Happy New Year !!

Everybody,

Happy New Year to all of you. May sucess, happiness, prosperity, and wisdom be always with you ... and with me as well.

May love and peace be granted to all men and women.

Happy New Year !!!

Best wishes,

Adam SMIK

世界金融危機

2008年は間もなく幕を閉じる。残念ながら、世界金融危機(global financial crisis)は中々そうはせずに発展し続けていく見通し。金融危機は実体経済に波及し、日米欧だけではなく、世界は同時に不況に突入。

１年前に想像もつかなかった大混乱が政界の金融市場を襲っている。アメリカの住宅バブル崩壊(collapse of housing bubble)に端を発した危機は「100年に1度」（グリーンスパン前米連邦準備制度理事会議長）と呼ばれ、恐慌守前に発展。投資銀行(investment bank)業務で高収益を上げていた5社のうち3社が破綻・身売りで姿を消した。

「リーマン・ブラザーズに公的資金を投入する計画はない」。ポールソン財務長官の言葉に居並んだ米金融業界首脳は顔色を失った。創業150年の証券大手リーマンは9月15日に破綻した。

直前まで「リーマンは救済される」という意見が市場の見方だった。FRBは、3月には経営困難に直撃している米大手証券ベア・スタンズに緊急融資、JPモルガンチェーズへの身売りで決着させた。9月7日には米政府系住宅金融2社（ファニーメイ・フレッディマック）への公的資金投入も決めていた。

米証券大手メリルリンチは米銀行大手バンク・オブ・アメリカへの身売りに走りなど、金融市場はパニックに陥った。混乱を見てFRBは方針を転換、9月16日には米保険最大大手AIGを救済した。だが、リーマンを破綻させたことで、危機は欧州に飛び火。アイスランドやハンガリーが相次いで国際通貨基金(IMF)に支援を呼んだ。

ブッシュ米大統領は総額7000億ドルの公的資金で金融機関の不良資産を買い取る金融安定化法案を提出したが、下院は9月末にこれを否決、市場の動揺を加速した。その結果、米株価は4年ぶりに1万ドルを割り、一時は7000ドル台に値下がった。また日経平均株価は26年ぶりに7000円を落ち込んだ。その他の国々も同様に金融危機のせいで悪影響に襲われた。

市場に迫られる形で10月の先進7カ国財務相・中央銀行総裁会議（G7)は金融機関への資本注入で合意。11月には新興国も含めた主要20カ国・地域（G20)の世界金融サミット(world summit)が開催された。金融市場への規制強化を明記する首脳宣言をまとめ、米国流の市場原理主義の転換迫られることを印象付けた。

中央銀行は利下げに乗り出して、FRBは史上初の事実上ゼロ金利(0~0.25%)と量的緩和政策(monetary easing)を導入。

日銀も10月末、約7年7か月ぶりに利下げ、12月には政策金利を0.3％から0.1％まで引き下げた。だが、市場は依然不安定で、金融機関の損失拡大が続く。ドル売り円買いも根強く、円相場は12月に一時、13年ぶりの1ドル＝87円台に直撃。

スペシャリストによれば、世界金融危機は来年度の第2半期までも続くという。一方、2010年度までには世界経済が回復できないという見通しも強まった。

(参考文献：毎日新聞、金融危機、平成２０年１２月２３日）

Merry Christmas !!

Santa: What do you want for Christmas?

Adams: Love and peace for people.

Santa: What about for yourself?
Adams: Yeah, I never forget myself,.... It is just,... when people live with love and peace, I strongly believe, I will be granted love and care as a reward.

Santa: What are the most valuable gifts you can receive?
Adams: Love, Care, and trust from family, friends, and people around me.

Santa: What was the last gift you received?
Adams: Love, Care and Support. They love me, care about what I do and how I do it. Moreover, I can feel it in my bone, they have always believed in me. I am either strongly motivated by them or driven by desires/ambitions to achieve the only one thing people longing for, that is the SUCCESS.

Cyber Santa

Dear Santa, I hope you`re not set in your ways
`Cause things are just different in these modern days.

Dear Santa, please tell me that I would be right
To figure you`ve set up your North Pole Web Site.

Do some of your elves keep the pages just right,
While you are preparing for your famous flight?
With all of the news of presents we`ll get,
Can we find it all there at Santa.net?

Do you accept e-mail, and phone faxes too?
Just think of the trees that you`ll save if you do.
And does a computer help guide your old sleigh,
To make sure that Rodalph does not lose his way?

Please tell me, dear Santa, that these things are true;
The times might be changing, but not without you.
Dear Santa, I have to say just one thing more,
Our fireplace is fake, so please come through the door!


The Other Santas

There are many Santa Clauses
Of every shape and size.
That`s not the name they go by;
That should be no surprise.

There are many Santa Clauses
Whose gifts are love and care,
Who treat each day like Christmas
For those whose lives they share.

There are many Santa Clauses;
You need not look too far.
Please stop and think about them;
You know just who they are.

(Sources: Alexandru, Joseph and others)

My favorite songs ....... for YOU !!

One day, ....... one day, ....... is so long for me ....... without you. Miss you so much, I wish you understand my ....... feeling.

I am ....... strong but without you within me ....... I cannot find no rest ........ All I am going to be is ....... INCOMPLETE. Honey ......., you know it, if you let go of me, I ....... I will be ....... INCONSOLABLE.

Baby, come on, my baby ......., what do you say!?









Hey, do you think it works?
....... Not so sure .............

Okay, then try another one !!

Baby, I know you are hurting ........ and right now you feel like you would never love me again. I am not asking you to forgive me, but all I ask is for a CHANCE, ....... a chance to prove that I love you.

I should ....... have told you that I love you, the time you asked me. Honey, right now, I realized that you are the only one girl that I cannot live without. I love you so much ....... and will always do. You are always beautiful in my heart.

Constructive Criticism!? .......Arguments?

The global financial crisis resembles a conflict among family members. I do not like it, you do not like it, and nobody likes it, I can say. Exactly, amid that critical situation, what people have to do is to remedy the dispute. However, there are many possible resolutions, among which they must single out the one most beneficial to every party based on rationality, optimization theory. I use “happy-happy-happy principle”; both parties and the third party who intervenes are all satisfied with the solution.

Nonetheless, the only one thing, I mean at least to bear in mind is that leaders are obliged to love everybody indiscriminately. Let`s just imagine about a small dispute between children. If the parents blame one child, and do everything to help the others, what that be effective? As a result, the relationship between them would worsen due to the strategy the parents apply. Actually, they are brothers and sisters, and happiness, success, prosperity can be achieved when they love, help each other. The stronger the relationship among family member is, the better the status of that family in the society.

Okay, let`s come to the global financial crisis that ruptures to every edge of global economy. I agree to take action now, as soon as possible to restore the economic growth and reverse the global economic downturn. World leaders and the market players have to do everything necessary to fix the financial turmoil. Plans, projects must be designed based on the real situation, the rationality and the expectation out of what people are dealing with. Meantime, the most critical variable that policy makers could not fail to do is “how to do it to successfully remedy the problem and to achieve the optimal result”.

President-elect Obama promised, on Saturday, a massive public works project to resuscitate both the reeling U.S. economy and global economy. The plan, he argued, with billions of dollars of government expenditure, millions of jobs will be created and the unemployment problem will either solved. I do not say it is a bad policy; indeed, I just am not convinced that it is the best move that the United States should do now. Leaders have to do the right thing at the right time, and for the right reason. Let me convince you, by raising some criticisms or resistances of specialists and my own argument to deal with the must-be-solved the so-called global financial crisis.

The GDP (global domestic product) is, by one approach, defined by the formula GDP=C+I+G+Im-Ex, where C: consumption, I: investment, G: government expenditure, Im: import and Ex: export. From the equation, when government expenditure, G increases, then the GDP would not decrease further amid the crisis and even move upward. But the critical question is where to get the money to spend? Taxpayers` money, government budget, or borrow hundreds of billions of dollars from world financial institutions or other countries. What will happen next?

President George W. Bush and other republicans have resisted such an approach in part out of concern for the already soaring federal budget deficit, which could hit $1 trillion at the end of 2008. Why? Because of scarcity, people cannot afford to have everything they wish for. This world is a place fulfilled with opportunity cost and trade-off. To be successful, like Karl Marx used to argue that “people live with animal spirit”, they will do everything to grab what they want, to maximize their profit. Profit maximization is pure, ideal and constructive, the concept itself, but the problem is how they are applied and whether it is the right thing to do. Right here, the main point is that “It is easy to spend money, however, is it the best of the best ways to spend lies beyond that.”

Moreover, Konosuke Matsushita, founder of National which present day known as Panasonic, is prominent and well-known for his business principles.

1. Collective wisdom or bottom up management

2. Companies are driven by each employee

3. The margin between success and failure is very slight

This business model is applicable for policy makers in the economic world as well. First, the good interaction between the players is desirable. Second, companies represent the whole economy, and employees are market participants. So all players, either CEOs or employees, are not to be discriminated. And lower-class, middle-class and upper-class people must be treated fairly, indiscriminately, to maximize the social welfare in the whole economy. Third, the slightest difference in effort translates into a major difference in achievement. Right now, what world leaders, CEOs, people desire the most is the shiny day after the very long night of crisis.

My main point is that, government intervention into the economy is recommended. However, the plan proposed by Obama to make a massive investment in public works project is not the best solution to deal with unemployment and the global credit crunch. His policy is the right one; unfortunately, it is just not the right time to do so. He focuses too much on the middle-class American people. For instance, “Help for homeowners (subprime mortgage-backed holders and borrowers) facing foreclosure is a top priority for me,” he said less than 6 weeks before he takes office in Jan. 20, 2009.

“The economy is going to get worse before it gets better,” Obama said twice in the early moments of the interview on NBC television`s “Meet the Press”. However, he sidestepped a question about when he plans to raise taxes on wealthy Americans. “The key for us is making sure that we jump-start that economy in a way that doesn`t just deal with short term, doesn`t just create job immediately, but also puts us on a glide path for long-term, sustainable economic growth,” Obama added.

On the other hand, conservative economists have also long derided public works spending as a poor response to tough economic periods, saying it has not been a reliable catalyst for the short-term growth and instead is more about politicians gaining points with constituents. Barack Obama defeated John McCain, beyond that existed many variables. One is his policy focused on middle-class American, everybody knows the percentage of those American are higher than the percentages of people of other classes. Moreover, he is a smart politician, he always choose the right person to work with him, like veteran Democrats Joe Biden to be Vice-president, and Hillary Rodham Clinton as his secretary of state when he is inaugurated next January.

Meanwhile, Alan Viard, an economist at the American Enterprise Institute, addressed congress recently that “public works spending should not be authorized out of the illusory hope of jobs gains or economic stabilization.” “If more money is spent on infrastructure, more people will be employed in that sector,” he told the House Ways and Means Committee. “In the long-run, however, an increase in infrastructure spending requires a reduction in public or private spending for other goods and services. As a result, fewer workers are employed in other sectors of the economy.” Alan elaborated.

Obama implicitly argued that by invoking the federal interstate highway program, widely seen as one of the most successful public works efforts in American history, introduced by President Dwight D. Eisenhower in the 1950s, International Herald Tribune reported. Besides, people learn from different economists, leaders, but it is not to do the same thing like what those people did in the past, it is to create something new and to innovate the even better model or policy for the interests of all people. One can argue against Obama that the creation of federal interstate system did work during President Dwight Eisenhower but now it is different, people live in a totally different new world.

A substantial part of the proposed economic package will go toward creating so-called green jobs, those that benefit the environment or save energy. The blueprint for such spending, can be found in a study, financed by the Political Economy Research Institute at the University of Massachusetts and Center for American Progress, a Washington Research Organization (founded by John Podesta, a co-chairman of Obama`s transition team.)

The study, released in November after months of work, found that a $100 billion investment in clean energy could create 2 million jobs over 2 years. Nonetheless, Daniel Weiss, an environmental analysts at Podesta`s center, argued that the government should start by providing fresh money to the deteriorating auto industry, preserving hundreds of thousands of jobs, on the condition that they commit to cleaner and more fuel-efficient cars, like plug-in hybrids.

Meantime, some concerns about unemployment and inflation have been raised and policy on how to deal with the crisis is also proposed. Global economy is in recession, unemployment is on the rise, and from day to day, more people are losing their jobs. Consumers lose confidence in the markets, investors` incentives slump due to declining sales and profits. Putting much effort in public works project requires a reduction in spending in other sectors of economy. Why Obama wait to create million of jobs in the future, without preserving hundreds of thousands of job being shed every month. It would be better if he afford to help the auto industry or financial sectors to be able to survive during this critical situation. Then the unemployment rates would not increase too high to create jobs in the future.

The Bush Administration has so far taken a largely ad-hoc approach to deal with credit crunch -- addressing problems instead of trying to get ahead of them. However, many market watchers say that is not going to be enough to cool down the current troubles, especially when asset prices drop and financial institution run into capital shortage. Whereas, Obama is likely to focus too much in the future, he assumed that millions of jobs will lose and his plan is to create jobs for those people. He expects that in the future, global economy will recover and now it is so difficult to keep the unemployment rate constant, some scholars can criticized him. Then, when is the future? For how long will the U.S. economy return to stabilization? He could not give the answer, I believe.

Another concern is Inflation. Just before the subprime crisis burst, before the crisis caused ruptures worldwide in terms of financial failures and credit crunch, the money supply and money demand was at an equilibrium point in the financial markets. Where did the money go then? Why there is a shortage of money supply in credit markets? Indeed, investment in subprime mortgage market, a great deal of capitals is converted to real estate assets. However, people do not consume, they lost confidence. Investors do not risk investing amid the financial crisis. To keep it simple, money is like the blood flowing in the body, when the cash does not flow smoothly, people are not healthy. The same thing for financial markets, cash flow was not operated very well. People just keep money at home, some of them even not deposit because they lost trust in banks.

In order to help restore the economy to health, world leaders, central bankers, policy makers injected billions of dollars into the markets to deal with shortage of capital of financial institutions and to provide those who have high demand of money to operate or pay debts when they face foreclosure or bankruptcy. Furthermore, short-term interest rates are nipped to the lowest level of the benchmark short-term interest rates, a major change of monetary policy. Now, indeed, it is not a problem yet, however, when the economy recovers to its original condition, some issues might happen. When people think that the crisis is over, they start to consume again, throw the money into the credit markets, and businessmen begin to invest to make profits because they face a lot of budget deficit during the crisis. Excess money supply would lead to a hyper-inflation (my projection).

Unemployment and inflation do not work well when they are together. There is a negative correlation between the two, that is, when one increases the other move in an opposite direction. Obama`s single largest investment is to create jobs for people, to reduce unemployment rate (right now 6.7% and is anticipated to grow) in the United States (The trade-off between unemployment and inflation is well explained by Phillip`s Curve). Then, the inflation would become visible just after the economy returns back to recovery.

The prophecy of “at the end of one crisis, it is the beginning of another” will be fulfilled if the right policy is not in place, at the end of global financial crisis. However, since the financial crisis is inevitable, people must accept the truth. They have to take advantage from the crisis, somehow, it can be an opportunity for mankind to learn about and innovate new strategies on how to protect the upheaval of the crisis in the future. People get stronger, they grow up after the crisis/obstacle or problem is solved successfully, rationally, and logically.

Single Largest Public Works Project !!

When the economy is in recession, policy-makers tend to design different plan as a remedy. One of those is to increase government expenditure, then the GDP (GDP=C+I+G+Ex-Im) would not decline or even increase. It is recommended to do so, but the even more critical points, HOW? How to do it? Is it the best move?, are always the most difficult questions to answer.

Adams

CHICAGO: President-elect Barack Obama has promised the largest public works construction program since President Dwight D. Eisenhower created the federal interstate system half-century ago. The program is to lift the United States out of economic recession, and to resuscitate the reeling global economy.

The Bureau of Labor Statistics (Dec. 5) reported U.S. loses 533,000 in November, the biggest drop since 1974. As days pass by, the unemployment is on the rise and there is no end to the recession in sight.

Obama began highlighting on Saturday elements of the economic recovery program he is trying to fashion with congressional leaders in hopes of being able to enact it shortly after coming to office on January 20, 2009.

“This painful crisis is an opportunity to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children, and by investing in clean energy projects.” Barack Obama said in a statement right after the latest grim economic report indicating job losses in the U.S. in November.

Obama`s remarks sought to improve the definition of traditional work programs for the middle class, like infrastructure projects to repair road and bridges, at the same time also pushing a federal effort to bring in new-era jobs in technology and so called green-technology related jobs.

Although Obama offered no price estimate for his grand plan, he said the massive government spending program he proposed will invest record amounts of money in the vast infrastructure project, which also includes work on schools, sewer systems, mass transit, electric grids, dams and other public utilities.

Simultaneously, he vowed to upgrade computers in schools, expand high-speed Internet to remote areas, make government buildings more energy-efficient and modernize health care institutions by improving information technology at hospital and doctors` offices.

“We need action – and action now,” Obama said in an address taped for broadcast on radio and You Tube. Millions of jobs would be created by making the single largest investment in national infrastructure since the creation of the federal highway system in the 1950s, he said. He added that state officials would lose the federal dollars if they did not use the money to repair highways and bridges quickly.

Obama and his team are working with congressional leaders to devise a spending package that some lawmakers have proposed could total $400 billion to $700 billion. Some analysts projected even higher costs to achieve the massive plan. The efforts to adopt a broad economic package are likely to wait until he swears in (takes office) and Democrats have bigger majorities in Congress.

“We won`t just throw money at the problems, we`ll measure progress by the reforms we make and the results we achieve – by the jobs we create, by the energy we save, by whether America is more competitive in the world.” Barack Obama addressed the public.

Last week, when he met with the nation`s governors, they said the states had $136 billion worth of road, bridge and other projects ready to proceed as soon as money became available. They estimated that each $1 billion dollars spent would create 40,000 jobs, if the plans are implemented smoothly.

“He hasn`t given us any commitment, but we are fairly certain it`s going to be large,” Edward Rendell of Pennsylvania, chairman of the National Governors Association, said in an interview on Saturday. “I think he understands if you`re trying to reverse the economy and turn it around.... This is not the time to do it in small doses. It`s got to be big.” Edward added.

In a joint statement, New York Mayor Michael Bloomberg, Pennsylvania Gov. Ed Rendell and California Gov. Arnold Schwarzenegger said it would help the U.S. stay ahead of other countries. “To stay competitive globally, the time to repair and modernize our nation`s infrastructure is now,” they said.

The delay to implement the project poses the possibility of a deeper recession, some experts recommended a quick action to make the plan happens.

(Sources: AP, Obama banking on large-scale public works project, Dec. 7, The Japan Times, Obama offers huge public works plan, and International Herald Tribune, Obama recovery plan: Massive public projects, Dec. 8, 2008.)

Accelerating Unemployment !!

When crisis happens, consumers start to use the “wait-and-see approach”. They do not spend money on goods and services then the companies face declining sales. In order to keep their margins, they tend to reduce scale of production, reduce operating costs, etc. to survive. One of those is to reduce expenses on labor force, so CEOs start to lay-off employees.

Who are the employees? They are “Consumers”. But why consumers lose confidence in market performance? The answer is, maybe policy taken by government can not lead to financial stability. Then the question is “Why can it not be achieved?” One of the right answers is “consumers and producers do not smoothly interact with each other.”

So, who is (are) the wrongdoer(s)? My answer is “ALL OF THEM”.

Adams

The author wishes to inform that President-elect Obama`s public works project will be introduced later. Then he is going to raise some arguments by specialists and his own ones against those plans to deal with the global financial crisis in the up-coming posts.

Nobody desires or satisfies with the financial crisis that ruptures worldwide and spread to virtually every corner of the whole economy. But world leaders just set the right policy at the wrong time, they just could not remedy it with minimum possible negative effects on the economy, as a result of what they are doing and will do in the near future.

From day to day, the crisis escalates to the next level, and job losses are spreading far beyond the housing and finance sectors to every edge of the global economy. Companies are now shedding workers at an accelerating rate, some in response to declining sales and others in anticipation of tougher time ahead.

The government`s report of a giant job losses in November, the biggest monthly decline in a generation. The nation`s employers cut 533,000 jobs in November, the Bureau of Labour Statistics reported Friday (December 5).

“We are caught in a downward spiral in which employment, income and spending are collapsing together,” said Nigel Gault, chief domestic economist for IHS Global Insight. “With private spending frozen, we have no choice but to rely on a stimulus package to revive the economy.” he commented on what to do about the crisis.

The Business Roundtable, which represents 160 big U.S. companies said Thursday that 60% of CEOs in a recent survey expect to lay-off employees in coming months, increased from only 1/3 projected job losses. “As economic conditions continue to soften, so have our member CEO`s near-term expectations for sales, capital spending and employment,” Harold McGraw III, Business Roundtable Chairman and also chief executive of McGraw-Hill Cos told reporters.

The unemployment rate rose to 6.7 percent, up six-tenths over the last three months. More than 420,000 people who had been working or seeking in October left the labor force in November. More significantly, if those too discouraged to apply for a job any longer or those working fewer hours than they would like is included, the rate hit a record 12.5 percent in November.

As part of Friday`s announcement, the government revised higher her estimates of jobs lost in September and October. Instead of 524,000 workers were cut in those months, 723,000 jobs were lost, or total of 1.2 million people in just three months became unemployed. Noting that 1.9 million jobs have been slashed since the start of the recession a year ago – two-thirds of them since September.

Steve Gross, a global practice leader at consulting firm Mercer LLC, says some executives are eliminating jobs “as a preventive measure” in anticipation of a long recession. “If you knew you were going to need the workers in 6 months, you would never lay them off,” he says. “But they probably do not need these workers for 12 months or longer…. Companies want to make sure that they can keep their margins.” Steve added.

(Sources: Wall Street Journal, Job Losses Accelerate in U.S. by Amol Sharma, Sudeep Reddy and Cari Tuna. And The New York Times, U.S. Loses 533,000 Jobs in Biggest Drop Since 1974 by Louis Uchitelle, Edmund L. Andrews and Stephen Labaton, December 5, 2008.)