This definition has never been logic, but now it is becoming more and defamatory. "Eastern Europe" - Geographical curiosity, which includes the Czech Republic (located in the middle of the continent), but not Greece or Cyprus (which are supposedly located in the "western" Europe, but in fact are in the south-east). This is also little sense from a historical perspective: The region includes countries (eg Ukraine), who for decades belonged to the Soviet bloc, as well as those countries (eg Albania), which were marginally associated with the Union. In some of these countries there were stringent planning of the economy, in other versions were "local communism" (Hungary) or "self-governing socialism" (Yugoslavia). Being unreasonable is already in 1989. this label in general has become meaningless, because after the fall of communism the way these countries differed. Almost 30 mill, which once called communist, now have more differences than similarities. However, the name "Eastern Europe" includes not only a common destiny in a totalitarian regime, but also a lot of problems: severe history of time, ineffective leadership and the economic disaster now. The economic downturn has shown how misleading such an approach. Concerns about the "contamination" of the Latvian banking crisis led to an increase in risk premiums in stable under different circumstances, economies such as Poland and the Czech Republic - is nonsense, based on the perception by outsiders fears other unauthorized persons. In fact, the most severe financial difficulties currently facing Iceland and the largest budget deficits in the European Union is projected in the next year not weaken the ex-communist East, and in Britain and Greece. The new Athenian government is struggling with budget deficits of the size of at least 12.7% of GDP and, possibly, a maximum of 14.5%. This issue was discussed recently in Greece, the members of the European Commission.
None of the ten "Eastern" countries that joined the EU, is not in such a deplorable situation. There is also advanced workers, and conservatives, and quite modern place, and regions, reminiscent of past disturbances. For example, the Czech Republic and Slovenia reached the level of life, recorded in Portugal, the poorest country in the "western" camp. None of them was seriously affected by the economic downturn. Some ex-communist countries have a higher credit rating than the old EU members, and can take more than cheap credit. Slovakia and Slovenia joined the euro area, which is not done in Sweden, Denmark and Britain. Estonia - at least so it seems from outside - one of the least corrupt countries in Europe, which is easily ahead on this indicator founding members of the EU, such as Italy. It is divided into three categories. One of them includes five former autocratic republics of the Soviet Union, located in Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan). They can hardly be attributed to the "Europe", while a tenth of (the size of Britain), Kazakhstan (about 200,000 sq. km.) Situated directly in Europe. Also in Kazakhstan this year chairs the Organization for Security and Cooperation in Europe - a consultative body created after the Cold War (Vienna). However, none of the former Central Asian republics of the Soviet Union did not become a member of the Council of Europe (one more deliberative body and the guardian of human rights, Strasbourg). That's the problem. Definition of "Europe" as unreliable as the word "oriental".
All of these former Soviet republics differ from each other (Tajikistan - poor, a Kazakhstan - enterprising state). However, it is unlikely that even one of them will enter the EU in our era. Hence the second category: the potential members of the Union. This primarily includes unconditional candidates for membership, such as Croatia and other small states of the Western Balkans, for example, Macedonia. This category includes such problematic countries like Turkey and Ukraine, and even - in the long term, 20 years - four other former Soviet republics of Georgia, Moldova, Armenia and Azerbaijan (the latter possibly with the support of Turkey). The third and most difficult category - a group of 10 countries, formed in 2004. major merger, which was expanded in 2007. This group includes the exemplary citizens of the EU - the Estonians (recently hit by the crisis, real estate, but ready to receive this year's resolution to join the euro), Romania and Bulgaria, corruption and organized crime which, respectively, have already become a byword in Brussels . Eight of them (except for Romania and Bulgaria) have joined the Schengen Agreement. Most (except Poland) have agreed on the abolition of visas to America. All (unlike EU members - Austria, Cyprus, Ireland and Malta) are members of NATO.
Some concern still remains: a small country within or adjacent to the EU, and stronger among those who expect the membership or those to whom it does not shine. Missed because of its communist past and the possibility of key positions in international organizations still cause irritation (according to some, another consequence of defamatory label "Eastern Europe"). The negative legacy of the past, such as all-powerful secret agents and secret police files, provide an opportunity for blackmail and causing other damage, especially in countries with weak institutions. The powerful state security service in Lithuania, VSD, located in the center of political scandal, but a wave of concerns about lawlessness and foreign invasion swept from the Baltic to the Black Sea. Four countries - Poland and the Baltic countries - Russia is seriously concerned about revisionism (or revanchism). Hungary, the Czech Republic and Slovakia, too, are concerned, but more energy and economic security than military threat. However, in other countries, for example, in the former Yugoslavia, such fears are simply puzzling and seem to be paranoid.
And new and future members need capital. They all need a lot of foreign money (from the safes of the EU capital markets and through foreign bank loans) to bring the economy in accordance with the standards of the rest of the region. However, the admissibility of the category called "the new member countries, over time, definitely reduced. At Oxford University, there is still a "New College", whose name in 1379g. perfect to highlight it in the existing structure of the university. Now it looks a bit strange. The Poles, Czechs, Estonians and others hope sooner or later get rid of the epithet "new" to them could be judged on their merits, not the past.
Wednesday, January 27, 2010
Tuesday, January 19, 2010
What is taught Japan problem
Twenty years ago no one doubted that Japan - The most successful high-income countries in the world. Only a few could have expected what would happen in the next two decades. Today Japan is experiencing a protracted recession. What went wrong? What do the new government in Japan? What are the lessons to be learned from this? What is happening should be viewed in its proper context. The quality of the railway system and the food is among the guests from the UK feel that they came from a very backward country. If that is so evident decline, the majority of people will be quite happy to him. Nevertheless, the country is really going through a recession. In the past two decades the average annual growth rate was 1.1%. According to Angus Meddisona, a historian in the field of economy, gross domestic product per capita in Japan (at purchasing power parity) in 1950 increased from 20% of the U.S. level to a maximum of 85% in 1991 to 2006, he dropped to 72%. In real terms the size of the index of the Tokyo Stock Exchange Nikkei is a quarter of its value two decades ago. Most frightening is that the net and gross public debt rose from 13% and 68% of GDP in 1991 to a projected 115% and 227% in 2010
What happened? Richard Koo of the Nomura Research points to the "deflation balance accounts. According to Mr. Koo, the economy, which heavily indebted residents persist in trying to repay their debts, has three characteristics: it stops the growth of credit and money supply, and not because banks are reluctant to lend, so that business and households refuse to take them, the traditional monetary policy is largely ineffective, but the desire of the private sector to improve their balance sheets makes the state in the last of the borrowers. As a result, all attempts to normalize the financial and monetary policies are in vain until, until you finish adjusting the balance sheets of the private sector. The balance between savings and investment (income and expenditure) in the Japanese economy shows that it is happening. In 1990, all sectors were close to equilibrium. Then the crisis erupts. In the private sector in Japan for a long time arose excess savings. But since the level of private savings is reduced, the main reason is the persistently high percentage of corporate gross savings to GDP and reducing capital investments. The huge surplus of savings of the private sector was in turn absorbed by the outflow of capital and current account deficit.
Mr. Ku argues that critics of the budget deficit misses the essence. Without the deficit country would be plunged into a depression, instead of a long period of weak demand. Alternatively, one could increase the current-account surplus. But that would require a weaker exchange rate. Japan would have to follow the Chinese exchange rate policy. And it certainly would have caused anger the United States. In spite of the arguments that Mr. Koo had a weak side. They do not explain why such huge surpluses of any debt, or why Japan was so vulnerable to shock the world now, when adjusting the balance sheets of the corporate sector for the most part completed. In my opinion, the underlying structural problem is the excessive corporate savings (retained earnings) and the reduction of investment opportunities. As noted by Andrew Smithers of Smithers & Co in London in 1991, the investments of the private sector to non-residential fixed capital amounted to 20% of GDP, almost twice more than in the United States. But after a modest recovery in 2000-ies. they decreased to 13%. A significant decline occurred in corporate undistributed profits. In the 80's. to address the development of these savings to use monetary policy, which lowered borrowing costs to near zero and increased the number of wasteful investment. In 2000-ies. This problem was solved with the help of a boom of exports and investment, mostly due to trade with China.
Then began the global economic crisis, which adversely affected the exports and investment and slowed economic growth. GDP of 8.6% from its maximum value fell to their lowest point, Japan has suffered more than all the other high-income countries among the Big Seven. According to the Organization for Economic Cooperation and Development, Japan, in 2009 alone reduced net exports led to a reduction of the economy by 1.8%. Now the task of Japan is to achieve growth, stimulated by the inside of the country. The most important requirement - significantly reduce the level of corporate savings. Smithers thinks that this will happen naturally because the savings will be spent as depreciation of fixed capital, which itself is a product of excessive investment. I would like to add that if any need to market economy, which controls the corporation, to collect cash from the hands of a sleepy leadership, it needs to look at Japan. The new government is not beholden to Japanese corporations should adopt policies that are at least change their behavior.
Also, it's time to stop deflation. To do this, the Bank of Japan should cooperate with the government to avoid the excessive strengthening of the exchange rate. The recent rise in the yen would evoke a more aggressive monetary action. Due to the significant inflation in Japan - the absolute minimum of 2% - real interest rates would become negative, so that should the country. Meanwhile, the rest of the world should think about whether they have learned the lessons of economic decline in Japan. Experience has shown that land of the rising sun, even a sustained budget deficit, zero interest rates and quantitative easing does not necessarily lead to inflation in the economy, where the bubble burst, suffering from excess capacity and excess balance sheet accounts, such as the United States. It also shows that the process of getting rid of these surpluses is delayed for a long time. Nevertheless, the history of Japan can serve as a model for the economies of a very different type. She said that if the economy with an extremely high level of corporate savings and the relatively high fixed investment is very rapid growth begins to slow down, demand can spiral out of control. This is especially true when part of a mechanism to stimulate demand is intentionally increased lending and bubbles in asset prices. So, who should be the first to learn this vital lesson? China - That's who.
What happened? Richard Koo of the Nomura Research points to the "deflation balance accounts. According to Mr. Koo, the economy, which heavily indebted residents persist in trying to repay their debts, has three characteristics: it stops the growth of credit and money supply, and not because banks are reluctant to lend, so that business and households refuse to take them, the traditional monetary policy is largely ineffective, but the desire of the private sector to improve their balance sheets makes the state in the last of the borrowers. As a result, all attempts to normalize the financial and monetary policies are in vain until, until you finish adjusting the balance sheets of the private sector. The balance between savings and investment (income and expenditure) in the Japanese economy shows that it is happening. In 1990, all sectors were close to equilibrium. Then the crisis erupts. In the private sector in Japan for a long time arose excess savings. But since the level of private savings is reduced, the main reason is the persistently high percentage of corporate gross savings to GDP and reducing capital investments. The huge surplus of savings of the private sector was in turn absorbed by the outflow of capital and current account deficit.
Mr. Ku argues that critics of the budget deficit misses the essence. Without the deficit country would be plunged into a depression, instead of a long period of weak demand. Alternatively, one could increase the current-account surplus. But that would require a weaker exchange rate. Japan would have to follow the Chinese exchange rate policy. And it certainly would have caused anger the United States. In spite of the arguments that Mr. Koo had a weak side. They do not explain why such huge surpluses of any debt, or why Japan was so vulnerable to shock the world now, when adjusting the balance sheets of the corporate sector for the most part completed. In my opinion, the underlying structural problem is the excessive corporate savings (retained earnings) and the reduction of investment opportunities. As noted by Andrew Smithers of Smithers & Co in London in 1991, the investments of the private sector to non-residential fixed capital amounted to 20% of GDP, almost twice more than in the United States. But after a modest recovery in 2000-ies. they decreased to 13%. A significant decline occurred in corporate undistributed profits. In the 80's. to address the development of these savings to use monetary policy, which lowered borrowing costs to near zero and increased the number of wasteful investment. In 2000-ies. This problem was solved with the help of a boom of exports and investment, mostly due to trade with China.
Then began the global economic crisis, which adversely affected the exports and investment and slowed economic growth. GDP of 8.6% from its maximum value fell to their lowest point, Japan has suffered more than all the other high-income countries among the Big Seven. According to the Organization for Economic Cooperation and Development, Japan, in 2009 alone reduced net exports led to a reduction of the economy by 1.8%. Now the task of Japan is to achieve growth, stimulated by the inside of the country. The most important requirement - significantly reduce the level of corporate savings. Smithers thinks that this will happen naturally because the savings will be spent as depreciation of fixed capital, which itself is a product of excessive investment. I would like to add that if any need to market economy, which controls the corporation, to collect cash from the hands of a sleepy leadership, it needs to look at Japan. The new government is not beholden to Japanese corporations should adopt policies that are at least change their behavior.
Also, it's time to stop deflation. To do this, the Bank of Japan should cooperate with the government to avoid the excessive strengthening of the exchange rate. The recent rise in the yen would evoke a more aggressive monetary action. Due to the significant inflation in Japan - the absolute minimum of 2% - real interest rates would become negative, so that should the country. Meanwhile, the rest of the world should think about whether they have learned the lessons of economic decline in Japan. Experience has shown that land of the rising sun, even a sustained budget deficit, zero interest rates and quantitative easing does not necessarily lead to inflation in the economy, where the bubble burst, suffering from excess capacity and excess balance sheet accounts, such as the United States. It also shows that the process of getting rid of these surpluses is delayed for a long time. Nevertheless, the history of Japan can serve as a model for the economies of a very different type. She said that if the economy with an extremely high level of corporate savings and the relatively high fixed investment is very rapid growth begins to slow down, demand can spiral out of control. This is especially true when part of a mechanism to stimulate demand is intentionally increased lending and bubbles in asset prices. So, who should be the first to learn this vital lesson? China - That's who.
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