File category Oscar García Muñoz
Myopic Economy
By Fernando Mexia - Columnists , Economy , featured , Oscar García Muñoz - 23/06/2009
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In the long term ...
When an economist of the neoclassical school was trying to refute his arguments Britain's John Maynard Keynes, he insisted that in which it approaches were not met in the long term. It seems that Keynes replied with a phrase that has been very successful as joke: "In the long run, all dead," to overthrow the neoclassical. That has the anecdotes, I know all that is myth.
Italian journalist Beda Romano has published a recent book that interview former Italian Minister of Finance of the last government of Romano Prodi, Tommaso Padoa-Schioppa, titled as "The look short" . Indeed, Padoa-Schioppa attributed the current crisis to a short-term view of economic developments: the immediate result, the benefit at the time, ruling out building a system of rewards both productive and that will sustain long term, because even if we die in the end, in between we have to live. What is striking is that this view did not come short of the Keynesians, but the neoliberals, who imposed their view from the eighties.
The most evident of how it has generated this view is short borrowing. The world has experienced a "new twenties", where credit has flowed as if Amazon had a flow and where the traditional major creditor, the United States has spent has to have a double deficit (public and trade balance) which has proved unsustainable. To this must be added that the bank was not looking at who to give the money: it made no risks, because immediately grew the portfolio of loans and provisions for doubtful debts were not high, since the economic boom makeup those risks. Thus, in the short term, generate more profit and more dividends were distributed and parallel the stock market was living a new golden age.
Padoa-Schioppa Recipe: supervision of the banking system to a higher level than simply national. In fact, the former minister was highly critical of the decision, when he founded the European Central Bank, that this body only controlling monetary policy and supervise the credit system, left in national hands. However, their main argument is the need to create structures that tame globalization, which has developed under the law of the jungle. It may be a point of view to think that we all get to long term ...
Fear of deflation
By Fernando Mexia - Economy , featured , Oscar García Muñoz - 08/05/2009
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Europe already makes money
In the end, everything is a matter of time. On Thursday May 7, European Central Bank (ECB) not only lowered interest rates to 1%, a move considered historic, but announced a series of extraordinary measures. The most important (and disturbing, in my opinion) is to buy debt. The ECB said it would buy 60,000 million euros in covered bonds (backed securities in a housing credit issuing banks to refinance and have liquidity), which means one thing: Jean-Claude Trichet, president of the issuing bank in Europe, and has given the order to give speed printing of bills, or put another way, as there is fear of deflation.
The measure is far from the massive purchase of debt raises the U.S. Federal Reserve (as we discussed in a previous article), but it certainly is symptomatic. The ECB is characterized by its deep conservatism money: God forbid the governing council to take precipitate action. I would say: God forbid the ECB to take action in time.
Possibly, when economic historians have time to see events in perspective, will make Trichet and their managers some serious accusations. It is true that the 2007 data showed a strong credit growth and inflation tended to rise due to the pressure of oil and food. At that time, the ECB took the worst possible decision: to raise interest rates to 4.25%. Suddenly, he broke the credit market, to drown families with mortgages.
In August 2007 the stock market began to collapse, banks eager to attending auctions and issuing bank provided special auctions began. The "credit crunch" had begun. Then there was the whirlwind known: balance sheets troubled assets, I do not trust to lend, lest I do not give it back, the interbank market collapses and presto! credit crunch and the data are beginning to discuss the financial crisis hit the real economy.
Now, putting biblical comes weeping and gnashing of teeth. The rate of reduction of the price of money in the EU has been anything but agile, unlike the Federal Reserve and the Bank of England (the latter started from a level of 5.25%). Now, the extraordinary measures will not be immediate, but from June. As if we were not for a rush, go.
However, if the ECB, which implements monetary policy catenaccio, and opt for these measures, how it should be the financial system and the real economy! Do not go too far, because the European Commission foresees a collapse of European GDP of 4%, no less. However, even with this situation, it is clear that there will be further reductions: already said Axel Weber, president of the German Bundesbank and known "hawk" in monetary policy. Recently, went on to say that 1% was the floor price of money. We'll see, Herr Weber.
Eastern crisis without remedy
By Fernando Mexia - Columnists , Economy , featured , Oscar García Muñoz - 13/04/2009
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Salvation does not come from Asia
It may not salvation arrives in Asia, but it can get patterns than we anticipated remains to be seen. The Spanish economist Pablo Bustelo, a specialist in Asia, has recently published two articles on the parallels of the Japanese crisis with the current crisis and the role it can have China in the world economic recovery. The latter is especially interesting as it dismantles two myths that have been generated on China: China's economy will collapse this year and will drive the global recovery thanks to his speedy recovery.
Since then, no doubt, when Asia's only a matter of time, but has not yet fully come. For now, a Chinese professor says his country will be the big winner in this crisis. The fact that more than half of the world's population is concentrated in the Far East is reason enough to think that fits the population is an important factor in the economies. The problem, says Bustelo, is that the weight of China in world GDP is still small if we compare with the EU, U.S. and Japan and its consumer market is still narrow. If capitalism is one of the foundations on consumption, not China who hold it.
One thing that concerns me in the article Bustelo: no talk of how far China could reach the huge dollar reserves and the management of U.S. debt. It may not have wanted to create more fear. Regarding the article on Japan, the emphasis becomes on the banking system. The action of the G-20 posed reforms in financial systems, but like all political statements are too vague. In any case, you start to bet more and more over a long period of stagnation due to the excess (that "irrational exuberance" was talking about former Federal Reserve chairman, Alan Greenspan, before today revered and ousted) of a golden period of the economy. Will the decade 1995-2005 the historical equivalent to the twenties? What does seem clear is that Asia will not be the engine of recovery, but will eventually be the ultimate beneficiary.
Image: stock.xchng
Clean home, a factor of wealth
By Fernando Mexia - Columnists , Economy , Society , Oscar García Muñoz - 24/03/2009
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Dusting also provides national wealth
Do not give many turns to a business journal to meet the mother of all data: gross domestic product (GDP). The traditional way to calculate the wealth of countries, developed by economist Simon Kuznets in the thirties of last century, draws on the activities that can be measured as monetary flows: consumption and investment (public and private) and trade with abroad.
At the time, Kuznets and warned against measuring other components such as maintenance work 
home or family care. However, bring richness, in a manner which can not be measured because they are not generated costs. For example, a friend told me the case of an acquaintance, he earned a salary of 800 euros per month in Spain, just what it cost the same child care center. He decided to stop working, because it saved the cost of daycare and enjoyed his son's childhood.
However, GDP measures not only these activities are not monetary, but neither is it a fact that allows to know if a country has an equitable distribution of wealth or, conversely, there are deep social divides. Numerous studies indicate that the concentration of wealth in a minority has accelerated in the world (have you ever wondered how many companies in the Dow Jones could have bought Madoff with the 35,000 million dollars that says he embezzled?). Perhaps in this emerging reality more visible, but is emerging little by little, a middle class, while in Europe this phenomenon, there also is more blurred by social protection systems.
However, a recent and comprehensive article , the business daily Financial Times echoed the work of a commission headed by Nobel laureates Amartya Sen and Joseph Stiglitz for economic indicators do not ignore the value of activities that are socially present, but do not generate cash flow. The article argues that the GDP has the advantage of being a quantitative scale, but the disadvantage of being qualitative. The problem is then: how to measure the qualitative, for example, the wealth of having healthy citizens or to produce less waste? On these issues the heady works commission, although the most likely reach the conclusion that it will take several parameters to give us an accurate idea of whether greater wealth of GDP also means better quality of life for all.
So, do not forget, when a politician in an election in the midst of a crisis to ensure economic growth (GDP improvement), ask who cleans the dust at home. Same contributes more to economic development that spending money on media campaigns.
Gold farming
By Fernando Mexia - Columnists , Economy , Oscar García Muñoz - 08/03/2009
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Gold price meals
Prices of staple foods such as cereals, reached unprecedented levels in 2008, with peaks exceeding, for example, $ 2,200 per bushel (1 bushel = 4.6 dm ³) in April 2008 compared to $ 1,200 today paid in the commodities market in Chicago , or $ 800 for corn in July, compared with the current $ 350. Prices moderated but still remain at high levels. The trend will not improve, according to a report published last year that the FAO, the UN agency for agriculture, and the OECD, one of the clubs of the world's wealthiest countries.
There has been a basic economic reason: the mismatch between supply and demand, caused by a series of bad harvests in some of the farms in the world (as the Black Sea and Australia) coupled to increased demand from India and China , especially of cereals for animal feed. However, there are other causes have also added fuel to the fire. The support of the former Government of the United States to growing corn for biofuels triggered the prices of this cereal and shifted production of many lands to this product for energy purposes, when part of the staple diet in South America and one of the key products to animal feed. On the other hand, speculation played a role, but has not been as intense as it is conceivable that comment from the think-tank specializing in agricultural policies IFPRI , but coincided with increased turnover of raw materials, which were funds fleeing the stock.
However, there is a serious problem that must be considered: the restoration of strategic reserves. For example, the European Union canceled at the beginning of the century in the process of elimination of the intervention mechanisms of the Common Agricultural Policy currently accumulated food can meet the needs of a few weeks and bonus policy of "zero stock" . Any catastrophic event would generate an upward spiral of prices or the difficulty of supply. The dialectic of recent years called for an end to intervention in markets to make them the same forces themselves who determine prices. This neoliberal logic is being questioned with the current crisis and there have been voices advocating re-impose trade barriers or restrictions, as happened last year in Southeast Asia and Argentina. There is the restriction to trade, but the controls of agricultural markets, you need to re-stabilize the price of something fundamental to humanity: food.
Germany, a post-war crisis
By Fernando Mexia - Columnists , Economy , Oscar García Muñoz - 16/02/2009
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Germany, with its worst crisis since the Second World War
They say that the bags anticipate the movements of the real economy. Of course, in Germany, the anticipation was clear: the DAX-30 reached in mid-July 2007 record high, surpassing the 8,100 points. Thereafter, he began his descent to the 4,600 existing points. The financial storm of subprime mortgages exploded that summer and began to get news about the German banks: they had committed investments in the U.S..
It all started with Commerzbank, which has been merged with Dresdner Bank, with heavy losses in the United States could drag its owner, the insurer Allianz, then the Hypo Real Estate, the largest mortgage bank, which had to be rescued and now, Deutsche Bank, Germany's biggest bank, has required an indirect support of the State through the postal service, which has entered its shareholders through a capital increase. Meanwhile, the German government has created a rescue fund and proposes a solution to the Swedish : create banks with assets worth nothing to clean up the parent entities. It would take an accounting trick your account the depreciation of these assets.
In the end, the reflection in the real economy has been inevitable. The German government has launched the largest economic recovery program in its history to offset the effects, but these are serious: GDP falls 2.5% in 2009, a fall that was involved or not in crisis seventies. The industry in general and the automobile, in particular, are low in a country whose main strength is the secondary sector.
Exports will fall 8% this year, another major figure when you consider that a fifth of Germany's GDP comes from exports. Un informe del Deutsche Bank pone negro sobre blanco las perspectivas para 2009 del motor europeo: es la peor crisis desde la II Guerra Mundial, aunque cree que la luz al final del túnel se verá en el segundo semestre. Un aspecto interesante es que descarta la deflación a medias, ya que podría producirse este verano como consecuencia de la caída de los precios del petróleo, para acabar el año con una inflación del 0,5%. No es de extrañar que el índice de confianza empresarial del Ifo esté en sus mínimos de los últimos 15 años.
¿Podría ser peor? Sí, el ministro de Economía acaba de dimitir y Alemania se enfrenta a elecciones generales en septiembre, con la parálisis que genera en la economía por la incertidumbre ante el nuevo Ejecutivo que pueda salir.
Where is the money?
By Fernando Mexia - Columnists , Economy , Oscar García Muñoz - 27/01/2009
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Dusting economics textbooks
One of the first lessons you learn economics at the University is the monetarist equation. Summarized in M x V = P x Q
This equation relates the output (Q), prices (P) and money supply (M)-the money in the market, through the so-called velocity of money (V). This last factor was constant for the monetarists and explain the price increases when relaxing the monetary and fiscal policy: more money in circulation meant more inflation.
However, the current situation seems to belie this equation and bring it closer to the Keynesian approach, advocating the changing nature of the V. The latest data from the European Union economy indicate that the low inflation at a good pace and the economy is in recession. In addition, the European Central Bank data show that the monetary expansion (the so-called M3) is slowing, but European governments have pumped enough money into the financial system. Therefore, there should be more money supply.
Perhaps the solution lies in V. The equation can be squared only if the velocity of money is minimal. So where's the money? The answer would be in the monetary base multiplier. That is, the money being injected into the system is multiplied through credit. The tap is closed. The financial system is accumulating funds to cover the defaults. Here is the destroyer of the money pit: in the default and the loss of value of assets, whether they be depreciated shares or houses for sale for several months without a buyer.
Perhaps this is a graphical way to see the process of creative destruction of Schumpeter . So far, it seems that there is only destruction. However, dust economics textbooks is good to remember the most basic things in front of more substantial explanations.
Dollars, no thanks
By Fernando Mexia - Columnists , Economy , Oscar García Muñoz - 13/01/2009
Oscar García Muñoz, follow it on other blogs here .
¿Qué pasaría si Estados Unidos dejara de pagar la deuda o devaluara?
Puede ser una pregunta que nadie se la quiera plantear, pero que me asalta desde que la Reserva Federal de EEUU anunció a finales de noviembre pasado que inyectaría 800.000 millones de dólares mediante la fabricación de billetes. Es una medida que muestra la desesperación, primero, ante unos mercados financieros que no acaban de funcionar para lo que se concibieron (prestar dinero), y segundo, para reactivar la demanda, como Keynes en sus mejores tiempos.
Según el último informe del Departamento del Tesoro , la deuda pública de EEUU ascendió a 10,6 billones de dólares a 31 de diciembre de 2008. De esa cifra, 3 billones son propiedad de extranjeros. El 40% de ellos lo tiene China y Japón, según la misma fuente, aunque los datos son de octubre. Ahora vamos a la deuda externa : la cifra asciende a 13 billones de dólares, de la que 10 billones está denominada en dólares. El 40% de esta última cantidad es a corto plazo.
De momento, el dólar se mantiene débil por la recesión, aunque su caída se ve amortiguada porque el resto del mundo también está en crisis. La emisión de moneda y la bajada de los tipos de interés hasta la trampa de liquidez son devaluaciones encubiertas. En un diario electrónico , un analista apunta a los riesgos de la inversión en deuda durante este año. Invertir en deuda estadounidense puede ser peligroso, no sólo porque el riesgo de impago, vistas las cifras, pueda cobrar fuerza, sino también porque la deuda comprada puede valer poco si, de repente, las autoridades deciden una devaluación competitiva frente al euro, la libra y el yen.
El nuevo presidente, Obama, propone inyectar otros 800.000 millones de dólares. ¿Tanto da de sí la máquina de fabricar dinero de una economía en recesión? ¿Hasta qué punto va a poder financiar el resto del mundo la deuda de EEUU con las dificultades que existen en los mercados financieros? China y Japón lo hacen con su superávit comercial, que les permite comprar títulos estadounidenses, pero ¿será igual de factible la colocación de deuda en las circunstancias actuales? Los alemanes , recientemente, han tenido problemas para colocar la suya.
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