and EU imports from China are of the same value, in 2010), 1.2652 USD per Euro!

Should we not make those calculations based on Yuan? Well, it depends. Among other things, on what happens to the revenue from exports. Does it get converted to Yuan and used in the Chinese economy or is it kept in the currency the contract was made and invested? Plus, are contracts for Chinese exports to the EU, are they usually made in Euros or in USD? In Yuan? Doubt it!

So is there an answer? Is the US or the EU the biggest market for China's exports?

Let's find a stat for the average USD/Euro rate for 2010:

According to the US IRS, it was 0.755 Euros per USD ie 1/0.755 USD per Euro = 1.3245!

Using that rate then: EU imports from China were 294.9 billion Euros times 1.3245 = 390.60 USD which is 17 billion more than the US imports from China., USD 373.1 billion (2010 stats, 2009 for US Services imports).

Thus the EU is a bigger market (2010) for China's exports (goods and services) than the US. And of course the biggest in the world.

But then again, the EU is not a country or a single economy (at least not yet). So, I now have an EU headache.

PS. So, EU, make up your mind. Are you a free trade area or a country?

To be continued (maybe; but surely at your local market)

PS2. Of course, only EU imports to the Eurozone were directly, at best in Euros. For the 10 other non-Eurozone members, they were probably denominated (the contracts thus the payments to China) in Pounds, Swedish Kronas, etc. But the European Commission lists them all in Euros. Thankfully, imagine if I had to convert 10 import data into Euros!)


Contagion is contagious too!

First there are the finance related contagion. Then it spilled over into a contagion of bad ideas (and especially policy related ones). Then to a social contagion.

Analyse this!

After Greece et al, it seems that now it's England's turn to be analysed top to bottom by all sorts of experts, analysts and commentators.

Who will be next?

(Contagion is contagious too)

EU & USA: The right policies can come from the center

Neither Marx nor Hayek or Ayn Rand were right. The times call for effective and to some extent radical policy, from the center! Neither monetarism nor keynesianism. ''

We are flooded by ideologies that either theologise the markets or demonise the state and its public sector (eg most Libertarians) or, the opposite, ie theologise the state and its public sector and demonise the private sector.

Neoliberalism and conservatism tend to underestimate the fundamental human "need" for basic needs including the security of social security. Socialism tends to suppress the freedom of economic and entrepreneurial expression. Both are faulty.

Most political parties and political/policy platforms to the right and left of the center miss the concept that some things are better done by the market, some are better done by the public sector (aka the state). Each has activities where it is stronger than the other. Neither the (financial and other) markets nor the state should be an object of political or philosophical worship!

The center I am referring to recognises both:
a) the need to secure peoples' basic needs and
b) to give people more freedom in pursuing wants and dreams

in their work/economic or social or other aspects of their lives

Modern systemics and dynamics are complex and volatile thus they are difficult to grasp. Thus some resort to the aforementioned and other simplistic models that have confused the public opinion.

What is the solution?

Not a simple one, but a basic element of any centrist model is:

To have the state/Society guarantee all its members that rain or shine their basic needs will be covered and then let them go out to real free markets to pursue their wants.

The philosophy that every human deserves healthcare, a basic place to live and basic food on the table, not matter whether he/she has "earned" it or not. That is the humanist as well as the proper thing for a society and polity to do. And the European way, in various models but with the same core values, aka the European Social Model. The ongoing crises are not an excuse to dismantle this model. If anything, it needs to to adopted globally, at least to some extent.

The key to the centrist policy platform I am referring to is separating needs from mere wants.

Radical times call for radical policy making. But these radical policies will come from the center, neither left and certainly not the hawkish right. In Europe, in the US, and elsewhere.

Saturday, 13 August 2011

Does the Eurozone need a new central bank (part 2)?

Further to Part 1 (July 7, 2011), while the Fed this week pledged to keep interest rates near zero for another 2 yrs, the ECB's President has boasted for having kept Euro inflation lower than Germany did during the DM days (1)!!! Does it take an economist or MBA to figure out that there is something wrong with that? The effects on the price of the Euro and thus on Eurozone's firms, over-priced for a large part of 2002 - present, not only in foreign markets compared to US, Chinese or even non-Eurozone EU made products (and services, see eg tourism) but also in the Eurozone and even home markets!

Europe, wake up! Anti-inflation fixation is suffocating the real Eurozone economy!

(1) New York Times, August 5, 2011: Euro Builder Ends His Career on a Bitter Note: "... As he never tires of reminding journalists, since the introduction of the euro in 1999, the central bank has held inflation below the official target of about 2 percent — a better record than the Bundesbank in the heyday of the German mark...."

Friday, 12 August 2011

Should we push the reset button on economic and political theories of the era?

Should we push the reset button on economic thinking & theories. Have most of them become irrelevant in our era? Back to basics as foundation?

Let me start off with this syllogism:

My parents taught me to sell only what I own and to only buy something when I have the money to pay for it. Were they wrong?

Someone suggested that my parents were wise. But does that mean that they were they right? Or wrong? Did they raise me for success or failure in the real world, based on that mentality (culture)? In other words, was/is that mentality a way to succeed in the modern world? Or a barrier? Just discussing.

Someone else suggested that if everyone did the same the economy would implode. Did he mean that credit based capitalism would implode? Assuming so. what does that then imply about its fundamentals? Sound or shaky?

Moving on:

Capitalism: Storing value is one thing, but Is it "OK" to make money (profit) from lending/investing money?

Moving on:

Many (eg in Britain) talk re "Sovereignty" vis-a-vis EU.

But:

How sovereign is a country that has financial obligations to foreign countries or nationals?

How sovereign is a country that takes instructions from foreign private organisations, media or "houses"?

How sovereign is a country that relies on foreign investment or foreign consumers or has a trade deficit?

Can't/shouldn't a sovereign have the freedom/power to walk away from any foreign or international legal (eg EU and its set of laws in the form of transposed directives or regulations) or financial (eg debt) obligation to another sovereign or a non-sovereign entity or even a private entity?

What about the sovereignty of the human race as a whole vis-a-vis global warming, radiation pollution risks, HIV/AIDS, cancer, famine, etc?

Sovereignty of a) nations, b) states (a state is not necessarily/usually a nation) or c) the human race? d) __________?

Moving on:

If the world is indeed global nowadays, then why do we still have ranking of countries in many areas/things? Why is there no label "Made on Earth"? Is it a global world or a global championship between countries?

How can one be a "citizen of the world" when the world is not a single Polity or state (in the Platonic sense)?

Is there a European union or a European championship between 27 countries with the EU institutions as the governing body & referee?

Just thinking, philosophising, etc. Because and therefore I am.
In 2011, is it "I think therefore I am" or "I am therefore I think"? Or both? Or neither (seems the case)?


There are no golden rules in Strategy and in Management

There are no golden rules in Strategy and Management

Originally written: December 2001 (in Greek)
words: 616


One could argue that business is like a chessboard, on which each "player" has its own "army". But the analogy with chess might lose its relevance in markets where the opponent (whose movements the player is expected to foresee) is not one not even a few.

The number of "players" (firms) in each market ("game") clearly affects the type of game. Maybe business is more like an "arena" in which many 'gladiators' compete against each other under the gaze of "referees”, and the audience (customers, analysts, investors, etc.). Let us adopt this metaphor for the purposes of this analysis.

In relation to the recent past, in the modern business "arena" the battles have more and more fronts, the weapons are more and more complex, the role of "referees" is getting smaller. New “gladiators” enter the game from all over the world.

Other gladiators are limited to one of the corners of the arena (ie local or regional markets), others move across the field. In parallel arenas, there are other industry/sectoral "battles" and moves from arena to arena (or the simultaneous presence) is allowed by the game.

In these "multi-fronts" conditions, strategy is particularly important.

Policies or actions such as cutting costs, or general measures to improve productivity are not "strategic." Neither is planning per se.

Corporate strategy is a broad and very demanding exercise. Even fundamental business questions should come under review, including:

  • What are (as a company) my skills (core competencies);
  • What is my market or markets (market definition)?
  • What is the product or my products and what is/are not (my products)?

Are strategies, tactics or procedures in Marketing, Sales, Communication, Finance, Human Resources, Production and Logistics, IT, etc. compatible with (or serving) the overall corporate strategy?

What is the rate of change of the parameters in the external environment of my company and what is the impact on strategy?

Strategy is no simple process anyway. But especially nowadays, it must combine intensive analysis with creative thinking.

We must be mindful of the external environment and the internal situation. .

Eg a strategy that is perfectly suited for a competitor is not necessarily appropriate for one's own company. The reasons may be many. The main one is that the strategy should among other things also fit the capabilities (competencies) of the company that will follow this strategy!

Undoubtedly, in the context of a strategy new competencies can be developed or acquired from the market.

This is obvious in the context of a dynamic (rather than static) strategy. But that does not mean that these new competencies are compatible with new strategy.

Matching conditions (opportunities and threats) of the environment with corporate competencies and weaknesses is a delicate process.

But the strategy, much like management, is both science and art. As an art, it requires creativity, especially in times like this.

Eg whether a trend in the environment is a threat or an opportunity depends on one's perspective. In the conception process of a new strategy, nothing should be a given. Ultimately it all depends on creativity and a thorough analysis and of the external as well as intra-company environment.

It is worth noting (though obvious) that no company is identical to the next (neither is any person).

So what can be achieved does not depend only on the characteristics and abilities of the company but conditions in its environment. No factor or parameter is the critical (decisive) one.

This is probably the magic (beauty) of business and entrepreneurship: At the end of the day, there are no limits to the available strategic options! That is why both rational analysis and creativity are needed.

Thursday, 11 August 2011

The sensitive warrior

There are 30" left in the game. The opponents are leading. The team is determined to win. Armed with years of training and experience, loyalty to the team and to the home crowd, and a lot of "HR Capital", they know they can do it. They are true warriors.

Salvaging all their strength, they go for the "extra yard". They win because they want to win more badly than the opponents.

They are now given the trophy under the cheering of the enormous crowd. They are the champions. They are winners, and to the winners the "spoils".


For many, business was and still is like "war". Just like football, just like "love". They do business, they play football, they treat the opposite sex as a battle.

To win, they study the opponents, they get motivated, they fight, they beat them. They treat the market just like they would treat the target territory. Fight and conquer.

In human relationships, this kind of "lover" has long gone out of "fashion". Nowadays it is the sensitive "lover" who builds relationships, who is chosen, isn't he.

He does not worry about beating any opponents. He focuses on understanding the opposite sex, feeling the emotions of the persons he is interested in.

Isn't the same principle applicable to business today?

Does
a) the competition matter, or
b) feeling the 'clients', building relationships with them? Keeping them (the target market) happy. Understanding and satisfying their needs and wants.

Some would agree with (b).

Others claim that this is nice in theory, but beating the competitors, the other "suitors", does matter too.

It is a matter of balance between the two, hence the need for a "sensitive warrior"?


Written: 2003


The Winds of Globalization

From the winds of change we have crossed over to the winds of globalization, sweeping everyone in their path.

A song:

Wednesday, 10 August 2011

Is it time to consider the unthinkable? Nationalisation of the banking industry?

In a past post, back on November 9, 2009, titled: Is free market capitalism fatally flawed?, I argued inter alia that:

a) The economic system in many countries today is flawed but that system is not free market capitalism

b) A key factor leading to the flaws and resulting popular dissatisfaction with the current economic systems are major flaws in competition laws and related supervision of the markets.

c) the BBC World Service poll results show need for better functioning free markers and better welfare state, both!

d) The BBC World Service poll results show the need to secure peoples' basic needs and for giving people more freedom in pursuing wants and dreams in their work/economic or social or other aspects of their lives.

e) Neoliberalism and conservatism tend to underestimate the fundamental human "need" for basic needs including the security of social security

f) Most political parties and platforms miss the concept that some things are better done by the market, some better done by the public sector. Each sector has activities where it is stronger.

Instead we are flooded by ideologies that either theologise the markets and demonise the state and its public sector (eg most Libertarians) or, to an increasing again level, the opposite, ie theologise the state and its public sector and demonise the private sector.

Modern systemics and dynamics are complex and volatile thus they are difficult to grasp. Thus some resort to the aforementioned and other simplistic models that have IMO confused the public opinion.

What is the solution? Not simple, but a basic element of any model I have in mind is:

To have the state/Society guarantee all its members that rain or shine their basic needs will be covered and then let them go out to real free markets to pursue their wants.

Well, basic banking falls under the "needs" part and given the performance of so many banks in so many OECD countries in the last few years, it is maybe time to consider the unthinkable (after all banks did get temporarily nationalised, officially or effectively, in the UK, the US, etc and now in Ireland, etc. Something that before 2008 only Chavez would consider! But 2008 has brought down many myths re the systemics of the economies we live in and if the taxpayers are to foot the bill for saving banks, then they have a right to own them in return (ie nationalisation).

As per investment banking, it should remain private but be 100% separated from basic banking and those who use them should do that at their own risk (ie policy makers and regulators must make sure that none of them becomes too big to fail again).

It is about separating needs from mere wants and about separating low or no risk from risk encompassing finance.

Radical times call for radical policy making.

being Euro-niche?

Business today:

a) be big and think mass or

b) be small and think niche?

Can a company based in the EU, specially an SME or micro, realistically focus on a global "niche market" or even an "niche" market within the EU (or Eurozone) these days?

Multiculturalism as a competitive advantage

In the midst of an period (not an era) of xenophobia, one has to note that multiculturalism is an asset not a problem for a Society, economy and country that knows how to appreciate it and deploy it as an advantage.

Societies, economies, countries that are as diverse as the world have the assets needed to be true "world powers" in other worlds play a key role in all aspects of world affairs.

It seems that not every country, society, economy has the fibre to appreciate nulticulturalism. Many, tolerate it at best. That makes culticulturalism a rare thus even more valuable asset and source of competitive advantage.

Tuesday, 9 August 2011

World Dynamics: The effects of just-in-time and outsourcing

Some years ago (2003) I decided to use my experiences and education (including and MNA and studies in Operations Research - Decisions Science and Transport Systems Analysis - Logistics) and in order to try to get an idea of the fundamental (I can them systemic) causes or factors that "drive" what is going on in our era.

After some time I came to the conclusion that it was not globalisation per se that was "responsible" for the volatile behaviour of the "system", but:

a) The just-in-time process in inventory management, combined with
b) Outsourcing

Two versions (not identical):

1) The vlog version (7 minutes, 38 seconds):



2) The text version:

a) It must now 30 or 40 years since just-in-time started being implemented by companies in order to improve their ROI by reducing the volume of inventory. Part of the reason for that was the then high interest rates and thus opportunity cost of capital. In other words, goods sitting around in inventory waiting for demand to absorb them contained value (capital) that was not being used. By minimising the volume of inventory, that cost was drastically reduced. But to do so, it required fundamental changes in the way companies, especially manufacturing ones operated, as well as their suppliers and clients (whole-sellers, retailers, transporters, etc), ie the who "value chain".

The adoption of just-in-time spread to more and more companies, even at times of lower interest rates, and started to affect all aspects not only of the economy but also society. Eg fast food is a result of the expansion of this process. 24/24, 7/7 news as well. Slowly, the world picked up pace and started to "spin" at a faster rate. At some point, the rate became relentless. We are still in that stage. Until the "engine" bursts.

More and more people, more and more decision makers have less and less time to make decisions, to analyse problems or situations. Or systemics and dynamics. In a way, that was the curse the Ancient Chinese referred to when they said "May you live in interesting times".

b) At some point, companies also decided that instead of keeping many functions internal, it made "more sense" to purchase them from the market. The idea was nor new. Let's not forget that once upon a time many companies had their own advertising department and their own corporate strategy/planning department. Once upon a time cleaning and security personnel were employees of the company not of a sub-contractor. Civil engineering had a long tradition of using sub-contractors. A theoretical backing of outsourcing was that by purchasing these "services" from the market instead of producing them internally, a company was able to expose them to competition thus improve their productivity (and cost to the company). That made things more complex and volatile, including employment. Sub-contractors lost contracts and let people off at once.

c) Then also came the M&As blitz financed by junk binds that put even more performance pressure on companies, on top of the existing pressure on CEOs and boards to show great performance every single quarter (as well as a system of remuneration via stock options). What globalisation did was, via the increasing freedom of trade of mostly manufactured goods, to offer more options not only re suppliers and clients but also sub-contractors. The volume of goods transport skyrocketed. The entry of China into the WTO system (12/2001) provided the world manufacturing industry with a huge new pool of industrial workers and eventually consumers (this is 1.4 billion of the 6.9 billion world population we are talking about!).

It should not have taken the realisation of global warming to realise that the system was overheating! All one had to do was slow done and take a look at the pace the rest of the world was passing him/her by. The average age of managers declined because experience was of less value and ability to think and act on one's feet of more value. So you pock up the phone and call info in the US or the UK and wind up taking to an operator in India or the Philippines pick up. A natural result of outsourcing combined with other systemic factors some of which are described above. Even some of stock trading have been "outsourced" from humans to computers and their algorithms.

During the same time (listen to my analysis here) the real economy was too regulated and suffocating with national and international red tape and thus running out of the ability to yield ROIs that investment houses could propose to their clients in order to get their business (ie manage their money/investments). That led to the search for new opportunities outside the real economy, the new economy. And a bubble, the dotcom one. Then to a real estate bubble or a bubble of investment tools (CDs) "based" on real estate loans (mortgages) to riskier than normally serviced clients (subprime). A "natural" development due to the pressure of the finance world to offer investors better expected and if possible, real returns. The rest is more or less known and the story is still in play. Just turn on your TV or radio or social network today.

----------------------------------------------

My analysis above tries to explain parts of how we got here.

Solutions?

Oh my! One is to liberalise all factors, instead of keeping some (eg capital) free to move globally or almost free (goods) and others (services and especially work and people in general) virtually fenced into 200+ sections. The other is to limit the mobility of capital and goods. Good luck, in any case.

And finally, as an add-on, a song inspired by the topic:

Sunday, 7 August 2011

Waiting for the dawn of ... (Dum spiro spero)

Sunday, August 7, 2011. 10 pm Central European Time.

Today (1) I have the gut feeling the humanity will soon have to stand up for what it really stands for: Humanism

That out of these miserable dynamics, a new Renaissance will soon take place, focusing on humans, all humans.

A new enlightenment.


(1) In the midst of the Eurozone crisis, the USAA+ downgrade, the social contagion in parts of Europe and the events last nigh in north London the demonstrations re cost of living in Israel yesterday, the situation in Syria, while waiting for the Asian markets to open, in the midst of the mediatic gloom, doom and other genres of hype.

Saturday, 6 August 2011

World and European dynamics: 20 years later ....

20 years ago today, the WWW was born. The world was still celebrating the winds of change propelled by the fall of the Berlin Wall and the return of freedom in Eastern and South Eastern Europe (and part of Asia).

The Presidency of the Council was in Dutch hands and the leaders of the then 12 members of the then EEC were slowly preparing for the European Summit aka IGC that was scheduled to take place in Maastricht in December 1991. That decided to create the EU out of the EEC et al and decide on a Economic and Monetary Union (that started in 1999, coins and banknotes introduced on 1/1/2002).

The mere suggestion of China membership of the WTO was unthinkable (it happened 10 years later, December 2001).

76 years ago today (August 6, 1945, the nuclear bomb was dropped at Hiroshima (Nagasaki on August 9).

Today, August 6, 2011 the winds of change have long died down. The winds of doom, gloom, xenophobia, etc etc etc are in full force.

December 1990: I was going from Brussels back to Paris by train and reading, in a well known magazine, about the plans for a single European currency while a few pages apart I was reading about the dis-integration of the Soviet Union. Little did I know that less than a year later I was to work in Brussels and dive into EU policies/affairs.

Times for the winds of change to blow again. Time for political union of the EU. Why? Unless you have been living in a cave for the past 20 years, you can understand why. Come to think of it, even if you have, you can still appreciate why.

One reason? Read this and connect the dots. Unless maybe you think that a social medium of 200 or 500 million "inhabitants" is a Polity or a country. You should not because it is not. Please unplug the matrix.

PS. Some 2491 years ago, in August or September 480 BC, the battle of Thermopylae took place.

Friday, 5 August 2011

Euro Systemics: Remember that December (1991 and 2001)?

When EEC leaders decided on EMU (Economic and Monetary Union not European Monetary Union, the Economic part still missing (in action)) in Maastricht (IGC) in December 1991 they did not count on China WTO entry in December 2001 a few days before the introduction of the Euro banknotes (1/1/2002).

The China effect on world trade along with the inflation-phobia effect of the ECB/Bundesbank (making the Euro etra-hard thus offering even greater price advantage for Chinese products in the Eurozone among other places) are two key factors in the current Euro and EU crises.

Thursday, 4 August 2011

Why does the ECB need to keep its rates higher than the Fed and the Bank of England?

Both the European Central Bank (the central bank of the Eurozone17) and the Bank of England have today decided to keep their interest rates (on rhe Euro and on the Pound) stable.

But whereas the 0.5% interest rate of the BoE has been stable since the bank decided to react to the effects of the 2008 economics recession (and so has the Fed, with a 0-0.25% rate), the ECB has already raised the Euro interest rate twice this year, from the 1% it had moved to in order to address the global recession.

The situations with Italy and Spain are being addressed by various measures that are beyond the scope of this post/analysis.

The issues are:

1) Why does the ECB insist with this anti-inflation obsession? It should have lowered its interest rate back towards 1% as a policy measure to ease the tension on Greece, Portugal and Ireland as well as Italy and Spain and the whole of the Eurozone. Especially since Eurostat data released on August 2 (2 days before) showed that in June 2011 compared with May 2011, the industrial producer price index remained stable in both the Eurozone and the EU. In May prices fell by 0.2% and 0.3% respectively.

In a June 2011 - June 2010 comparison, industrial producer prices gained 5.9% in the Eurozone and 6.9% in the EU, down from 6.2% and 7.1% respectively in the May 2011 - May 2010 comparison. The Eurozone figure had peaked at 6.8% in March 2011-March 2011 and April 2011-April 2010 comparisons. Thus it was in June 2011 900 basis points below the peak. Since producer prices are an indication of the inflation (consumer prices index) a few months down the line, one can appreciate that the high annual industrial producer prices were a cause for inflation concern down the line in the Eurozone. And coupled with the inflation obsession of the ECB, the Bundesbank and a few other circles in Europe and globally, one can see why the ECB raised its rates 2 times this year. See but not fully appreciate, because those hikes had significant effects on other key socio-economic parameters, in some states more than others, but in all.

2) Which brings one to the following issue:

Why does the ECB have to offer such a premium for the Euro interest rates compared to the Pound and the USD?

It was already a premium at 1%, compared to the Pound's 0.5% and the USD/Fed's 0-0.25%, ie +50 bps to +75 to +100 bps (basis points). Now it is at +100 bps vis-a-vis the Pound and +125 to 150 bps vis-a-vis the USD!!!!

What on Earth (or in the systemics of the EU - Eurozone economy) requires such a premium, other than a premium of inflation-obsession?

Is it the cost of the absence of genuine economic and political union that translates into a Eurozone economy that lacks key elements that the US and UK economies have? Eg movement of labour? And in general the sub-performance in the functioning of the Single Market? The absence of EU or Eurozone economic policy? Tha forces the ECB to use interest rates and a premium to keep the Euro in balance with the USD and the Pound?
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