Samstag, 11. März 2017

About Those Animal Spirits...

"A large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."

John Maynard Keynes (General Theory of Employment)

When, during the post-2008 recovery, the expected recovery never really became a recovery, the star economist Paul Krugman, a biblical follower of Keynes, often proposed that some 'act of irresponsibility' was required, either by the Treasury or by the Fed, to set animal spirits in motion. One of his ideas was that the Treasury should 'mint that coin', the trillion USD coin, to circumvent the debt ceiling.

Since then, Krugman seems to have forgotten all about animal spirits. Instead, he described the improved job situation more or less as 'the outcome of weighted average of quantitative benefits multiplied by quantitative probabilities'. In Krugman's words: "The first few months of job numbers reflect the previous president's policies, not the new ."

If Krugman is right, then consumer confidence must also have a lagging impact, i. e. the confidence was built up by the previous President but it didn't show until the new President arrived. Be that as it may, according to Bloomberg, US consumer confidence is now at its highest level since 2001.

With so many positive news about the US economy, one forgets easily that it could have developed in the opposite direction, as Krugman predicted the day after the election:

But, fortunately, Krugman's then prediction did not (yet) prove correct. Perhaps it never will.

PS: Maybe the election of Donald Trump as President was the 'act of irresponsibility' which Krugman considered so necessary, except that he probably had a different act in mind.

Montag, 14. November 2016

Reflections On Donald Trump

I am amazed at the ignorance which opinion leaders, politicians, intellectuals, etc. display about the American system. Perhaps they should read up on James Madison, the "Father of the Constitution", particularly his Federalist #51 where he explains in detail the system of checks & balances. The worst fears of the Founding Fathers were that America could return to something akin to a monarchy, an imperialist Presidency, for example. In terms of domestic policy, the President is rather weak and in terms of foreign policy he is only a bit stronger. A sole major decision by a President, a decision which might affect future generations and the rest of the world (like Angela Merkel's gut decision to exit nuclear energy or to open doors to mass migration) would be impossible in the American system.

The most critical check of all on the President is impeachment. Two of the very few prominent people who predicted a Trump win (Prof. Allan Lichtman who has now correctly predicted 9 Presidential elections and Michael Moore who predicted a Trump win since July (but changed his mind in late October)), both of them are now predicting a Trump impeachment within a year. They argue that it will simply be impossible for Trump to spend an entire year without breaking a law. And David Brooks of the NYT predicts the same.

Trump appears strong because the Republicans also have the House and the Senate. In fact, George F. Will argues that not since the 1920s have the Republicans been as strong as now (and the Democrats as weak as now). And yet, there are checks and balances between the two houses and within each party. Some people may remember in the hysteria of the day that a lot of Republicans were against Trump. They will not automatically rubberstamp Trump's proposals (because they have to bear in mind the constituencies which elected them).

Newt Gingrich now calls the "Mexican Wall" a great "campaign device", not to be taken literally. The same will happen with other Trump provocations of the campaign. Someone wrote that "Trump's critics take him literally but not seriously. His followers take him seriously but not literally". American pragmatism: if you want to change the country as President, you first have to be elected President. What you need to do to get elected may be different from what you need to do to change the country. Anyone who claims to know what will happen under Trump is a demagogue. Perhaps Trump himself is not so sure yet.

The critical milestones are: (1) whom will Trump choose for his cabinet? (2) Inaugural Speech and (3) State of the Union Speech (both in the second half of January). By the end of January, one should have a reasonably clear picture of what Trump aims at.

The most thrilling experience of my life was the campaign and election of Barack Obama 8 years ago. When Trump later started the birther hysteria, I was thrilled how Obama shut up the lunatic in an elegant way. Am I for Trump today? No, but I have never in my life felt as brainwashed as in the last few weeks and if that brainwashing continues I may well be forced to join those who hate brainwashing with a passion.

Do we remember how upset we were when Trump said that he might not concede on election evening and how forgiving when, instead, Clinton did not concede? Do we remember that we warned of militant Trump followers in case of defeat and how tolerant we are now of militant Clinton followers? Are we concerned that 3 million Clinton followers signed a petition to change the result of a constitutional election? Is there an outcry when the German singer/entertainer Konstantin Wecker expresses his wish that Trump had died instead of Leonard Cohen? Is there an outcry when a features writer of The Guardian writes that it's about time for a Presidential assassination?

If we pride ourselves of being open-minded liberals, we should extend that courtesy not only to those whose values we share but also to those whose values we do not share. If we think their values are wrong, declaring them as such won't do any good. One has to convince them of better values. I recommend an article by the renowned liberal Prof. Robert Skidelsky on Project-Syndicate titled "Slouching toward Trump". I wish every self-appointed liberal would feel that way!

Samstag, 5. November 2016

How To Get Rich Quickly!

"If I were to predict the direction of the market movement correctly for five successive weeks, you might think that I knew something you didn’t. Indeed, you might be willing to subscribe to an investment service with that sort of track record. How might one create the illusion of clairvoyance? Select around six thousand names and addresses from the London or NY phone book. Divide the names into two groups. To the first group, send a letter predicting that the market will rise over the coming week. To the second, write predicting a fall in the market. At the end of the week keep the three thousand or so names who were given the correct prediction and discard the others. Divide those names in turn into two groups. To the first, predict a rise in the market and to the second, a fall. Repeat this process for five weeks, at which point there will be around 200 people to whom the following letter could be sent: „You may well have been sceptical when you received our first letter, but by now you will know that we have indeed found the secret of predicting successfully the direction of movement of the stock market. You know that our method really works. To subscribe to our investment service please send $ 5,000 by return.’"

Mervyn King: "The End of Alchemy: Money, Banking, and the Future of the Global Economy".

Freitag, 7. Oktober 2016

Deutsche Bank Shareholders: Life Under Capitalism Can Be Tough!

Reports about the impending failure of Deutsche Bank are greatly exaggerated! Deutsche - like any other company - can only fail in one of two ways: illiquidity or insolvency. De facto, Deutsche cannot become illiquid because of the (de facto unlimited) refinancing availability from the ECB. On the other hand, Deutsche could become involvent (insufficient capital) and that scenario actually looks quite probable at this point.

If Deutsche were to need capital, there should be no lack of supply. Certainly some of the existing shareholders (Qatar?) ought to be interested in increasing their ownership share at a cheap price. The greatest source of fresh capital, however, would be the German state.

The role model should be the US government's rescue of AIG in 2008. The state acquired 80% of AIG at a relatively low price. In the end, that allowed the state to take a very large profit when it exited AIG a few years later. AIG's founder and previous major shareholder Maurice Greenberg may justifiably feel that the has been ripped off by the state to the tune of 30 BUSD.

But, then: a capitalist like Maurice Greenberg will understand that life under capitalism can be very tough. 

Freitag, 15. Juli 2016

Auf Zur Europäischen Republik?

In Maybrit Illner's Sendung am 14. Juli wurde das Thema "Planlos nach dem Brexit - wie weiter in Europa?" diskutiert. Unter den Diskussionsteilnehmern war auch Frau Prof. Ulrike Guérot, ihres Zeichens Leiterin des Departments für Europapolitik und Demokratieforschung an der Donau-Universität Krems.

Guérot gab sich als leidenschaftliche Gegnerin von nationalstaatlichem Denken (und Nationalstaaten!) in der EU. Ihre Kernaussage: "Es gibt heute keine 'Franzosen', keine 'Deutschen', etc. mehr!" Ziel müsse es sein, eine europäische Republik zu gründen, wo alle Europäer vor dem gleichen Recht gleich sind. Nationalstaatliches Denken muß durch transnationales, regionales Denken ersetzt werden. In der Diskussionsrunde erntete Guérot keine Zustimmung, vom Publikum hingegen Applaus.

Ich habe auf Guérot's Ausführungen mit angehängtem Schreiben reagiert.

Sehr geehrte Frau Prof. Guérot,

einerseits war ich sehr beeindruckt, wie leidenschaftlich Sie sich bei Maybrit Illner für eine EU ohne nationalstaatliches Denken (keine Nationalstaaten mehr, sondern nur Regionen) begeistern konnten. Wenn Sie sich nicht ohnehin schon für DIEM 2025 von Yanis Varoufakis engagieren, wäre das sicherlich ein interessantes Engagement für Sie. Varoufakis’ Ziele sind Ihren Äußerungen bei der TV Diskussion sehr ähnlich.

Andererseits stellen sich für mich ein paar einfache Fragen: Wieviele Mannschaften würde Ihre europäische Republik ohne Nationalstaaten zu den olympischen Spielen schicken? Wieviele Mannschaften würde dieses Europa zur den Fußballweltmeisterschaften schicken? Gäbe es dann noch Fußball-Europameisterschaften? Und - last but not least - wieviele Mitglieder hätte die UNO aus dieser europäischen Republik? Wenn man die europäische Republik ernst nimmt, dann müsste die Antwort auf diese Fragen (und auf ähnliche andere) „1“ sein.

Ich meine, dass Sie die 3 Einwände gegen eine Art „Vereinigte Staaten (bzw. Regionen) von Europa“ von Prof. Ralf Dahrendorf nicht ausreichend gewürdigt haben:

1) Es gibt keinerlei Beispiele für wirksame demokratische Institutionen außerhalb des Nationalstaates.
2) Nur der Nationalstaat kann letztendlich verzweifelten Globalisierungsverlierern den Halt inmitten von unruhigen Emotionen geben (siehe UK).
3) Das Projekt Europa könnte sich auf den Irrweg des Anti-Amerikanismus’ begeben.

À propos Amerika. Wenn man die Gründerzeit der USA mit der Entwicklung der europäischen Vereinigung vergleicht, dann kann man nur sagen, dass die letzten 50-60 Jahre der europäischen Integration wesentlich glatter verliefen als die ersten Jahrzehnte der USA. Die USA waren in ihren ersten Jahren mehrmals an einem Bürgerkrieg nur ganz knapp vorbeigeschrammt und es war letztendlich ein richtiger Bürgerkrieg, der zur Einheit führte.

Könnte man daraus schließen, dass heute die Chancen für eine europäische Republik mit einer zentralen Regierung besser stehen als damals für die USA? Immerhin waren damals die kulturellen Unterschiede zwischen den puritanischen Neuengländern und den sklavenbesitzenden Landherren aus dem Süden wahrscheinlich größer als heute zwischen Deutschland und Griechenland. Das Kapital und die Produktivität waren im Norden, die „Nichtstuer“, die auf Pump ihren Wohlstand genossen, waren im Süden. 

Theoretisch könnte man zu diesem Schluß kommen. Im soziologischen Labor müsste man meinen, dass, wenn es die Amerikaner damals geschafft haben, die Europäer es heute allemal schaffen müssten.

Mein Eindruck war, dass Ihr Drang, Ihre theoretische Meinung zu verkünden, so stark war, dass Sie den praktischen Erfahrungen eines Elder Statesman wie Edmund Stoiber gar nicht folgen konnten und/oder wollten. Oder haben Sie gehört, wie Herr Stoiber auf „Jahrhunderte von Geschichte“ verwiesen hat? 

Ich halte eine von Europas größten Stärken (und dies im Gegensatz zu den USA) seine Vielfalt. Eine vielschichtige Vielfalt, u. a. auch eine Vielfalt an Nationalgefühlen und Nationalstaaten. Wer diese große Stärke schwächen möchte, muß m. E. aus seinem/ihrem Elfenbeinturm herausgeholt werden.

Die berühmte „Subsidiarität“ war kein Modeausdruck. Im Gegenteil, ohne eine kluge Subsidiarität wird Europa nie gemeinsam funktionieren können. Die Schweiz ist ein Musterbeispiel der erfolgreich gelebten Subsidiarität. Ich glaube, dass sich die meisten Europäer dafür begeistern können, dass eine strenge EU Institution über die Einhaltung des Kartellrechtes in allen Mitgliedstaaten wacht. Ich glaube allerdings nicht, dass viele Europäer verstehen, warum 70% (oder mehr) ihrer Gesetze außerhalb des eigenen Landes gemacht werden, die EU jedoch nicht in der Lage ist, ihre Außengrenzen verantwortungsvoll zu schützen, mit einer außenpolitischen Stimme zu sprechen oder eine einheitliche Verteidigungspolitik zu haben.

Die berühmten „4 Freiheiten der EU“ sind wohl im Rausche der Gefühle entstanden, ein rationaler Geist hätte wahrscheinlich sorgsamer gehandelt. Griechenland ist buchstäblich kaputt gegangen, weil es für die Freiheiten des Güter-, Dienstleistungs- und Kapitalverkehrs noch nicht gewappnet war. Aktuell ist es die Freiheit des Personenverkehrs, über die man durchaus nachdenken sollte. 

Obige „4 Freiheiten“ können nur am Ende und nicht am Anfang einer europäischen Integration stehen und sie müssen schrittweise und bedächtig eingeführt werden. Das Vereinigte Königreich ist mit der Freiheit des Personenverkehrs ohne Übergangsfristen vorgeprescht und heute kann man das Ergebnis beobachten.

Freundliche Grüße

Montag, 4. Juli 2016

EU Political Elites Are Seriously Flawed. But British Elites???

Both, Boris Johnson and Nigel Farage, have declared June 23, 2016 as Great Britain's Independence Day. One wonders how all those countries which have fought for independence FROM Great Britain in the last few hundred years have felt about that.

To only suggest similarities between July 4, 1776 and June 23, 2016 (other than having the same last digit in the number for the year) is a sham. First of all, Great Britain voted to become independent from a union which it had voluntarily joined only a few decades ago. The 13 American colonies, on the other hand, were loyal to nation from which they had emerged until that nation began treating them like subordinates.

The WSJ commentator Peggy Noonan recently wrote an article titled "A World in crisis, and no genius in sight". In it, she argues that there are times in history, typically times of crisis, where a group of leaders develop hitherto unknown gifts; where they become historic figures. Examples: Jobs, Gates, Ellison, Brin, Page; or: FDR, Churchill, de Gaulle; or: Reagan, Thatcher, Havel, Walesa; etc. etc.

The American Independence Day was the product of such a genius cluster. The names of George Washington, Thomas Jefferson, John Adams, Alexander Hamilton, Benjamin Franklin and James Madison influence political thinking throughout the world through this date.

And the British genius cluster? David Cameron, Boris Johnson, Michael Gove, Nigel Farage or Jeremy Corbyn, perhaps? A cluster it definitely is but it seems more like an egomaniac cluster.

I am a fierce critic of the EU elites who behave like self-appointed elites who, with great self-gratulation, pick up their Nobel Prize and who have lost touch with reality. But compared with EU elites, what we have seen from Great Britain of late simply defies description!

Samstag, 4. Juni 2016

My Memory Of Muhammad Ali

Those born after about 1950 probably don't remember the time when there was no Muhammad Ali (yet), only a Cassius Clay Jr. The first time I came across Cassius Clay was in the early 1960s when I saw a photo of him in a magazine. The photo showed a cocky young black, elegantly dressed in a morning suit with bowler hat and umbrella in hand on a sidewalk in NYC. The article confirmed the cockiness of the young man. One could easily imagine how an opponent, when looking at the photo, might think "I'll wipe that cocky look off your face!" So I was waiting for the day when some other boxer would wipe that cocky look of Cassius Clay's face.

This was going to happen in late February 1964, when Cassius Clay fought Sonny Liston for the first time. There was just no imaginable way how Clay (or anyone else) could escape the brutal fists of that bear of a man. There was no TV broadcast at the time in Austria, only radio and the fight was in the early hours of February 26. I could not stay up because I had a big exam at school the next day but no big loss because Cassius Clay was going the get the beating of his life, anyway.

There are certain events where one never forgets how one was informed about them. I still remember how I learned about JFK's death back in 1963. And I still remember how my father woke me up in the morning of February 26 by calling "Clay won!" And the rest is history.

I once had the opportunity to be close-up with Muhammad Ali. It must have been around 1970. Ali was making the rounds to American universities to give speeches. There was a student grill at the Harvard Business School, "The Galley", which I was running part-time while studying at the College. The big events at "The Galley" were when celebrities visited the Harvard Business School and were shown around campus. Invariably, they would pass through "The Galley" or at least have some coffee prepared there. My biggest event so far had been making coffee for Henry Ford II. I never saw the man but I was later told that he liked my coffee.

And then came Muhammad Ali. He moved around in a cluster of about a dozen people and I have never ever witnessed a situation where one person would physically so much stand out in a group. First, there was the beauty of this human being, the absolute physical perfection. Then there was his expensive light suit which could not have been surpassed in elegance. Finally, there was the charisma which this man radiated. Ali passed through "The Galley" in less than a minute but it seemed like an eternity. I felt thunderstruck afterwards.

I often wondered whether I experienced this sensation because I knew it was Muhammad Ali who walked through "The Galley" or whether he was the unforgettable Muhammad Ali because he could radiate such charisma. But there was one thing which stuck to my mind: even though Ali was smiling left and right, he did not seem relaxed. Instead, he seemed full of nervous energy, full of pressure to be Muhammad Ali.

Finally, in March 1973, I thought I would see Muhammad Ali without cockiness in his face. Ken Norton had just broken his jaw in their first fight and within days Ali appeared on the Johnny Carson Show. When Ali was announced by Carson and came on stage, everyone wondered how he would handle this embarrassing situation. Ali sat down at Carson's desk. There were tense moments of silence. And then Johnny Carson, in his unique style, deadpanned the audience by asking Ali: "What the hell happened to your jaw?" Before Ali could react, the audience broke up in laughter and so did Muhammad Ali and, once again, we were all deprived of witnessing an embarrassed Muhammad Ali.