วันจันทร์ที่ 24 มิถุนายน พ.ศ. 2556

How Did the Global Financial Crisis and Bubble Happen?

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Former FED Chairman Alan Greenspan made a very interesting comment when he testified before congress after the Global Financial bubble burst of late 2008. When asked how did this happen, he made a number of astute observations and comments, of course the most telling and one that has been repeated the most was; "I couldn't believe that bankers would act this way against their own interests" or something to that point.

Was it more irrational exuberance, only this time aimed at the banking sector? Well, if you'd like to read an extremely good book on the reality of "rational investment" on Wall Street than boy to I have a good book recommendation for you. The book is a really good read, but very detail oriented and philosophically based, which 100s of names, theories, examples, observations and a good bit of history on economic thought, and financial theory. The book is:

"The Myth of Rational Markets; A History of Risk, Reward, and Delusion on Wall Street" by Justin Fox; Harper Business Book Publishers; New York, NY; 2009.

As the author takes you through some 350 pages, he never actually answers the question, which is the suggested in the title of the book; are markets rational? But, that is okay, as the reader, if intellectually endowed will have a very good understanding by the time they finish. All the pros and cons, and theories of this question are addressed.

I very much enjoyed the history, and his lectures on the evolution of economic and financial thinking. There were many folks listed in the book, as well as all their arguments. I enjoyed the comments about Warren Buffet, and the top academic scholars on investment theory, portfolio allocation schemes, capital asset pricing, and option pricing. Action packed with references galore, it's all here. Think on this.

Lance Winslow - Lance Winslow's Bio. Lance Winslow is also Founder of the Car Wash Guys, a cool little Franchise Company; http://www.carwashguys.com/history/founder.html.



วันพุธที่ 12 มิถุนายน พ.ศ. 2556

Fault Lines - How Hidden Fractures Still Threaten The World Economy

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Theses culprits are none other than greedy bankers, sleepy regulators and irresponsible borrowers whose individual choices that collectively brought about the economic meltdown.

Raghuram Rajan was one of the few economists who warned the world of the global financial crisis before it even hit. In the book Rajan warns us of the serious flaws in the economy that need to be fixed to prevent potentially more devastating crisis that awaits us. According to Rajan there were two main causes that led to initial breakdown-One was stagnant wages and the other was growing inequality in the U.S.

All this led to the reduced purchasing power of many middle class households which gave birth to an urgent demand for credit. The financial industry that had already gained encouragement from the government responded back by supplying home equity loans, subprime mortgages and auto loans. Most economists had failed to consider that the side effects of this unrestrained credit growth would turn out to be more devastating.

Raghuram writings are always well reasoned and based on sound set of facts. While the book is worth it even for the explanation of why we had a crisis and is even the most thought provoking contribution in the aftermath of the financial crisis. Readers will find that the book is full of great examples and cases and will certainly question some long held biases about current economic conditions in western countries.

Raghuram in his book also lays out some common patterns of global economic behavior in households, markets and governments and shows that when economic conditions become so demanding the difference of behavior between developed and developing countries becomes negligible.

Jenny is an online marketing professional, who keeps on researching on how various businesses are using online marketing for their advantages. He often shares his research and understanding through his articles and blogs.
He is currently researching on the global book industry and finding out the best resource to procure and buy books. To buy books online, he tests the usability factors associated with the online bookstores. Based on his real life experiences he would be contributing some of the articles for various resources to procure and buy books.



วันพุธที่ 29 พฤษภาคม พ.ศ. 2556

The Fight to Free the Charleston 5

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On the Global Waterfront: The Fight to Free the Charleston 5 by Suzan Erem and E. Paul Durrenberger. Monthly Review Press: 240 pages, 2008. $17.95.

When the union's inspiration through the workers' blood shall run

There can be no power greater anywhere beneath the sun;

Yet what force on earth is weaker than the feeble strength of one,

But the union makes us strong.

This old labor hymn was written by Ralph Chaplin way back in 1915 and is the unofficial anthem of the US labor movement. It's sung at labor rallies and gatherings, but with an interesting twist. Organizers often pass out songsheets because many of the assembled labor activists don't know the words.

It's a sobering and even embarrassing moment for the US labor movement which is now down to about 8% of the private sector workers. Those who romanticize organized labor based on college history classes or nostalgic folksong fests need to remember that solidarity always begins with a hope....not a certainty.

And if solidarity leads to even a small partial victory, you can bet there will have been lots of hard work, hard feelings and heartaches along the way to that ecstatic moment when the victory celebrations begin.

Suzan Erem and E. Paul Durrenberger have put together a book that tells how solidarity really works and that yes, the words Ralph Chaplin penned can become a reality even to those of us who can't remember the lyrics without a songsheet.The book is the product of years of research and writing from a team that consists of a former union organizer and an anthropologist . You couldn't ask for a better combo.

January 19, 2000 was a bad night for the City of Charleston S.C. and the Port through which so much of it economy depends. What had been planned as a routine picket of a ship being unloaded by a non-union crew escalated into a bloody melee involving hundreds of mostly Black dockworkers and mostly white police. Even though some of the picketers were white, no one doubted that there was an ugly racial component to the behavior of the cops. It's a wonder no one was killed.

South Carolina has a long violent racial history that stretches back to the earliest slave days and many Black South Carolinians had to die before the chains of slavery and later Jim Crow were finally cast off. Although modern South Carolina likes to pretend that its days of white supremacy are over, its citizens know better.

The authors of On the Global Waterfront describe in detail what happened that January evening. Later, local police and union officials both concluded that the confrontation had simply gotten out of hand. Some workers apologized to the police the next morning for the rocks and railroad ties they had thrown. For their part, the local police wanted to settle the whole thing as simple cases of trespass. Police behavior that night was far from exemplary and their provocations and brutality had been fully recorded on video.

City officialdom wanted the whole incident disposed of quickly and quietly so as not give the city a reputation for being "troubled". Troubled ports repulsed rather than attracted the kind of shipping business that the Charleston economy had come to depend upon.

But this was a new Millennium and the realities of a globalized economy made it impossible for Charleston to quietly bury that violent evening.

The 5 men who were charged with serious felony offenses as a result of the riot become the focal point of a complex international struggle that involved competing US dockworker unions, an international network of dockworker militants who saw Charleston as an opening salvo against dockworkers everywhere, a politically ambitious rightwing Christian fundamentalist politician, competing interests among the shipping owners themselves and an expensive legal battle that managed to cross oceans before being resolved.

It would have been easy to lose readers in this bewildering story, but Suzan Erem and E. Paul Durrenberger manage to tell it without resorting to facile oversimplification. One comes away with a special appreciation for ILA Local 1422 President Ken Riley who led his local through the entire struggle with an intelligence and grace under fire that was key to their eventual victory.

Ken Riley's union was the East Coast based International Longshoremen's Association(ILA), an organization with a tainted history of corruption and gangsterism that had endeared them to the worst of the brutal shipping company owners. Ken Riley represented a new generation of dockworker leaders, people who wanted to clean up the union and adopt a militant stance toward the pressures of the new globalized economy. The oldline leadership of the ILA hated Ken Riley and everything he stood for. It would take many months before the national ILA leadership lifted a pinky finger to help Local 1422.

Fortunately, the West Coast based International Longshore and Warehouse Union(ILWU) had a much different tradition that had grown out of the bloody 1934 San Francisco General Strike. Their leadership evolved from the leftwing movements of the 1930's and their legendary former leader Harry Bridges had been accused of being a communist, not a Mafia thug. Their tradition was one of labor solidarity and alliances with social movements for peace and civil rights.

The modern ILWU leadership grasped immediately the importance of Charleston. If the international shipping industry could break ILA Local 1422 and the port of Charleston went non-union, the results could be catastrophic for dock workers everywhere. The ILWU immediately contacted Ken Riley and offered him the kind of money and international contacts he needed to save not only the 5 workers facing serious charges but his very union local.

On the Global Waterfront takes the reader step by step on how another kind of globalization was evolving, the globalization of the labor movement. As Charleston 5 defense committees sprang up and the creaky wheels of the AFL-CIO leadership began to turn in favor of ILA Local 1422, the authors make it clear that all of this was the result of long exhausting hours of work done by a core of very smart and very committed people with the support of thousands around the world.

When victory for the Charleston 5 and Local 1422 finally came in March of 2002 it was a time for joyful celebration. It also became a time of deep reflection as labor activists around the planet pondered their next move in a globalized economy when money crossed borders at light speed and the economies of entire nations were dwarfed by the largest global corporations

Global capital by its very nature seeks to cheapen the price of labor to increase its profits. To do this it must maintain efficient production while fighting to keep workers as disunited and divided as possible. But efficient modern production is difficult with a dispirited demoralized labor force, so the more far-seeing multinational corporate owners see a place for compromise with the global labor movement. This is not compromise based on any sort of moral values or sense of justice, but a cold calculation of power relationships.

It's class war. But even in war, enemies sign treaties and ceasefires while they anxiously assess what the capabilities of their adversaries might be when the peace is finally broken again.

The last chapter of On the Global Waterfront is called "Not Just Another Labor Story". The authors aren't kidding. It's easy to say,"Think globally, but act locally". But what are we exactly supposed to think about? And what actions are we supposed to take?

The morning after that bad night of violence in Charleston SC, Ken Riley and the other Local 1422 activists did not have immediate answers to those questions. But with their own formidable inner resources and the help of others around the world, they came up with some pretty good answers later on. How they did it is an organizers textbook for anyone concerned about social justice.

What Ken Riley and the members of ILA Local 1422 discovered when they took their campaign on the road was that there really is a solidarity community out there and it is truly global. We don't hear about it much from our corporate-owned media (surprise.....surprise), but it's real, it's growing and we here in the USA really need to take our place in this global community.

Whether you are a union militant, a feminist, an environmentalist, an anti-racist organizer, a peace advocate, a combination of all these things or any kind of social activist at all, it really is Global Solidarity Time.

Living in the world capital of individualistic dog-eat-dog cat-eat-mouse economics, solidarity is not something we are taught in school, inherit as part of our common culture or learn about on "Reality TV". It's going to take some effort, but the Ken Riley's of the world are patiently waiting to teach us all about it.

In our hands is placed a power greater than their hoarded gold,

Greater than the might of armies, magnified a thousand-fold.

We can bring to birth a new world from the ashes of the old

For the union makes us strong.

Remember: Ask not what your planet can do for you, ask what you can do for your planet.



วันพุธที่ 15 พฤษภาคม พ.ศ. 2556

Unjust Deserts - Book Review

Like a law of physics, corrupt politics, unshared national wealth and uncontrolled greed combine to produce economic inequality and delusional prosperity. Now comes a book that should have been titled Stolen Wealth. This would have been more consistent with its long subtitle: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back.

In today's world of economic crashes and calamity it comes to this: Should there be higher taxes on the richest people in society? Gar Alperovitz and Lew Daly make a very sound case that considerable research demonstrates that a huge fraction of the success of the wealthiest people results from inherited knowledge that society at large owns. The incredible economic inequality we see today, therefore, is morally unacceptable.

If President-elect Obama and his many economic advisors buy into the intellectual arguments presented in this book, which is very likely, then we can expect a strong push for higher rates of federal taxation on the highest incomes and capital gains, as well as on accumulated wealth by higher inheritance taxes. This book presents the central argument for such public policies, namely the incredible importance of inherited knowledge accumulated over long periods that forms the basis for financial success by some individuals. Their smartness, creativity and hard work cannot explain their disproportionate wealth. It largely results from inherited, accumulated knowledge from the past.

According to this understanding, it is not so much about redistribution of wealth from the richest people to everyone else, it is more about the morally correct and necessary action to rectify the unjust and immoral ownership of wealth that a relatively small fraction of the population has improperly (though legally) attained.

What Americans need to be told by politicians is that "ever-increasing knowledge, accumulating across the generations, is central to the creation of all wealth," according to the authors. Therefore the proper role of government is to ensure that many more people get some of this wealth. And the practical way to do this is through higher taxation of the unjust deserts now enjoyed by the Upper Class.

Looking at this another way: the economic decline of the middle class and the expansion of the working poor result from all these unjust deserts. All the unshared wealth that has resulted from inherited knowledge that a few people have managed to unfairly benefit from. This has produced rising economic inequality and increased economic suffering by so many Americans.

This is not the easiest book to read because it is written in an academic rather than a populist style. Nevertheless, for anyone that wants better justification for "taxing the rich" public policies it is essential reading. Another good title for the book would have been: Battling Economic Injustice.



วันอาทิตย์ที่ 5 พฤษภาคม พ.ศ. 2556

Economics for South African Students Price

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For the economy to make progress (stabilize) there are certain things that must be done. There are several things that can be done. You can even get books that will help you familiarize yourself with those things. Read on to get the Economics for South African students price.

A number of books have been written to help stabilize the economy. This one is among the many books that are sold out there. If you want to get more information then go through the following article.

The Economics for South African students price is about R353.35. This book has a high customer rate which shows that it is really helpful. Its authors are Philip Mohr and Louis Fourie. The third edition is made for business and economics. Its price is about R135.00. The fourth edition is made for business and economics. It is classified under economics and management sciences. It has an introduction of economics, the bases and a close look at the economics dilemma.

It will take you through the problems and the solutions that you can apply. It will simply talk about the economy; the business and monetary section. This book is usually used in universities by economics and business students. You can carry this book around since it has 534 pages and weighs 1095g. It has a width of one hundred and ninety mm and a length of two hundred and sixty mm.

Since the Economics for South African students price is low, just about anyone can get it. If you want more data about this item or want to see the item, you can go to Shopbot.co.za. You can also go there to view other similar products.



วันศุกร์ที่ 26 เมษายน พ.ศ. 2556

Rich Dad Poor Dad - A Book Review

Rich Dad Poor Dad is written by Robert Kiyosaki, a well-known and best-selling author of many a books regarding personal finance. I happened to pick up a copy of Rich Dad Poor Dad over the weekend thanks to its catchy tagline or maybe I though it could help my ever dwindling bank balance! This book has been on the New York Times best-selling list for many years and it has numerous other credits to its name.

Rich Dad Poor Dad deals with many a theme such as the fact that it is wise to practice financial literacy by avoiding debt and starting business and real estate. Robert's book tells us to gain more and more knowledge about financial markets and finance related terms because most of the people lose money not because they are foolish, rather they tend to lose because of lack of knowledge.

According to the book, Rich Dad Poor Dad, financial literacy should be treated like learning another language and one must be apt at it. As one learns more and more about basic financial terms and practices to become more financially literate, one begins to pay more attention to details such as financial statements, assets, liabilities, credit and debt and other components of the financial world. These terms would either have been ignored earlier or one just simply did not know anything about them.

In the book, Rich Dad Poor Dad, Robert refers to his real dad as "poor dad" as a symbol to all those people who are always running the Rat Race, helplessly trapped in a vicious cycle of needing more but never able to satisfy their dreams all because of one glaring lack: financial literacy. On the other hand, the man referred to as "Rich Dad" is his neighborhood friend's father who has never finished eighth grade yet owns warehouses, a company and a chain of three restaurants.

His "Rich Dad" represents those independent and wealthy people of the world who consciously and deliberately take advantage of their personal knowledge of tax and accounting and manipulate it to their advantage to enjoy huge success in this world.

Rich Dad Poor Dad is a good book for people who have just started the journey to becoming financially literate. Although there is a lack of actionable items that the reader must do, it sets a foundation for people to get started. It is available at all leading bookstores although it is better to buy it through some online retailers because of the large discounts they offer.

To read a detailed and in-depth review of Rich Dad Poor Dad, simply visit my site which specializes in Book Reviews and learn how you can get an amazing discount on Rich Dad Poor Dad combined with Free Shipping!



วันเสาร์ที่ 13 เมษายน พ.ศ. 2556

Book Review - The Economic Institutions Of Capitalism By Oliver Williamson

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In this book, Williamson presents a refined and elaborated version of his transaction cost theory that he had first outlined in his 1975 book Markets and Hierarchies: Analysis and Anti-trust Implications. His book attempts to systematically examine those economic issues that classical economic theory simply assumes away. The classical economics believes that markets are perfect, and if they are not then the action to remove market failures needs to be initiated. Williamson, on the other hand, focuses on these economic issues that are acknowledged to be widely prevalent in any economic system. "If complexity is deep in the nature of things economic then that ought to be acknowledged rather than suppressed. An equilibrium approach to economics is thus preliminary to the study of main issues (Hayek on P8)." This book, then, is a scrutiny of such economic phenomenon as market structures, monopolies, anti-trust policies, labor policies, public utility regulation, vertical integration and other economic institutions that have traditionally been neglected by the economic theory.

His basic proposition that most of us are familiar with by now is that the transaction costs should be treated as a fundamental unit of analysis for understanding such issues. Drawing on three streams of research- economics, organization theory and contract law, he repeatedly highlights the need to consider the governance (or transaction) costs. "Rather than characterize the firm as a production function, transaction cost economics maintains that the firm is more usefully regarded as a governance structure (P13)." While his basic argument appeared sound and plausible, I got an impression that Williamson attributed more to transaction costs than it deserved. Why should we regard only governance costs? Why should we think that the firm is only a governance structure? In other words, in my view, instead of correcting an existing flaw in the theory, he seems to be, to borrow the stock market jargon, proposing an over-correction. The field would be better off considering a cost function that combines both production and governance costs or at least choosing the concept based on the specific requirements of the situation or problem at hand.

Having said that, let's now delve into the foundations of the transaction cost economics which is first three chapters in the book. Until this book, Williamson considered opportunism, bounded rationality, frequency and uncertainty to be the building blocks of TCE. However, in this book, he rightly puts forth asset specificity alongside opportunism and bounded rationality as the three legs of TCE. "Any attempt to deal seriously with the study of economic organization must come to terms with the combined ramifications of bounded rationality and opportunism in conjunction with a condition of asset specificity" (P42), which is assumed to be the most critical dimension of TCE (P30). Without asset specificity, markets are believed to be in a competitive world even if people are opportunistic and rationally bounded. This is because buyers and sellers can freely move between market players.

In contrast, uncertainty and frequency drop down a tad bit in the scheme of things. Now, they are supposed to be meaningful in presence of first three elements only. Conceptually, this makes a lot of sense. Take for example, if market players are uncertain about the outcomes, but they believe in the fairness of the parties to contract, the market mechanism would be adequate to deal with all the contingencies since the players would share equitably in the profits. However, we understand that such a behavioral assumption would be wrong since opportunism and bounded rationality are common behavioral traits. What intrigues me, albeit, is that if they are such common traits, then why they should even be made variables in the model. After all, a variable that doesn't vary is no variable at all. It is not surprisingly, therefore, to see most literature to refer only to asset specificity, uncertainty and frequency as the three pillars of TCE. Williamson himself seems to acknowledge this in a subsequent chapter when he mentions that "principal dimensions for describing transactions are frequency, uncertainty and asset specificity (P242)."

After outlaying his conception of economic fundamentals, Williamson proceeds on to explain the boundaries of firm, which is to say what transactions will take place in market and what within the hierarchically organized structures. In his opinion, if the expected costs or risk of transacting in a marketplace are higher than the cost of organizing the functions internally, then such transactions will take place within the firm. If we ignore his exaggerated claims, this is indeed novel and useful approach at looking the firm size and boundaries. No longer is the size of firm held irrelevant as is the case in classical economics. No longer is it believed that the firms will operate at marginal cost whether they produce internally or buy externally. It opens up a can of worms that classical economics under its perfect market and equilibrium economics assumptions puts aside as aberrations. This is a welcome change in the approach to the study of industrial economics.

Next, Williamson moves on to the main theme of the book: providing alternative explanations vertical integration, mergers and monopolies, and joining issues with anti-trust enforcements. He believes that vertical integration results not because of technological determinism or a desire for monopolistic power but from a pragmatic desire to economize on transaction costs. In the similar vein, he contends that non-standard contracting practices such as long-term contracts are not monopolistic practices, but perfectly justifiable attempts at minimizing transaction costs. Further, he attributes such decisions "to a condition of asset specificity (P86)" since asset specificity in conjunction with uncertainty "makes it more imperative to organize transactions within the governance structure that have the capacity to work things out (P79)." The author makes a persuasive case for five out of six hypotheses on the boundaries of firm. However, his fifth hypothesis that claims that "firms will never integrate for production reasons alone" seems a little far-stretched. The fact that some firms organize for efficiency reasons doesn't and can't automatically preclude the fact that some firms organize for monopolistic or technological reasons. Once again, the author's case would have been better served by refraining from such overstatements.

Next, Williamson turns his attention to analysis of such arrangements as can neither be classified as market contracts nor as hierarchical structures, but fall somewhere in between. Also known as hybrid structures, these include credible commitments, joint ventures, relational contracting, hostage models, reciprocal arrangements, and network relationships. His main claim is that even when such arrangements appear to be exercise of monopolistic power, they may be justifiable from transaction cost perspective. "A comparative institutional assessment of contractual alternatives discloses that efficiency purposes are often served by hostages and it is in the mutual interest of the parties to achieve that result. Not only can producers be induced to invest in the mutual interest of the parties to invest in the most efficient technology, but buyers can be induced to take delivery whenever demand realizations exceed marginal cost." Interesting proposition, but it doesn't explain the impact on the hostage (e.g. P&G) if the monopoly (e.g. Wal-Mart) decides to dump it! His second main claim derives from Coase's 1960 article on problem of social cost. Recall Coase's claim that when people are left to bargain among themselves, most economic externalities can be better resolved than when courts or other non-market interventions take place. Williamson develops on this proposition and claims that parties to a contract don't normally take recourse to courts, but try to use "private ordering" to resolve their disputes. I would presume this would chiefly be out of concern for future business relations.

Let's wrap up this review with a summary of strengths and weaknesses. For the strengths, I will let the Williamson speak for himself. To quote him,
"As compared with other approaches to the study of economic organizations, transaction cost economics (1) is more micro-analytic (2) is more self-conscious about its behavioral assumptions (3) introduces and develops the economic importance of asset specificity (4) relies more on comparative institutional analysis (5) regards the business firm as a governance structure rather than as a production function and (6) places greater weight on the ex-post institutions of the contract, with special emphasis on private ordering as compared with court ordering."
-Williamson, P387

While the theory is conceptually persuasive and logically sound, a principal weakness of transaction cost analysis lies in its post-facto nature of analysis. Notwithstanding Williamson's superb efforts, it has been rather difficult to define it in a way that it can be measured and tested. The theory in its current formulation continues to be plagued with a criticism that it's tautological in nature, after all ex-post facto any system can be shown to be economizing on transaction cost or at least that it will be eventually replaced if it doesn't. Therefore, transaction cost economics needs to find variables with predictive powers.

Williamson mentions three limitations of his work- its crude form, instrumentalism, and incompleteness. To me, these appeared more to be challenges for future research rather than any weaknesses in the theory. Besides occasional excessive enthusiasm and exaggerations and the difficulty in operationalization of the concept, a major challenge in reading this book is to be prepared to learn a new language! Williamson's choice of words lives a reader with no less an impression.

Overall, Williamson does a superb job in developing the transaction cost economics that had first appeared in Coase's 1937 article 'nature of firm', but had been left untouched until this work because of difficulties in operationalization and empirical testing. Williamson succeeded in overcoming most of these challenges and it is for the future researchers to meet the rest.

Reference:

Williamson, Oliver. The Economic Institutions of Capitalism. 1st. New York: The Free Press, 1985.

Punit Arora is a research scholar on management and public policy.