Archive for the ‘Economics’ Category

Swedish Council for Novel Therapies sets a limit for cost of medication to preserve life

June 8, 2015

The Swedish Council for Novel Therapies (NT-rådet) has recommended that certain medicines should not be given to patients if they are too expensive – even if the alternative is death. The recommendation is to the Counties who run the hospitals on behalf of the country’s health service. Effectively it means that patients who have atypical hemolytic-uremic syndrome (a-HUS) can no longer be prescribed Eculizumab. There is no known cure for this quite rare (1:500,000) genetic condition  which attacks the kidneys:

Atypical hemolytic-uremic syndrome is a disease that primarily affects kidney function. This condition, which can occur at any age, causes abnormal blood clots (thrombi) to form in small blood vessels in the kidneys. These clots can cause serious medical problems if they restrict or block blood flow. Atypical hemolytic-uremic syndrome is characterized by three major features related to abnormal clotting: hemolytic anemia, thrombocytopenia, and kidney failure.

With a population of just under 10 million, Sweden may have about 20 individuals suffering from this genetic condition. Eculizumab (trade name Soliris) is a medication that has recently been approved for the treatment of aHUS, an ultra-rare genetic disease that causes abnormal blood clots to form in small blood vessels throughout the body, leading to kidney failure, damage to other vital organs and premature death. But it costs approximately €430,000 per year for ongoing treatment.

Clinical trials in patients with aHUS demonstrated inhibition of thrombotic microangiopathy (TMA), the formation of blood clots in small blood vessels throughout the body, including normalization of platelets and lactate dehydrogenase (LDH), as well as maintenance or improvement in renal function.

The medicine does not cure the condition but inhibits the expression of some its fatal effects. It gives a patient a chance to live on.

But as Swedish Radio reports, the Swedish Council for Novel Therapies has decided that this cost of keeping a patient living is too high. For this council, the value of the life of a patient suffering from a-HUS is clearly less than about SEK 4 million per year.

Clearly there is an economic cost benefit analysis to be made for all medical treatment. Clearly also an unlimited cost for keeping someone alive is also not possible. But what about the value of the life to be prolonged? Even assuming that there is some cost limit which is not be borne, the “forbidden” cost level cannot just be an absolute value which takes no note of the value of the life preserved. If cost-benefit is to be the guiding factor, then should not all health costs be balanced against the life or the quality of life to be preserved?

Swedish Radio:

The Swedish Counties’ council of experts, the Council on Novel Therapies, has decided to discourage counties from using a drug for a very rare and life-threatening blood disorder. The reason is that the medicine will cost 4.5 million kronor per patient annually – making it one of the most expensive in the world. A small group of patients could thus eventually die of the disease that brings inflammation, clots and kidney failure. 

“I think it is a completely unreasonable decision. One can not deny the patients with this difficult disease to receive treatment. Although there is plasma and dialysis treatment, survival is most certainly not so long as with this treatment. So I think that they have to change their decision”, says chief physician Ingela Fehmarn-Ekholm.

The disease is called aHUS (atypical hemolytic uremic syndrome), where the blood cells break down and patients become anemic and can get blood clots, stroke, and renal failure.

Ingela Fehrman Ekholm describes one of the patients she treated with the new drug. Before it came, he had donated a kidney to his daughter who suffered from the disease, but the girl did not survive.

A year later he  himself got aHUS. After several years of dialysis and three kidney transplants, he received the new medicine. “It is now almost three years, absolutely no side effects and kidney works great and he feels great”, says Fehmarn-Ekholm.

But it would seem that for this patient, Stefan Persson, the treatment will not be able to continue if this recommendation is followed.

However the statement from the Chairman of the Council almost reads as if it is just a game – a price negotiation with the manufacturer with the death of patients being played out as one card in the game.

Stefan Back is the Chairman of the Council of Novel Therapies that has taken the decision stop using the medicine Soliris.

He believes that the responsibility lies with the manufacturer, who failed to show why the drug has such a high price.

“It is regrettable that it had to come to this because it’s not an easy decision to make. It leads to anxiety with the patients and we hope that the company will deliver significantly better economic evidence and perhaps a lower price”.

A price negotiation where patients’ lives and their peace of mind are just another card to play.

Explaining inflation as resistance to motion

May 14, 2015

“Dad, What’s inflation? Why are Sweden and the UK trying to increase inflation and why are India and China trying to reduce it? Is inflation good or bad?”

Well, it all starts with the economic cycle and the resistances in …….

“What’s an economic cycle?”

OK. Let’s start at the beginning.

Let’s start at the very beginning
a very good place to start
when you read you begin with abc
An economy begins with “N”, “P”, “C”
“N”, “P”, “C”
the three legs needed just happen to be
“N”, “P”, “C”; “N”, “P”, “C”

When you get hungry you have a Need, a need for food. That’s where all economies start – with a need, the “N”. So you shout “Mom, What’s for dinner? I’m starving”. It’s fortunate that Mom is there and responds to your shout and starts Producing some dinner. Thats the “P”. And after some time you get your dinner and you Consume it. That makes you a consumer. And then when you’re ready to go out to your party you shout “Dad, can you drop me off at Jimmy’s (and pick me up later)?” you are just another Consumer expressing another Need – a need this time for transport. And when I take you there and bring you back, I am the Producer. And when you come home you’re hungry again. This is the basic cycle – Needs lead to Production which in turn leads to Consumption which leads to new Needs.

A production-consumption loop provides a business process.

economic cycle

The fundamental economic cycle


Every human is a consumer. All producers are consumers. But not all consumers are producers. The economic cycle is the cycle of living. And the more complex the society, the more complex and interconnected are all the various business processes that go to making up the economic cycle. Much of the production may be indirect or the production is of abstract things. Teachers produce “education”. Policemen produce “safety”. Actors and sports stars produce “entertainment”. It can be difficult to discern what politicians and priests produce but they too satisfy human needs. Even you produce something – mainly tension and stress which we consume for the goodness of our souls.

But time is the necessary additional dimension. All these various processes take time. It takes time for a new need to entice a producer and it takes time for the production and then it takes time to get to the point of consumption. The economic cycle is not just a circle. It is a continuous circle wrapped around the time axis. With time involved, the economic cycle reflects “motion” – a movement in time. And wherever there is motion there is resistance to motion. Each part of the cycle and of its subcycles is subject to inertia and friction. Inertia is the resistance not only to the start of motion but also to a change in an existing motion. It comes into play whenever a new need or a changed need requires some new production process or a change to a production process. And once the motion is in progress – and this applies to every business process and to every interaction between processes – there is a frictional resistance to the motion. Inertial resistance is generally higher than rolling friction.

And so we come to inflation. You can think of inflation as a measure of the resistances (inertial and frictional) to motion within an economic cycle. For any business process it can never be zero except if motion stops. When an economic cycle is said to have a negative inflation or a deflation, it only means that some of the component business processes are coming to a halt. For a well functioning economy, the resistances will be as low as possible and that represents the “healthy” level of inflation for that economy.  When inflation is said to be very high it means that business processes are operating sub-optimally – maybe in a stop-go manner, or that they are not meshing together very well or that there is turbulence in the work place.

So when the UK and Sweden try to bring their inflation rate up to about 2%, it is because 2% is judged to be representative of the resistance if all parts of the economy are functioning as smoothly as possible and growing modestly. When India tries to bring its inflation down from double digits to about 4% as a target, it means that many component parts of their economic cycle are functioning – or not – with too high a level of resistance. Processes are starting and stopping or are very inefficient – within themselves or that their inter-connections are broken or damaged.

In a rapidly growing economy where there are inertial resistances to overcome, the “healthy” level will have to be greater than the assumed 2% norm.

So, inflation is neither bad or good – it is a consequence of the business processes making up the economic cycle. It is measure of resistance to the motion of business processes. Even when operating smoothly these processes are subject to frictional resistance. Any growth of the cycle itself requires that production processes start or change and that brings in inertial resistance in addition to the frictional resistance. So inflation can never be zero but for every economic cycle, it needs to be as low as possible for a given complexity, a given size and a given growth. A too low inflation means that some of the component business processes are shrinking or coming to a halt. A too high level of inflation in an economy indicates that resistances are much too high and that the component business processes are not functioning as they should.

In developed countries of Europe the target inflation is at about 2% whereas in faster growing economies (China or India) the target is to be at around 4%.

It’s just a simple matter of “N”, “P”, “C”.

Got it?


With the resistances in this house, my pocket money needs to go up by 20% – at least!”

On the legitimacy and morality of taxation

February 16, 2015

These are two questions that I have been wrestling with. First whether the concept of taxation of individuals by a state is legitimate and moral, and second, what basis of taxation is the least unjust. Here I just consider the legitimacy and morality of the concept of taxation.

Anarchists and libertarians see taxation as theft. They see it as the oppression of the individual (private or corporate) by the greater society – ostensibly for the “common good”. Communists and socialists see it otherwise. For them there is no individual ownership of property and all wealth is owned by the masses. It is a manifestation of the conflict interface between an individual and the larger society. Some – libertarians for example – suggest that the “greater society” cannot abrogate to itself an authority which is not delegated to it by its individual members. And the power to confiscate the property or wealth of some of its members is not an authority that originates with the individual “victim”. Liberal democrats would argue that taxation is merely the membership fee for individuals to be part of the “club” represented by the “greater society”.

There have been many headlines in the last week about HSBC and the manner in which it has assisted its clients to avoid and evade taxation (where avoidance is legal whereas evasion is illegal). The indignation of politicians rings rather hollow. That the poor resent the rich is not surprising. It is inevitable that in a “democracy” the majority poor will seek to oppress the rich minority. But the bottom line is that all taxation is a confiscation of an individual’s property or wealth by a society (state). It is confiscation by force or under the threat of force. But much of the recent turbulence is based on envy and resentment and of various socialist politicians attempting to create a populist wave out of such resentment and envy. (Of course they conveniently forget that the poor are not poor because the rich are rich. Most are poor because they do not, or do not have the opportunity to, create wealth).

I am persuaded that the concept of taxation as practised today is immoral. It is fundamentally a coercion of an individual by a larger (stronger) society. It is an enforced confiscation (by threat of legal action) of an individual’s property or wealth. It cannot be seen as a membership fee for being a member of the society because leaving (or being expelled from) the society is not an option. It is closer to the extortion of “protection money” than to the membership dues for a golf club. The use to which the funds are put is irrelevant. The key point is whether the payment is voluntary or coerced. When early Christians paid a “tithe” to the Church voluntarily it was not immoral. But when the payment was coerced and no longer voluntary, the system became immoral. Similarly Islam requires the payment of zakat on individual wealth over the minimum nisab and this also shifted from a quite unexceptionable and moral voluntary payment to become an obligatory and immoral coercive confiscation.

I don’t quarrel with the need for any society to generate “common funds” to improve the well being of that society. But the legitimacy of appropriating the funds lies only in that the society (state) is stronger than the individual. Might becomes right. I come to the conclusion that a tax code by which the amount a “good citizen” should contribute to society is calculated is quite moral as long as the payment is then voluntary. There would be no moral issue if all taxation was voluntary. The immorality lies in the use of threat or force to confiscate the payment. It is the oppression of the minority by the majority which is immoral. (I observe that all democracies use the very fact of being a “democracy” as being a justification for the oppression of minorities when that is the will of the majority. As if being in the majority – by and of itself – ensures proper behaviour). But, the good socialist will argue, compulsory payment of tax is necessary to ensure the funds for the common good. Without coercion society as a whole would suffer. The common good – as seen by the majority – is worth the oppression of the minority who do not pay their dues.

And so we come full circle. The end justifies the means. Oppression of the minority by a majority is acceptable for the good of the majority. A society must be able to use force and coercion against its own minorities for the greater good. Taxation is made legitimate only because the state is stronger than the individual.

But that does not alter the fact that involuntary taxation is fundamentally immoral.

Whether a tax code should be based on wealth creation or wealth consumption is a question for another day.

Wealth inequality: The poor are not poor “because” the rich are rich

January 21, 2015

In the run-up to Davos, the headlines have been about 1% of the world’s population owning half the world’s wealth. (The Wealth “bible” is the Credit Suisse Wealth Report). The richest 80 people (0.1% of the 1%) have more wealth than the poorest half of the world’s population. Obama is talking about an additional tax on the wealthy. In his State of the Union address yesterday he declared that the economic crisis was over and about “spreading the wealth”. He prioritised the working families and the “middle class”. In Davos, 2,500 delegates arrived in 1,700 private jets.

Most people on the left of the political divide want more to be taken from the rich to be “given” to the poor. The Robin Hood syndrome. Note that when the intention is to “give to the poor” and not for “making the poor greater creators of wealth”, the driving force is mainly envy. It is when the desire to deprive the rich is more important than any desire to improve the lot of the poor. Concern is over-ridden by envy. Sometimes it seems to me that the real difference between left and right is that the left wants to spread the consumption of existing wealth (and hope that total wealth increases), while the right want to focus on creating wealth (and hope that it trickles down and gets equitably distributed).

But there is a fundamental fallacy in the view that the poor are poor because the rich are rich. There may well be some of the rich who are exploiting some of the poor and where the poor are not getting a just opportunity to be creators of wealth. There may well be members of the rich who create no wealth but remain rich because of inherited wealth. But by far the greatest majority of the rich are rich because they created more wealth than others. The real question is whether each individual gets an equitable opportunity to create wealth and then gets to retain an equitable portion of the wealth he has created. (It is a different matter but I still do not understand why it is the creation and the retention of wealth that attracts more penalties in the form of taxation than the destruction or consumption of wealth).

What constitutes wealth is a different matter, but no matter what definition is used, wealth is not something static. The “wealth of the world” is always changing. It is constantly being created and consumed and destroyed. The key point is not how much the rich have but whether the “poor” are increasing their creation of and their stock of wealth.

And the simple fact is that the “poorer half” of the world has been steadily increasing its wealth creation and its wealth retention. Between 2000 and 2014 the total stock of “wealth” in the world increased by over 250%!

Wealth Report Figure 1 Credit Suisse

Wealth Report Figure 1 Credit Suisse

It is during periods of growth that inequality reduces and this is very striking when comparing the 2000-2007 period with the 2007-2014 period.

Inequality trends for individual countries are explored in more detail in Table 2, with countries listed in order of the increase in inequality since 2000. The most striking feature is the contrast in experience before and after the financial crisis. In the period from 2000 to 2007, 12 countries saw a rise in inequality while 34 recorded a reduction. Between 2007 and 2014, the overall pattern reversed: wealth inequality rose in 35 countries and fell in only 11. The reason for this abrupt change is not well understood, but it is likely to be linked to the downward trend in the share of financial assets in the early years of this century, and the strong recovery in financial assets since 2007.

The “poor” have to leave the ranks of the poor. They are not poor because the rich are rich – but because they do not have the opportunities to create and retain wealth. And that will only come in growing economies and not by increasing public expenditure where the emphasis is on consuming existing wealth rather than creating new wealth.

Don’t rely on politicians to avoid another financial crash; build your own defences

November 17, 2014

I am no expert but I tend to pay attention to the behaviour of experts and those who are supposed to be experts. And I  get worried when politicians start painting alarmist pictures because that indicates that they have no idea what to do.

The number of voices warning about another financial crash are increasing and getting louder. That there are always some financial pundits warning about a coming crash is nothing out of the ordinary. But the number of pundits making such projections (here and here for example) is getting worrying. The US debt is still much too large and is not really being addressed except by printing money. Japan has entered recession. Leftist governments in Europe are getting tired of austerity and good housekeeping (France, Sweden for example) and are preparing to increase public expenditure and to raise taxes. Markets seem overvalued and unless Asian countries – mainly India and China – start consuming and manufacturing again, it is difficult to see a real motor to drive the global economy. Low oil prices will help but the signs of an upswing are not visible yet. No bank is so big that it cannot fail.

It is worth noting that some big investors are also circling the wagons and building up their defenses – and not least among them is Warren Buffet. But what is even more ominous is that the political leaders of the G20 nations are beginning to make noises as if a financial crash is a real risk and outside of their control. David Cameron’s warnings yesterday about a possible financial crash were made immediately following the G20 meeting in Australia. They sound like political positioning when faced with an intractable problem. As if the G20 leaders find themselves powerless and unable to come up with any joint actions to avoid a future financial crash.

The Guardian:

David Cameron has issued a stark message that “red warning lights are flashing on the dashboard of the global economy” in the same way as when the financial crash brought the world to its knees six years ago.

Writing in the Guardian at the close of the G20 summit in Brisbane, Cameron says there is now “a dangerous backdrop of instability and uncertainty” that presents a real risk to the UK recovery, adding that the eurozone slowdown is already having an impact on British exports and manufacturing.

His warning comes days after the Bank of England governor, Mark Carney, claimed a spectre of stagnation was haunting Europe. The International Monetary Fund managing director, Christine Lagarde, expressed fears in Brisbane that a diet of high debt, low growth and unemployment may yet become “the new normal in Europe”.

The message is that the G20 countries are just living in hope and have no concrete plans to avoid a crash. I would have thought that the bottom line is – and always will be – of living within one’s means. And that can only ultimately mean reducing public spending and reducing tax burdens. In any event it is imprudent to be relying on the politicians to avoid a crash. And that means that each individual is on his own and would be well advised to build up whatever defenses he can.

Whether a crash comes or not, and the main threat is, I think, over the next 12- 18 months, it is worth being a little circumspect over the next few months. My list of gradual actions for myself for the next 9-12 months are:

  1. Pay off as much debt as possible
  2. Call in my loans
  3. Protect capital by reducing overall risk exposure
  4. Get out of equities which may be in a bubble (say P/E >30 or where values have risen >50% in 1 year)
  5. Hold onto my blue chips (but check how blue they really are)
  6. Increase my own liquidity towards 25% of assets and in more than one “hard” currency
  7. Have more than one bank
  8. Shift away from the banks which perform poorly in stress tests
  9. Shift away from corporate bonds to government bonds (higher credit rating countries wherever possible)
  10. Buy some gold or silver (gold or silver coins not jewelry)
  11. Defer capital expenditure for the next 12 months wherever possible (car replacement, new kitchen, house extension…)


Juncker’s Luxembourg marketed tax avoidance

November 6, 2014

Maybe it’s just my jaundiced vision, but I don’t see the European Commission as being any repository for ethics or good behaviour.

Of course Luxembourg’s economy is dominated by its banking sector. In global competition it depends on its banks and financial institutions having a competitive advantage over other countries. And it now becomes clear that the country’s government did as much as they could to ensure that the country’s laws allowed these institutions to market and exercise this advantage.

Jean-Claude Juncker

Jean-Claude Juncker

It has now been revealed that Luxembourg, its government, its bureaucrats and its institutions have actively marketed their “tax avoidance” services to at least 340 major companies. Much of this was during the time that Jean-Claude Juncker was Prime Minister of Luxembourg between 1995 and 2013. This is the same high-living Juncker who is the new President of the European Commission and declared 3 months ago that he would “try to put some morality, some ethics, into the European tax landscape.”  Juncker lives up to my low expectations of EU mandarins.

Of course tax avoidance is legal and not tax evasion. I have little sympathy for politicians who blame corporations for taking advantage of the rules they themselves make to minimise their tax payments. Any corporation would be failing in its fiduciary duties if it did not legally try to minimise its tax burden. For that matter any individual who for want of being familiar with the rules, payed more tax than he had to – even if it was for philanthropic reasons – would be just a fool.

(This has nothing to do with my view that taxes based on wealth generation are fundamentally counter-productive and should instead be based on wealth consumption or destruction).

The Guardian:

A cache of almost 28,000 pages of leaked tax agreements, returns and other sensitive papers relating to over 1,000 businesses paints a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale.

The documents show that major companies — including drugs group Shire, City trading firm Icap and vacuum cleaner firm Dyson, who are headquartered in the UK or Ireland — have used complex webs of internal loans and interest payments which have slashed the companies’ tax bills. These arrangements, signed off by the Grand Duchy, are perfectly legal.

The documents also show how some 340 companies from around the world arranged specially-designed corporate structures with the Luxembourg authorities. The businesses include corporations such as Pepsi, Ikea, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan and FedEx. Leaked papers relating to the Coach handbag firm, drugs group Abbott Laboratories, Amazon, Deutsche Bank and Australian financial group Macquarie are also included. …….. 

……. The revelations will be embarrassing for the new president of the European Commission, Jean-Claude Juncker, who was prime minister of Luxembourg between 1995 and 2013. In a speech in Brussels in July, Juncker promised to “try to put some morality, some ethics, into the European tax landscape.” He has insisted that the country is not a tax haven.

Pressure is already building on Luxembourg after the European Commission launched a formal investigation into whether Amazon’s tax arrangements in the Grand Duchy amount to unfair state aid. The Luxembourg tax arrangements of Italian carmaker Fiat’s finance unit are also under official scrutiny by Brussels.

Asked recently if such a crackdown risked damaging the economy of Luxembourg, one senior figure closely involved in the G20 reform programme said: “I don’t care. It is like saying: ‘If you fight drugs there will be no jobs in certain parts of Mexico.’” …… 


Germany needs to dump the profligate Energiewende

October 22, 2014

The German economy is export driven.

As long as Greece and Spain and the weaker Euro zone countries were holding back the value of the Euro, German exports and its economy boomed. Unemployment reached extremely low levels. There was a shortage of qualified labour. But now the German economy is stagnating and the high cost for energy, resulting from the misguided, self-mutilating Energiewende, is one of the chief contributors. The total cost to German consumers and German industry is comparable to the bailouts of the weak Eurozone countries. For no benefit.

Der Spiegel (2013): German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energy policy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany, and one of the country’s most important future-oriented projects is acutely at risk. …..

….. For society as a whole, the costs have reached levels comparable only to the euro-zone bailouts. This year, German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants — electricity with a market price of just over €3 billion. Even the figure of €20 billion is disputable if you include all the unintended costs and collateral damage associated with the project. Solar panels and wind turbines at times generate huge amounts of electricity, and sometimes none at all. Depending on the weather and the time of day, the country can face absurd states of energy surplus or deficit.

How the Energiewende has increased German electricity price graphic notrickszone

These are unsustainable costs. Industries dependent on high electricity consumption have found it increasingly difficult to compete against the lower electricity costs especially in the US. Investment and jobs have started shifting to areas with lower operating costs.

WSJ (sep 2014):

The project is the linchpin of Germany’s Energiewende, or energy revolution, a mammoth, trillion-euro plan to wean the country off nuclear and fossil fuels by midcentury and the top domestic priority of Chancellor Angela Merkel.

But many companies, economists and even Germany’s neighbors worry that the enormous cost to replace a currently working system will undermine the country’s industrial base and weigh on the entire European economy. Germany’s second-quarter GDP decline of 0.6%, reported earlier this month, put a damper on overall euro-zone growth, leaving it flat for the quarter.

Average electricity prices for companies have jumped 60% over the past five years because of costs passed along as part of government subsidies of renewable energy producers. Prices are now more than double those in the U.S.

Now the business climate is sharply down, orders are falling and costs are still increasing.

Graphic: German Economy Weakens.

Der Spiegel (Oct 2014)The problem, though, is that Europe’s motor is losing steam, with a slew of bad news about the German economy in recent weeks. The latest business climate index published by the respected Munich economic think tank Ifo, which is considered to be a reliable early indicator, fell for the fifth straight month in September to its lowest level in almost a year and a half. Furthermore, German factory orders are down and exports are collapsing. And last week, the country’s leading economic research institutes issued downward revisions of their economic forecasts for this year and next.

Merkel’s new government have been on a give-away spree and that has not helped. Now finding funds to spur investment is becoming increasingly difficult. Meanwhile the ludicrous subsidies for renewable energy continue to drain the economy. The Energiewende is profligate, has no measurable benefits and has only led to more coal being burnt.

At the very beginning of its term, Merkel’s current government approved an expensive package of what amounted to pension gifts for women and older workers that is now consuming up to €9 billion a year in public finances. In their autumn economic forecast released last week, the country’s leading economic think tanks warned that the German government has “already given away a substantial amount of its room for maneuver.”

Compounding the problem is that measures taken by the government — a coalition of Merkel’s CDU and the center-left Social Democrats (SPD) — are contributing to weak growth. The think tanks predict that projects undertaken by the coalition, including allowing people to retire at the age of 63 and the introduction of Germany’s first-ever national minimum wage, will cause around 300,000 jobs a year to disappear. The CDU and SPD haven’t done much to fuel investments to counter that trend either. Interest rates in Germany may be lower than they’ve ever been before, but few companies have plans to build new factories or buy additional heavy machinery, they warn. The report states that while the many international crises do play a role — from the Middle East to Ukraine — homegrown factors do as well, especially the hostile environment created by (the government’s) economic policies.”

In Poland a different kind of energy revolution is taking place. Two new nuclear plants are being planned. Shale gas development is inevitable but is being hampered by the environmentalists. So more coal is being burned as in Germany.

The world has more to gain from a Germany with a strong economy exporting its excellent products. The pointless and profligate Energiewende needs to be dumped. Germans and Germany and the world are paying the price of pointless political correctness.

Bad forecasts and grovelling apologies have become standard for the IMF

June 9, 2014

It’s not what you say but what you do that counts.

Economics is clearly not a science though many would like us to think it is. But with the IMF it is just apology followed by apology for wrong forecasts and bad advice. It smacks of forecasts made to suit a political agenda or just plain incompetence. Based on their track record nothing that is said by Christine Lagarde or the International Monetary Fund that she heads can be taken very seriously. She spends more time apologising than would seem to be healthy.

The latest apology by Christine Lagarde has been called “grovelling”:

‘Do I have to go on my knees?’: grovelling apology from IMF head for incorrect warnings on UK economy

Head of the International Monetary Fund, Christine Lagarde, accepts her organisation’s low growth forecasts for the UK economy were wrong.

Christine Lagarde has asked whether she needs to grovel on her knees before George Osborne over the IMF’s incorrect warnings on the UK economy, as she warned against raising taxes.

“Do I have to go on my knees?” Ms Lagarde, the head of the International Monetary Fund said, when asked whether she has apologised to George Osborne over the fund’s low growth forecasts and calls to adopt a ‘Plan B’ of less austerity – calls the body now accept it got wrong.

In a blow to Ed Miliband, who has called for higher rates of personal taxation and new levies on banks, Ms Lagarde said tax rises are “not recommendable”.

But this is not an isolated incident. Time after time the IMF announces that some country has got its economic policy wrong and warns of dire consequence if the country does not follow the advice of the IMF. Then – a few months later – they admit that the IMF got it wrong. And ususally by then they have caused much misery and wailing and gnashing of teeth.

12th January 2012: Does the EU-IMF Owe Ireland an Apology?

2nd June 2012: IMF apology to Greece after Lagarde remarks – YouTube

3rd January 2013: An amazing mea culpa from the IMF’s chief economist on austerity

6th June 2013: For hard-hit Greeks, IMF mea culpa comes too late

In any normal corporation Christine Lagarde and the IMF’s Chief Economist,  Olivier Blanchard would have been sacked a long time ago. And to think that some are suggesting Christine Lagarde for the top job in the EU only reduces my respect for the IMF and the EU.


Secession is in the air as 89% vote for the rebirth of the Venetian Republic

March 23, 2014

Secession is in the air.

The Most Serene Republic of Venice (Serenissima Repubblica di Venezia) lasted for over a thousand years from the late 7th century until 1797. It came into being as a secession of the region from the Byzantine Empire and lasted until Napoleon came along. In its heyday it controlled Crete and Cyprus and was a major – if not the paramount – centre for European trading and banking. 

Secession is in the blood of Venetians.

File:Flag of Most Serene Republic of Venice.svg

Flag of Venice with winged Lion of St. Mark

History of Venice:

The city of Venice originated as a collection of lagoon communities banded together for mutual defence from theLombards, Huns and other invading peoples as the power of the Western Roman Empire dwindled in northern Italy. At some point in the first decades of the 8th century, the people of the Byzantine province of Venice elected their first leaderUrsus (or Orso Ipato), who was confirmed by Constantinople and given the titles of hypatus and dux. He was the first historical Doge of Venice. …..

Between 1414 and 1423, some 10,000 slaves were sold in Venice, almost all of whom were “nubile” young women from the Balkans. In February 1489, the island of Cyprus, previously a crusader state (the Kingdom of Cyprus), was annexed to Venice.

And  now the people of Veneto want to secede again – this time from “the blood-thirsty beast of the Italian state”.

The Veneto Region

EU Observer:

A self-organised “referendum” over the independence of one of Italy’s wealthiest regions has resulted in an overwhelming victory for the separatist camp, but authorities in Rome have largely ignored the result, amid scepticism over the regularity of the informal, non-binding poll. 

Nevertheless, events in Veneto, the north-eastern region around Venice that is home to almost 5 million people, have attracted international attention, particularly from government-sponsored Russian media, keen to draw comparisons with the military-backed vote that sanctioned Moscow’s annexation of Crimea. 

Out of 3.8 million eligible voters, 2.3 million took part in Veneto’s independence “plebiscite,” organisers said Friday, after six days of voting through makeshift polling booths, via phone or the internet. The pro-secession camp was declared the winner with over 89 percent, against just under 11 percent for the unionists. 

“The Venetian Republic is born again,” the leader of the ‘yes’ camp, Gianluca Busato, exclaimed at a victory rally in Treviso, in front of a crowd of a few hundred supporters. …… Secessionists, who are not attached to any mainstream political party, see themselves as the heirs of the Most Serene Republic of Venice, the state that ruled the lagoon city and its surroundings for about 1,000 years, until it was routed by Napoleon in 1797. 

Their main argument for independence is economic. They calculate that Veneto subsidizes Italy’s inefficient central government and its poorer southern regions to the tune of €20 billion a year. They claim that an independent state – modeled on the likes of Catalonia or Scotland – would be far better off. “The right of self-determination that is triumphing in Veneto is the only way to free ourselves from the worst bureaucratic monster of the Western world. The blood-thirsty beast of the Italian state is hated by all of its subjects, everywhere,” Busato said. 

The 44-year-old software entrepreneur was elected as one of 10 “delegates” tasked with setting independence plans into motion. “The first objective is to keep all taxes in Veneto,” he said. “Veneto’s businesses and citizens no longer have to pay immoral and illegitimate taxes to the Italian state.”

File:Repubblica di Venezia.png

Republic of Venice territories in red c. 1500 CE

An existentialist problem for virtual Bitcoins

February 26, 2014

“Virtual” has no connotations of having any virtues. As long as things “virtual” remain in the abstract world they work.

Virtual books can be read. Virtual commerce is fine for recording transactions. But virtual foods are indigestible and unsatisfying. A virtual house doesn’t keep out the rain. And virtual currencies are useless if they cannot be translated into the real world.

I am not convinced that virtual currency offers me anything more than I get with electronic transactions with real money. At least the real currency has a value which is somewhat connected to things happening on the ground (even if speculation does occur). The Bitcoin however has an exchange value solely dependent upon somebody’s imagination.

(Reuters)Mt. Gox, once the world’s biggest bitcoin exchange, abruptly stopped trading on Tuesday and its chief executive said the business was at “a turning point,” sparking concerns about the future of the unregulated virtual currency. ……. The website of Mt. Gox suddenly went dark on Tuesday with no explanation, and the company’s Tokyo office was empty – the only activity was outside, where a handful of protesters said they had lost money investing in the virtual currency. …

…. Investors deposit their bitcoins in digital wallets at specific exchanges, so the Mt. Gox shutdown is similar to a bank closing its doors – people cannot retrieve their funds.

A document circulating on the Internet purporting to be a crisis plan for Mt. Gox, said more than 744,000 bitcoins were “missing due to malleability-related theft”, and noted Mt. Gox had $174 million in liabilities against $32.75 million in assets. It was not possible to verify the document or the exchange’s financial situation. If accurate, that would mean approximately 6 percent of the 12.4 million bitcoins minted would be considered missing. ……. The digital currency has caught the eye of regulators concerned with consumer protections and bitcoin’s use in money laundering. ….

…… Mt. Gox halted withdrawals earlier this month after it said it detected “unusual activity on its bitcoin wallets and performed investigations during the past weeks.” The move pushed bitcoin prices down to their lowest level in nearly two months.

Even with the halt on February 7, Mt. Gox still handled more transactions than any other in the past month. Over the last 30 days, Mt. Gox has handled more than one million bitcoin transactions denominated in dollars, or about 34 percent of activity, according to Bitcoincharts, which provides data and charts for the bitcoin network.

Critics of the exchange, from rivals to burned investors, said the digital marketplace operator had long been lax over its security. Investors in bitcoin, who have endured a volatile ride in the value of the unregulated cyber-tender, said they still had faith in the currency despite the problems at Mt. Gox.

“Mt. Gox is one of several exchanges, and their exit, while unfortunate, opens a door of opportunity,” The Bitcoin Foundation, the digital currency’s trade group, said in a statement. “This incident demonstrates the need for responsible individuals and members of the bitcoin community to lead in providing reliable services.” …….

Bitcoin value Feb 2014

Bitcoin value Feb 2014

The exchange rate applying is entirely speculative and – it seems to me – purely a result of manipulation. It is not anchored to anything real  – but why would it be?

After all it is only virtual.

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