Politics
Institute of New Economic Thinking has raised substantial future funding
The Berlin conference (April 12-15) by the Institute of New Economic Thinking (INET) entitled “Paradigm Lost: Rethinking Economics and Politics” might not have reached the fundamental impact on economics worldwide, yet. Besides the overwhelming interest and attention of reform orientated economists worldwide and some political interest groups the relatively small scaled coverage by world media and the limited readiness of traditional institutions to adopt the paradigms discussed were obvious.
There was no participation of political key figures, nor any manifesto or plan that evolved from the meeting.
Anyhow, the approach, financed mainly by the Soros Foundation up to now, showed all signs of a growing interest and a much larger potential in the future.
A press release by the Institute stated that INET Governing Board member William Janeway, Senior Advisor at the venture capital firm Warburg Pincus, and his wife, Weslie, have decided to contribute $25 million to INET’s core funding. In turn, INET’s governing board has committed to raise $75 million over the next eight to nine years, giving INET $100 million in total additional funds. Further, INET Co-Founder George Soros has decided to contribute an additional $50 million, bringing the total capital infusion to $150 million, which essentially will double the resources available to the organization over the next decade.
One of the contents during the conference was the subject of inequality and the challenge of employment.
James Heckman, Henry Schultz Distinguished Service Professor of Economics, University of Chicago speaking at the (INET) Paradigm Lost Conference in Berlin. April 14, 2012.
Africa funds with good performance
With a rapidly growing middle class in most African countries the continent and the impact of IT technologies the continent has gained more attention of institutional investors in the last three years. Still described as a ‘frontier market’ and mostly confused by economic observers as a more or less homogeneous entity, the African patterns of modernization still need a much more differentiating analytical view than they have been established since the end of the colonial centuries.
The usual way of including South Africa in the economic development reports, a country that is generating its trade revenues by more than 85% with non-African countries can’t provide a sufficient picture. Impressive improvements of governance for example in Ghana and Botswana with corruption levels lower than in many Eastern European countries, the ongoing oil boom in Angola and visible progress in Ethiopia and Nigeria are still not fully recognized in the portfolios of most institutional investors.
Best performing Africa Fonds
| Name | Valor | Performance 3 years |
| Lyxor Pan Africa A ETF | FR0010636464 | 51,5% |
| Van Eck Africa Index ETF | US57060U7871 | 22,1% |
| JPM Africa Equity B | LU0355585190 | 17,3% |
| DWS Invest Africa FC | LU0329759921 | 15,3% |
Source: Morningstar and etinfo.com
Exports of goods and services Ethiopia
Economic theories differ on impact of political decision making
Christopher Sims, Nobel laureate and Harold B. Helms Professor of Economics and Banking at Princeton University is among the founders of qualitative and quantitative evaluation of economic effects by political decisions. In his scientific work he had described in which way political steering measures frequently create opposite effects to the initial intentions.
In his recent lectures he had extended the basic model he introduced already in the 70’s and 80’s to the effects of the financial markets that have become significantly under mutual influence with policy making.
Volatility Management shows his most recent lecture at the King’s, Institute for New Economic Thinking at April 22nd as an opener to the overall subject of mutual effects between politics and economy that has created a variety of perspectives in the last years especially with the financial crisis as a fundamental shake-up of former certainties.
The European crisis is back along with a weaker world economy
The apparently easing risks of the European debt crisis in the first quarter of the year and the positive figures from Central Europe tend to come to an end with the scond quarter as it was estimated on the volatility management platform in December 2011.
Spanish, Portuguese and Italian bonds are going to rise again and there is not much chance that this will change soon. Industries in these countries are still struggling with lacking competitiveness.
Even if the Italian industry is in a better shape than the one in Spain and Portugal, the challenges stay comparable, the mid term outlook is negative as long as siginificant cost advantages by a weaker currency cannot be realized.
There are signs of a new potential for investors in the European markets despite the bad figures: the cost advantages of Asian products on the world market are getting weaker steadily due to higher wages, inflation and higher energy and transportation costs while production in the Southern parts of the Eurozone are getting gradually cheaper step by step. Outsourced production might come back sooner than expected to Europe, especially to the South.
But the political framework is still not set to encourage and boost these chances. Overall figures do not leave much space for optimists. But investors with long term strategies are already back on the scene in Europe.
American Jobs Act versus European Austerity – a difficult choice?
Signs of a strategic change of French and Dutch politics besides a more easing ECB monetary policy has left behind the German austerity approach. Europe seems to be on the way now to come closer to Obama’s QE and job creation policies. The US JOBS ACT was signed April 5th this year.
Given the highly volatile situation in Spain, the ever harder recession in Greece and the negative signals from Great Britain, it starts to become visible even for hawkish observers that austerity measures have strangulated economies all over Europe. The power to stay this rigid course is about to end. Stimulus might not be back but it might become a necessity if stability and living conditions should not be sacrificed.
A closer look to the ratified American job act shows the differences between the European and the US approach that evolved already years before. It gives an impressive insight regarding priorities and the willingness to act:
The White House provided a fact sheet which summarizes the key provisions of the $447 billion bill. Some of its elements include:
Cutting and suspending $245 billion worth of payroll taxes for qualifying employers and 160 million medium to low income employees.
Spending $62 billion for a Pathways Back to Work Program for expanding opportunities for low-income youth and adults.
$49 billion – Extending unemployment benefits for up to 6 million long-term beneficiaries.
$8 billion – Jobs tax credit for the long term unemployed.
$5 billion – Pathways back to work fund.
Spending $50 billion on both new & pre-existing infrastructure projects.
Spending $35 billion in additional funding to protect the jobs of teachers, police officers, and firefighters
Spending $30 billion to modernize at least 35,000 public schools and community colleges.
Spending $15 billion on a program that would hire construction workers to help rehabilitate and refurbishing hundreds of thousands of foreclosed homes and businesses.
Creating the National Infrastructure Bank (capitalized with $10 billion), originally proposed in 2007, to help fund infrastructure via private and public capital.
Creating a nationwide, interoperable wireless network for public safety, while expanding accessibility to high-speed wireless services.
Creating additional regulations on businesses who discriminate against hiring those who are long-term unemployed.
Loosening regulations on small businesses that wish to raise capital, including through crowdfunding, while retaining investor protections.
In total the legislation includes $253 billion in tax credits (56.6%) and $194 billion in spending and extension of unemployment benefits (43.4%).