| |
| |
|
Politics Information |
|
|
|
Liquidity or Liquidation
Large parts of the world today suffer from a severe liquidity crisis. The famed globalization of the capital markets seems to confine itself, ever more, to the richer parts, the more liquid exchanges, the more affluent geopolitical neighbourhoods. The fad of "emerging economies" has all but died out. Try telling the Macedonians about global capital markets: last year, the whole world invested 8 million USD in their poor country. Breadwinners earn 300 DM a month on average. Officially, in excess of one third of the workforce is unemployed. Small wonder that people do not pay their bills, employers do not pay salaries, the banking system has a marked tendency to crash every now and then and the average real default rate is 50%. Illiquidity erodes the trust between the economic players. Such trust is a precondition to the existence of a thriving, modern economy. We all postpone the gratification of our desires: we save now and consume later, for instance or we sell goods or services and get paid a month later. Such postponement of gratification is at the heart of the economic machine of the new age. It cannot be achieved, however, if the players do not trust each other to fulfil their promises (to pay, for example). Alternatively, the state can instate an efficient court system, aided by active law enforcement agencies. Keeping promises can be imposed to counter the natural tendency to ignore them. The countries in transition lack both: liquidity necessary to keep one's monetary word and the legal system to force him to do so if he reneges. Small wonder that solutions are actively being sought by all involved: the business community, the state, the courts and even by consumers. In this article, we will describe a few of the global trends. The trends are global, the reaction is world-wide because the problem is global. Bouncing checks have become a household reality in places as rich as Israel, for instance. The mounting crisis in Southeast Asia foreshadows bankruptcies and delinquencies on a chilling scale. The simplest method is to revert to a cash economy. Payments are accepted only in cash. This, naturally, slows the velocity of money-like products and diminishes their preponderance, obstructing the expansion of economic activity. An even more malignant variant is the barter economy. Goods and services are swapped on a no-cash basis. It is money that generates new value added (by facilitating the introduction of new technology, to mention but one function). In the absence of money, the economy stagnates, degenerates and, finally, collapses because of massive mismatches of supply and demand aggregates and of the types of goods and services on offer and demanded. Still, this system has the advantages of keeping the economic patient alive even following a massive liquidity haemorrhage. In the absence of barter economy, the economy might have ground to a complete halt and deteriorated to subsistence agriculture. But barter is like chemotherapy: it is good for a limited period of time and the side effects are, at times, worse than the disease. In many countries (Georgia, to mention one) defaults are prevented by demanding prepayment for projected consumption. Let us take the consumption of electricity as an example: many heavy users and numerous households do not pay their bills at all. To disconnect the electricity is an effective punitive measure but it costs the electricity company a lot of money. The solution? Programmable Electronic Meters. The consumers buys a smart card (very similar to phone-cards). The card allows the buyer to use a certain amount of prepaid electricity and is rechargeable. The consumer pays in advance, electricity is not wasted, the electricity company is happy, the tariffs go down for all the users. Prepayment does have a contracting effect on the demand and usage of electricity - but this is welcome. It just means that people use electricity more efficiently. A totally different tack is the verification approach. The person making the payment carries with him a card which confirms that he is creditworthy and will honour his obligations. Otherwise, the card also serves as an insurance policy: an entity, not connected to the transaction, guarantees the payment for a fee. This entity is financially viable and strong enough to be fully trusted by the recipient of the payment. This market in credit guarantees is more developed in the USA (where credit cards have overtaken cash and personal checks as a mode of payment) than in Western Europe. But even in Europe there are credit card equivalents which are very widespread: the Eurocheck card, for instance, is really a credit card, though it usually comes with physical checks and guarantees only a limited amount. One must differentiate the functions of a debit card (with direct and immediate billing of a bank account following a transaction) from those of a credit card. The latter allows for the billing of the account to take place in a given day during the month following the month in which the transaction was effected or converts the payment into a series of instalments (within the credit limits of the cardholder as approved by his bank). But in both cases, the guarantee is there and is the most predominant feature of the system. Such cards seem like a perfect solution but they are not: the commissions charged by the card issuers are outrageous. Between 2 and 10 percent of the payment made go to the pockets of the card issuers. Cards get stolen, forged, lost, abused by their owners, expire. But with the advent of new technologies all these problems should be solved. Electronic POS (point of sale) cash registers, connected through networks of communication, check the card and verify its data: is it valid, is it presented by the lawful owner, was it stolen or lost, is the purchase within the limits of the approved credit and so on. Then, the billing proceeds automatically. Such devices will virtually eliminate fraud. The credit card companies will guarantee the payments which will be subject to residual crime. Another fast developing solution is the smart card. These are cards similar to phone cards and they can be charged with money in the bank or through automatic teller machines. These cards (in wide use in Belgium, Austria, Germany and many other countries) contain an amount of money which is deducted from the cardholders account. The account is billed for every recharge. The card is the electronic (and smart) equivalent of cash and it can be read (=debited) by special teller machines in numerous businesses. When payment is made, the money stored in the card is reduced and the recipient of the payment stores the payment on magnetic media for later delivery to his bank (and crediting of his account). A more primitive version exists in many countries in Eastern Europe: depositors receive checks exactly corresponding to the amount of money deposited in their account. These checks are as safe as the banks that issued them because they are fully convertible to cash. They are, really, paper "smart cards". Credit cards and (more cheaply) smart cards are a way to restore confidence to a shattered, illiquid economy. Macedonia should consider them both seriously and encourage them through the appropriate legislation and assistance of the state. For Macedonia, the choice is to be liquid or, God forbid, to economically self-liquidate. About The Author Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia. His web site: http://samvak.tripod.com
MORE RESOURCES:
Politics - Google News |
|
|
|
RELATED ARTICLES
From Democracy to Omniocracy Clint Eastwood recently plunged into the murky political pond with his statement, "Extremism is so easy. You've got your position, and that's it. Politicians Are Like Car Sales People Well, another election has come and gone in the US and no matter which way you voted there are some important marketing lessons to learn.First, you need to put aside the campaign rhetoric and focus on the strategy and tactics and there are a number of clear winners for both sides. A Few Quick Thoughts on Freedom and Technology We have known of the innate characteristic need of members of our species to control individual other members. We also know of our desire to control other species. Delta As you know Delta Airlines is close to bankruptcy. Their income is less than their outgo. Farming Human Clones If someone wanted to farm future clones they would need many things. They would need to also consider the time commitment for the future and weigh the costs for those 16-years of conditioning. Are We Serious About Fuel Alternatives? As you can see from some of our previous articles, government agencies predict about 40 years of petroleum still remains. As usage climbs, the amount of time remaining may shrink even more. How Dogpoo is Changing The World Perhaps a silent revolution is taking place, this time more than ever literally on your doorstep. Irritatingly literally even. UAV Decoy Stategies, Theories and The Modern Art of War Well having studying the need for decreasing America's dependence on Foreign Oil and the advances of the automotive industry such as Fed Ex and UPS along with Eaton and GM. Also studying the efforts of Sunlite Bus in Palm Desert and the recent information on ceramic coatings and problems in Urban Heat, Ozone Levels, Global Warming Issues from NASA and GeoSat efforts and various weather updates and information gathering data efforts to predict thunder storms, Hurricanes, Fires and Tornados we have learned quite a bit. Liquidity or Liquidation Large parts of the world today suffer from a severe liquidity crisis. The famed globalization of the capital markets seems to confine itself, ever more, to the richer parts, the more liquid exchanges, the more affluent geopolitical neighbourhoods. The Rosicrucian Council of Three THE ROSICRUCIAN COUNCIL OF THREE:A Thelema/OTO leader who became a Mason in 2003 told me that I am silly to talk about the Rosicrucian Council of Three because it is no longer in existence. Yes Clymer, Paine and Franklin are all dead physically despite the machinations and rituals to prolong life that these people often do use. The Protocols of Sion # 2 -The Protocol plan 'will remain invisible until the moment when it has gained such strength that no cunning can any longer undermine it.' (Protocol 1) {Gardner's 1999 book and those of Barrett and the Blandford Publishers would seem to make it no longer "invisible"!}-'Wars, so far as possible, should not result in territorial gains. The European Bank for the Retardation of Development In typical bureaucratese, the pensive EBRD analyst ventures with the appearance of compunction: "A number of projects have fallen short of acceptable standards (notice the passive, exculpating voice - SV) and have put the reputation of the bank at risk". If so, very little was risked. Oil Pipelines and Rates of Flow How much oil can travel through a pipeline? It depends on the upon the pounds per square inch, dimensions of the pipeline, gravity, and dynamic pressure of the fluid behind the fluid you are measuring. In the Netherlands, they are using water pipelines to move data to a central point in then onto the Internet. Liberal Agenda and Communism; Lance Rants If we go hog wild towards the liberal agenda where everything is equal and everything is fair and it does not matter if you produce or not or have any productivity all you're still entitled the same amount of potatoes, then you will find every American in line for said potatoes. Think of this unemployment lines of 2000 as our inability to live within reality as we listen to podium pushers promise us the world of unattainable dreams, of an unreachable utopia for the impossible price of FREE? Oh really since when? Quite frankly it cannot exist without the commitment, integrity and teamwork that built this country in the first place. The Options For Regime Change In Iran If recent speeches by US officials on Iran's plans to become a nuclear power can be seen as part of a build-up to a possible US-evoked regime change in Iran, the intelligence behind it is at once scant and abundant. Whatever the real official US policy toward Iran is aiming for exactly is hard to get clear, but it is noteworthy that off late, US officials have stepped up their campaign of Iran criticism. Colts' Stadium Short on Horse Sense The predominant discussion in the Indianapolis media over the proposed $500 million Colts stadium is how to fund it, not over the wisdom and propriety of taxpayers going into debt to build it.Apparently the leaders of both major political parties in Indiana have signed off on the concept, including a poor building design, and are content to confine their discussion to who's picking up the tab. Social Security Rant As the Baby Boomer Generation continue to get older, one of the hot topics will continue to be Social Security. Critics claim that Social Security is going bankrupt, and that it needs to be privatized as soon as possible, or people will lose their benefits. Free Markets, Wal-Mart, Over Regulation; What an interesting concept? Unions are angry at the high salary of the executives which have gotten a little out of line especially as the companies are laying off workers and the company is not making a profit. However, a man should put in an honest day for that which he was hired and that does not mean just showing up and punching the clock but actually providing some real work and productivity. Intellectual Property: The ECJ Extends the Use of Trade Marks to Goods and Services The European Court of Justice ("ECJ") ruled in Praktiker Bau- und Heimwerkermärkte (C 418/02) that a trade mark that is now in use by a company on its goods can be extended to cover the services provided by this company.A DIY retailer Praktiker Märkte, filed for registration with the Deutsches Patent und Markenamt (the German Patent and Trade Mark Office) of the mark PRAKTIKER in respect of the slogan 'retail trade in building, home improvement and gardening goods for the do-it-yourself sector. Bio Attack Nation Unready We are told by out leadership that we risk loss of American life from a Bio-Attack. This is quite a scary notion.
|
| home | site map |
| © 2006 |
