What caused the crisis

It will take years and many arguments to settle the questions

But Alan Blinder from Princeton and former vice chairman to the Fed provided a preview in NYT of decisions that lead us closer to current circumstances

Wild Derivatives
Sky-High Leverage
A Subprime Surge
Fiddling On Foreclosures
Etting Lehman Go
Tarp’s Detour


(for complete article click here):

Econ matter in Obama Inauguration Speech

State of US economy:

"Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet. "

Remaining potential:

"Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions"

What to be done:

"The state of the economy calls for action, bold and swift, and we will act — not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do."

Role of government and market:

"Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control — and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart — not out of charity, but because it is the surest route to our common good."

Europen Economist on Financial Crisis

Just find out a link to download a complete book for free by strong list of European economists o financial crisis. The authors including Guido Tabellini, William Buiter and Paul de Grauwe.

Highly recommended to anyone interested in non Anglo Saxon point of view. Click here to read in full

P.S.
The VoxEU website is an excellent portal of column and papers of many top European economist. Ignore at your own perils.

Economist on Indonesia

Economist put out an article on Indonesia. they are quite optimistic

Most banks are healthy, thanks to radical reform after the Asian crisis of a decade ago. And in 2008 the country achieved rice self-sufficiency for the first time in 24 years. Manufacturing is starting to feel the heat but only 25,000 workers have been laid off since November. And, according to research by the Asia Foundation, an American NGO, the huge informal sector has yet to feel much of an impact of the crisis.

Click here to read complete article

Getting NPWP is quite a taxing effort

I was calculating the benefit against cost of having NPWP. Being a student with unsteady job(s) make worry about the hassle of filling a tax return especially if I am abroad.

But Pak Darmin, the director general of tax, is a shrewd economist and he knows how to tilt the incentive. Just like busway make life harder for non-busway user. Now the non-NPWP have to pay higher percentage from salary and property sales as well as, a deal clincher, got to pay 2.5 million if ever going abroad.

Thus I went at final days of sunset policy, turn out to be extended to end of february, to the my area-designated tax office. It was pack with people, one official there told me they got 600+ applicant in one day.

But the system could be improved for sure. They dont have numbers but one must wait to be called to get the NPWP card after submitting the form. So people stand shoulder to shoulder close to the announcer to be able to hear him. It get really hot and exhausting. If they better planned then we could have a seat while waiting for our number to be flashed on the announcement.

Yup, it was quite a taxing endeavour. While the IT system of tax has been improved, the human side still need more work.

Could You Purchased Knowledge?

Today I finally put aside the unfinished task to chase discounted books at Gramedia Grand Indonesia. The 35 percent discount is just too much too ignored for a bookworm like me. I arrived a bit after 10 am and finish the shopping before Friday prayers so I managed to beat the crowd.















One things that struck me is how books is a elastic goods. There are certainly more than 35 % increase in people coming (and the amount of purchase they make). More like 5 fold increase, and my friends told me yesterday and tonight is even more packed.

Elastic goods should get more revenue if they reduce price by getting larger sales volume. So why the bookstore doesnt hold sales more often?

Or maybe because this feel like a onetime only so people are more willing to splurge on it? Why there is a massive coordination failure when what is needed is to put a list of books we want to buy with friends, pooled our money and take turn reading the book? Where have all the library gone?

Even more systemic, why govenrment not following the steps of India and China by forcing major book published to print the book locally or buy the copyright (yes, some also just ignore it). Thus. reducing the price significantly.

Some people (like me) still believe that buying books will make them more knowledgable. Bad news, only reading will. So asked me what I learn after I finish the pile of books above, if ever.

Death, tax and alcohol

They say that the only certain things is death and tax.

I found an article in Freakonomics blog (click here) that after crack down on illegal trading and closing of an incompetent license holder there is only one legal importer of alcohol in Indonesia

So what happened when a supply is lower than demand? the price increase. In this case, when year end as the excuse of excessice drinking is nearing, four fold. (complete article here).

Another article in CNN report a study between death and alcohol tax (click here). Now we know the price to pay to reduce (alcohol-reated) death.

Isn't economics a great (if a bit gloomy) science?

We can't explain why the story is not reported in Indonesia newspaper though. Please comment and send the link if you find any

Creative monetary policy

Found a 2004 paper with Bernanke (yup, the Fed chairman) as one of co-author.

It listed alternative policy when the rate cut is neither feasible nor having impact (click here to read in full).

America is so lucky to the someone so prepared for the crisis at in charge of the monetary policy. BI still have a lot of ammunition to cut rate but its good to be prepared.

All you need is marketing

The maker of shoes thrown to Bush is surprise to see the demand for Ducati model 271, soon be renamed “The Bush Shoe”, sky-rocketed after the incident.

Click here for the full article in Bloomberg.

The shoe-cide managed to send a sock-and-awe and in-your-face moment in marketing.


P.S.
If you need some weekend diversion, click here or here

Rural is down but even more for urban

Very interesting article in Jakarta Post (click here) by Chris Manning, director of indonesia project at ANU and Sudarno Sumarto, director of top notch Smeru research institute.


The highlight

Overall, compared with 1998, the looming economic slowdown may have a greater impact on less flexible urban labor markets than in rural areas, where small-scale enterprises are much more common.