Recent comments by arnim holzer

• The Global Growth Quest

  Thank you Mohamed. While I agree with the well reasoned analysis, I still wonder how much of the economic malaise in which we find ourselves is due to a temporary lull (Temporary can be longer than we are comfortable with- remember Kondratievs?) in innovation that could ressurge soon and how much is due to a simple denial of demographic realities. In either case, I agree that the global political/ economic process will need to transcend its current limitations or we will struggle with the necessary adjustments. A perfect example of this is the violent devaluation of the Yen. The repercussions of this action by the BOJ opens up a bipolar set of outcomes that could be extremely destabilizing and geopolitically unwise. The solution to this prisonner's dilemma of global economic policy lies somewhere between your pragmatism and David Stockman's radicalism...I hope. It is more than ironic that Margaret Thatcher just passed away.

• To a Third Way Consensus

  Thanks for the note. Agree on many fronts but I am concerned that the timeframes required to execute effective industrial and economic policy often render anachronistic the current political and social structures. In a world where people want internet fast entertainment and decision making on financial matters are we really able to make policy decisions that could take 15 -20 years to execute. Global warming, alternative energy, and income inequality are just a few of the major long term issues that face policymakers. Unfortunately the timeframes are of such duration that crafting an executable solution would render the politicians unelectable. Until we deal with politicians' terms or the structure of democratic governments we will be unlikely to get ideal long term solutions.

• The Long Mystery of Low Interest Rates

  Thanks so much for the note. We have been discussing this issue for so long that I think we have gotten stuck in the ruts of all the prior arguments. I would propose that the combination of poor demographics, protectionist and mercantilist policies can only explain a part of the problem. I think more likely is a temporary (which can be a decade long and in the scheme of history this is short) lull in the recognition of innovation and disruptive productivity improvement. Historically as changes in productivity are recognized, investing and spending is dramatically changed. Employees get more confident and start to spend on better hope and companies start to invest to meet demand. Simple, I know, but the impact of this cycle is what leads to upward pressure on rates. It doesn't matter where the workers are just that they get hope and ability to spend. As the developing markets mature and allow their workers to consume and earn the benefits of their productivity improvement we should see a break to this cycle of low rates. In the developed ageing world productivity improvement will still have impact through better equity returns and disposable income. In the developing world we should see the long awaited consumption movement that will bring higher rates.

• Blaming the Fed

  I appreciate professor Rogoff's analysis and agree that hindsight always adds IQ points and clairvoyance. The most important point, however, is that our system of modified moral hazard created asymmetry in the risk / reward relationship for financial institutions at a size most investors and regulators simply did not understand. While leverage statistics and credit data were available, the degree of fraud and poor control was simply overlooked because the burden of risk was not equitably distributed. This philisophical misallocation of risk that Nassim Taleb discusses in 'Antifragile' is part of the Fed's purview and hopefully will be better understood in the future. Regulation can be dangerous but ultimately the penalty for inequitable risk/ reward is costly bail-outs. The Fed's transcripts are indeed interesting and document a snapshot applicable to a brutal moment in our financial history. I would hope that the next releases also give us insight into the Fed's deeper thought process about risk and reward and the correct balance of free financial markets and societal protection. As always, there has been a political backlash from capital hill to establish extreme measures to avoid the risk of another financial meltdown. What is most needed, however, is not sure to be anachronistic new rules but fundamental principals and thoughts that correctly weigh risks and reward for the benefit of the economy and society.

• A Year on the Brink

  Well put Dr. Stiglitz. The problem for democracies (or republics) with difficult economic choices at points of inflection is that often those that will suffer the consequences do not have a say or vote on the outcome. In contrast to China where command/ control policies are in effect and the population culturally understands authority's mandate, In the west we believe that open dialogue and consensus protect the individual. This faith in the west's political processes will be sorely tested as the class warfare of changing demographics and wealth drive governments to redistribute and delay rather than face reality. China will not be wasting resources on such arguments and has already begun transitioning to moderate consumerism taking into account that its demography will roll over in about 20 years. Concommitant with our freedoms comes the responsibility to protect them for our future generations. If Europe and the US' policymakers don't start acting in concert with the demographic and financial realities through reasonable negotiation, we will lose our economic (and potentially other) freedoms to nations that were willing to do the hard and painful work.