The economics in the mirror

How bad/long would it be?

That's the most often question come out when people meet me after the crisis unfold and think I (am supposed to) know some economics.

Tim Hartford say it best:

"Consumers should cut back their spending if they believe that their earning power will fall for an extended period of time, but if they believe the hard times are temporary—say, a short period out of work—then they should "smooth" by borrowing in hard times and paying back when things pick up"

But what consumer belief affect their action and expectation of companies/banks while government trying to project both to come up with appropriate policies.

Since so much (but not all) of the problem is self-fullfilling and paradox then I'd suggest an (slightly altered- in italics) jadul song lyrics as big part of the answer

I'm starting with the economics in the mirror
I'm asking it to change its ways
And no message could have been any clearer
If you wanna make the world a better economics
Take a look at yourself, and then make a change

Little reunion with Keynes

Recent economic crisis has made me read and read again several macroeconomic theory, especially the Aggregate Demand and their relevant subject. This has lead me to one prominent economist in the century - I believe so. This economist is John Maynard Keynes.

I am not a big fan of Keynes as I am not also a big fan of Macroeconomics. But, I've just have little reunion with Keynes in very "introductory" ways. If you feel that you need to refresh some macroeconomics with Keynes, Greg Mankiw's article in The New York Times titled "What Would Keynes Have Done?" is an interesting one for you.

To lightened up further your reunion with Keynes, "An open letter to President Roosevelt" that appeared in the New York Times on December 31, 1933 is next to be your delicious desert.

They are all Indonesian now

What is the world if not Indonesian now? They got our crisis, only on larger scale.

The question is, what they can learn from our experience. Hints, one of them is to treat the stock market like a lady.

More on my musing out loud at The Jakarta Globe column (click here)

The intuitive economy

New York Times has this incredible piece:

Since September, when the Dow collapsed, Mr. Taccetta, has talked with his psychic about once a month, roughly twice as often as a year ago. “There is no rhyme or reason to the way the market is trading,” he said. “When conditions are this volatile, consulting a psychic can be as good a strategy as any other....Ms. Hartman, the Los Angeles psychic, said her Internet traffic has picked up substantially, from about 30 visitors a day to more than 200. She charges from $150 for a 30-minute telephone reading to $500 for 90 minutes of “intuitive counseling."

So when the rational is down, the intution is up.

But when the market is a stochastic or random walk proces, any advice is as good as any.

Another Move by Nelli Kroes.

DG of competition again fines another cartel with a record USD 1.12 bil. This fine beats the the previous highes individual fines to ThyssenKrupp in Elevator and Escalator Cartel and collectives fines to the cartel for Elevator and Escalator Cartel in medio 2007.

This is the news from IHT
"...In 2005, EU antitrust authorities raided several car glass producers across Europe following a tip-off from "an anonymous informant", the commission said in a statement.

The French company Saint-Gobain was fined €896 million; Pilkington, a British unit of Nippon Sheet Glass, was fined €370 million; Soliver of Belgium will pay €4.396 million; and Asahi will pay €113.5 million. ...."


This remarkable fine joins the lines of convicted cartel as the results of a tough DG Competition under Nelli Kroes. Furthermore, since June, 2008, this tough reputation of DG competition is added with kinda-soft program, so-called settlement program. With this new program, DG can offer up to 10% fines reduction in exchange of a guilty plea of any cartel members. With this new program, cartel members is encouraged to plea guilty rather, thus the long-and-costly fight in courtroom could be minimized

Hopefully, in the next future, the combination of tough DG, Leniency program and Settlement Program become a perfect mixture to detect and convict cartel.

Radical time call for radical solution?

I am pulling out some not-so-mainstrem ideas in article (click here) at Jakarta Post for global economic crisis. Most part are taken from a paper I wrote and selected to be presented in a conference at Bordeaux Uni - France, just added some update of the moments.

I do neglect the prudent behaviour of preferrential treatment of FDI and limitation of secondary capital outflow for stock/bonds. I expect monetary authority to be aware of that already, maybe I'll mention on my next article entitle "Its time to get moderate"