Alan Greenspan – born 1926. Was inspired by J.P.Morgan, the stabilizing force before the Fed was formed. Studied at School of Commerce, Accounts & Finance at NYU – education factory. Economics was hot topic after WWII. 1944 Bretton Woods to set up IMF and World Bank. John Maynard Keynes. In 1948 opted to work at Conference Board with big offices at Park Avenue near Grand Central Station. The library was the big event with wealth of data on how industries operated- from mining, retail, steel, advertising to foreign trade. Started publishing articles in Business Record. take data and tell a story.
Excess government spending causes inflation – Arthur Burns.
1952 was immersed in economics PhD earning more than $ 6,000 a year more than all his friends.
1953 started Townsend-Greenspan at Broadway, a little south of NYSE after a steady stream of freelance research projects. Was careful not to expand too fast and maintain 40% profit margins.
Aluminium replaced steel as raw material for cans. Study of inventories in Steel in 1957 showed inventories were building rapidly and production was thus above the demand levels. Then came 1958 steel recession. Predicting the steel downturn was first big forecast.
Kennedy announced 1963 $10b tax cut, after CEA told it would stimulate growth. It worked. Townsend-Greenspan did not undertake macro forecasting as it was more an art than science. Vietnam war intrigued Greenspan who had already studied/ worked on Korean war economics. Turned 40 in 1966. Worked on Nixxon’s campaign in 1967. He could listen to a subject for 5 minutes and sound as knowledgable as a professor.
1970 slid into recession. Keynisian economics failed to account for a possibility of stagflation- where unemployment and inflation both rise in tandem. Nixxon resorted to wage and price controls. Market will always undermine any attempts at control. The farmer lobby ensured that raw cotton did not have price ceiling so textile industry was squeezed.
1973 Arab oil imbargo led to 1974 double digit inflation and unemployment was 6%. Watergate. Greenspan was asked to become Chairman of Council of Economic Advisors (CEA) the 3rd most important position in Washington apart from Treasury Sec and Fed chairman. Nixxon resigned. Ford.
In business, inflation creates risk & uncertainty which makes planning more difficult and there is no new hiring bo building of new factories no investing and this growth comes to a standstill.
Recessions are like hurricanes. They range from mild to catastrophic.the worst is where consumers stop spending and businesses stop investing.
To review a policy, always ask : what are the costs to the economy if things go wrong? If the cost is potentially very large, then avoid the policy.
1975 Milton Friedman in Chicago built theory that markets and not central planners are the best allocators of capital & resources.
Greenspan joined boards of companies to learn the economic workings the best being JP Morgan where he learnt the inner workings of international finance. A Saudi billionaire on the board who started his career driving trucks was an even more sponge for information.
Jimmy Carter carried on the deregulation that Ford had started. Deregulation had a lasting impact not just on the economy but also on the Democratic party.
1979 Islamic fundamentalists overthrew the Shah of Iran and began the oil crisis. Brazil had 5000% inflation. The interest rates on 10yr T-notes, best indicators of long term inflation expectations, climbed. Investors started dumping long term bonds and interest rates rose to 11% on 10yr treasury bonds. Paul Volcker decided to focus not on interest rates but money supply. In 1980 interest rates climbed to 20% and unemployment was at 10%. The ecomic misery cost Jimmy Carter the 1980 election.
Recession is when your neighbor loses his job. Depression is when you lose your job. And recovery is when XYZ loses his job!
Ronald Reaganhe Fed consists of 12 banks strategically located around the country, it serves as the window to the American economy as officers are constantly in touch with the bankers and businessmen in their district.
Claims for unemployment benefits are an early indicator that all is not well.
Developing countries typically have a much higher savings rate becoz of lack of social security. The shift in developing markets share in world GDP has created excess capital hence low interest rates.
Inflation in a fiat economy is difficult to suppress. When market value of assets grows faster than nominal GDP growth, there is excess liquidity.
Economists cannot avoid being students of human nature – panic and exuberence
Excess government spending causes inflation – Arthur Burns.
1952 was immersed in economics PhD earning more than $ 6,000 a year more than all his friends.
1953 started Townsend-Greenspan at Broadway, a little south of NYSE after a steady stream of freelance research projects. Was careful not to expand too fast and maintain 40% profit margins.
Aluminium replaced steel as raw material for cans. Study of inventories in Steel in 1957 showed inventories were building rapidly and production was thus above the demand levels. Then came 1958 steel recession. Predicting the steel downturn was first big forecast.
Kennedy announced 1963 $10b tax cut, after CEA told it would stimulate growth. It worked. Townsend-Greenspan did not undertake macro forecasting as it was more an art than science. Vietnam war intrigued Greenspan who had already studied/ worked on Korean war economics. Turned 40 in 1966. Worked on Nixxon’s campaign in 1967. He could listen to a subject for 5 minutes and sound as knowledgable as a professor.
1970 slid into recession. Keynisian economics failed to account for a possibility of stagflation- where unemployment and inflation both rise in tandem. Nixxon resorted to wage and price controls. Market will always undermine any attempts at control. The farmer lobby ensured that raw cotton did not have price ceiling so textile industry was squeezed.
1973 Arab oil imbargo led to 1974 double digit inflation and unemployment was 6%. Watergate. Greenspan was asked to become Chairman of Council of Economic Advisors (CEA) the 3rd most important position in Washington apart from Treasury Sec and Fed chairman. Nixxon resigned. Ford.
In business, inflation creates risk & uncertainty which makes planning more difficult and there is no new hiring bo building of new factories no investing and this growth comes to a standstill.
Recessions are like hurricanes. They range from mild to catastrophic.the worst is where consumers stop spending and businesses stop investing.
To review a policy, always ask : what are the costs to the economy if things go wrong? If the cost is potentially very large, then avoid the policy.
1975 Milton Friedman in Chicago built theory that markets and not central planners are the best allocators of capital & resources.
Greenspan joined boards of companies to learn the economic workings the best being JP Morgan where he learnt the inner workings of international finance. A Saudi billionaire on the board who started his career driving trucks was an even more sponge for information.
Jimmy Carter carried on the deregulation that Ford had started. Deregulation had a lasting impact not just on the economy but also on the Democratic party.
1979 Islamic fundamentalists overthrew the Shah of Iran and began the oil crisis. Brazil had 5000% inflation. The interest rates on 10yr T-notes, best indicators of long term inflation expectations, climbed. Investors started dumping long term bonds and interest rates rose to 11% on 10yr treasury bonds. Paul Volcker decided to focus not on interest rates but money supply. In 1980 interest rates climbed to 20% and unemployment was at 10%. The ecomic misery cost Jimmy Carter the 1980 election.
Recession is when your neighbor loses his job. Depression is when you lose your job. And recovery is when XYZ loses his job!
Ronald Reaganhe Fed consists of 12 banks strategically located around the country, it serves as the window to the American economy as officers are constantly in touch with the bankers and businessmen in their district.
Claims for unemployment benefits are an early indicator that all is not well.
Developing countries typically have a much higher savings rate becoz of lack of social security. The shift in developing markets share in world GDP has created excess capital hence low interest rates.
Inflation in a fiat economy is difficult to suppress. When market value of assets grows faster than nominal GDP growth, there is excess liquidity.
Economists cannot avoid being students of human nature – panic and exuberence
---------------------------------------------------------------------------------------------
The book essentially touches upon all the significant events economic & political & cultural, during the second half of the 20th century.
It beautifully describes the Asian renaissance and the 'March to Modernity'.
Impact of TV, consumer goods and most importantly mobile revolution – farmers & plumbers and vegetable vendors can communicate. Connnectivity is Productivity
Chinese who lived in endless poverty for generations now witness free markets. Chinese are among the most industrious people. Their profound hunger for education to uplift standards of living. Potential change in human life with universal primary education.
Example of Shenzen, a sleepy village in China that became SEZ. GDP grew 126 times @ 30% CAGR for 25 yrs! As compared to Singapore 30 yrs 10% CAGR. China’s GDP grew from $150 billion in 1980 to $2 trillion in 2005 (and that too inspite of a depressed yuan, so it’s infact much higher in PPP terms).
Beyond these numbers, is the Transformation of human spirit. Nike factories have changed the way locals live, from rural toil to financial liberation.
In 2025 China will have 360 million well to do middle-class, equal to entire population of USA. 90% PhD holders will be Asian. Even today, most PhD holders from US universities are from China, India, S.Korea, Japan, Taiwan. Children of peasants are now Wall Street managers. Power of meritocracy as compared to dynastic rules.
A nice example is Ramanujan school of Maths in Bihar which successfully sends poorest kids to IITs.
The advantages of paying civil servants at par with MNCs is seen in Singapore
Very importantly, is the observation that a powerful middle-class will avoid violence because they have comforts & lifestyle. As against Pakistan where the madrassas find it easy to recruit extremists who anyway live a horrible life and have nothing to lose.
However, the book tends to get a wee bit into America bashing mode at times with pages & pages of anti-USA material and references. USA’s monopolist dominance in UN Security Council and IMF. US Dollar hegemony. Petro-dollar scam. Funding of the Marshall plan and inflation ripple effects. How the Soviet Union was out-spent rather than outfought. CIA interference to remove democratically elected leaders and install their puppets etc.
But on the whole, it’s an amazing book, must read!
The madness to watch 2008 NBA Finals to see the LA Lakers battle the Boston Celtics in a Father's Day blowout had tickets quoted at Cost: $112,000 for couple- or $56,000 each!!!; (and you must buy two).
As many as 20 fans a day are plunking down up to $18,000 for a premier seat season package for the right to see the Lakers with three times more premier seats sold than last year. Not even Super Bowl tickets, which can sell for $10,000, can compare.
Brokers attributed the popularity of this year's championship bout to a storied Boston- L.A. rivalry of 11 NBA Finals contests since 1959 - of which the Celtics have won eight. This time they met 21 years after their last NBA Finals meeting in 1987 .
The two seats next to the Lakers bench that listed for $56,000 each - minimum two - were posted on Ticketturbo.com, with other sites selling them for slightly less.
"It's the Lakers-Celtics, the classic of all classics."
But courtside seats now listing from $30,000 to $56,000 have astonished even veterans of the ticket business.
A skybox with 44 seats sells for $50,000.
By comparison, floor seats in Boston cost between $8,000 and $9,000, brokers reported, but without the Hollywood stars.
"I've never seen them this expensive, and I've been in this business for 29 years," said Don Vaccaro, CEO of Ticketnetwork.com, whose inventory includes $1billion in tickets for 71,000 events worldwide. "This is definitely a marquee matchup.
Before the first game in Boston, Harry Rosner, founder of VIP Tickets in Encino in 1981, had already sold two $25,000 courtside tickets.
"There might be somebody who says money is no object, who wants to be seen next to celebrities."
No comments:
Post a Comment