Posts Tagged ‘economics’

Satish Kumar’s article on the guardian “Worshipping The Wrong God” is an interesting take on the present financial crisis, with a refreshing ethical and spiritual approach:

It amazes me to see that the great economists, industrialists, business leaders and politicians have even forgotten the true meaning of economy. They only think in terms of profit maximisation, whereas the true economy means good housekeeping; proper management of all aspects of the home. The criterion of good house management is to ensure that all the members of the household are living in harmony with each other and the place. Money is only a means to a good economy, not the economy itself.

Banks and business leaders, politicians and economists are looking for economic recovery, hoping to go back to business as usual: the good old days of growth without limit, consumption without restraint and profit without principles. From a spiritual perspective economy is good economy only when it is in harmony with ecology, ethics and equity. Day and night we chant the mantra of economy while our ecology is in ruins, our ethics shelved and our principles of justice are put on the back-burner.

Kumar statements highlight first the obvious issue:

There are two roads to economic recovery: the first option is to bail out the banks and fuel consumerism,

the second option is to think holistically, to invest in land and agriculture, in renewable energy and practical skills

But at the same time, he poses the deeper, neglected question to us:

But how do we choose the right answer without some guiding values? Such values can be none other than moral, ethical and spiritual.

Ah that word: “moral”–notice how it scares people into not thinking. But very brave and inspiring words Satish. We definitely agree.

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This Bloomberg interview last November 2008 of notorious bearish commentator Marc Faber shares his thoughts on the recent recovery of global stock markets . Faber reveals some of the dynamics between the U.S. Dollar and asset markets, and how they move in opposite directions.

Faber also shares his criticism of monetary and fiscal policy in reaction to the financial crisis–which are all geared towards consumption, when he mentions the solution is to improve savings rates and production rates, similar to Peter Schiff’s comments. He also criticizes the bailouts of banks financial institutions which practically exonorate their bad investment and lending practices which created originally the housing bubble and the subprime mortgage bubble and subsequent crash.

He also expects the current rally to go a little further, as far as January to March of 2009 as Global Central Banks inject liquidity which will prop up asset markets. Afterwards, the recessionary pressures begin to reassert themselves. Faber is still in favor of acquiring assets that are outside the U.S. Dollar, especially precious metals such as gold to weather the crisis.

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Former derivatives trader turned skeptical philosopher, Nassim Taleb, vents his frustration at the world financial system for allowing hindsight bias to fool them into a false sense of security which has now led to the worldwide financial crisis and recession.

Taleb criticizes economists for relying on theoretical models that have little bearing on the real-world appreciation of risk, and blames banks for throwing large amounts of capital on academics and PhDs whose economic theories were widely off the mark in anticipating the global crash.

(It’s just too bad the journalist couldn’t formulate better questions to appreciate the thinking of this guy. (Next to economists and academics, Taleb despises journalists too.)

We discussed some of Taleb’s ideas here before, notably the Platonic fallacy and fallacy of history, which are dangerous human tendencies that can lead to a grave misunderstanding of events which is exactly how he describes the current financial crisis.

Taleb is a skeptical empiricist: or one who considers historical evidence only as a PARTIAL indicator of probabilities, as opposed to naive empiricists who consider historical evidence as the complete basis for predicting future events. Skeptical empiricists like Taleb never admit to knowing the truth fully, and only fully consider evidence that DISPUTES a claim, while evidence that SUPPORTS a claim can never be fully accepted.

He was inspired by skeptical thinkers like Karl Popper whose theory of falsification we feature in this website. Popper also inspired the investment styles of other investors such as George Soros and Jim Rogers.

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Peter Schiff Analogies

This guy’s ideas never fail to amaze me. Lately though I felt that he has been saying things over and over again until I came up with this video.

For the general public which really isn’t much into Economics, this video shows some really good analogies. For those who understand Economics, one really starts to wonder whether or not America is in such a bad mess.

I particularly like the way he explains that “the boom is the problem, the bust is the solution”. People usually assume that an economic boom is good for us while a recession is bad and should be corrected. I also like his last two analogies when he talks about five Asians and one American stranded on an island. The last analogy is when he talks about the story of Tom Sawyer.

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Here’s an excerpt from a speech given by Ms. Robina Gokongwei-Pe to the students of the UP School of Economics. Interesting insights on business, economics, and life as a Chinese-Filipino and entrepreneur in the Philippines:

The first theory is the ubiquitous law of supply and demand. The reason I failed to graduate from UP was that I was kidnapped on the way to school in September 1981, and guess what, right on the day I was supposed to take Prof. Canlas’ exams. 

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One thing that remains odd in people’s thinking is that generally people are selective in their skepticism and treat different topics with varying levels of critical thinking. An investor can be critical for instance of news and information he receives about his favorite stocks, but every Sunday listens to a religious sermon without question. On the flip side, you can have Atheists who are skeptical of the idea of a God but are taken hook-line-and-sinker by CNBC and Bloomberg analysts on the direction of the economy.

If you doubt science and the laws of physics, how can you ride an airplane without being a hypocrite? If you consider yourself critical of religion, how can you read and believe the newspapers and mass media and economic analysis at face value without being a hypocrite?

Nassim Taleb has written books on these very subjects and the topic of randomness, luck, and philosophy and how it affects people’s decision making. Taleb asserts that on some level, beliefs take over where critical thinking should, and this is where luck and randomness can play big tricks on people if they are not careful.

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