Category: English

Annual reviews and other Soviet business practices

As the end of 2016 is quickly approaching, it is time to reflect on the past year. For people working in large bureaucratic organizations like banks and government, this means filling out performance evaluations. Organizations collect these records of their employees’ professional histories. Managers can use old reviews to motivate (non) promotions of their subordinates.

One intriguing aspect is the fact that employees are expected to write negative things about themselves. In management speak this is called “opportunities for growth” or some other bullshit term. But basically the writers have to incriminate themselves. The self-evaluation provides the proverbial rope for somebody to hang them with.

This reminded me about something I read in a book1 by historian Orlando Figes on the Soviet Union. Members of the Communist Party had to write an autobiography which was regularly updated. The higher-ups in the hierarchy could use these documents to control their underlings and their rivals.

The more you think about it, the more parallels there are between modern business life and Soviet society.

It is well known that corporations are not democracies nor markets. But this post focusses on the cultural similarities that caught my attention. Continue reading “Annual reviews and other Soviet business practices”

Social media warriors for Trump

WARNING: This post is NOT SUITABLE FOR WORK!

Decades from now, historians will be discussing how the political outsider Donald J. Trump could win the American presidency from a career politician like Hillary Clinton.

While the memory is still fresh, I – as a foreign observer – want to highlight a part of the presidential race that has not been covered well by the press. Especially as censorship is rapidly destroying evidence of what has really happened.

This article documents an aspect of the online battle for the hearts and minds of the public that was not organized by the official Trump campaing team.

This is my report on the Meme War of 2015-2016. Continue reading “Social media warriors for Trump”

Trump predictions. Let me get some popcorn.

There is a Dutch proverb that says “een ezel stoot zich geen twee keer aan dezelfde steen”. Its literal translation is “a donkey doesn’t bump against the same stone twice”, but is usually translated as “once bitten, twice shy” or “a fox is not caught twice in the same snare”.

The proverb means that people don’t (or shouldn’t) make the same mistake twice. Even a dumb animal like the donkey is smarter than that.

Apparently, the political pundits are dumber than donkeys when it comes to Trump. For over a year, they have underestimated his chances. Here is a list of Trump predictions, in which the ‘You are now here’ marker has continuously moved down:

greentexttrumppredictions

Not having learned from their embarrassing experience, the pundits cannot help but continue their failed predictions. Continue reading “Trump predictions. Let me get some popcorn.”

Don’t be an idiot like Paul Krugman

The electoral victory of Donald Trump has dumbfounded the pundits. Nobel Prize winner and political commentator Paul Krugman was very confident prior to the election that Hillary Clinton would win.

When the election results came in, he was shocked. Krugman admitted that he didn’t know the United States as well as he thought he did.

This was not surprising. Krugman is the prototype of a sheltered elite living in a bubble. How many Trump voters do you think he personally knows? Probably none. Rather, he inhabits an echo chamber full of likeminded people. Just to give some examples, I’m talking about people like Noah Smith, Brad DeLong, Paul De Grauwe and Simon Wren-Lewis.

All have academic backgrounds, cushy jobs, and liberal technocratic preferences. They all read papers like the New York Times. They all are given a forum in the quality press. The all “know” Trump is an incompetent idiot. They all “know” that “facts have a well-known liberal bias”.

In spite of their titles and influence, they were dead wrong about Trump. Continue reading “Don’t be an idiot like Paul Krugman”

From Moses to Trump: elites against the establishment

Elites cannot act against their own interests, right?

Donald Trump has been running a populist campaign against the establishment. To many of his critics, this is absurd.

Why should a billionaire care for the working class? How can a man whose shirts and ties are made in China be against trade deals? Is Trump credible when he calls for a wall at the US-Mexican border, knowing he hired Mexican workers himself?

Trump is so much part of the elite that his Democratic rival Hillary Clinton even attended his wedding to Melania.

It appears that Trump belongs to the establishment which benefits from the status quo. Why would anybody who is a ‘winner’ in the system want to change it?

These critics, however, miss two important points.

First of all, the critics assume that members of the elite are only motivated by their personal financial interests. This, however, denies human nature. People have strong feelings on what is just and right. Elites have the means to become champions for others they sympathize with. Continue reading “From Moses to Trump: elites against the establishment”

Robot shark lifeguard

One of my business ideas has recently been implemented. My former colleagues at KBC launched a platform where small business owners can find entrepreneurs who want to take over an existing company.

I had this idea when a well-run shop for fishing gear and pet products in my hometown closed down. The owners retired and none of their children was interested in continuing their work.

This was a shame, because a lot of know-how and service to customers was lost. The owners missed out on the sale of a profitable business. A sale of the going concern could have yielded much more than selling separate assets. For the bank, a sale would have brought the opportunity to manage extra retirement funds. In addition, it could offer a loan to the new owner, sell insurance2, payment solutions etc.

As I regularly have ideas for startups or other business opportunities that I cannot pursue myself, let me share an idea that I had today. Feel free to implement it! You can thank me later when you’re a millionaire.

Engineers at the US Navy are developing a robot shark. They intend to use this robot to patrol around ships and in harbors. It is normal that the Navy explores military applications first.

A clever startup could market such robots as lifeguards.

But such devices could find widespread civilian use. A clever startup could market such robots as lifeguards. Imagine a robotic lifeguard loaded with sensors that can detect when a swimmer is in trouble. And that can grab them and bring them to the surface or to shore. This would give extra support to human lifeguards. And because it is seaborne already, a robot shark would cut down valuable intervention time.

The market for such a device would be huge. Think of all the swimming pools and beaches that would want to improve the safety of their bathers. Or robot sharks could assist in saving drowning migrants in the Mediterranean.

Central bank liabilities and profits

Central banks (CentBs) have drastically expanded their balance sheets in the wake of the global financial crisis. The Federal Reserve (Fed) and the European Central Bank (ECB) followed the example of the Bank of Japan (BOJ) by buying trillions of dollars and euros worth of long-term bonds, a policy known as quantitative easing (QE).

The CentBs make these purchases by “base money”, i.e. cash and reserves3. Neglecting legal restrictions, CentBs can create base money at will.

There is a lot of controversy among economists about QE and its consequences for the balance sheets of central banks.

This post discusses the question of whether or not base money should be considered a liability of the central bank. After that issue is understood, we can clarify when the CentB can book a profit and how this affects government finances.

One of the stated goals of QE is to raise inflation. Some worry that once this happens, rising interest rates will cause massive losses to the central bank, resulting in unspecified “bad things”. I argue that these fears are unjustified. Continue reading “Central bank liabilities and profits”

The sultan, the czar and the refugees

A conflict with Turkey and Russia on opposing sides. The violence causes a stream of refugees towards Europe. Are we talking about Syria in 2016?

Although history never repeats exactly, there are a remarkable number of similarities between events of today and what happened in 1864. Over 150 years ago, there also was a caliphate and terror motivated by religion.

The Ottoman Empire has fought a series of wars against czarist Russia. These great powers had conflicting interests in the territories bordering the Black Sea.

When Russia conquered the Caucasus in 1864, it ethnically cleansed the indigenous peoples. Hundreds of thousands of Islamic Circassians fled to the Ottoman Empire. Many of them went to the Ottoman provinces in the southern Balkans, what is now Romania and Bulgaria. Continue reading “The sultan, the czar and the refugees”

Helicopter money part III: economic stimulus

What is helicopter money (HM)4 supposed to accomplish? Advocates of HM believe that HM acts as a stimulus which increases the level of economic activity. In this post, I construct a simple model and show in detail how it works. The steady state economy – an economy with a constant aggregate nominal income and expenditure per time – is described first. Next, the effect of reduced spending and income of the agents is illustrated. And then it is discussed how the economy can be returned to its previous steady state of spending.

What are the assumptions behind the model? And what is the scope of this post?

  • The economy is closed, there are no inflows from or outflows to the “rest of the world”
  • There is one single currency
  • Only nominal amounts and flows of money are considered in this post.

The effects of stimulus on prices and exchange rates will be discussed in later posts.

Easy numerical examples are used throughout this blog post. As I wrote before, this avoids the hidden inconsistencies that many words-only economic commentaries suffer from. The reader can check the logic of the model and expand it further for his own use. This should make it a powerful analytic tool for economists. I am planning to frequently use this model for further research, to answer questions regarding balance of payments and transfers between economic classes5.

Continue reading “Helicopter money part III: economic stimulus”

How to win votes

The rise of Donald Trump and the Brexit referendum have led to a lot of commentary on democracy itself. Understandably these comments usually come from people who dislike the outcome. But that does not mean they do not have a point.

This article looks at the democratic process up to the casting of the ballot. How the votes are counted, what is done with the result, how votes are translated into representatives and policy, the influence of non-elected lobbyists on legislation… is outside the scope of this post.

If this post comes across as cynical, it’s probably because it describes reality.

 

The fantasy

A lot of pundits have a cartoonish view of democracy, which can be summarized as follows:

  1. People get informed on issues, programs and candidates
  2. Voters weigh the arguments
  3. A rational evaluation leads to a decision in the form of a vote

Even if commentators do not actually believe this is how it works, their opinions betray that they think it is how democracy should be in the best of worlds.

Let us now scrutinize how elections work in reality. As always on this website, we take a step by step approach to make all assumptions explicit. As a thought experiment6, a number of possible changes to the existing election process are suggested. I pose some fundamental questions that should be answered by those who are not satisfied with the status quo.

Continue reading “How to win votes”