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Oliver Hartwich on Greek WW2 reparation demands, house & house nots, blogging Ben Bernanke, the great stagnation, is one woman enough? Dilbert & more

Oliver Hartwich on Greek WW2 reparation demands, house & house nots, blogging Ben Bernanke, the great stagnation, is one woman enough? Dilbert & more

 

Today's Top 10 is a guest post from Oliver Hartwich, the executive director of the New Zealand Initiative.

As always, we welcome your additions in the comment stream below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1. Germany owes Greece 279 billion? Yeah, right
You might think that the Greek government was busy enough sorting out its economic issues and preventing bankruptcy. However, they still have time to assess how much money Germany allegedly owes them as reparation for World War II. The two issues obviously have nothing to do with each other, if you believe the Greeks.

The only surprising thing is the fact that the war reparations claim at €279 billion is a little smaller than Greece’s total debt load at €320 billion. Perhaps they should go back to the drawing board and calculate again. Wouldn’t it be nice to have Germany pay all their debt and maybe also leave them with a bit of small change? 

The issue of German war debt towards Greece has been raised many times before -- most recently in 2010 and 2012, when Greece was negotiating the terms of its 240 billion euros ($260 billion) international bailout package.

But this is the first time Athens has put an official number -- roughly $300 billion -- on World War II reparations.

The German government has -- again -- dismissed the claims, saying the matter has long been closed. “They won’t get their debts paid by conjuring up German obligations from World War II,” German finance minister Wolfgang Schaeuble told German media last month.

2. ‘House and house-nots’: The chart that should change how we think about inequality
The Sydney Morning Herald’s Luke Malpass (our former colleague at The New Zealand Initiative) questions whether we should be concerned about income inequality or inequality of another kind: housing inequality. As it turns out, house price inflation has driven a wedge between home-owners and the rest. If you care about inequality, you should therefore ask yourself what could be done to make housing more affordable. 

Inequality is a major concern for policymakers in Australia and across the globe. But new research suggests that it is not so much a case of “haves and have-nots”, but “house and house-nots”.

Traditional arguments have it that inequality is caused by falling wages, or by “the one per cent” getting richer. Or, a neo-liberal lack of government or its opposite: growth in government regulation and taxation.

Yet according to a new Brookings Institution paper by Matthew Rognlie, it’s none of the above. According to Rognlie, the real increase in post-War inequality has been caused by housing.

3. The great stagnation
The International Monetary Fund has sounded the alarm on global growth. Since the Global Financial Crisis of 2008, the world has failed to return to previous growth rates. But we have not only run out of growth but also out of ideas on how to respond to it. The IMF’s own suggestion to increase spending on infrastructure certainly appears to be just another kind of stimulus – which we tried before.

The global economy is caught in a low-growth trap as innovation withers and the population ages across the Northern Hemisphere. It will not regain its lost dynamism in the foreseeable future, the International Monetary Fund has warned.

The IMF said the world as a whole has seen a “persistent reduction” in its growth rate since the Great Recession and shows no sign of returning to normal, marking a fundamental break in historical patterns.

This exposes the global economic system to a host of pathologies that may be hard to combat, and leaves it acutely vulnerable to a fresh recession. It is unclear what the authorities could do next to fight off a slump given that debt ratios are already at record highs and central banks are running out of ammunition.

4. Too small to regulate
There has been much talk in recent years about crypto currencies such as Bitcoin – but at least the issuers of more traditional money are not worried. The Reserve Bank of Australia believes alternative electronic currencies were such a marginal phenomenon that they are not even worth regulating. If only everything that was small and unimportant would never be regulated!

Senior Reserve Bank officials have told a Senate inquiry that the “very limited” use and acceptance of digital currencies in Australia meant these alternative forms of payments did not pose any financial stability risks.

The RBA’s head of payments, Tony Richards, and the senior manager of its payments policy department, David Emery, yesterday attended a hearing of the Senate Economics References Committee, which is inquiring into digital currency.

Richards said the RBA was keeping an eye on the development of digital currencies, which it believes could eventually have broad applications.

5. Monetary policy and financial stability 
The blogosphere welcomes Ben Bernanke. Since late March, the former Federal Reserve chairman has been writing a blog for the Brookings Institution. Whether you agree with him or not, it is great to see Bernanke share his thoughts on this platform. In his latest post, he discussed what role central banks should play in maintaining financial stability.

Let there be no mistake: In light of our recent experience, threats to financial stability must be taken extremely seriously. However, as a means of addressing those threats, monetary policy is far from ideal. First, it is a blunt tool. Because monetary policy has a broad impact on the economy and financial markets, attempts to use it to “pop” an asset price bubble, for example, would likely have many unintended side effects. Second, monetary policy can only do so much. To the extent that it is diverted to the task of reducing risks to financial stability, monetary policy is not available to help the Fed attain its near-term objectives of full employment and price stability.

For these reasons, I have argued that it’s better to rely on targeted measures to promote financial stability, such as financial regulation and supervision, rather than on monetary policy.

6. Is one woman enough?
Most large companies nowadays have formal diversity policies in place. However, it appears hard to recruit women for top jobs – especially if there is already another woman in the senior management team. At least that is the finding of new research reported in The Wall Street Journal.

Having a woman at the top of a company might signal that there is no room for any others.

New research from the University of Maryland’s Robert H. Smith School of Business and Columbia Business School finds that a woman’s chances of landing one of a company’s five highest-paid executive jobs drop 51% if there’s already a woman on the team.

The explanation is not entirely clear, but the authors speculate that unconscious biases are at play.

“It might very well be the case that male top managers just want to check a box – there is no more effort, no more mentoring, to appoint a second woman to the top management team,” said Cristian Dezso, an associate professor at the University of Maryland’s business school and an author of the study. “They are one and done.”

7. Beware the spreadsheet culture
London’s Daily Telegraph warns that the next financial disaster could be caused by “stupid errors in spreadsheets”. Apparently, the complexity of modern spreadsheets combined with the fact the few people understand how to properly use them makes corporations vulnerable. I am not surprised. There are enough people already struggling with Word and I would feel uncomfortable letting them loose on Excel.

Errors in company spreadsheets could be putting billions of pounds at risk, research has found. This is despite high-profile corporate catastrophes, such as the collapse of US energy giant Enron, ringing alarm bells about inaccurate accounts and financial spreadsheets more than a decade ago.

Almost one in five large businesses have suffered financial losses as a result of errors in spreadsheets, according to F1F9, which provides financial modelling and business forecasting to blue chips firms. It warns of looming financial disasters as 71pc of large British business always use spreadsheets for key financial decisions.

The company’s new whitepaper entitled Capitalism’s Dirty Secret showed that the abuse of humble spreadsheet could have far-reaching consequences. Spreadsheets are used in the preparation of British company accounts worth up to £1.9 trillion and the UK manufacturing sector uses spreadsheets to make pricing decisions for up to £170bn worth of business.

8. The Welfare of Nations 
A decade ago, British journalist James Bartholomew published a devastating critique of the welfare state under the title “The Welfare State We’re In”. He is now launching a sequel to this book called “The Welfare of Nations”. City A.M. has a short review:

In the aftermath of the Cold War, we were told that capitalism had won. Communism had been defeated, and we were entering Francis Fukuyama’s “End of History” – with capitalist liberal democracies the highest, and final, form of human government.

But what if “capitalism” versus “communism” was always a false dichotomy? What if the truly victorious system had never had an ideological blueprint, but had been built up in piecemeal fashion through the democratic process itself? In James Bartholomew’s tremendous new book, The Welfare of Nations, he argues persuasively that what advanced countries have really ended up with is a commitment to “Welfare Statism”.

This hasn’t had the obviously catastrophic consequences of communism. But Bartholomew provides ample evidence that welfare states worldwide have produced a range of disastrous consequences, despite the best intentions of their architects.

9. China’s demographic challenge
The Business Spectator’s Peter Cai draws some scary parallels between Singapore’s decline in fertility rates and China’s population ageing problem. The difference between the two is simple: Singapore was always able to fix its population problems through migration. China, on the other hand, is so large that migration is not an option to correct the results of its one child policy.

China has one of worst fertility rates amongst emerging economies. At 1.4 babies per every women of child-bearing age, China will have the world’s largest pensioner population and lesser and lesser productive workers to support them.

Modelling shows that if the current birth trend continues. China’s population could shrink by as much as 29 per cent between 2030 and 2070 and the number of women of child-bearing age could be halved. If this prediction is accurate, China will have a demographic crisis worse than Russia, which is a basket case of declining demographic misfortune.

There is a real possibility that China will become old before it becomes a rich country. And yet, despite the looming demographic crisis, the country’s powerful vested interests are still debating whether it should completely abolish the one child policy. At the moment, adults who were once single children themselves are allowed to have a second child. …

By 2040, the world’s second largest population after India will be 400 million Chinese pensioners. Now that’s a scary thought. Beijing needs to address this problem right here and right now before it goes down the path of Japan. And no immigration program will ever be large enough to solve China’s problem, it has to take this problem on its own.

10. And finally: Time to put some spin on your life
The Wall Street Journal has some practical advice for anyone who has to deal with failures, whether in business or in their personal lives. The more people are able to construct a narrative around events, the better they are able to cope with them. It may be healthy to be your own personal spin “doctor”.

Personal narratives “keep us sane,” says Warren Kennaugh, a leading behavioral strategist based in Sydney, who works with clients on changing their narrative. “While we may not like them at times, they enable us to make sense of others and the roles we play.”

When reframing negative events, acceptance is crucial, says Hal Shorey, a psychologist and assistant professor for the Institute for Graduate Clinical Psychology at Widener University in Chester, Pa., who helps clients with this issue.

“If negative events and their impacts are not first acknowledged, the experience of invalidation can actually lead people to hold on to the negative narrative,” he says. But there eventually comes a point when it’s healthier to just move on, he says.

Dr. Shorey recommends looking at how the situation could have been worse. And be aware that you probably had less control over the situation than you think.

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29 Comments

The Greeks actually have a pretty good case against Germany for War reparations. http://en.wikipedia.org/wiki/German_reparations_for_World_War_II

Given the Treaty of Versailles after WW1 arguably forced unpayable reparations on Germany, those reparations directly leading to WW2, the US led post WW2 arrangements including the Marshall Plan had minimal reparations.

While noone alive in Germany today should feel guilty about WW2 given none of them would remotely have been in any decision making capacity at the time, that arguably does not dismiss the validity of potential claims.
Of course it is not a coincidence either that the claim is being made now, or that the amounts are conveniently close to the Greek debt amount, but in fact paying of them would be a fairly elegant solution.
Related to this it is tempting to note the parallel between unpayable German reparations post WW1, and unpayable Greek debt now. It doesn't matter how self inflicted those debts were in either case- unpayable at a sovereign level is no good for the sovereign or the world.

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However I think this was "sorted" in the 1980s.    Also the claims is against the German tax payer, ie those alive today and not those responsible. 

Your last para is a good one, the damage done to the Greek economy is severe almost on par in some ways with the Treaty effect.  France ? then forced payments and we all know how that worked out, it seems we have not learned.

 

 

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We never do, and we never learn that we never learn.  Read #10 to find out why, unsurprisingly this is claimed to be a sign of a well adjusted socially acceptable person. 

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whats happening reparation wise , of course - is the GReeks are saying to Germany "you owe us this huge old debt from your predecessors"

But if Germany says - hey no way, that's not our debt - none today agreed to that.....

Then GReece is going to turn around and say "Your loans were to our predecessors, not to us.  So by your own rules and logic we don't owe you anything."

Germany is between the rock and hard place.  Best to form a happy compromise but most likely top dog ego won't allow that...

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CB re. #1. The new Greek government has had a team of legal consultants in Wellington for months study the Waitangi Tribunal. 

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And I would say, that Italy owes Germany at least 3000 billion Euros in reparations for the devastation and genocide Roman legions brought on that country. After all, it is only 2000 years ago. Half the world could make claims against Italy. After all - what have the Romans ever done for us? Exactly!

 

I hold in your favour that you have probably never been to Europe let alone Greece. If you had, you would appreciate that no amount of money can heal the Greek diseases of corruption, nepotism and general moral and social rot. Most Greeks (not their full of lies poiliticians) would back that claim. That is why millions of them emigrated, to flee a country rotten to the core. 

 

The best that could happen to Greece would be cessation of all payments as that would probably displace their criminal elites. Giving them money means feeding corruption and organised crime.

 

In any way, as I suggested before, I will find a Greek government SWIFT/BIC for all of you bleeding heart corruption lovers who want to donate to Greece. Who will be the first?

 

 

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Guten Abend Peter, ein paar Bier zu viel gestern, vielleicht?

If you Germans wish to keep your new empire, under the European Deutchsmark, you will have to get used to revolting subjects. And you will sometimes have to accept that at least the taxes you might expect from those subjects won't be paid, or indeed that you might have to pay them to keep the empire afloat. The Romans and the British before you worked that out and gave up on thoughts of empire. The Americans have had it pretty well sorted through the 20th century but may just now be getting empire fatigue.

If the arrangements of empire don't suit, then best let the revolting subjects back to their Drachma, and move on.

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Oh, so people holding other views than you must be imperialistic alcoholics?

 

If you cannot argue your point, at least spare us your nasty little racist comments. interest.co.nz may not be the pinnacle of intellectuality, but it is definitely a lot better than your standards. 

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3. just a case that those who stood on the pulpit and deluded enough slavering fools that they would provide "growth" now have trouble explaining that it was actually not possible, it's like watching Wile Coyote again and again. Population increase and credit availability have almost reached their peak, as they do, "growth" will then stop.

8. If you do not already realise that what we have in the western world is Oligarchy dressed up and sold to the masses as democracy, then you really don't live in this reality. Politicans are not leaders despite the spin, they are the paid brand ambassadors who provide the sideshow to deflect the publics attention while the old guard continue slurping at the trough.

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My thoughts exactly. How many commentaries are we going to get on this topic - essentially that the economic models sold to our Governments by economists and bank are just so much BS designed to make a minority excessively wealth by fleecing the rest; before something is done about it.

Obama decided the banks were too big to fail despite their driving the GFC. Would the Keys', Clarks', Blairs' Abbots' etc of the world do any different?

With huge profits by the banks, who is questioning the ethics of it and having effect? The Australian finding that the charges were not a rort as they were well communicated si specious at best. What choice does the consumer have - move to another bank that charges the same amount?

Society, the majority, should be demanding more from our politicians. The wealthy should be paying all their taxes and not using loop hole to avoid them, multi-national corporations should not be allowed to move money off shore until they have paid all the company taxes due on that income here, rather than using loop hole to avoid it.

And finally perhaps more regulation will help close the weath gap!

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dangerous stuff you talk there. The rort of offshore is simple, buy here and then claim francise payments = the profit your NZ subsidary makes, result NET zero tax to pay while NZ owned and absed companies pay, time to stop that one me thinks.

I am not so sure its economics models sold by genuine/honest economists, eg say Keynes. Personally I think both pollies and the agenda driven "think tanks" convince themselves their determinations (trickle down "theory" etc ) are based on sound economics when actually they are not.  The thing is we as voters allow them to get away with this bunkum.

 

 

 

 

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Curious to see if they'll re-bag the hard core debt and just keep paying the 0.01% for the privilege; and start with an almost fresh slate.  That's what my ex-wife used to do with the credit cards and our mortgage.  Too much? just roll it into the mortgage and start spending again.  She worked for a bank.

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"2015 should prove to be a watershed year for the “de-carbonization” of the US power sector, with record volumes of coal-fired capacity to be shuttered, renewables capacity to be built, and natural gas to be consumed. The result: CO2 emissions from the power sector should drop to their lowest level since 1994."

If only the rest of the world could be more like those evil polluting americans.

http://about.bnef.com/white-papers/us-power-sector-emissions-poised-fal…

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Careful what you wish, Americans produce double the CO2 of Europeans, in fact they are one of the worlds biggest producers of CO2.  So thankfully most countries are not like the polluting Americans.

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That would have something to do with the fact that the US is the worlds largest industrial producer, ag exporter and energy producer -  and the EU is a retirement home.

 

Pollution is way down too. By hey don't let a sterotype get in the way of a few facts.

 

"Between 1990 and 2008, US manufacturing output grew by one-third. Yet air pollution from US factories fell by about two-thirds"

 

http://www.vox.com/2015/2/8/7999417/US-factory-pollution-offshoring

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Well the EU is still the worlds largest exporter, on half the energy budget of the US.  SO yes good move by the US getting their pollution down, but they still have a very long way to go before you could claim that they are in any way leading by example.  Don't mention that in NZ our CO2 emmission grew by 42% since 1990.

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9. The world does not NEED more babies. Falling birthrates/infertility is a good thing, as far as the planet is concerned. I can't see Japan imploding any time soon.

Fully acknowledge that an ageing population has its challenges, but like an ecnomy can't 'grow' forever on a finite planet, neither can a population

Time to start thinking about a solution other than getting women to bear more children.

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Yup.. money (growth) is important...

http://www.nature.com/news/acidic-oceans-linked-to-greatest-extinction-…

Well not so much... as we turn our planet into a wastland.

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Ah can't have a Friday without a bit of doom porn.

"The team saw little change in acid levels during the first phase of the Permian extinction, which lasted about 50,000 years."

"Many questions remain. The team cannot explain definitively what caused the first phase of extinction, which seems to have happened before the volcanoes began to erupt. And the researchers need to confirm whether Permian marine rocks in other parts of the world — not just those in the United Arab Emirates — also show the same sharp ocean acidification during the second extinction pulse."

Even if we see a change of 0.7 over 10,000 years like those UAE rocks the oceans will still be alkaline. I think they need to change their "Acidic" oceans headline.

 

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The point is that our oceasn ARE becoming more acidic and that is thanks to us.

Period...

No to mention the changes in water flow.

It's not rocket science to know we are killing the planet for human habitation.

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Well no as they are not acid to start with and even if we see a repeat of the doomy Siberian volcano like senario you posted it will still be alkaline.  I guess "acid" is just sexier for doom porn compared with boring old less alkaline.

 

The oceans have been less alkaline in the past the planet seemed to survive ok. Also your Nature paper clearly states it wasn't oceans becoming less alkaline that caused the first extinction event. Perhaps there is something else we should be worrying about that Greenpeace can scare up for funds?

 

If we are "killing the planet for human habitation" why are we seeing increases in global biomass and record crop yeilds? Surely if we were killing it we would be seeing decreases in global biomass and crop failure? I guess satellite science beats rocket science. Cheer up.

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Congratulations on finding a new thought stopper!  Global biomass increased, stop thinking.  Chemistry can explain exactly what happens when you mix CO2 with water, it can tell you exactly what happens when something burns.  You need to combine chemistry with thermodynamics to understand how increasing the CO2 content of air can raise its temperature, but thankfully it has been tested many many times and scientist agree that it does indeed happen.

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He also ignores that we are now in the sixth great extinction event at this current time (human led). Hopefully we wipe out those pesky things known as 'ecosystems'.

 

Still, profile probably has tight oil stocks to spruik. It's getting tough out there at the moment, gotta keep the good news rolling or people might catch on that the 'recovery' is a sham.

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#9 We need to undersatnd that oil is gone by 2050 and without oil we cant feed 7billion let alone 9billion.  So by 2050 we need to be around 2billion, seems we are determined to let the 4 horsemen do that for us.

 

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Farming.. the process of turning Oil into Food...

http://www.resilience.org/stories/2005-04-01/why-our-food-so-dependent-…

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What happens between 2040 and 2050?

 

http://www.eia.gov/forecasts/aeo/er/early_production.cfm

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Your point?

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It's strange that Rognelie has been getting so much attention, income inequality has increased dramatically in the last 35 years and it's only getting worse.  Six months ago everyone knew this, today everyone has forgotten that because someone decided to argue a strawman with Picketty.  Can those with higher incomes afford to own more property, or does owning more property give you a bigger income?  It's a positive feedback to a greater extent, but if wages were growing at the same rate across all wage brackets we wouldn't even be having this conversation.

 

I'll explain it a different way; lets say Mum and Dad own a house in Orcs that is now worth 1.5m they brought low and have cleared their mortgage.  Now son wants to buy a house, yes he can tap ino mum and dads equity as a guarantee but if he wants to buy an 800k home he is still going to have to come up with over 60k pa to meet the mortgage rates and insurance, before he even thinks about buying a bag of rice to eat.  So while the capital gains give an illusion of wealth they can't do bugger all in terms of aquiring more property unless you have a very high income.

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Here's something for all you bed wetters to wring your hands over. Taupo gets a mention too.

 

"That said, there is no reason to limit concern to Tambora-sized eruptions. There are much larger ones on offer. Some 26,500 years ago the Taupo volcano in New Zealand erupted with well over ten times the power it mustered 1,800 years ago. The odds of a really big eruption in any given year are tiny. Over a century, though, they mount up to maybe a few percent. So, though few of those alive today would perish in a rerun of Tambora, the chances of something much worse over their lifetimes cannot be ruled out. And though forewarning would help, there is no way of forestalling. Humans have huge powers over the planet. But they cannot stop a volcano whose time has come."

 

http://www.economist.com/news/briefing/21647958-two-hundred-years-ago-m…

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