Korea and Greece in Comparison

During the Asian financial crisis in the late 1990s, Koreans lined up for hours to donate their personal gold treasures to help their country.
It was this selfless devotion and self-sacrifice that lifted Korea out of the crisis.
Today, Korea has not only recovered but performed better than ever.

In comparison, during the current crisis in Greece, Greeks have chosen to take it to the street while doing nothing for their country.
Who is to blame if Greece fails to get the aid package from the troika and slumps even further?
Nobody but themselves.

That Used to Be Us – What the Authors Think and What I Think

I just finished “That Used to Be US: How America Fell Behind in the World It Invented and How We Can Come Back,” co-authored by Thomas Friedman and Michael Mandelbaum.

I wish I could recommend this book to you, but frankly speaking, if you have been following the political and economic development in the U.S., you probably don’t need to read this book to understand the malaise in that country. “That Used to Be Us” is like a compilation (a good one, though) of all the information with a lot of anecdotes and statistics and, of course, the authors’ views and analyses.

The authors argue that the U.S. is confronted with four major challenges, i.e. globalization, IT revolution, large and growing budget deficits, and energy consumption and rising climate threats. Each of these four challenges is threatening the U.S. in one way or another, and if left unresolved, the U.S. could decline further and eventually lose its dominant power as the world’s leader. Therefore, the U.S. needs to revive and reinvest in its formula for success that has shaped the country in the past several decades by focusing on, as they call it, the five pillars. The five pillars are universal education, infrastructure building, foreign talents, support for basic research and development, and regulations on private economic activity.

To achieve this, the authors claim that it is imperative for the U.S. to cut spending in government programs and raise taxes on the wealthy as well as all the other Americans. Priority would need to be given to the five pillars. This is to preserve the liberty, greatness, and prosperity of the U.S. not only for the current generation but for posterity, too.

However, given the partisan rancor between the Republican and Democratic parties, and the direction to which the country is heading, the authors simply could not envision any accomplishment of this sort. They propose an interesting idea, or absurd as some might think, which is to have a third-party candidate run for presidency; and this candidate would advocate tax raise, spending cut, and all the aforementioned approaches.

What are my thoughts on this? Well, I personally agree with most parts of the book including tax raise and spending cut, except the third-party candidate running for presidency. Given the scale of the crisis confronting the U.S. and the world, it is undeniable that the U.S. probably needs an unorthodox solution, but having a third-party candidate is far from being realistic. First, tax raise and spending cut would definitely be unpopular among most Americans. Second, other approaches to address the four grave challenges such as investing in clean energy would not be well-received by giant corporations, particularly oil companies and financial institutions. The candidate would have a hard time getting funding for campaign, let alone garner enough votes to deliver a “shock” to the Republican and Democratic parties. Thus changes would need to come from the incumbents.

In my opinion, the Republicans and Democrats are certain of what needs to be done to bring the U.S. back on track to, once again, be the place where people believe in American Dream. However, the vested interests in American politics put them in a predicament which they risk being ostracized if they go against the tide. Likewise, the American folks know what sacrifices have to be made to achieve generations of prosperity. The problem is that they refuse to take the short-term pain required for the long-term growth. Some can be very obstinate and reject any compromise outright. All companies that practice Lean know something very well – the change in mindset and culture is the most daunting task in implementing Lean. This is also true here – it would be a serious challenge that needs to be addressed before they take on the four major challenges.

All in all, there is no simple and painless panacea for all the problems the U.S. is facing today. It can’t, and won’t, thrive again by merely being reactive rather than proactive. The U.S. needs a change, a change that the whole nation can believe in.

The Current State of World Economy

There’s hardly any good news these days.

The U.S. economy is in bad shape.
The unemployment rate still hovers around 9%.
The housing market doesn’t seem to have improved much since 2008.
As of today, the U.S. stock market is very close to bear territory.
Some economists actually assert that a recession is looming on the horizon.
We will see.

Things aren’t better in Europe.
Greece might not meet its targets with regard to reduction in budget deficits this year.
Italy and Spain are also having their debt problems.
Worst of all, the troika which consists of IMF, the European Central Bank, and the European Commission don’t have a good solution to their fiscal problems.
Imagine the following situation.
My neighbor borrowed a huge sum of money from a loan shark but couldn’t pay back. Therefore, I was forced to pay for him or her to maintain peace in the neighborhood. Does it make sense?
That’s what is happening in Europe.
Other European countries, particularly Germany, are bailing Greece out.
Italy and Spain risk being the next ones needing rescue.

China has fared better compared to other countries in the past few years, but it still has its own problems to solve.
China’s recent growth has been fueled by strong overseas demand for its low-cost products.
With global economy slowing down, China’s export sector hit the brakes, too.
Further, the inflation is rising and social unrest is growing.
China has a lot of work to do.

Most companies will be reporting their quarter earnings in the coming weeks.
Let’s see if there are any good news.

Inside Job

After searching fruitlessly for an hour for a good movie, I turned to Inside Job, a documentary film that won an Academy Award earlier this year.

At first, I thought it was a movie based on a real story like The Social Network, so it kinda turned me off when I found out it was a documentary.
I gave it a try.

What a great film it was!

It is a documentary film about the financial crisis in 2008 that put the U.S. in recession and then later engulfed the whole world.
If you are interested in economy or if you want to understand how the crisis occurred, this is a film you MUST watch.
It will be well worth of your time.

There is something to ponder over after watching the movie.
Wall Street is actually a small circle. There are thousands of people, but everybody knows everybody.
And that does not only include the people who work at financial firms, banks, etc. The circle includes economists and professors at top universities, as well as government employees who are involved in financial activities, such as the Federal Reserve and Securities and Exchange Commission.

Here’s how it works in the circle.
1. You get a job at an investment bank.
2. You climb the corporate ladder to the very top and earn big bucks.
3. You are invited to join the government for a prominent post.
4. While you are working for the government, you also serve as a board of director for some financial firm(s), perhaps your former employer.
5. During your tenure, you recruit professors and economists to write papers for the government and various firms. These people also have business interests with Wall Street.
6. Nobody questions a thing. Everything is good until it goes out of control.
This pretty much happens to all the big guns on Wall Street. Now you know how the subprime mortgage crisis happened the way it did.
As long as they are getting millions of dollars each year, why would they care about the Main Street?

How about the government?
As someone succinctly puts it, “It’s a Wall Street government.”

time to enroll for classes

It’s almost time to register for Fall semester.
It feels good to deal with degree audit and time schedule again after nearly a year.

I am still considering whether I should take intermediate macroeconomics next semester.
If I do take it, my total number of credits for the semester will go up to 18, which I think might be a little too much.
I am not sure if I will have trouble dealing with the coursework. Even if I won’t, but who doesn’t want to do as less work as possible?

Again, question arises here – why bothers taking a subject that I don’t need?
Well, I just want to gain some knowledge about economics, and I think this intermediate economics will serve to fulfill this purpose.

I checked out the course outline given by the professor who is currently teaching this course.
He hoped that after taking this course, students would find it easier to understand macroeconomics-related articles.
He cited Wall Street Journal as one place where we would find such articles.
And, he also gave WSJ as one of the two suggested readings.

Wall Street Journal is exactly the reason why I aim to learn more about economics, so that I can understand not only the words but contents.
Anyway, I will just enroll for the class before I make up my mind.