Mohamed A. El-Erian, Chief Economic Adviser at Allianz and a member of its International Executive Committee, is Chairman of US President Barack Obama’s Global Development Council. He previously served as CEO and co-Chief Investment Officer of PIMCO. He was named one of Foreign Policy’s Top 100 Global Thinkers in 2009, 2010, 2011, and 2012.
From blaming him for the renewed collapse of the Greek economy to accusing him of illegally plotting Greece’s exit from the eurozone, it has become fashionable to disparage Yanis Varoufakis, the country’s former finance minister. While I have never met or spoken to him, I believe that he is getting a bad rap (and increasingly so). In the process, attention is being diverted away from the issues that are central to Greece’s ability to recover and prosper – whether it stays in the eurozone or decides to leave.
That is why it is important to take note of the ideas that Varoufakis continues to espouse. Greeks and others may fault him for pursuing his agenda with too little politesse while in office. But the essence of that agenda was – and remains – largely correct.
…Greece’s prime minister, Alexis Tsipras, appointed Varoufakis to lead the delicate negotiations with the country’s creditors. His mandate was to recast the relationship in two important ways: render its terms more amenable to economic growth and job creation; and restore balance and dignity to the treatment of Greece by its European partners and the International Monetary Fund.
These objectives reflected Greece’s frustrating and disappointing experience under two previous bailout packages administered by “the institutions” (the European Commission, the European Central Bank, and the IMF). In pursuing them, Varoufakis felt empowered by the scale of Syriza’s electoral win and compelled by economic logic to press three issues that many economists believe must be addressed if sustained growth is to be restored: less and more intelligent austerity; structural reforms that better meet social objectives; and debt reduction.
These issues remain as relevant today, with Varoufakis out of government, as they were when he was tirelessly advocating for them during visits to European capitals and in tense late-night negotiations in Brussels.
RTFA to understand the reasoning behind Dr. El-Erian’s defense of Varoufakis. I feel he’s absolutely correct.
We seem to really enjoy contemplating the money and lifestyles of the top 0.01 percent. The wealthiest Americans garner immense mind-share in the imaginations of the rest of the populace. We incessantly track the incomes of hedge-fund managers and other finance stars, the heirs to the Wal-Mart fortune and other $100 billion families. Don’t forget the Bloomberg Billionaires Index and the Forbes 400 and the wealthiest New Yorkers.
We are in short fascinated with other people’s wealth.
What about the rest of the income strata? As it turns out, there is a fascinating story there as well. It may not be as glitzy and luxe as the Billionaires Index, but it is a tale of gradual improvement. So says a recent data analysis on the global middle class by the Pew Research Center.
The good news is that during the first decade of the 21st century, about 700 million people were lifted out of poverty. That is a 14 percent reduction in poverty. The bad news is that moving into, and staying within, the global middle class is a significant challenge.
The study found that 71 percent of the global population is either poor (15 percent) or low-income (56 percent). The middle class is only 13 percent of the total population. To put some hard numbers on those percentages, with a world population of 7.2 billion humans, about 936 million are middle-class. A little more than a billion (1.08) are impoverished, and more than half the world’s population, a giant 4.03 billion people, are low-income.
The Pew report contains some astonishing data points: 84 percent of the world’s population, including those defined as middle-class, live on less than $20 a day. Surviving on the maximum in the U.S. or Europe would be difficult for an individual — about $7,300 a year…
Think of it another way. More than fourth-fifths of world’s population live on less than $20 a day. In other words, how well this vast swath of humanity is doing will have important implications for industry, from health care and finance to agriculture and energy.
Income growth in these groups in both the developing and developed world will alter the economic and political landscape.
Not to be too optimistic, but the economic state of world is getting better. As more people move into the global middle class, they are able to buy more consumer goods, save and invest. That creates a long-term self-interest in political stability and, one can hope, democratic institutions.
Barry Ritholtz is justified in his positive outlook for the global population – even if the “we” in the industrial western civilization aren’t doing as well. The United States, Canada and Western Europe – with conservative governments very often – have a declining middle class. So, we feel the squeeze of Republican-style economics.
It’s your choice, folks. In my view as someone who’s a citizen of the planet Earth, I’m pleased the struggles of so many people around this globe are moving forward towards better opportunities for themselves, their children. The ennui of ignorant North Americans, of Europeans who have stepped into the bipolar trap of two-party politics continues to drag down what always has been the most dynamic and creative segment of our economy.
You can keep on with the obvious foolishness of believing you alone can make it – while the fat cats at the top stack the deck – or you can fight for independent thought and action and try for change that starts with education, healthcare, social security – and, did I say, education.
Pickup truck crashed into collapse of Interstate 10 bridge
All traffic along a major freeway connecting California and Arizona was blocked indefinitely when a bridge over a desert wash collapsed during heavy rain, and the roadway in the opposite direction suffered severe damage…
The collapse Sunday of Interstate 10 in southeastern California left one driver injured, stranded numerous motorists and complicated travel for countless others for what officials warned could be a long time.
The closure will force drivers seeking to use I-10 to travel between California and Arizona to go hundreds of miles out of their way.
The rains came amid a second day of showers and thunderstorms in southern and central California that were setting rainfall records in what is usually a dry month. Forecasters expected scattered rain through Monday as the remnants of a tropical storm off Baja California continued to push north…
One driver had to be rescued from a pickup that crashed in the collapse and was taken to a hospital with moderate injuries…
Hundreds of other cars were stranded immediately after the collapse, but the California Highway Patrol worked to divert them and it wasn’t clear if any remained, Kasinga said…
Saturday’s rainfall broke records in at least 11 locations, including five places that had the most rain ever recorded on any day in July, said National Weather Service meteorologist Joe Sirard.
July is typically the driest month of the year in Southern California. Because of that, Saturday’s 0.36 inch of rain in downtown Los Angeles exceeded the 0.24 inch recorded July 14, 1886, which had been the wettest July day in nearly 130 years.
The storm brought weekend flash floods and power outages and turned Los Angeles County’s typically packed coast into empty stretches of sand when the threat of lightning forced authorities to close 70 miles of beaches.
Rebuilding, repairing infrastructure across the nation was a non-starter when President Obama and his economics advisors suggested the process in his first term. He could have suggested the sun rise in the East and Congressional Republicans would have opposed the concept. The amalgam of racism, contempt for working people, fear of science and real change has kept the Republican Party tightly bunched into a herd of cattle stupidity for several years, now.
Ayup. No problems from climate change either. As long as you have sufficient money to relocate to a McMansion further inland – on a mountain top – with no fire danger.
Worldwide, an estimated 1.9 billion adults are overweight, and of these 600 million are obese. Obesity increases the risk of diseases like type 2 diabetes; in the US alone, obesity-related healthcare costs around $200 billion a year. Due to their high sugar content and low nutritional value, there is growing concern that sugary drinks are a significant contributor to obesity. Consumption has increased drastically in recent decades, leading policy makers to look for ways of reducing the amount of sugary drinks in our diets.
In January 2014 Mexico became the first country to do a nationwide sugar-sweetened drink tax when it introduced a tax of one peso…per liter — around 10% of the price. The tax includes all drinks that have been sweetened using sugar, not just carbonated drinks. Mexico consumes more sugar-sweetened drinks than any other country: looking at Coca-Cola products alone, Mexico consumes 745 servings per person per year, compared to the worldwide average of 94.
Early results indicate that the tax is having an impact and reducing consumption of sugary drinks. However, the new study suggests that basing the tax on the dose of calories or sugar in a product, rather than applying a flat tax across the board, could make it even more effective…
In his new study, Dr. Evan Blecher at the American Cancer Society drew comparisons between taxing tobacco, alcohol and sugary drinks, using South Africa as a case study. While a flat tax is a good approach to tobacco, it may not be the best way to encourage different habits when it comes to the consumption of alcohol and sugary drinks..
So far, the results of tobacco tax suggest that taxing by the number of cigarettes is the best approach. Translated to alcohol and sugary drinks, this would mean taxing by volume. However, taxing the dose of a particular ingredient — the alcohol in alcoholic beverages or the sugar or calories in sugar-sweetened drinks — could be a more effective way to reduce consumption. This may also incentivize drinks companies to offer healthier alternatives.
This dose approach to taxation has been effective at reducing the consumption of alcohol in South Africa, reducing the amount of alcohol consumed in beer by 12% since 1998. As well as being a possible approach for sugar-sweetened drinks, it could also be effective at controlling unhealthy food consumption, and even fuel consumption.
Not a bad idea. I’d be willing to support almost anything that works for reducing smoking and alcohol consumption. If the same approach works on sugar consumption – uniformly understood as contributing nothing but illness to modern society – it would be another positive for public health.
The New Development Bank being launched by the BRICS group of emerging economies plans to raise money both on local markets and internationally…
The bank, with an initial capital of $50 billion, is being introduced at an organisational summit of the BRICS countries – Brazil, Russia, India, China and South Africa – in the Russian city of Ufa…
Kundapur Vaman Kamath, 67, a former executive with India’s largest private bank, ICICI Bank, was appointed president of NDB in May this year. The bank is headquartered in Shanghai, China.
The bank, which the BRICS countries see as an alternative to the World Bank, will have its capital expanded to $100 billion within the next couple of years. It plans to issue its first loans, yet to be agreed, in April – a plan K.V. Kamath said was on track…
He added that the NDB will seek international and local agencies ratings – a necessary step for issuing debt…
K.V. Kamath added that there were no specific deals yet in the pipeline and no limit had been set on the size of loans.
The size of the loan “will depend on what is the structure of the loan, what is a need of a borrowing country and then we will look at it,” he said.
One positive side of global growth is the new capability of banking based in developing nations – for developing nations. Not the least of which is the absence of colonial-era strictures required by present and former imperial governments.
Coal is having a hard time lately. U.S. power plants are switching to natural gas, environmental restrictions are kicking in, and the industry is being derided as the world’s No. 1 climate criminal. Prices have crashed, sure, but for a real sense of coal’s diminishing prospects, check out what’s happening in the bond market.
Bonds are where coal companies turn to raise money for such things as new mines and environmental cleanups. But investors are increasingly reluctant to lend to them. Coal bond prices tumbled 17 percent in the second quarter, according to an analysis by Bloomberg Intelligence. It’s the fourth consecutive quarter of price declines and the worst performance of any industry group by a long shot.
Bonds fluctuate less than stocks, because the payoff is fixed and pretty much guaranteed as long as the borrower remains solvent. A 17 percent decline is huge, and it happened at a time when other energy bonds—oil and gas—were rising. Three of America’s biggest coal producers had the worst-performing bonds for the quarter:
Alpha Natural Resources: -70 percent
Peabody: -40 percent
Arch: -30 percent
The map shows coal plants in 2010 that may be headed for retirement. Blue circles represent plants that will be shuttered by 2020, while yellow will convert to gas, and red have undetermined futures.
About 17 percent of U.S. coal-fired power generation will disappear over the next few years, according to an analysis by Bloomberg New Energy Finance (BNEF). Obstacles include age, the abundance of cheap natural gas, and new EPA rules to cut pollution…
Even China, the world’s biggest consumer of coal, wants to be rid of it…While China’s electricity demand will soar in the coming decades, its coal use will remain relatively flat, peaking by 2030 and then declining, according to BNEF. The pollution is too thick and the alternatives too cheap for coal to flourish…
But even setting aside the environmental and health issues, renewables are on a trajectory to outcompete fossil fuels, starting with coal. Between now and 2040, two-thirds of the money spent on adding new electricity capacity worldwide will be spent on renewables, according to BNEF…
Pigs like the Koch Bros and their bed-buddies ExxonMobil et al are putting their last hopes into the Republican Party. Unlike their peers in archaic monarchies like Saudi Arabia, they have to confront minimal papier mache democracies like the United States. Conservatives like Republicans or Blue Dog Democrats needn’t involve themselves with science to decide policy. Their only decision is whether they require a new wheelbarrow to carry away the dollar$ on offer from the barons of fossil fuel – or the old one is adequate.
It only remains for the crowd in charge of the Democrat Party to decide if they will listen to reason, evidence-based science and concern for future generations of our species. For some that’s still a difficult questions.
Women are saving a lot of money as a result of a health law requirement that insurance cover most forms of prescription contraceptives with no additional out-of-pocket costs, according to a new study. But the amount of those savings and the speed with which those savings occurred surprised researchers.
The study…found that the average birth control pill user saved $255 in the year after the requirement took effect. The average user of an intrauterine device (IUD) saved $248. Those savings represented a significant percentage of average out-of-pocket costs.
“These are healthy women and this on average is their No. 1 need from the healthcare system,” said Nora Becker, an MD-PhD candidate at the University of Pennsylvania and lead author of the study. “On average, these women were spending about 30% to 44% of their total out of pocket health spending just on birth control.”…
Becker said that while making birth control substantially cheaper may not increase the number of women who use it, the new requirements could well shift the type of birth control they use to longer-acting, more effective methods like the IUD. “If prior to the ACA a woman was facing $10 to $30 a month for the pill but hundreds of dollars upfront for an IUD and now both are free, we might see a different choice,” she said.
Of course, the Republican Party thinks all these women are sluts.
The Senate introduced a bipartisan bill on Thursday that would prevent criminal prosecution as well as liability and asset forfeiture for banks that do business with a state-sanctioned marijuana business.
Sen. Michael Bennet, a Democrat, and Sen. Cory Gardner, a Republican, both of Colorado, announced the bill in a joint statement.
Joint statement. Har.
Last year, the Treasury Department said banks could serve the marijuana industry under certain conditions. Many banks call the guidelines too onerous, resulting in a marijuana industry that still relies heavily on cash. That reliance on cash rather than traditional banking methods has made marijuana dispensary operators robbery targets.
Marijuana advocacy groups lauded the new bill, citing safety issues involved with cash-rich businesses…
Gov. John Hickenlooper of Colorado, a state that legalized marijuana in 2012, praised the Senate bill, saying the federal government has a duty to ensure the safety of people as the marijuana legalization experiment expands in states across the country.
At the community level, banks considered the Treasury statement last year to be nothing more than window dressing. Unless laws and regulations are officially changed no bank executive is going to consider arrest or closure of their bank at the whim of some pissed-off bureaucrat. Laws to protect folks who aren’t breaking reasonable laws should be easy as pie.
The problem, as usual, is Congress. Federal laws passed from sheer stupidity, obstinate sophistry, decades ago.