Posts Tagged ‘financial crisis’

A recent story on the Herald Tribune: (bold emphasis added)

Ukraine, once considered a worldwide symbol of an emerging, free-market democracy that had cast off authoritarianism, is teetering. And its predicament poses a real threat for other European economies and former Soviet republics.

It is not hard to understand why world leaders are increasingly worried about the discontent and the financial crisis in Ukraine, which has 46 million people and a highly strategic location. A small country like Latvia or Iceland is one thing, but a collapse in Ukraine could wreck what little investor confidence is left in Eastern Europe, whose formerly robust economies are being badly strained.

It could also cause neighboring Russia, which has close ethnic and linguistic ties to eastern and southern Ukraine, to try to inject itself into the country’s affairs. What is more, the Kremlin would be able to hold up Ukraine as an example of what happens when former Soviet republics follow a Western model of free-market democracy.

Ukraine’s economy has stumbled due to falling prices of its top exports: steel and chemicals.

One danger of the current financial crisis is that it has given a wide floor for critics of capitalism. The fears highlighted above are precisely the manifestation of how history usually becomes a naive judge of moral and political ideals.

From Russia Today, a lowdown on how the economic crisis has manifested in the politics of Ukraine:

Not only is the economic crisis influencing judgement of political ideals, but it has also stirred a new wave of politics on its own.


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Financial crisis humor with just a slight touch of irony.

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In this interesting talk from TED, technologist and scientist Juan Enriquez begins with a quote straight from today’s financial crisis:

The key to managing crises…
Is to keep an eye on the long term…
While you’re dancing in the flames.

– Sir Philip Hampton, Chairman
Royal Bank of Scotland

Are you sick of the financial crisis? See any end in sight? Apart from all the discussions on philosophy and ethics we’ve posted lately, Enriquez, points to technology as the next step. A reboot of humanity so to speak.

He begins with a short discussion of the largest issues facing the global economy now, namely leverage, stimulus, and inflation. However, these problems only set the stage for a most compelling argument for technology–and how it can bring about the next step in human and societal evolution. From artificial intelligence, to intelligent microbes, to stem cell research, and finally to robotics, Enriquez lays out the ground work for the future of humanity.

If you liked this, check out Ray Kurzweil’s talk on technology and a short clip on the speed of information we posted before.

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Nouriel Roubini (Dr. Doom) and our favorite skeptical empiricist Nassim Taleb (The Black Swan) appeared on CNBC to discuss the current financial crisis.

Taleb makes a bold declaration: much of the causes of the crisis are still present: the same people who did not see the crisis coming are still in office. Roubini criticizes the actions taken to solve the problem–bailing out the bad institutions are not going to solve the problem.

Taleb also makes a crucial point about asymmetric payoffs: how bankers are compensated by taking unreasonable risks, which the journalists completely miss–and instead harp hopelessly on investment tips rather than absorb the deeper implication of what is being presented to them.

The reporters end by pinning the two down as “bears” in the face of the recently rising markets.  If you can get past the interruptions of the journalists, the two pessimists actually have crucial insights to share. However, this clip is an example of how soundbite journalism takes the place of expert advice (watch how the CNBC anchors talk about Roubini and Taleb as “rockstars”).

For me, give this CNBC clip a capital “F” for frustrating.

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citigroup-market-capGot this image from a Bloomberg email. It shows the market capitalization of Citigroup last January 2009 (green circle) compared to its value last 2007 (big blue circle). This shows how much the bank’s value has fallen in just one year.

How many of us would have thought back then that great banks like Citigroup would be less than 10% of their worth a year or two later? How many experts, journalists or economists could have made that forecast? And yet, our media, internet, books, and magazines are inundated with 5-10 year economic and earnings forecasts made by analysts, using probably nothing more than simple look-back regressions on the past.

Here are similar images of other major banks:


Scary food for thought.

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Eerie timing right after our last post on Zimbabwe, this story appeared on the Telegraph yesterday about how gold has been climbing in recent months due to fears that the bailouts will result in the debasement of money and hyperinflation.

In dollar terms, gold is at a seven-month high of $964. This is below last spring’s peak of $1,030 but the circumstances today are radically different. The dollar itself has become a safe haven as the crisis goes from bad to worse – if only because it is the currency of a unified and powerful nation with institutions that have been tested over time. It is not yet clear how well the eurozone’s 16-strong bloc of disparate states will respond to extreme stress. The euro dived two cents to $1.26 against the dollar, threatening to break below a 24-year upward trend line.

Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times.

Is this tick-up in gold price a reflection of reality, or just the fears and anticipation of people and investors? Then again, maybe the fears ARE the reality.

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In Zimbabwe, where money has been reduced to worthless paper due to hyperinflation, citizens are forced to panning for gold to pay for bread to stave off hunger.

Hyperinflation is an economic phenomenon, the root of which can be complex–but generally blamed on an increase in money supply, which consequently reduces the value of the money in stock. In Zimbabwe, as of 2008, the inflation rate is estimated at 516,000,000,000,000,000,000% (516 quintillion).

The sordid history of how great increases in money supply led to hyperinflation is chronicled in the wiki entry for Hyperinflation In Zimbabwe, which started with the government printing new currency to pay off international debts in 2006.

We previously featured Glenn Beck’s hockey stick presentation of potential US inflation. Are the US and European bailouts simply another Zimbabwe?

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