Sovereign Debt: A Modern Greek Tragedy

by Fernando M. Martin and Christopher J. Waller
in Federal Reserve Bank of St. Louis Review, September/October 2012 Vol. 94, No. 5, pp. 321-340

The authors of this article provide a general introduction to the concept of sovereign debt—including the seductive nature of borrowing and the strategies associated with default—before analyzing the current debt crises in Europe. They focus on Greece’s current woes but also discuss Portugal, Ireland, Italy, and Spain. The authors also discuss the environment in the United States, which has a high debt burden of its own, and present fiscal choices for policymakers and taxpayers.

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Now you know why liberals hate Charter Schools. They are effective, and they break the suction between the unions and the taxpayer teat.

Leslie Daniels enrolled her son in a Chicago charter school three years ago because she didn’t like the education he was getting in his local neighborhood school.

In the back of her mind, she also knew the school was less likely to be affected by labor problems because its teachers are not members of the Chicago Teachers Union. That’s an added benefit now that the union has called for its first walkout in 25 years. All of the city’s charter schools will remain open Monday.

“I’m glad I made the switch,” said Daniels, 55. “I feel for the other parents because a lot of them are working. What are their children going to be doing?”

Charter schools, which are independently run but largely rely on public funding, have been growing steadily in Chicago over the last decade. Former Mayor Richard M. Daley pushed a major expansion of charter schools in the mid-2000s, promoting them as options for parents frustrated by low-performing public schools in their neighborhood.

As a result, the city’s charter enrollment has nearly doubled in the last five years, reaching about 52,000 students this fall, according to Chicago Public Schools figures. Mayor Rahm Emanuel, like his predecessor, wants to see charter options expand even further, and there are plans for 60 more charter schools in Chicago over the next five years.

Read the rest here.

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Sweden’s success is not a result of its extensive welfare state, as many argue, but of its positive cultural norms and its recent free market reforms.

A new report, The surprising ingredients of Swedish success – free markets and social cohesion, shows that an over-bearing welfare state, along with high taxes, damaged the economy in Sweden as well as undermining its social capital.

It suggests that it is only through focusing on increasing economic freedom and introducing more choice in public services that it has rebuilt its economy. Specifically, by reducing taxes and benefits it has increased work incentives and by introducing more choice, for example through voucher schemes, they increased productivity in areas like education, pensions, healthcare and elderly care.

• As late as 1950, Swedish tax revenues were still only around 21 per cent of GDP. The policy shift towards a big state and higher taxes occurred mainly during the next thirty years, as taxes increased by almost one per cent of GDP annually.
• The rapid growth of the state in the late 1960s and 1970s led to a large decline in Sweden’s relative economic performance. In 1975, Sweden was the 4th richest industrialised country in terms of GDP per head. By 1993, it had fallen to 14th.
• Big government had a devastating impact on entrepreneurship. After 1970, the establishment of new firms dropped significantly. Among the 100 firms with the highest revenues in Sweden in 2004, only two were entrepreneurial Swedish firms founded after 1970, compared with 21 founded before 1913.
• As Swedes became accustomed to a system of high taxes and generous government benefits, their positive social norms gradually declined. In the World Value Survey of 1981-84, almost 82 per cent of Swedes agreed with the statement ‘claiming government benefits to which you are not entitled is never justifiable.’ At that time, Sweden was still a nation with very strong morals related to public benefits but as the population adjusted its norms to the higher tax and welfare regime, the number who held this view dropped steadily in further surveys. In the survey of 1999-2004, only 55 per cent of Swedish respondents believed that it was never right to claim benefits to which they were not entitled (Heinemann, 2007).
• The favourable social outcomes in Swedish society were evident before the creation of an extensive welfare state. The expansion of welfare benefits, however, created huge social problems. Generous benefits, in conjunction with high taxes and a rigid labour market led to high levels of dependency amongst large segments of the population and have limited the ability of Swedish society to integrate migrants into the labour market.

Notes to editors

To arrange an interview about the publication please contact Ruth Porter, Communications Director, [email protected] or 077 5171 7781.

The full report, The surprising ingredients of Swedish success – free markets and social cohesion, by Nima Sanandaji, can be downloaded from www.iea.org.uk.

Nima Sanandaji is a Swedish author with a Kurdish Iranian background. He has a Master’s Degree from the Chalmers University of Technology in Gothenburg, an Advanced Master’s Degree from The Royal Institute of Technology in Stockholm, and has previously conducted research studies at both Chalmers and the University of Cambridge.

Nima has previously published seven books, covering subjects such as entrepreneurship, tax policy, women’s career opportunities, integration and innovation within the IT sector. He is also the author of several reports, dealing with various public policy subjects in Sweden, as well as articles in international publications such as The Wall Street Journal, Human Events and The Guardian.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

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This should make any tax payer sick. Keep in mind that over 80% of Chicago 8th Graders do not pass the state reading examinations…

Source

September 9, 2012

The Chicago Board of Education is Offering the Chicago Teachers Union a Fair and Reasonable Proposal to Set the Stage for a Deal and Avoid a Strike:   Increases in Pay: 16 percent average salary increase equaling $320 million over the next four years, including COLA (3% year 1; 2% years 2,3,4) lanes and modified step increases that both reward experience and provides better incentives for mid-career teachers to help keep them serving in the Chicago Public School system.   New Opportunities and Security for Laid Off Teachers: Teachers displaced due to school closings: will receive a job at a school receiving their students if there is a vacancy; placed in a reassigned teacher pool for five months or may elect to receive a three-month lump sum severance; or placed in a Quality Teacher Force Pool in which teachers who apply for positions shall be entitled to an interview and explanation if not hired. Teachers displaced due to turnarounds or phase outs: placed in a reassigned teacher pool for five months or may elect three-month lump sum severance. Teachers displaced for other reasons: shall have recall rights for one year for the same unit and position and will be offered interim assignment in substitute teacher pool. Joint Implementation of Teacher Evaluations with Flexibility When Needed: The Board has proposed to work jointly with CTU to fully implement REACH Students and maintain performance standards and student growth requirements. This proposal will also allow CPS and CTU to study REACH’s implementation jointly and make adjustments as needed.   New Short-Term Disability Policy, Including First-Ever Paid Maternity Leave: While the banking of sick days will end, the Board will offer short-term disability to all CTU members, including paid-maternity leave. Employees will no longer need to use sick days to take time off needed for the birth of a child – nor will they need to bank the number of sick days needed before starting their family planning. Employees who have a short-term illness will not have to use sick days in order to take time needed to get well; short-term disability coverage will cover their needs and provide pay while recovering. The proposal will protect accrued sick-day accumulation for teachers with over 15 years of service in the form of pension service credits.   CPS to Cover Part of Employee Pension Contribution: The Board has also offered to continue picking up 7% each employee’s 9% pension contribution.   Freeze on Health Care Contributions for Most Plans:  The Board is calling for a modification to the health care plan funding that will freeze all employee health care contributions for single and couple plans with a small increase in family contributions of no more than $20 a pay period in addition to a small increase in emergency room co-pays.  67 percent of all CTU members will not see a change to their healthcare.   Increased Opportunity for Promotion: The Board proposes that CPS and CTU collaborate and work together to increase promotion opportunities and identify differentiated compensation models that have worked in other places.   Improved Health and Living: Like the nearly 40,000 City employees who have already signed up for the Wellness program, the Board is asking teachers to join the program at no cost. Teachers can opt-out of Wellness, and pay a small premium differential.   Improved Monitoring of Class Size Issues: The Board remains committed to protecting and maintaining current class sizes, but will establish a panel and joint supervisory committee with the CTU to monitor and address any class size issues that may arise.   Creation of a New CTU/CPS Commission to Find Fair Pension Funding Solution: The Board pledges to partner with the CTU through the formation of a Legislative Commission to find the right solutions for pension reform and draft legislation that ensures equitable pension funding.   A Better, Fuller Calendar: Maintain a calendar with 180 student attendance days, and 190 teacher workdays, including 10 Professional Development days.   A Full School Day: The newly extended Elementary school day will continue to be 7 hours, while high school days will now be 7.25 hours, a decrease from 7.5 hours. In addition, high school teachers will be limited to teaching only five classes.

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After running all the numbers under conditions that were very, very favorable to Mitt Romney’s tax plan, the nonpartisan Tax Policy Center concluded that there was simply no mathematical way for Romney to fulfill all his promises simultaneously.

But more recently, Harvard economist Martin Feldstein has said they’re wrong. Feldstein leans to the right — he chaired President Ronald Reagan’s Council of Economic Advisers — but he’s a very respected, very honest economist. No one should dismiss his work.

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The CNBC host that once said Paul Krugman reminds him of a “unicorn” now has another word to describe the Nobel Prize-winning economist: communist.

Joe Kernen, an anchor for CNBC’s “Squawk Box,” made the statements Monday while defending CNN anchor Erin Burnett against a recent HuffPost article that took issue with Burnett’s claim that food prices and gas prices have spiked because of the Federal Reserve’s quantitative easing programs. Burnett moved to CNN from CNBC last year.

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In a riveting interview on CNBC, legendary investor Jim Rogers warned Americans to prepare for “Financial Armageddon,” saying he fully expects the economy to implode after the U.S. election.

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Hacktivists suck!

Full report

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Lots of folks both here and abroad say liquidity is tight unless you are already privileged with padded bank accounts and assets.

Maybe to stimulate the economy the liquidity in the system should trickle down.

 

Full article

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Could you live without an iDevice ? Perhaps you must have a substitute. Either way usury gets most in the end.

Full article

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Interesting commentary on the ECB and their new bond buying plan.

Hey you never know! Let’s all hope the odds are just like lotto.

Full article

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I have been known to chomp on some charts…..

Full look

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“Chinese oil imports in August plummeted 12.5% from a year ago.  This is according to new preliminary data from the General Administration of Customs reported by Dow Jones.

The 18.4 million metric tons reported is the lowest level since October 2010, DJN said.

This is the result of slowing economic activity.

“Since downstream demand is fairly sluggish, refiners don’t have the incentive to process much,” the wire quotes Zhu Chunkai, an oil analyst at Shandong-based energy consultancy Chem99.”

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From analysts to hedge fund managers we are seeing incredibly strong bullish sentiment across the board according to B.I.

Full article 

[youtube://http://www.youtube.com/watch?v=-58-36lSqG4 450 300]

 

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“New bank regulations and capital requirements are “structural” changes to the industry that are more to blame for declining profits than the U.S. economic slump, Goldman Sachs Group Inc. (GS) analysts said.

“The operating environment is unlikely to change any time soon, and we see shareholders of challenged banks becoming more demanding in asking management teams to lay out a path to unlocking value in the near term,” analysts led by Richard Ramsden in New York wrote in a report published today.”

Full article

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Markets are waiting to see how a German court rules on the ESM bailout funds and for their friend who might be brewing some Clam Cocaine Broth to juice risk on assets.

The markets barely have a pulse trading around the unch line. The NASDAQ leads to the down side along with conglomerates and capital goods.

In a word….digestion.

Market update

3D heat map

[youtube://http://www.youtube.com/watch?v=wMYjTWbU76k 450 300]

 

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[youtube://http://www.youtube.com/watch?v=7G17Qf5nrLw 450 300]

 

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