Exploring global energy demand

From The McKinsey Quarterly, a neat interactive graphic exploring global energy demand.

(Hat tip: Bojan Bozovic)

Plastic Flashback: A visual history of the credit card. | The Big Money

For your weekend pleasure, The Big Money has a great visual history of the credit card.

Thoughts on food aid

Development requires fresh thinking. Throwing money at tried and failed programs is as deplorable as inaction. But new doesn't necessarily mean good.

Cash distribution is something that has been floating around among young(ish), forward thinking development scholars and practitioners for a while. Owen Barder makes the case:

American legislation requires that food aid be bought in the US, that  50 percent of commodities be processed and packed in the US before shipment, and that 75 percent of food aid managed by USAID and 50 percent of the food aid managed by the US Department of Agriculture be transported in “flag-carrying” US-registered vessels. The result is that only 40% of money spent on food aid by the US actually goes towards buying food; the rest goes to US transport companies. Buying the food locally would be better, but best of all might be something even more radical.  Why not give the money itself to people who are hungry?

Not a bad idea, but keep in mind that most countries that really, really need international food aid are often not open to the help: Burma after last year's Cyclone Nargis, Zimbabwe for the past 29 years, North Korea - the list goes on. De-tying food aid from American agricultural producers is a noble cause and a good idea, but that doesn't mean direct cash aid is its' logical, or even possible, conclusion.

What's in a poverty line?

Gini coefficients and poverty lines are helpful for forming estimates. But lest we forget, poverty, as informed by our social life, is contextual.

...being poor in a poor country means having an income that is not just low but variable and unpredictable. At least as much as a family’s average level of income (such as $2/person/day), the volatility around the average drives how the poor manage money. If you make $1 today, $4 tomorrow, and nothing the day after, but need to put food on the table every day, you will engage in complex strategies of borrowing and saving to smooth the mismatch between your income and outflows. Thus out of necessity poor people deploy more complex financial strategies than do the rich.

As the world turns...

Duncan Green has a thought-provoking, and downright frightening, post on how institutions may shape the climate change debate in the coming years.

I tend to be optimistic that this will not be the case; but more because I think technology will propel us forward, not the magnanimous actions of politicians or the scepter of international cooperation. Climate change is something we here at zzeitgeist are worried about. Let's hope Mr. Green's fiction is much stranger than the truth.

What is happening in Central Asia?

Pakistan is so bad that we're highlighting trash pick-up and the former American ambassador may soon be effectively governing Afghanistan.

Mr. Holbrooke has his work cut out for him...

Sentences to envy

It's pretty rare that a blog makes me want to buy a textbook; I've just finished graduate school, have a pretty solid grasp of my subjects (at least I like to think), and am pretty broke to boot. But MR makes me reconsider with one pithy sentence. On cap and trade:

...To make progress against global warming, may require building a political coalition. A carbon tax pushes one very powerful and interested group, the large energy firms, into the opposition. If tradable allowances are instead given to firms initially, there is a better chance of bringing the large energy firms into the coalition. Perhaps it’s not fair that politically powerful groups must be bought off but as Otto von Bismarck, Germany’s first chancellor, once said,“Laws are like sausages, it is better not to see them being made.” We can only add that producing both laws and sausages requires some pork.

For some reason, I don't remember my 101 class being this exciting...but maybe that's because it was MWF at 9 am.

Will exchange rate competition undermine international cooperation?

An interesting piece by Sebastian Mallaby in which he argues that competitive devaluations could undermine economic recovery. I don't see this as a particularly worrisome problem right now. Currency tensions between the US and China are hardly new. And Germany, as part of the eurozone, has already surrendered its monetary policy to the ECB. 

But I do wonder what this means about the viability of export-led growth going forward. If in five years the global economy has recovered, but countries like China are still running massive trade surpluses, does that mean we will have failed to address the systemic problems which caused this recession in the first place?

Just to the north (and a little to the right)

Have a look at this fascinating interactive graphic comparing key fiscal indicators in the United States and Canada. I had have read stuff detailing Canada's newfound fiscal conservatism but was nonetheless surprised at how similar we are to our northern neighbors.

A revolution in the organization of human knowledge

Watch this introductory video and get excited about the future:

Introduction to Wolfram|Alpha by Stephen Wolfram

Sentences to ponder

Via the World Bank's Private Sector Development blog:

Mongolia is about the size of Alaska and has a population of fewer then 3
million people. This translates into one of the lowest population
densities in the world. With almost half the population living in
Ulaanbaatar, the capital city, and the rest spread out across the country,
it may seem that Mongolia is not the ideal landscape for mobile financial
services...[but] it is actually one of the most banked countries in the
world.

One question worth considering - do all these development finance programs (mobile banking, microfinance, crop insurance) get a free pass on regulation because they are seen as helping the poor? I sure hope not...

Practicing development: reason and results

Chris Blattman asks:

Why don't we write more about worst practices?

Well for one thing, agencies and consultancies that rely on government funds are loathe to air their dirty laundry when future funding is on the line. Even when they do screw up reports are written so as to subtly blame local partners and government participants. Just like politicians, development professionals and NGOs - meant to act in the long-term interests of their supposed constituencies - profit much more from acting in their own short-term interests (exhibit A - schools).

Well, what to do? We must incentivize frank admissions of errors. Those who openly and honestly declare mistakes and poor programs should actually be rewarded - at least to a certain degree. 

The World Bank already has an Independent Evaluation Group and randomized evaluations are all the rage among academics. For markets to be efficient (and yes, proposals for development funding indeed comprise a market), information must be freely available and accurate; let's hold development results to the same standard.

(Picture from Penguin Blog)

You Are What You Share

We live in a world where web 2.0 and massive technological innovations have created unprecedented potential for collaboration with no regard for geographical distances, or any of the traditional divisions of humanity.

Check out this clip from the Us Now film project- a succinct synopsis of our rapidly changing methods of communication:    



Matthew Taylor of the Us Now film project said it best:

"The state needs to understand the potential of these new forms of collaboration and give them the kind of non-intrusive support that they need to grow. "

Voice mail is weak

Good riddance to voice mail. I have seriously been thinking of changing the greeting on my phone to: "You have reached Patrick Thomas. I do not monitor my voice mail - if you need to reach me please send me a text message or email."

Kindle DX

WANT

Timeline of the financial crisis

For those of you keeping score at home, VoxEU has a handy chronology of the financial crisis.

Spread the word. Global education action on HIV/AIDS in Mozambique

[ed. Malgorzata contacted zzzeitgeist and asked us to link to their film on HIV/AIDS in Mozambique.]

My name is Malgorzata Malak and I participated in a 3-month internship in a local Mozambican organisation, Kindlimuka http://www.kindlimuka.org.mz/ in August – November 2008. My sending organisation was GLEN http://www.glen-europe.org/.

During the internship together with my tandem partner, Verena Allinger, we made a documentary about HIV/AIDS in Mozambique. The film is called “Vida Positiva” and is an outline of the situation including reasons for HIV spread, national combat strategies, projects run by NGOs, ways of treating the disease and personal stories of HIV positive people and their relatives.

The film is available at: http://mlume.com/vida

Engineering an international incident

This article is a great follow up to the post I wrote a few weeks ago. New estimates suggest that the cuts in carbon emissions that would be necessary to halt climate change are much larger than we thought. They may not be politically feasible. Policymakers need to start thinking seriously about the international implications of unilateral climate change plans like geoengineering. 

The Plugin Hybrid

As a technology nerd, I am excited about the prospect of plug-in hybrid electric vehicles (PHEV). General Motors recently sponsored a Society of Automotive Engineers task force to develop a standardized power connector for recharging electric vehicles.  Several major auto makers have agreed to adopt the technology.

Beyond standardization within the industry, environmentalists and techno-nerds alike have reason to be excited about a bright future for cleaner transportation.  First, one can expect that PHEV's won't single-handedly overload the power grid: the Energy Information Administration's 2009 annual energy outlook predicts "Plug-in electric hybrid vehicles are not expected to reverse the trend of slowing growth in electricity demand, which increases by only 0.1 percent for every 1 million PHEV-40 vehicles in operation." Second, batteries from PHEVs will minimally impact the environment.

However, one long-term issue could diminish the environmental benefits of PHEVs. These vehicles shift most emissions from gasoline to electric power plants.  The US needs to make its electricity sources look more like this, instead of this.  Coal provides the U.S. with half of its power, and no, clean coal is not a viable solution. Strip mining and the disposal of coal ash wreak havoc upon the environment.  Society must not trade its problems, but one can hope that the mass adoption of PHEVs encourages a cleaner power generation.

Global spread of swine flu

The Guardian has a handy interactive feature on the spread of the new swine influenza strain, which the WHO warns could become a global pandemic.

What would shareholders do?

An interesting profile of how shareholder driven capitalism plays out in China.

I have to think there are many parallels in Japan as well. I wonder whether Asian leaders have had a chance to sit down with the new Jack Welch.

(Photo from World Business Forum)

Please, one at a time

Just in case you thought the financial calamity fulfilled our quota of global crises, remember, the food crisis isn't over yet.

If you didn't believe us back then, maybe you will now - Conceicao and Mendoze, two UN economists, have crunched the numbers. Guess what? They concluded that we're only one supply shock (drought, tsunami, you name it) away from encountering a serious global famine.

A drop in the ocean

$100 million here, $100 million there - Paul Krugman

I was surprised that Obama really tried to pass this off as a legitimate money-saving exercise. I was pleasantly surprised that just about everybody called him on it. That presidential honeymoon is pretty much over before Obama has 100 days under his belt...

Climate change legislation

EPA moves toward climate change regulations: "This decision is a game-changer," said Rep. Ed Markey, D-Mass. "It is now no longer a choice between doing a bill or doing nothing. It is now a choice between regulation and legislation. EPA will have to act if Congress does not act."

Financial Journalism Shut out of Pulitzers

Financial Journalism Shut out of Pulitzers - Megan McArdle

I'd be inclined to agree with her assessment... how could they NOT give a Pulitzer to a financial journalist this year? And not one, but TWO sex scandals? COME ON!

Debt to GDP ratios

Which countries have high debt to GDP ratios? Datablog has a handy visualization.

We need a book deal

I (and my mountain of student loans) really need international political economy to go viral.

I can has liberal democracy and economic liberty, right?!

(Photo from Philonoist)

Lehman Brothers: Nuclear power?

Bloomberg broke the story this week that Lehman Brothers Holdings Inc. is sitting on a nuclear bomb's worth of yellowcake uranium. Apparently, the bank physically acquired the uranium after a futures contract matured. It now sits in a secure storage facility in Canada. Which begs the question:

How the hell did Lehman allow this to happen?

Actively traded futures contracts are typically closed out before the contract expires. This absolves the trader/firm from having to take physical delivery of the underlying commodity. It is remarkable that Lehman failed to close such a massive contract. DealBook wonders if the contract simply slipped through the cracks amidst all the chaos of the Lehman bankruptcy.

However it happened, the bankrupt bank is reportedly sitting on the uranium until prices rise; uranium has fallen for five straight months as traders expect delays to nuclear power projects in China and India, and under the expectation that Lehman could dump its stock on the market. Essentially, by holding tight Lehman depresses the very market it needs to recover.

I highlight this story because it underlines just how disastrous, and far-reaching, the Lehman bankruptcy has been. Lehman was an active commodities trader in the broker-dealer and exchange markets, and it got caught on the wrong side of a massive trade that continues to depress an illiquid market. The ripple effects of Lehman's failure haunt us in the most improbable of areas.

(photo source)

Efficient institutions

Non-profit and development institutions have long been (fairly) critiqued for their inefficiency. Seemingly guaranteed funding tends to breed employee complacency and supplant any urgency or incentive to perform beyond expectations.

We've all heard the (impossible) assertion that government should be run like a business. Can one man actually make non-profits run like a business?

Democracy and accountability

Megan McArdle has a very interesting piece addressing the legitimacy of the Fed's aggressive, central role in the policy response to the ongoing financial crisis:

But here's the problem: the Fed has performed vastly better on any
metric except "being elected" than the Congress. There's little doubt in
my mind that if we had not had an independent central bank, unemployment would
be many percentage points higher, GDP would have contracted much more strongly,
and we wouldn't now be making optimistic noises about the thing bottoming
out...

I think that the political process will hopelessly screw up the
management of this crisis (something which libertarians are perfectly able to
see when the government screwing things up is a left-wing populist one in Latin
America). But maybe The People, God bless them, deserve to screw up their
economy if they want. On principle, I am opposed to saving people from
themselves. And anyway, maybe I'm wrong and the wisdom of crowds will
prevail.

On the other hand, do they have a right to screw things up for everyone
else? Should a populist 60% be allowed to plunge their neighbors deeper
into crisis? In the case of America, to plunge the whole
world deeper into crisis?

The uncomfortable conclusion I'm coming to is that yes, they
should. Ben Bernanke should be hamstrung even though it's likely that this
would make everyone worse off. And people who advocate for ending the
independence of the central bank should be willing to accept all that this
entails: inflationary monetary policy (the people love inflation!), bad
and unpredictible banking policy, the collapse of the US economy. I just
wish I didn't have to go along for the ride.

Huh? I don't follow her logic at all. A modern democracy is a sophisticated political system. For some specialist functions like monetary policy, undemocratic actors do a much better job. In such cases, democratic lawmakers can voluntarily cede authority to an institution that's insulated from political pressure.

But here's the catch. No one's saying they couldn't take that power back if they wanted to. The Fed's only independent because elected lawmakers chose to make it so. They did this because they judged it to be in the long-term interests of the country.

So do we still have to hamstring Ben Bernanke? I'm just asking. He seems like a pretty nice guy.

Update: By sheer coincidence, Dave writes almost the exact same post at IPE Journal. Really, it's kind of spooky how similar they are.

About that money under the mattress...

Via Bloomberg: "The London interbank offered rate for three-month dollar loans is dropping at the fastest pace since January." This is one positive indicator that credit is starting to flow again in financial markets. At the same time, Goldman Sachs announced that it would sell stock to facilitate repayment of $10 billion in TARP funds to the US government, ostensibly to avoid some of the more prickly (compensation-related) strings attached to the government funds. Goldman Sachs also posted a $1.66 billion profit in Q1.

Good news is welcome news, but two happy stories do not make a turnaround. The Goldman Sachs development may even be counterproductive if other banks rush to pay back their own TARP funds so as not to appear weak, in what would amount to a very public stress test. There is also a danger that Congress, already suffering from bailout fatigue, will become even less inclined to authorize more financial stabilization spending. That's worth keeping in mind, because not everyone is as optimistic as this.

Rags to rupees

India wants its own currency symbol.

The rupee is certainly a strong, and storied, currency, but if China doesn't even have a standardized keyboard and the euro sign isn't yet really universal, what chance does the rupee have of making it as a globally recognized symbol?

The development of a common market (Pakistan, Sri Lanka, and Nepal) would certainly help; bringing together more than a billion people using the same currency in a volatile region would promote greater market integration and freer trade within South Asia. Though not very likely, if implemented, such a momentous change would help to ensure a little more political stability in the 'hood and it just might make for a lasting rupee (and symbol).

(Photo from 8en)

Game Show Network: Your days are numbered

As media providers like Hulu continue to offer highly customized and unbundled entertainment options, Rob Pegoraro writes a timely article on a la carte cable pricing.

I agree with Pegoraro, and his argument for a flexible cable pricing model highlights an important trend that affects many industries.

The decomposition of a product or service into discrete parts, or what many call the “great unbundling,” developed recently in modern business. We have all witnessed traditional bundles: a music CD, a newspaper with many sections, and a cable package with hundreds of channels. Implicit in these bundles is the decision about what gets bundled together in the first place. Rob rightly notes one bundle does not fit all. I don’t like the style section in the newspaper, I don’t like the game show network, and I don’t like the 13 songs on a CD that aren’t the hit single. Fortunately, successful enterprises such as Apple’s iTunes have discredited this anachronistic approach to product bundling.

Unbundling has a powerful implication: personalized aggregation. Examples of personalized aggregation include Google reader for news, Boxee for media consumption, and Amazon MP3 and iTunes for music. With these tools the consumer assembles a custom package of content, cobbled together from a variety of sources. Personalized aggregation empowers the consumer to pay for only what one chooses to consume. The cable industry should note that companies which honor this philosophy will ultimately thrive.

P.S. – Let's not be rash and unbundle the Oxygen channel. Hidden Gem.

Failsafe finance?

Dani Rodrik agrees that the IMF is changed, but does not agree that the Fund is now a true lender of last resort. 

Mr. Rodrik's call for stronger national regulation is, in my eyes, (somewhat) correct. Context requires nuanced solutions beyond those that a blueprint framework can provide: this applies from everything from finance to film. His skepticism is healthy, but I remain more hopeful than he that these reforms are at least a step in the right direction. International finance may not be safe, but was it before this mess?

The Associated Press takes on Silicon Valley

A interesting debate:

http://www.politico.com/news/stories/0409/21136.html

and 

http://www.techcrunch.com/2009/04/06/behind-the-aps-plan-to-become-the-webs-news-cop/

The politics of geoengineering

In an interview this week, John Holdren, Director of the Office of Science and Technology Policy in the White House, indicated that “the Obama administration is discussing radical technologies to cool Earth's air.” They probably are talking about it, but it was a huge mistake for Holdren to mention so publicly, for three reasons.

The "radical technologies" that Holdren references are collectively known as geoengineering. In a nutshell, geoengineers propose to purposefully manipulate the environment to counteract the effects of global warming. The idea has gained traction as a relatively painless way to fight climate change without taxing carbon or raising the cost of doing business. However, there is disagreement over whether it is actually possible and whether it risks making things much worse. Modern climate science is still relatively primitive – there are many things that we simply don’t yet understand. Geoengineering is the scientific equivalent of a Hail Mary pass.

By acknowledging it as a viable option, Holdren risks undermining international negotiations on combating climate change. Currently, the best solution available to climate change is to reduce carbon emissions, most commonly through some form of cap-and-trade system. But by pricing carbon, you raise the cost of goods and services at least in the short run. This is a tough enough pill to swallow, and geoengineering gives naysayers more ammunition to lobby against it. Negotiations are going to be hard enough as is – remember that it’s been seven torturous years of Doha Round negotiations that would produce a net economic gain, and we’re still not done.

Finally, geoengineering does not eliminate international coordination challenges. As a global problem, climate change requires a global solution. There are significant collective action problems to address. But even if we decide to geoengineer our way out of this mess, these problems will remain. Who gets to pick which geoengineering scheme gets used (there are many)? What if different nations choose to go forward with different geoengineering strategies? And most importantly, who pays for it?

I am somewhat of an international cooperation sceptic, and I worry that the global community won’t reach a consensus on climate change. For that reason, President Obama really ought to be exploring every contingency plan, geoengineering included.

But he and his team need to keep it to themselves.

Holbrooke's heroes

Obama's Afghanistan policy review and the following talks at the Hague are being praised for the inclusion of Iran. I've long advocated the inclusion of Iran in Afghan dealings; but a regional solution will only work if every country is involved in shaping strategy. Instead of opening the table to debate, Holbrooke and his team are essentially dictating policy. Apparently, they expect India to accept the notion that Pakistan is a victim of terrorism and a trustworthy partner. Guess what? They're not buying; nor should they be.

The fact that the Obama administration is still supporting Pakistan and now talking with Iran, without any significant conditions, is a huge slight in the eyes of India. Prime Minister Singh has essentially banked his career on the new strategic relationship with the US he helped usher in with the nuclear deal. India, after reorienting their entire foreign policy to align with the US, is being cornered into supporting their enemy, who have still not pursued the planners of 26/11 or even shared evidence.

Treating our strongest ally and partner in South Asia as an afterthought is a huge mistake. Indian elections are this month; the economy is obviously the central issue, but if Mr. Holbrooke continues to talk to India instead of with it, you better believe we will have a much less sympathetic ear in Delhi. Replacing a centrist, liberalized government with a nationalist, populist alliance hostile to most US activity isn't exactly a good change.

(Photo from Politics and Meetings)

A false dawn

April is the cruelest month - if you're an economist. Seriously, the dismal science has outdone itself in the past week. Here are some graphs charting the collapse in trade flows. (Bonus: here are some related statistics and graphs tracking the slowdown of bilateral US-UK trade). Here are some measuring the even faster disintegration of capital flows. Here are some which show that by every indicator, the global economy is tracking or doing worse than during the Great Depression. And here is the impossible (to paraphrase Felix Salmon) list of things we would need to do to avoid another Black Swan like this occuring in the future.

I am most troubled by the argument that current aggressive policy responses may eventually end the recession without addressing the fundamental problems which caused it in the first place. Green shoots? Try cold snap.

After 2 days of communism, Moldova falls apart

Moldova, a small country between Ukraine and Romania, doesn’t get much serious international news coverage and for good reason – most of what they do is inherently hilarious. For instance, last December, the country got a small mention when police arrested a Christmas tree in Chisinau, the Moldovan capital. Other than that, they don’t get much attention, until now.

Moldova exploded this week after the communists won 50% of the parliamentary vote on April 5, which was enough for them to choose a new president and amend the Constitution. OSCE and the EU maintain the elections were mostly free and fair, but many within the country assert that the elections were rigged.

So, unhappy with this democratic decision to curtail democracy, 10,000 people mobilized using SMS, Facebook and Twitter and staged protests on Tuesday in the main square of Chisinau. However, not everyone was there for the same reason. Some called for support from the EU. Some called to join the country with Romania. Others just plain don’t like communism. Together, they put the MOB in mobilization. They ransacked and torched government buildings. 193 people were arrested, including eight minors. 96 police officers were wounded. People again assembled on Wednesday to continue ransacking and torching government buildings. Moldovan president Voronin was quick to blame Romania for inciting the violence. Romanian leaders, for their part, were quick to deny this.

It’s hard to say what ultimately led to this outbreak of violence. It seems to be a culmination of negligence, ignorance, lack of true democratic structure, rampant corruption, and economic hard times (to name a few). In fact, the country’s recent history reads like “What Not to Do” manual. Without solid democratic structures, civic education, transparency and responsible reporting, hard times become impossible to cope with and failure is inevitable, which is either hilarious or tragic to the international community.

Fund-amentals

Plenty have highlighted the promises to the IMF as one of the greater success of the G20 Summit. Free Exchange doesn't agree:

In the quest for a big headline number to throw at the world and the press, and in an attempt to equate this to the missing globally coordinated fiscal stimulus, there's been a fair amount of hand-waving. Of the money that the IMF is supposedly getting, the only clear new commitment is a relatively small $40 billion from China.

True, the new commitments aren't as stellar as the media is reporting. But, the big change is not the new money; it's the Flexible Credit Line. To be fair, the author correctly notes that countries aren't exactly lining up for these IMF handouts. But if Mexico has a decent time with the revamped IMF system, you better believe a few more governments will be putting in a call to Mr. Strauss-Kahn.

Besides, the amount of money isn't that important: it's the fact that after years spent resisting change and asserting their right to essentially dictate monetary policies to countries (ahem, Thailand), the IMF is loosening its grip, albeit slowly. Countries still must have "sound monetary policies" to qualify for these new loans. But the definition of "sound" hasn't been spelled out and more importantly, the loans don't come with IMF staff. With nationalist rhetoric rising in the wake of the financial crisis, taking IMF money is going to be a much easier political sell if it doesn't come with resident Fund officials. The US and Europe may still have de facto veto power within the Bank group, but that's something most people won't know when they head to the ballot box.

(Photo from Kyrion)

International counterfactuals

I thought Jacob Weisberg's piece challenging conventional wisdom on a number of current affairs truisms was good. Compare his thoughts on Chinese stability with some of our own writing.

The Future of Capitalism

For the past couple weeks, the FT has been running an uneven series called The Future of Capitalism. That said, I thought yesterday's entry by Quentin Peel was excellent, and you should read it in its entirety. There's nothing revolutionary here, but it's a remarkably articulate and balanced look at the future of the international political economy.

Track your favorite Senator's salary

Jock Friedly and his congressional staff salary tracking website, legistorm, have become dreaded additions to the Internet database community. A recent Washington Post Article called Friedly "the scourge of capitol hill," but it was hard to tell if the staff writer at the Post agreed with Friedly's motives or just found him a curiously ambitious soldier of public financial disclosure.

The important question that needs to be raised will ask what this project does for the public. So far the Post appears to be passively opposed to disclosure at this level, citing numerous examples of embarrassment and reaffirming that financial matters in America are private (especially if you are filthy rich and your friends are not). Those with their names on legistorm appear to agree. Meanwhile, Friedly lets his hate mail slip passed his conscious and he likely gets some amusement out of keeping congress on the edge of their seats.

The glimmer of hope is that this openness and accessibility will eventually alter the way public officials behave, influence people that run for public office, and draw in the most responsible public servants. Legistorm may also be serving as an interesting social barometer. We still strongly believe that economic inequality will result in social stratification. Should society be pushing for a level playing field with pressure from tools like Friedly's (he doesn't disclose his own profits) or strive for the right to privacy?

Also check out Patentstorm, Stormingmedia, Energystorm, and Sciencestorm.

(Photo from confusedvision's photostream)

A chocolaty financial crisis metaphor

Among all of the recent metaphors used to describe the financial crisis, this one takes the cake (or fudge).

Special thanks to The Browser and The Financial Times.

(Photo from merfam's photostream)

Locally grown analysis

The Olive & the Arrow, was brought to my attention a few weeks ago. This clever Washington based blog has a few eerie similarities to zzzeitgeist. I would start by examining some of the names on the list of contributors. They have their recent G20 commentary and we have ours. Let's not be one to judge, there's always room for more analysis as well as the possibility one might bump into their contributors in a local coffee shop.

(Photo from Dan Shouse's photostream)

The Second Great Depression

Last October, we asked whether or not the world was heading for a Second Great Depression. Today a new piece by Messrs Eichengreen and O'Rourke addresses the question in much more detail. Their findings are sobering.

Say uncle: So much for that commodities rally

In my last post, "The inflation hedge of choice", I highlighted the recent run-up in commodity prices, buffeted by OPEC production cuts and speculative capital seeking a hedge against the Fed's big inflationary adventure. While I expressed deep scepticism over the sustainability of such a rally, I did anticipate a speculative run up in prices over the near-term. Perhaps I should have broadened my outlook.

A trip over to Bloomberg.com made me say uncle. Headline: Commodities Head for Worst Slump Since 2001 as Demand Shrinks. D'oh! The Reuters/Jefferies CRB index fell 5.8% in the first quarter, on top of a 50% decline in the second half of 2008. Afshin Nabavi, senior vice president at MKS Finance SA, shot down the idea that speculative capital would contribute to a commodities rally, “For commodities, the main mover is demand and supply and if demand is down, then the price comes down, no matter how many speculators are in the market.”

True, in a perfect market. But speculative capital often drives prices beyond levels justified by supply and demand fundamentals. No one still believes that $150 oil was driven solely on the strength of Chinese demand. Right? Mike Wittner, head of oil-market research at Societe General SA, makes the point that, while we have seen speculative inflows driving certain commodities higher (oil, for instance), the focus will quickly shift away from long-term inflation and back towards "the global recession, weak demand, and still-high stocks." Copper, which I cited as one of the highest-performing commodities, is still expected to decline by over 9% in 2009, in spite of the 30% run-up thus far. This would mean another price collapse is right around the corner.

I draw two important points from these experts. One, this commodities rally is likely to be shortlived. Two, it is misleading, financially speaking, to speak of "commodities" as one monolithic asset-class. As the article notes, while copper and gasoline have experienced a significant recovery this year, it was more than overwhelmed by further declines in natural gas, wheat and nickel. That is the mistake I made in my last post: I took a particular segment of market as indicative of a broader trend.

So beware of false rallies, bet on gold instead and don't take investment advice from me. Or this guy.

(photo from the following photo stream)

G20 deliverables

There's been some grumbling about how the G20 London Summit's deliverables are disappointing. Regardless, I feel like one substantial achievement has been underreported: the G20 pledged $250 billion in new trade financing to help plug a $300 billion worldwide gap. Trade finance isn't as sexy as financial regulation, new global reserve currencies or fiscal stimulus coordination, but it is absolutely essential to world commerce, the engine of economic growth. As an added bonus, it will disproportionately benefit developing nations.

Sponsored Link: Earn big money by sitting in your car trunk!

I've grown weary of sponsored links littering the web but I thought that advertising had earned a permanent home on the Internet. Or has it?

Wharton Professor Eric Clemons made a controversial claim recently: that Internet advertising will ultimately fail. His article elicited a strong response and even a full rebuttal from Danny Sullivan.

Regardless of where one stands in the debate, Clemons makes three excellent points about advertising in general:

First he realizes that "consumers do not need advertising." Consumers spend time researching products and then making purchasing decisions based on recommendations and reviews. His observation affirms the common assertion that product excellence is the best form of advertising.

Second he argues that "Consumers do not trust advertising". Common sense kicks in: one cannot trust a company as a source of information on its own products and services because a company is inherently biased in favor of its own products! Recommendations from friends or trusted reviewers have more impact. I'm amazed that social networks have not yet found a way to profit from friend to friend recommendations and the resulting commerce.

Third, he notes that "Alternative models for monetization are available". That is a refreshing statement: advertising is a lazy man's revenue stream and a cliched business model. The Internet must not rely on a single revenue stream and I would love to see more variety in how start-ups attain profitability.

On the G20

On the G20:

One risk is that the group, if it seeks consensus, will produce an anodyne statement that adds little or nothing to the existing efforts to respond to the global slump. A greater risk is that the summit is so badly divided, and the outcome is so feeble, that dashed expectations actually worsen confidence.

Unfortunately, I don't see the two as mutually exclusive. I have a feeling "confidence" - whether of investors, politicians, or pundits - is going to be eroded either way. In fact, the only people coming away with a morale boost will be either the protesters or the police.

(Photo from G20London2009)

The global tea party

Tea prices are about to jump...

to an all-time high after damage to production in the world's key exporting countries from simultaneous droughts...Dry weather has led to low yields in India, Kenya, and Sri Lanka. The output fall in the three countries, which account for half the world's exports, will exacerbate last year's market deficit.

Droughts, yes. But Kenya and Sri Lanka are also undergoing serious civil strife. I can't help but imagine that political unrest and violence have contributed to the price rise, either by disrupting supply and delivery chains or through the flight of foreign capital and investors that finance tea farming.

Tea, unlike opium, is not used to finance insurgencies. Maybe the governments, if they are strong or capable enough, should take this chance to encourage the farming of such a storied and legitimate crop. Tea has long been exposed to price fluctuations on the open market, like most commodities. But governments should be careful in the tide of rising protectionism to resist placing restrictions on the trade of tea and encourage its widespread promotion and consumption. Empires have been built on less.

(Photo from thebensteads)

Gallows humor

President Obama has had a rough few months. As the global economy continues its slide, what the crisis means for global trade and financial regulation will dominate discussions in London on Thursday. Rightfully so. After the economy, North Korea's impending missile launch and Afghanistan's gradual decline into disarray dominate any foreign policy discussions. With so much on his plate, not to mention health care reforms and an understaffed Administration, Iraq has fallen by the wayside. The President has admitted as much.

But lest we forget how perilous the gains we've made in Iraq are, Tom Ricks is happy to remind us:

The Maliki government is putting the screws to the Awakening movement (for those who just arrived, that's a mainly Sunni group of about 100,000 people, many of them former insurgents, who in late 2006 and 2007 arrived at ceasefires with the U.S. military presence in Iraq). The American plan was to integrate 20,000 members...into Iraqi security forces, and help the rest find other work...But the Shiite-dominated Baghdad government never really like the idea. Indeed, the first deals were cut by U.S. officials behind the back of the Iraqi government...I think Maliki's gambit is to crack down on the Sunnis while American forces are still available in sufficient numbers to back him up. This is turning into a test of strength, Sunni vs. Shiite.

Sound familiar? 

The President may be better served to focus on actually shoring up our international standing, rather than just paying lip service to the notion while using our current crisis environment to push big government, domestic programs that most independent voters hoped he would avoid.

We're famous in China. Oh, wait...

Random fact of the day: we've received word that China's internet firewall has blocked zzzeitgeist in the People's Republic.

Latin America Update

Venezuela is working on trimming costs at its state oil company, and after the hassle of dealing with services contractors demanding payment, has decided to slowly pay its outstanding bills and then simply replace them all.

Ecuador, by slapping new tariffs on 627 imports, has become the global protectionism posterboy, including mentions in a new WTO report, a World Bank report, and The Economist, as well as lengthy features in the Washington Post and Independent.

Colombia and Panama still have free trade agreements pending with the US. The Obama administration and key members of Congress have signaled a willingness to bring them up, if there is progress on eliminating tax havens in Panama and creating benchmarks for enforcing labor protections in Colombia. The Post interprets this as a toughening of US trade policy, but it may just be the only realistic way to make progress in the current economic and political environment.

Panic and Pandemic

According to the World Health Organization, Ukraine experienced a huge drop in diphtheria, mumps, polio, hepatitis B, TB and whooping cough vaccinations in the last year after a widespread scare about vaccine side effects. Last May, a 17-year-old boy died after he received a combined shot for measles and rubella, and though the causes of his death turned out to be unrelated to the shot, the panic spread across the country like… well like a virus.

Two factors fed this panic: an unstable government and irresponsible media. First, true to their nature, the politicians sought to use the boy’s death to promote themselves and discredit others. Instead of properly investigating the boy’s death and initiating a thorough vaccination campaign, they squabbled like they’ve been doing since the Orange Revolution. So accurate information was not made available, and vaccinations expired before a campaign could be launched.

While the public did not get any accurate information, they were inundated with rumors and drivel, because those types of stories sell. The most popular misinformation: the boy's death was caused by an Indian-made measles and rubella vaccine, which also sterilizes men as part of a plot by Ted Turner, whose charity paid for the vaccines. Why Ted Turner would want to sterilize Ukrainians, I’m still not sure. How would that be good for business? If there were more Ukrainians, he could rationalize opening a chain of Montana Grills in Kyiv. But I digress.

This most recent side effect of political instability and unreliable media causes much cause for concern. In the early 1990s, Ukraine experienced an economic crisis and didn’t really get vaccinations to the public. Combined with the scare, UNICEF estimates that almost 9 million Ukrainians need vaccinations. Since 2000, there have been two major outbreaks of measles, and experts predict another larger outbreak. Moreover, with freer visa regulations established in the last couple years, more Europeans are traveling to Ukraine, and more Ukrainians are traveling to Europe.

Thus the possibility of exporting an outbreak is more and more likely. In this blogger’s opinion, it’s incredibly important that the EU and international organizations work with the Ukrainian Ministry of Health to start a campaign that will convince the public of the importance of vaccinations. Barring that, perhaps they can launch a campaign giving Ted Turner more credibility.

Buying bras shouldn't be this complicated...

One of the irony's of Saudi Arabia's gender segregation is the way in which women shop for lingerie - uncomfortably and inappropriately.

As a result of labor policies aimed at preventing women from dealing with male customers, women are not employed as salespeople. This means that in lingerie stores men end up talking to women about bras/thongs/etc and checking out their bodies to determine cup sizes. On top of that, fitting rooms are banned in the kingdom, since women undressing in the close vicinity of a man is unacceptable.

Not only does this not make sense in ANY way when you consider the conservative nature of Saudi society, (in a gender-segregated society, why would men not be banned from lingerie stores?), but even in the US and Europe, men typically do not sell lingerie to women. Well, as they say in the Arab-world, HALAS! Enough!

A group of Saudi women have launched a boycott of lingerie stores until they employ women. The women are not asking to work WITH men. Far from it - they are not demanding any major shifts in Saudi culture - in fact, they are supporting it. They don't want men to be involved in this type of intimate purchase at all. They want men completely removed from the process, as you would think conservative leaders would agree with.

The boycott was launched on Tuesday by approximately 50 women who gathered at the Al-Bidaya Breast-feeding Resource and Women's Awareness Center in Jeddah, run by founder Modia Batterjee. The aim of the boycott is to pressure the government to IMPLEMENT a law that has been in existence since 2006, which mandates that only women can be employed in women's clothing stores. Reem Assad, a finance professor at Dar Al Hekma College in Jeddah says: "We are raising awareness and calling for the implementation of the law." Assad started a Facebook group which now has 1,680 members, and posted an online petition which has at this point been signed by 1,700 people.

Since only a few Saudi papers have written about the boycott, it has depended largely on word-of-mouth and the internet. The women who launched this campaign knew how to leverage online communications and social media to disseminate their message quickly and effectively. The impact of the campaign remains to be seen, but I am curious to see how else Saudis will chose to utilize new and social media to initiate these types of activities in the Kingdom.

Doing business with the World Bank

Doing Business reports on the ease and openness of starting a business in 181 countries by providing reports and information on a variety of select indicators.

A useful resource for all young entrepreneurs.

Soft power vs. hard power

The fallacy of equating economic power with clout. Choice excerpts:

The US is the world’s pre-eminent military power, but the economic benefit of
that is hard to see...

In the modern world, there is no observable relationship
between size of country and its standard of living. Small and large countries
are found among the rich and among the poor...

Economic power is based on monopoly derived from being the only seller of a particular good or service, or on monopsony derived from being the only buyer. Such power is held by individuals and businesses, not by states. Dominance of an industry or activity is not the same as scale, though scale and dominance are loosely related. International trade is conducted by individuals and businesses, not governments, and it is individuals and businesses, not governments, that negotiate the division of the value added trade creates. The principal economic role of states is not to get in the way. They can impede the process of adding value through trade, protectionism or disruptive currency interventions. These actions damage their own businesses even more than they damage the businesses of other countries.

A visual explanation of Geithner's two-pronged plan

The FT has a handy graphic explaining how Secretary Geithner's plan will actually work if you're a little bit confused.

The inflation hedge of choice

On Wednesday, the US Federal Reserve "shocked the world" by announcing plans to buy $300bn of government debt and double its purchases of Fannie and Freddie securities. According to the FT, once the Fed's plans are fully realized its balance sheet could swell to $4,ooobn, one third the size of the US economy. Hellicopter Ben, meet Bazooka Ben.

The Fed's actions are an attempt to literally shock life into the credit markets. It may also have the convenient effect of driving down the cost of government borrowing. However, the Fed runs the very real risk of stoking a very big inflationary problem down the road. Weimar Republic the US is not, but the money supply is growing at such a rapid rate that the Fed had better hope the US economy rebounds this year. Remember central bankers, there are unintended consequences to such dramatic monetary easing; like say, a housing bubble (Mr Greenspan, I'm looking in your direction).

What then are some of the likely consequences of the Fed's policy innovations? For one, the dollar was the big loser last week; in fact, it registered its worst week against the major currencies in 24 years. This fed into an accelerating rally in commodities, the moment's inflation hedge of choice. The benchmark S&P GSCI index was up 8% last week. Or take copper, up some 28% this year, a feat completely divorced from the underlying fundamentals. Though, the FT has an article this morning on the actions of a "secretive" Chinese state institution stockpiling copper supplies (which sounds like the perfect plot for Bond film). Oil is back over $50, supported by the OPEC cuts, but boosted in recent weeks by Fed policy. The speculative inflow into commodities, as an asset class, may be small compared to the bubble of recent years, but it is nonetheless paring the steep losses experienced in the second half of 2008.

The sustainability of this rally is highly suspect. With Chinese growth forecast at 6% for the year, and the G7 contracting by 3.2%, the global recession will depress demand for commodities well into the year (with the possible exception of food, but that's another discussion). However, loosey-goosey monetary policy (as A-Rod would call it) comes at a price, with inflation second only to a loss of confidence in US treasuries. Bernanke has demonstrated that he is willing to throw everything in the Fed's arsenal at the credit markets. Until he wins, expect commodities to outperform as an asset class.

(photo courtesy of Shiny Things' photostream)

Not a good way to start the week

On the front page of tomorrow's New York Times: Trade Barriers Rise as the Recession's Grip Tightens. Key quote:

"The U.S. is in such great danger of backing away from free trade," said Kenneth
S. Rogoff, a professor of economics at Harvard. "The next two years could be a
disaster for free trade."

Big game hunting

* Trade posts represent solely my own opinions.

At a recent conference that I attended, one of the speakers borrowed a quote from Ike Eisenhower to great effect: “if a problem cannot be solved, enlarge it.” It occurs to me that this sentiment directly applies to the politics of trade in the United States. The public is divided on whether trade is beneficial to the economy, the 111th Congress has already demonstrated protectionist instincts, and it is increasingly difficult to advocate openness as jobs are lost and the recession deepens. How should President Obama, who understands the benefits of trade, address these political realities?

Enlarge the problem substantially by negotiating a comprehensive free trade agreement with the European Union or Japan. First, such an agreement would have huge economic benefits: EU-US trade flows were worth more than $640 billion in 2008. Export-oriented industries on both sides could be counted on to exert a lot of political pressure for that kind of market access. Second, a USEUFTA would take a very long time to negotiate due to the complexity of the trade relationship and both sides’ preference for high-quality agreements. This would put trade on the backburner for at least several years, which would help diffuse political tensions and give the economy time to recover, thereby mitigating the political influence of import-exposed industries. Negotiating with the EU would eliminate the standards (labor, environmental or otherwise) problem.

There are serious drawbacks to such an approach, such as the fact that it shuts out China, India, Brazil and other developing countries (though if you believe in competitive liberalization, you might argue that this would spur further negotiations.) Perhaps most worrisome, by establishing a substantive parallel system, it could easily undermine the multilateral trading system and provide a final knockout blow to the Doha Round. That would be terrible.

Still, the Obama Administration made it clear in its 2009 trade policy agenda that it would seek more economically meaningful agreements. Indeed, in a lot of ways, it would be better to complete one really big one instead of many smaller ones. Perhaps it’s time for trade policy-makers to consider big game hunting.

Hidden gains from trade - St. Paddy's Day edition

This is a few days late, but I wrote this note to my colleagues earlier this week on St. Patrick's Day and thought I would share here:

The shamrock (three-leaf clover) is one of Ireland's most recognizable symbols. But demand for "Irish" shamrocks is now so great that the small island nation must import clover seeds from countries like New Zealand, India, and Germany. In 2007, Ireland imported nearly 200 metric tonnes of clover seeds worth $677,864.

Gains from trade, indeed.

Free trade petition

The Atlast Global Initiative for Free Trade, Peace and Prosperity has written a petition for free trade, to be unveiled on April 1st before the London Summit. My favorite part:

Trade’s most valuable product is peace. Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

Trade promotes peace by encouraging people to build bonds of mutually beneficial cooperation. Just as trade unites the economic interests of Paris and Lyon, of Boston and Seattle, of Calcutta and Mumbai, trade also unites the economic interests of Paris and Portland, of Boston and Berlin, of Calcutta and Copenhagen – of the peoples of all nations who trade with other.

Introducing...

... our newest contributor, Alex Orr, who will be writing on finance and economics. His first (excellent) post is here, and his bio is here.

Mo' Rubles Mo' Problems

Amidst the spring-time clouds and snow over the Moscow sky, there appears to be one bit of good news: the ruble, for now, seems to have stabilized, defying the critics of the Kremlin’s ruble stabilization program. When I was in Russia just two months ago, every stop at the ATM was like a special delivery from Ded Moroz, as the RUB/USD rate dropped from 29 to 32 in 8 short days. In the spirit of the season, I decided to do my part for the economy by “donating” my extra 10% of purchasing power to the fine brewhouses and eating establishments of St. Petersburg.

Yet, before we start celebrating, we should keep in mind that movements in the ruble have correlated almost entirely with movements in the price of oil, which is really the only marketable Russian export (in addition to vodka, defunct ideology, and depressing literature), and thus the indicator for the overall Russian economy. As crude has now stabilized above $40/bbl, so the ruble has stabilized below the euro-dollar basket of 41. This is a good thing, but it can also create an illusion of stability and economic upturn. Meanwhile, inflation continues to soar in Russia, outpacing other Eastern European countries. While inflation has picked up, salaries, both nominal and real, have been falling, and consumption has dropped sharply – it has even hit one of the most rock-solid sectors of retail! Sadly, many of my friends have recently had to choose between leaving their jobs or taking pay cuts of up to 50% - one friend tells me that her employer has not even paid her in the past 2 months, and she has taken out a line of credit to fund her basic living costs.

This last part is particularly worrying, especially since ruble stabilization has necessitated a significant rise in the already sky-high interest rates for personal and business loans at Russian banks. Faced with double-digit interest rates, Russians have done what many in the former Communist bloc have done over the past few years – take out loans in foreign currency, particularly in Euros, at much lower rates. This was great when emerging markets were booming, but now that currency devaluation has hit, consumers and businesses are struggling to make payments, with the latter raising prices on goods. Already in Russian cities, most real estate rental prices are set in Euros. As small businesses get hit with higher real costs for rent and loan payments, prices continue to rise. Moreover, as confidence in the ruble continues to wane, the desire for holdings (and lending) in foreign currencies grows still.

What is the Kremlin to do? Lowering interest rates on loans below the current 13% inflation rate would effectively mean government subsidization of lending, and would drive further devaluation of the ruble, and price inflation for imported goods. While this could cause a further flight of capital from Russia and could plant the seeds for ‘90s era economic chaos, it could also stimulate lending and growth, if coupled with prudent policy reforms, particularly toward small businesses which are drowning in bureaucracy and corruption. It might also cost the Kremlin less, and be more effective, than continuing to subsidize banks who then speculate against the ruble in the Forex markets. Keeping interest rates high, however, may create the illusion of stability, but will surely continue to stifle growth, and will hurt ordinary Russians most. In any case, winter in Russia may not end for some time to come.

(photo from Alcoyotl's photostream)

Quantitative easing explained

The FT has a great new interactive feature explaining the central bank policy of quantitative easing. The British narrator sounds reassuringly competent.

Exxxxcellent!

Much talk has surfaced lately concerning provisions in the recent stimulus bill that curb hiring of workers through the H-1B visa program. The proposed restrictions only affect TARP recipients, and Science points out that the practical impact of the limits could be minimal:

The limits affect new hires, not existing holders of work-related visas. And while the amount of TARP money is staggering, the number of companies involved -- generally in the financial services industry -- is relatively small. Only about 1 percent of workers in this industry have H-1B visas.

Rejoice you bloodthirsty capitalists, here are a few reasons to celebrate!

1. Computer software is a high growth industry with great employment prospects, yet interest in computer science remains generally low. Silicon Valley relies on the H1-B hiring process to find skilled workers.
   
2. Immigrants start companies. See Google.
   
3. Exporting education services helps the US to reduce its global trade imbalances. We still have the best higher education system in the world, but inhibiting the prospects of employment in the US may deter foreign students.
   
4. Backdoor isolationism sends the wrong message to our allies and trading partners. We have much work to do in order to improve our global standing.
   

Addendum: This should be an interesting study

Mobile education

I went to New York this past Friday and someone yelled at me on the bus for making a phone call. In the spirit of our age, it immediately inspired me to write a blog post on the topic (ok, ok - I was in the process of writing it already, but it seemed especially serendipitous).

For those of you who may chide me right away for my public chattering, read the whole post. But for those of you too lazy, here is a (long) excerpt.

The use of mobile phones has been used for all types of initiatives that typically fall under the umbrella of development work. Text messages have been used to monitor elections and share market prices for milk. As long as mobiles continue to improve daily life, their importance will grow. If monitored correctly, governments can harness this trend to garner another source of foreign and domestic direct investment to gain desperately needed capital. Doubly productive, the explosion of mobile technology also acts as a "leap frog" technology preventing governments from needing to expend huge sums for the development of traditional infrastructure needed for analog phones and land lines.

Despite all their benefits I would argue that cell phones are still underused in the developing world. In areas where education of youth is prevented either by conflict, distance or terrain, or simply a lack of time due to hours spent working, mobile technology can help provide educational materials and resources that may traditionally be unavailable.

It may sound a little unusual, but radio technology was used throughout Australia in the 1950s and 1960s to educate children where Outback distances prevented collective schooling. If countries are really going to ensure universal primary education by 2015, then governments may be better off distributing cell phones than laptops.

All this and more at Youthink!, the World Bank blog where I'm a regular contributor.

FT Energy Source

It has been a particularly busy beginning of the week, so instead of my usual fare I thought I'd draw your attention to another blog offering really great coverage of the energy/commodities markets.

I recently discovered FT Energy Source, and it is already one of my regular reads. It brings together all the best energy coverage from around the web and the newspaper itself, while also providing terrific original analysis and behind-the-headlines insight. Its coverage this weekend of the OPEC meeting perfectly illustrates the access and insight it offers.

If you are looking to build on the energy/commodities coverage of zzzeitgeist, I recommend checking out FT Energy Source. After us, of course.

I thought the culture wars were over

Via Time,  10 ideas that are changing the world

 

#3: The New Calvinism

Calvinism is back...John Calvin's 16th century reply to medieval Catholicism's buy-your-way-out-of-purgatory excesses is Evangelicalism's latest success story, complete with an utterly sovereign and micromanaging deity, sinful and puny humanity, and the combination's logical consequence, predestination: the belief that before time's dawn, God decided whom he would save (or not), unaffected by any subsequent human action or decision.

Is this for real or is religion simply a counter-cyclical asset?