考虑以下两个情况。
有个富人， 本身就是个花钱的大款。 出门坐头等舱， 吃饭必选米其林三星餐厅， 兴趣是收集豪车， 买礼物给女友必选LV, GUCCI， 衣服必须是 Armani , 电子产品必须是 Iphone, Ipad, I mac 系列最好品牌， 等等等等。。。。。。
另一个富人， 生性节俭。 出门只坐经济舱， 吃饭只选路边摊， 座驾十年不变。衣服是从夜市场， 百货公司拣的， 电子产品是 老牌 Nokia 3300 , mp3 之类。 但是， 他每年捐了一大笔钱给慈善机构。
前者， 我们称之为奢侈， 严重点叫炫富。
后者， 我们称之为节俭的慈善家。
但是， 我们先想想， 就经济效益而言， 这两者有区别吗？
奢侈富人的每个活动， 都是在创造经济效益。
坐头等舱， 赚的是航空公司， 空服人员， 卖票的中介。
吃米其林， 餐厅老板， 大厨， 服务员都受益
豪车， LV , Armani, Iphone, 都有各自的 店员， 老板， 中介。
而这时 老板， 店员， 中介， 转过头来， 能用花来的钱消费。 更多的中介， 店员， 老板会因此而受惠。 而这些一个个的中介， 店员， 老板， 就是我们社会的普罗大众。
只不过， 这种方式， 不如节俭老板直接捐钱 ， 来得直接。
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也许你会说， 因为富人买的都是国外的商品， 所以在购买过程中， 等于财富流向国外。
在这样指责前， 有必要先想清楚， 财富的概念是什么？
财富（实体为钞票）， 是购买东西的能力， 这个能力如果不使用， 和废纸无疑。
对一个国家来说， 出口是它挣取财富（美钞）的成本。 进口是它用财富购买 到的东西。
所以一个国家如果只出口， 不进口。 只劳动， 不享受， 这和政府花钱雇人在路上挖洞无疑， 徒劳无功。
一个国家累积太多外汇（美钞）， 其货币必然要升值。 如果货币不按市场要求升值， 只会发生以下事情。
1． 手中的美钞， 必然会贬值。 未来的损失更大。
2． 国内货币供应大于商品供应， 通货膨胀， 老百姓手中货币会贬值。
3． 国际贸易失衡， 一旦遭遇金融危机， 出口为导向的经济会遭遇重挫。
避免上述问题的唯一方法是多消费， 多用美钞买外国货。
所以， 奢侈富人购买昂贵舶来品的过程， 其实是帮了国家的大忙。
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同样能创造经济效益， 奢侈富人和节俭慈善富人的行为， 还有两点不同。
1． 奢侈富人创造的经济效益纳税， 节俭慈善富人创造的经济效益不纳税。
姑且不论 政府是否廉洁有效的问题， 在政府开支一定的情况下，
富人纳税越多， 分摊到 穷人身上的纳税负担就越少。
有能力者 纳税越多， 政府越能免除没能力者的纳税责任。
2． 奢侈富人创造的经济效益强调 等价交换。 鼓励人们用劳力/智力/任何有生产价值的东西， 去赚取属于自己的报酬。
节俭慈善富人的捐款， 重点在于单方面的给与和付出。 长此以往， 本来值得感激零涕的善心， 会被视为理所当然。
一旦这个善心因为被视为理所当然而制度化， 人们就会从 劳有所得的心理 转向 按需分配的心理。
这产生的社会制度， 是很危险的。
上面谈的， 就是集体主义者 和 个人主义者的区别。
也就是， 我下次要介绍的。米尔顿·弗里德曼 （milton friedman）（不是那个写世界是平的 的托马斯. 弗里德曼( Thomas Friedman) ） 的主要思想。
Saturday, October 15, 2011
米尔顿·弗里德曼 《天下没有免费的午餐》书介绍 上
米尔顿·弗里德曼(Milton Friedman) 是个不折不扣的自由主义者。
他生命中的一半， 奉献给了经济学， 奉献给了 货币供应理论及历史， 以及政府或央行在经济动荡时的稳定政策的影响，
他生命中的另一半， 则奉献给对政府政策的批评， 为自由主义进行的斗争， 以及， 尽个人之力阻止美国往大政府的方向前进， 最后一项， 在六七十年代西方掀起的福利主义浪潮中， 殊为不易。
但弗里德曼是幸运的，
一，他健康长寿， 足够时间见证美国， 见证世界资本主义的发展， 波折， 重起。
二， 他有个知心且长培在旁的好妻子， 罗丝·弗里德曼( Rose Friedman )。
http://zh.wikipedia.org/wiki/米爾頓·佛利民
_____________________________________________________________________________________
人类社会在发展过程中， 随着工业化的进程， 生产效率的提高， 教育的普及， 文明的进步， 开始面临一个非常大的难题。
首先， 不管人类再怎么有文化， 他身上依旧残留着动物的本性， 是动物， 就会自私。
但随着人类的开化， 开始有了社会的观念后， 他有了， 怜悯之心。 有怜悯之心， 就自然会想要帮助， 社会上的老弱残幼， 贫贱困苦的其余人。
因此， 只要能力所及，在满足个人私欲后， 人们都会尽力帮忙周遭不幸的人群。 古时中国在天灾时捐款救济的乡绅富豪， 中世纪文艺复兴时期的教会， 到19世纪资本主义突飞猛进时的大富豪变身大慈善家， 莫过于如此。
但是，
1929年到1933年间的在西方国家发生的大萧条， 宣布了资本主义的失灵，
经济的衰退， 很多人失去工作的同时， 社会也丧失了对穷人的救济能力。
于是， 1933年罗斯富上台后， 推行了新政， 提出免于贫瘠， 免于饥饿的自由。
另一边厢，以打倒资本主义阶级为己任， 以实现社会分配为目标的共产主义上台，
其他欧洲国家， 即使没有被共产化， 也全面左倾， 变成社会主义福利国家。
刚开始时， 一切看起来是那么美好。 二战后， 欧美经济飞速增长， 人们生活得到极高改善， 工人的劳动时间缩短， 平均时薪却提高了， 社会上的老弱残幼有政府专门照顾， 甚至， 六零年代民权运动后， 少数民族的权益也获得极大改善， 社会， 看起来变得更加公平。
只是， 一如弗里德曼（milton friedman)的书名一样， “世上没有免费的午餐”
____________________________________________________________________________
福利国家运作良好的假设是，
一， 每个人都有对社会的责任感， 奉献者有怜悯之心， 会不计较报酬的付出， 获取者有羞耻感， 不会索取多于短暂救济所需。
二， 负责抽取和分配的中介（政府） 非常廉洁且高效率。
但是，
当慈善变成制度，救济变成权利，自愿捐助变成强迫纳税， 而且采用累进税率， 奉献者和获取者的连接给制度， 政府切断时， 人们的自利之心， 就会逐渐大于它的社会责任感。
特别是， 当获得社会福利救济的人们， 感谢的， 是政府， 是伟大的领导， 而不是那些努力工作创业， 尽其所能纳税的人时，
特别是， 所有富人都被套上财富的原罪， 赚取越多， 反而付出的比例更大时， 别指望， 这个制度不会崩溃。
于是， 因为感谢的对象， 是给人强大印象， 是要对选民负责的政府， 人们会开始贪得无厌， 即使本身不是好吃懒做， 在看到周遭的人即使不工作， 收入依然比自己高， 生活比自己更轻松时，每个人都会开始放弃自己的工作， 开始领社会救济。
于是， 因为政府很强大， 自己不纳税， 也有别人纳税的侥幸心理， 以及为了平衡被冠上 财富原罪的 社会道德谴责， 富人会开始想办法逃税。 即使自己不是奸诈狡猾之徒， 看到政府财政收入不断增长， 自己的生活因为过度征税没有改善， 反而街上一群人嚷嚷着 富人是社会资源的劣夺者， 多数人投票通过对富人增税的法案时， 每个人不能移民， 都会开始逃税。
福利制度影响最大的本来只是穷人和富余阶层。 但在领取社会救济的人越来越多， 富人却开始逃税的情况下， 税负的重担， 势必会落在中产阶级身上， 直到，把他们压垮。
于是，我们看到， 七十年代， 欧美福利国家纷纷破产， 自那以后， 西方社会呈现两级化， 中产阶级逐渐消失。
在马来西亚， 中产阶级还能天天上馆子， 即使进口税抬高车价，仍能负担起一车一房， 仍能在放假时去旅游兜风，
但在英国， 中产阶级， 变成每天逛 Sainsbury ( 廉价超市）， Primark ( 廉价衣服）的人。
于是， 弗里德曼提出了一个问题，
给定人类都是自私的，给定世界上没有免费的午餐， 政府应该实行什么样的政策，才能兼顾效率和公平， 实现社会和谐？ 或者， 那些政策是可行的， 那些政策注定失败， 投入远大于产出？
他生命中的一半， 奉献给了经济学， 奉献给了 货币供应理论及历史， 以及政府或央行在经济动荡时的稳定政策的影响，
他生命中的另一半， 则奉献给对政府政策的批评， 为自由主义进行的斗争， 以及， 尽个人之力阻止美国往大政府的方向前进， 最后一项， 在六七十年代西方掀起的福利主义浪潮中， 殊为不易。
但弗里德曼是幸运的，
一，他健康长寿， 足够时间见证美国， 见证世界资本主义的发展， 波折， 重起。
二， 他有个知心且长培在旁的好妻子， 罗丝·弗里德曼( Rose Friedman )。
http://zh.wikipedia.org/wiki/米爾頓·佛利民
_____________________________________________________________________________________
人类社会在发展过程中， 随着工业化的进程， 生产效率的提高， 教育的普及， 文明的进步， 开始面临一个非常大的难题。
首先， 不管人类再怎么有文化， 他身上依旧残留着动物的本性， 是动物， 就会自私。
但随着人类的开化， 开始有了社会的观念后， 他有了， 怜悯之心。 有怜悯之心， 就自然会想要帮助， 社会上的老弱残幼， 贫贱困苦的其余人。
因此， 只要能力所及，在满足个人私欲后， 人们都会尽力帮忙周遭不幸的人群。 古时中国在天灾时捐款救济的乡绅富豪， 中世纪文艺复兴时期的教会， 到19世纪资本主义突飞猛进时的大富豪变身大慈善家， 莫过于如此。
但是，
1929年到1933年间的在西方国家发生的大萧条， 宣布了资本主义的失灵，
经济的衰退， 很多人失去工作的同时， 社会也丧失了对穷人的救济能力。
于是， 1933年罗斯富上台后， 推行了新政， 提出免于贫瘠， 免于饥饿的自由。
另一边厢，以打倒资本主义阶级为己任， 以实现社会分配为目标的共产主义上台，
其他欧洲国家， 即使没有被共产化， 也全面左倾， 变成社会主义福利国家。
刚开始时， 一切看起来是那么美好。 二战后， 欧美经济飞速增长， 人们生活得到极高改善， 工人的劳动时间缩短， 平均时薪却提高了， 社会上的老弱残幼有政府专门照顾， 甚至， 六零年代民权运动后， 少数民族的权益也获得极大改善， 社会， 看起来变得更加公平。
只是， 一如弗里德曼（milton friedman)的书名一样， “世上没有免费的午餐”
____________________________________________________________________________
福利国家运作良好的假设是，
一， 每个人都有对社会的责任感， 奉献者有怜悯之心， 会不计较报酬的付出， 获取者有羞耻感， 不会索取多于短暂救济所需。
二， 负责抽取和分配的中介（政府） 非常廉洁且高效率。
但是，
当慈善变成制度，救济变成权利，自愿捐助变成强迫纳税， 而且采用累进税率， 奉献者和获取者的连接给制度， 政府切断时， 人们的自利之心， 就会逐渐大于它的社会责任感。
特别是， 当获得社会福利救济的人们， 感谢的， 是政府， 是伟大的领导， 而不是那些努力工作创业， 尽其所能纳税的人时，
特别是， 所有富人都被套上财富的原罪， 赚取越多， 反而付出的比例更大时， 别指望， 这个制度不会崩溃。
于是， 因为感谢的对象， 是给人强大印象， 是要对选民负责的政府， 人们会开始贪得无厌， 即使本身不是好吃懒做， 在看到周遭的人即使不工作， 收入依然比自己高， 生活比自己更轻松时，每个人都会开始放弃自己的工作， 开始领社会救济。
于是， 因为政府很强大， 自己不纳税， 也有别人纳税的侥幸心理， 以及为了平衡被冠上 财富原罪的 社会道德谴责， 富人会开始想办法逃税。 即使自己不是奸诈狡猾之徒， 看到政府财政收入不断增长， 自己的生活因为过度征税没有改善， 反而街上一群人嚷嚷着 富人是社会资源的劣夺者， 多数人投票通过对富人增税的法案时， 每个人不能移民， 都会开始逃税。
福利制度影响最大的本来只是穷人和富余阶层。 但在领取社会救济的人越来越多， 富人却开始逃税的情况下， 税负的重担， 势必会落在中产阶级身上， 直到，把他们压垮。
于是，我们看到， 七十年代， 欧美福利国家纷纷破产， 自那以后， 西方社会呈现两级化， 中产阶级逐渐消失。
在马来西亚， 中产阶级还能天天上馆子， 即使进口税抬高车价，仍能负担起一车一房， 仍能在放假时去旅游兜风，
但在英国， 中产阶级， 变成每天逛 Sainsbury ( 廉价超市）， Primark ( 廉价衣服）的人。
于是， 弗里德曼提出了一个问题，
给定人类都是自私的，给定世界上没有免费的午餐， 政府应该实行什么样的政策，才能兼顾效率和公平， 实现社会和谐？ 或者， 那些政策是可行的， 那些政策注定失败， 投入远大于产出？
Saturday, September 10, 2011
100 articles on Economic- (2): Should George Osborne stick to his austerity plan?
When a saver deposit ￡100 in bank x, the money will not sit still in the bank. Instead, the bank will try to lend some of money, where amount only limited by the capital reserve requirement set by the central bank. If the bank decided to lend the 90% of the money to company A, company A will eventually deposit a fraction ( let say 90%) of the money into bank y, bank y will then try to lend 90% of the money to company B.
At the end, a ￡100 primary deposit will end up in total of ￡100 + ￡90 + ￡72.9 = ￡262.9 in the economy. This is how the economy expands in financial term.
What happened during financial crisis was, when the primary depositor trying to call back ￡50 of the money he deposited, bank x have to recall ￡45 of the money it lend.As company A withdraw deposit to pay back loan, bank y have to recall the loan it made with the same portion to the deposit withdraw by company A.
Hence, an initial withdrawal of ￡50 will reduced the amount of money available in the economy by ￡45 + ￡22.5 = ￡67.5 . (provided company A decided to hold same amount of cash)
However, during the financial meltdown, the bank tends to horde more cash reserve by recalling more loan. Company A will forced to liquidate some of its assets if the amount recalled by bank is more than the amount of liquidity company A have. The fire sell of assets ( such as house price or equities) will drive down the values , forcing more company to go into negative balance and hence had to withdraw more deposit to maintain liquidity. This vicious spiraling cycle is precisely what happened during global financial meltdown of 2008.
Even if somehow, the primary depositor feel safe to keep their money in their bank (because of deposit insurance), and the central bank is pumping more ￡100 into commercial bank, the multiplication effect of the money is determined by the willingness of the bank to lend, and the willingness of the company to borrow. If the bank is unwilling to make riskier loan to avoid worsening their own balance sheets, and creditworthy companies decided to borrow less amid by economy uncertainty, the bank might end up loaning less fraction of the money, creating less money in the economy. This is precisely what happening now when UK facing the potential threat of double dip recession.
The key here is restoring the confidence of the market, by restoring economic growth through increasing government spending throught keeping large budget deficit. Ie, when the government acted as the borrower of the last resort, absorbing the cash reserve save by the bank, to recycle the money back in the economy. However, as I will try to show, this action came with huge costs of inefficiency and increasing government debt.
If the government decided to pay off a public servant( or funding a project that hired worker) about ￡100, the immediate tax revenue that the government can generated back, is 20% ( including income tax and National insurance contribution).
Out of the ￡80 that the worker receive, some will be paid to local council, some will pay back to government when they spent on tobacco and fuel, some will be save by them/ or used to pay loan to finance purchased of house, some will pay as rent. Only a fraction of it(lets say 50%, will be spent on goods that incurred VAT.)
Hence, the government only receive about ￡30 of each ￡100 spent immediately. ( including income tax, NI, VAT and tax on income gained from financial assets
). Out of the ￡70 , only ￡40 will be recirculate at the economy for further taxation. An amount of ￡30 will be untaxable.
The idea is that if you put the total money in recirculation as a sum of infinite GP series, with r as the fraction of money recirculate, t is the tax rate. And imposing the condition, r+t <= 1 ( the sum of income taxed and income spent to be recirculate in economy could not be greater than 1) .
The total tax return that a government can get from what it spend is t*(￡100/1-r), which could only equal to ￡100 if r+ t = 100. ( extremely unlikely as people will save some of the money, or spent it on way that is taxed at lower rate/non taxable such as rent and interest on mortgage payment.)
Hence, the conclusion, the government can never taxed the money back from its own spending. It will have to eventually financed it by borrowing ( or deficit ). You can never grow an economy in sustainable path simply rely on government spending. The only benefits of increasing gov spending and keeping budget deficit, is to create a false hope/confidence/demand that stimulate the economy, so that the economy can start its own hope/confidence/demand that will be sustainable.
Furthermore, the only two reason developing can keep budget deficit without much trouble, is by selling government bond to foreign investor as a way to attract foreign capital into local economy, and glowing themselves out of debt burden. ( As long as GDP growth rate is higher than debt accumulation rate, a debt to GDP ratio of 100% with total debt growth at 5% per year, will down to debt to GDP ratio of 63% in 10 year as long as the GDP growth rate is 10% a year).
The reason that the developing country can growth out of their debt burden, are they have faster population growth and pyramid demographic structure which have growth in total demand, combined with untapped efficiency potential in current productivity practiced, coupled with the catch up effect due to the lack of their economy compared with the developed one.
However, developed countries won’t have these three growing factors, thus if their debt burden growing too fast, they will not be able to grow themselves out of the debt burden. The only reason, that the US, and UK are keeping large government deficit, is to prevent the economy from collapsing.
Hence, cutting spending might reduced tax revenue generated from the spending alone, but the overall effect will improve the government balance sheet. Increasing taxation will reduced disposable income in the economy, but depending on which tax is increased, the increased should have zero to positive impact on government balance sheet. The only costs of doing it, is by reducing the size of the government in economy, it will produce a false fear/lost in confidence/collapse in demand that might initiated a real one in the underlying economy.
The need to improve government balance sheet, stems from the costs bear by rising government debt burden. First, it competes with private sector for the same source of capital, driving up interest rate unless the central bank decided to finance it by printing more money (or quantitative easing ) . However, when central bank started printing money to finance government deficit, inflation started. Second, when government debt burden is too high, private sector will deemed the government to be insolvent and start demanding higher interest rate, which worsening the government balance sheet due to increasing interest payment for debt. Thus, forcing the government debt burden into unsustainable path that the government will be forced to default (Like what happening in Greece now).
The default could be less painful, if the debt is denominated in local currency brought by foreign investor, the government can simply deflated its currency( like the USA). However, whether the burden can be reduced or not, a sovereign default will have a devastating effect on the economy, which initiates recession for several years.
As mentioned before, given the UK economy can never grow rigorously like the developing country again ( at least not without a big recession), the danger of sovereign default, far exceed the danger of potential double dip recession caused by government austerity measures. The key is , you can’t avoid the pain after the labour badly managed the public finance during the boom year, the only thing you can do is making it less painful at a time, avoiding extra pain induced.
Hence, Ms largade would be right to comment that UK fiscal consolidation plan was appropriate,
. The Welsh economist would be wrong to urge the government stop austerity plan now, when using the “if …” clause of Ms Largade,
Martin Wolf article on FT argued that the market is begging the government to borrow more, but I will agree with Stephen King on FT, that the low bond yield cannot justify higher government borrowing.
The key question,whether you should accept the inevitable GDP stagnation/shrunk followed by government austerity measure is, whether the part of the role that the government play in economy, is justified or just a waste of resource to create a false demand.
At the end, a ￡100 primary deposit will end up in total of ￡100 + ￡90 + ￡72.9 = ￡262.9 in the economy. This is how the economy expands in financial term.
What happened during financial crisis was, when the primary depositor trying to call back ￡50 of the money he deposited, bank x have to recall ￡45 of the money it lend.As company A withdraw deposit to pay back loan, bank y have to recall the loan it made with the same portion to the deposit withdraw by company A.
Hence, an initial withdrawal of ￡50 will reduced the amount of money available in the economy by ￡45 + ￡22.5 = ￡67.5 . (provided company A decided to hold same amount of cash)
However, during the financial meltdown, the bank tends to horde more cash reserve by recalling more loan. Company A will forced to liquidate some of its assets if the amount recalled by bank is more than the amount of liquidity company A have. The fire sell of assets ( such as house price or equities) will drive down the values , forcing more company to go into negative balance and hence had to withdraw more deposit to maintain liquidity. This vicious spiraling cycle is precisely what happened during global financial meltdown of 2008.
Even if somehow, the primary depositor feel safe to keep their money in their bank (because of deposit insurance), and the central bank is pumping more ￡100 into commercial bank, the multiplication effect of the money is determined by the willingness of the bank to lend, and the willingness of the company to borrow. If the bank is unwilling to make riskier loan to avoid worsening their own balance sheets, and creditworthy companies decided to borrow less amid by economy uncertainty, the bank might end up loaning less fraction of the money, creating less money in the economy. This is precisely what happening now when UK facing the potential threat of double dip recession.
The key here is restoring the confidence of the market, by restoring economic growth through increasing government spending throught keeping large budget deficit. Ie, when the government acted as the borrower of the last resort, absorbing the cash reserve save by the bank, to recycle the money back in the economy. However, as I will try to show, this action came with huge costs of inefficiency and increasing government debt.
If the government decided to pay off a public servant( or funding a project that hired worker) about ￡100, the immediate tax revenue that the government can generated back, is 20% ( including income tax and National insurance contribution).
Out of the ￡80 that the worker receive, some will be paid to local council, some will pay back to government when they spent on tobacco and fuel, some will be save by them/ or used to pay loan to finance purchased of house, some will pay as rent. Only a fraction of it(lets say 50%, will be spent on goods that incurred VAT.)
Hence, the government only receive about ￡30 of each ￡100 spent immediately. ( including income tax, NI, VAT and tax on income gained from financial assets
). Out of the ￡70 , only ￡40 will be recirculate at the economy for further taxation. An amount of ￡30 will be untaxable.
The idea is that if you put the total money in recirculation as a sum of infinite GP series, with r as the fraction of money recirculate, t is the tax rate. And imposing the condition, r+t <= 1 ( the sum of income taxed and income spent to be recirculate in economy could not be greater than 1) .
The total tax return that a government can get from what it spend is t*(￡100/1-r), which could only equal to ￡100 if r+ t = 100. ( extremely unlikely as people will save some of the money, or spent it on way that is taxed at lower rate/non taxable such as rent and interest on mortgage payment.)
Hence, the conclusion, the government can never taxed the money back from its own spending. It will have to eventually financed it by borrowing ( or deficit ). You can never grow an economy in sustainable path simply rely on government spending. The only benefits of increasing gov spending and keeping budget deficit, is to create a false hope/confidence/demand that stimulate the economy, so that the economy can start its own hope/confidence/demand that will be sustainable.
Furthermore, the only two reason developing can keep budget deficit without much trouble, is by selling government bond to foreign investor as a way to attract foreign capital into local economy, and glowing themselves out of debt burden. ( As long as GDP growth rate is higher than debt accumulation rate, a debt to GDP ratio of 100% with total debt growth at 5% per year, will down to debt to GDP ratio of 63% in 10 year as long as the GDP growth rate is 10% a year).
The reason that the developing country can growth out of their debt burden, are they have faster population growth and pyramid demographic structure which have growth in total demand, combined with untapped efficiency potential in current productivity practiced, coupled with the catch up effect due to the lack of their economy compared with the developed one.
However, developed countries won’t have these three growing factors, thus if their debt burden growing too fast, they will not be able to grow themselves out of the debt burden. The only reason, that the US, and UK are keeping large government deficit, is to prevent the economy from collapsing.
Hence, cutting spending might reduced tax revenue generated from the spending alone, but the overall effect will improve the government balance sheet. Increasing taxation will reduced disposable income in the economy, but depending on which tax is increased, the increased should have zero to positive impact on government balance sheet. The only costs of doing it, is by reducing the size of the government in economy, it will produce a false fear/lost in confidence/collapse in demand that might initiated a real one in the underlying economy.
The need to improve government balance sheet, stems from the costs bear by rising government debt burden. First, it competes with private sector for the same source of capital, driving up interest rate unless the central bank decided to finance it by printing more money (or quantitative easing ) . However, when central bank started printing money to finance government deficit, inflation started. Second, when government debt burden is too high, private sector will deemed the government to be insolvent and start demanding higher interest rate, which worsening the government balance sheet due to increasing interest payment for debt. Thus, forcing the government debt burden into unsustainable path that the government will be forced to default (Like what happening in Greece now).
The default could be less painful, if the debt is denominated in local currency brought by foreign investor, the government can simply deflated its currency( like the USA). However, whether the burden can be reduced or not, a sovereign default will have a devastating effect on the economy, which initiates recession for several years.
As mentioned before, given the UK economy can never grow rigorously like the developing country again ( at least not without a big recession), the danger of sovereign default, far exceed the danger of potential double dip recession caused by government austerity measures. The key is , you can’t avoid the pain after the labour badly managed the public finance during the boom year, the only thing you can do is making it less painful at a time, avoiding extra pain induced.
Hence, Ms largade would be right to comment that UK fiscal consolidation plan was appropriate,
. The Welsh economist would be wrong to urge the government stop austerity plan now, when using the “if …” clause of Ms Largade,
Martin Wolf article on FT argued that the market is begging the government to borrow more, but I will agree with Stephen King on FT, that the low bond yield cannot justify higher government borrowing.
The key question,whether you should accept the inevitable GDP stagnation/shrunk followed by government austerity measure is, whether the part of the role that the government play in economy, is justified or just a waste of resource to create a false demand.
Saturday, September 3, 2011
100 articles on Economic- (1): On Uk inflation.
7 month ago, i wrote an article expressing my view on the BoE monetary policy, stating that the bank shouldnt raise the interest simply because inflation caused by soaring international commodities price.
7 month have passed, and on recent BoE monetary policy committee meeting (MPC), the BoE sill voted to keep the interest rate low at 0.5 %.
The recent year to year monthly inflation index might look worried a bit,however, if we taking the VAT increased effect out, the overall inflation rate is actually quite moderate.
According to the golden rule of Monetary discipline, MV=PT.
where
M= nominal quantity of money
V= velocity of circulation
P= price level
T= total quantity of goods.
The product of P and T determined GDP. Given the UK GDP only growth moderately, and inflation rising fast, this means the total quantity of goods being purchased is declining。 （this should be worrying sign)
Milton Friedman once argued that the central bank should target the money aggregate instead of interest rate to control the inflation.
The money aggregate , whether M1, M2, M3 or M4. had been contracting since january. And contractionary since 2008 if we ignore the effect of the Quantitative Easing.
Hence, my guesing is that, the current inflation mainly stem from the VAT rise, global commodities rise, depreciation of pound causing rise of price for foreign goods, and the temperory effect of the Quantitative easing.
There is no immediate pressure for inflation judging from the change in money aggregate. Hence, the BoE shouldnt raise interest rate now just to tackle the inflation.
What the low interest rate might do is reduced the incentive of people to hold money, hence increase the velocity of circulation, which might initiated another round of inflation. However, there are many other factors that influence the people desires to hold money. One is the worrying economic downturn, which required more cash for emergency. Another is the increasing price of essential expenditure ( such as food and energy), forcing people to horde more money now for the use of future even though the real interest rate is negative.
Thus, in my opinion , the BoE should keep the interest low, until the economic show strong sign of recovery, and money aggregate start to reversing its downward trend.
However, i do not personally support the BoE action which hurt the saver to help the debtor. Lowering the interest rate, is just one of the least painful action which we need to take now, at least from what i known now.
The graph. Data taken from Bank of England and National office of statistic website
7 month have passed, and on recent BoE monetary policy committee meeting (MPC), the BoE sill voted to keep the interest rate low at 0.5 %.
The recent year to year monthly inflation index might look worried a bit,however, if we taking the VAT increased effect out, the overall inflation rate is actually quite moderate.
According to the golden rule of Monetary discipline, MV=PT.
where
M= nominal quantity of money
V= velocity of circulation
P= price level
T= total quantity of goods.
The product of P and T determined GDP. Given the UK GDP only growth moderately, and inflation rising fast, this means the total quantity of goods being purchased is declining。 （this should be worrying sign)
Milton Friedman once argued that the central bank should target the money aggregate instead of interest rate to control the inflation.
The money aggregate , whether M1, M2, M3 or M4. had been contracting since january. And contractionary since 2008 if we ignore the effect of the Quantitative Easing.
Hence, my guesing is that, the current inflation mainly stem from the VAT rise, global commodities rise, depreciation of pound causing rise of price for foreign goods, and the temperory effect of the Quantitative easing.
There is no immediate pressure for inflation judging from the change in money aggregate. Hence, the BoE shouldnt raise interest rate now just to tackle the inflation.
What the low interest rate might do is reduced the incentive of people to hold money, hence increase the velocity of circulation, which might initiated another round of inflation. However, there are many other factors that influence the people desires to hold money. One is the worrying economic downturn, which required more cash for emergency. Another is the increasing price of essential expenditure ( such as food and energy), forcing people to horde more money now for the use of future even though the real interest rate is negative.
Thus, in my opinion , the BoE should keep the interest low, until the economic show strong sign of recovery, and money aggregate start to reversing its downward trend.
However, i do not personally support the BoE action which hurt the saver to help the debtor. Lowering the interest rate, is just one of the least painful action which we need to take now, at least from what i known now.
The graph. Data taken from Bank of England and National office of statistic website
Sunday, October 24, 2010
The Green Mile， 你以为在支持的，其实是在反对。
为什么终身监禁代替不了死刑的作用？
因为只要罪犯活着，就有可能。不管是假释， 监狱暴动， 某国家因为预算问题而采用减刑政策减少监狱囚犯数量， 人们的恻隐之心使他们容易相信死刑犯伪装的悔改之意。对那些穷凶极恶的罪犯， 我们冒不起这个风险。
因为， 监狱再苦， 穷凶极恶的罪犯总会泰然自若。而被害者的家属， 承受不了那些可能是在自己面前干下令人发指的罪行的罪犯依然逍遥自在的活着。 我们社会， 欠他们一个公正。
没错， 死刑犯的产生，和我们的社会制度， 失败的教育体制脱不了关系。 但应该改变的是我们的体制，这是我们的责任，不能因为我们没有做好责任就让受害者， 受害者的家属买单。
人总要为自己的行为负责， 哪怕你临死忏悔了， 上帝也要你自我救赎，才能上天堂。
John Coffey 不该死，要改变的是司法和审核制度。
Eduard Delacroix 忏悔了， 改变的是考虑假释制度。
'Wild Bill' Wharton， 那已经是死性不改，人群里腐烂的苹果。
就好比蝙蝠侠黑暗骑士里的小丑，有些人就是只想毁灭世界， 仁慈，只会给他们毁灭的帮助。
这东西好比Universal wealthfare, 你不能因为有些人需要帮助就制度化给全部人帮助。
你也不能因为有些人值得原谅就制度化原谅所有人。
因为只要罪犯活着，就有可能。不管是假释， 监狱暴动， 某国家因为预算问题而采用减刑政策减少监狱囚犯数量， 人们的恻隐之心使他们容易相信死刑犯伪装的悔改之意。对那些穷凶极恶的罪犯， 我们冒不起这个风险。
因为， 监狱再苦， 穷凶极恶的罪犯总会泰然自若。而被害者的家属， 承受不了那些可能是在自己面前干下令人发指的罪行的罪犯依然逍遥自在的活着。 我们社会， 欠他们一个公正。
没错， 死刑犯的产生，和我们的社会制度， 失败的教育体制脱不了关系。 但应该改变的是我们的体制，这是我们的责任，不能因为我们没有做好责任就让受害者， 受害者的家属买单。
人总要为自己的行为负责， 哪怕你临死忏悔了， 上帝也要你自我救赎，才能上天堂。
John Coffey 不该死，要改变的是司法和审核制度。
Eduard Delacroix 忏悔了， 改变的是考虑假释制度。
'Wild Bill' Wharton， 那已经是死性不改，人群里腐烂的苹果。
就好比蝙蝠侠黑暗骑士里的小丑，有些人就是只想毁灭世界， 仁慈，只会给他们毁灭的帮助。
这东西好比Universal wealthfare, 你不能因为有些人需要帮助就制度化给全部人帮助。
你也不能因为有些人值得原谅就制度化原谅所有人。
Wednesday, October 20, 2010
《集结号》
有时候看历史为背景的战争电影，能够把交战双方的立场忘记越好。
例如《拯救大兵雷恩》， 你最好忘了里面十恶不赦的是德国人。
看《集结号》， 你最好只记住这是场共产党打国民党的战役，而不是中国人打中国人的战役。
有学过历史的人多多少少应该知道，德国在大萧条时的超级通货膨胀时期导致 希特勒的崛起， 以致引发后来的二次世界大战。 这之前，一战获胜国英法美在战争赔款上的苛刻，以及对德国经济情况的漠不关心，多少脱离不了干系。
但国共在1945-1949这四年的内战不同，本来可以和平用选票解决的事，结果用枪干子来解决了。
前者大不了导致政府难产，经济短暂停顿。 后者， 却会引申出很多历史定位的问题。
历史定位很重要，因为不管是枪杀活生生的人，或是在枪林弹雨下， 看着队友一个个被炸得血肉横飞仍然要前进，都需要别人来告诉自己，你是站在正义的一方。 但正义这个东西本来就是相对的，你如果是正义的， 别人就被逼接受自己是邪恶的。
谷子地还算幸运，他到最后还有昭雪的一天。但我不敢想象，那些连续冲阵三次的国民党将士， 他们的家属，该背着怎样的包袱过活。
看完集结号，你总该理解日本人为什么宁冒天下之不韪也要把甲级战犯供奉在靖国神社吧。。。。
例如《拯救大兵雷恩》， 你最好忘了里面十恶不赦的是德国人。
看《集结号》， 你最好只记住这是场共产党打国民党的战役，而不是中国人打中国人的战役。
有学过历史的人多多少少应该知道，德国在大萧条时的超级通货膨胀时期导致 希特勒的崛起， 以致引发后来的二次世界大战。 这之前，一战获胜国英法美在战争赔款上的苛刻，以及对德国经济情况的漠不关心，多少脱离不了干系。
但国共在1945-1949这四年的内战不同，本来可以和平用选票解决的事，结果用枪干子来解决了。
前者大不了导致政府难产，经济短暂停顿。 后者， 却会引申出很多历史定位的问题。
历史定位很重要，因为不管是枪杀活生生的人，或是在枪林弹雨下， 看着队友一个个被炸得血肉横飞仍然要前进，都需要别人来告诉自己，你是站在正义的一方。 但正义这个东西本来就是相对的，你如果是正义的， 别人就被逼接受自己是邪恶的。
谷子地还算幸运，他到最后还有昭雪的一天。但我不敢想象，那些连续冲阵三次的国民党将士， 他们的家属，该背着怎样的包袱过活。
看完集结号，你总该理解日本人为什么宁冒天下之不韪也要把甲级战犯供奉在靖国神社吧。。。。
Monday, October 18, 2010
On inflation, deficit, debt, exchange rate (complement of budget 2010-2011)
I'm not doing economic for undergraduates so the following Its just general rule of macroeconomic that i knew must be true.
Ok, the only cause of persistent inflation inside a country is demand more than supply.
This mayb caused by
(i) More money created than increase need in productivity. ( mainly by government deficit)
(ii) International commodities price increase due to raising demand globally. ( like what happened to crude oil price in 2008)
Contrary to many believes,the following do not cause long term persistent inflation.
(i) Temporary government measure in raising tax for general goods. ( Like imposing VAT, value added tax). As this is done in one-term, and demand will generally fall when price increase, thought not elastically.
(ii) Depreciation of exchange rate . first, it will not affect local wages. Second, increase price in import goods will shift customer preference to local production.
(iii) Sudden large depreciation of exchange rate . This is often the consequence of hyperinflation and bad government monetary and budgetary policy rather than the cause.
What does inflation mean? simply, the loosing real term value of every bank notes that you are holding.
In an extreme case, if the inflation rate is 25%, you will can only buy 80% of the item that you can buy now in next year.
What are the consequence of high inflation mean?
Simply, it encourage people to spend now, even if thats mean borrowing large chunk of loan.
As you will see your real-term value of saving decreasing, you will buy whatever you want now instead of waiting for some years. Like housing .
Companies will take loans to buy new production equipments , or simply make acquisition, as the real -term actual amount they need to pay back become less in the future.
As a result, economy grows, government has more revenue, and the debt burden it carry will be lessen.
So the government will like moderate inflation, as long as it didnt hurt the economy.
But the problem with inflation cause economy boom do not last long, economy growth will need productivity growth to support, else it can only be sustained by borrowing money from the future.
Government deficit will cause government debit. The consequence of high government debit are either
(i) if the goverment debit is funded by borrowing from abroad, high debit level cause foreign investor worried about ability of the government to pay back the debt, hence they start dumbing government bond in foreign exchange market, which cause the currency to depreciate. ( like what happened to Euro and Pounds when Uk gov debt, PIGS( portugal, ireland , greece , spain) debt soared)
(ii) If the government debit is funded by domestic investor( mostly pension fund), large amount of gov debt will drive the interest rate low, so low that even a PER of 30 in stock market seemed more profitable than investing in gov bond.
( PER= price earning ratio, namely price of share divided by dividend, the higher the number, the higher the price).
The only way that a government running deficit but saw the currency appreciate is either, other country are doing badly, or the country still have international trade surplus( more export than import)
Cutting government spending, or raising tax would be very painful in the short run, especially in democratic country where both will cause ruling party loosing support.
Therefore , in the long run, government will like to keep inflation moderate , deficit moderate, to grow themselves out of debt burden.As long as everything under control.
Ok, the only cause of persistent inflation inside a country is demand more than supply.
This mayb caused by
(i) More money created than increase need in productivity. ( mainly by government deficit)
(ii) International commodities price increase due to raising demand globally. ( like what happened to crude oil price in 2008)
Contrary to many believes,the following do not cause long term persistent inflation.
(i) Temporary government measure in raising tax for general goods. ( Like imposing VAT, value added tax). As this is done in one-term, and demand will generally fall when price increase, thought not elastically.
(ii) Depreciation of exchange rate . first, it will not affect local wages. Second, increase price in import goods will shift customer preference to local production.
(iii) Sudden large depreciation of exchange rate . This is often the consequence of hyperinflation and bad government monetary and budgetary policy rather than the cause.
What does inflation mean? simply, the loosing real term value of every bank notes that you are holding.
In an extreme case, if the inflation rate is 25%, you will can only buy 80% of the item that you can buy now in next year.
What are the consequence of high inflation mean?
Simply, it encourage people to spend now, even if thats mean borrowing large chunk of loan.
As you will see your real-term value of saving decreasing, you will buy whatever you want now instead of waiting for some years. Like housing .
Companies will take loans to buy new production equipments , or simply make acquisition, as the real -term actual amount they need to pay back become less in the future.
As a result, economy grows, government has more revenue, and the debt burden it carry will be lessen.
So the government will like moderate inflation, as long as it didnt hurt the economy.
But the problem with inflation cause economy boom do not last long, economy growth will need productivity growth to support, else it can only be sustained by borrowing money from the future.
Government deficit will cause government debit. The consequence of high government debit are either
(i) if the goverment debit is funded by borrowing from abroad, high debit level cause foreign investor worried about ability of the government to pay back the debt, hence they start dumbing government bond in foreign exchange market, which cause the currency to depreciate. ( like what happened to Euro and Pounds when Uk gov debt, PIGS( portugal, ireland , greece , spain) debt soared)
(ii) If the government debit is funded by domestic investor( mostly pension fund), large amount of gov debt will drive the interest rate low, so low that even a PER of 30 in stock market seemed more profitable than investing in gov bond.
( PER= price earning ratio, namely price of share divided by dividend, the higher the number, the higher the price).
The only way that a government running deficit but saw the currency appreciate is either, other country are doing badly, or the country still have international trade surplus( more export than import)
Cutting government spending, or raising tax would be very painful in the short run, especially in democratic country where both will cause ruling party loosing support.
Therefore , in the long run, government will like to keep inflation moderate , deficit moderate, to grow themselves out of debt burden.As long as everything under control.
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