Category Archives: Economics in Brief

Revolutionary Change and the Greek Financial Crisis: Lessons from the Venture Capital World

Dr. Tamir Agmon is the  Associate Dean for Research and Development at the School of Management and Economics, Academic College Tel Aviv Yaffo in Israel. He is also  a Professor of Financial Economics at the School of Business, Economics  and Law at Gothenburg University in Sweden.

Dr. John Psarouthakis is a Distinguished Visiting Fellow-Professor, Institute of Advanced Studies in the Humanities, University of Edinburgh, Scotland. Founder and former CEO, JPIndusries,Inc., a Fortune 500 industrial corporation. .He is the Publisher of www.BusinessThinker.com

1.      Introduction  

Greece is in great need for a peaceful revolutionary change in her political and socio-economic structure and culture. All the current programs for austerity and such like are based on the existing system. They are necessary, but not sufficient. We know from our research of the market for ideas that incumbent system cannot initiate or even supports revolutionary change. What is needed are new ideas and independent way of funding the ideas in their development stage. A good example is the case of supporting revolutionary change in technology by venture capital funds

The current financial crisis in Greece is a test case for the ability of the Greek government, the European Union, and the global financial system to deal with the need for revolutionary change. The current crisis in Greece is an outcome and a reflection of deep seated political, social and economic factors in Greece. The fact that Greece is a member of the European Union makes what could be a Greek problem a European and hence to a global problem. In a recent article in the New York Times Professor Aristides Hatzis from Athens University relates the problems today to the, justified, imitative of the senior Karamanlis to join Greece to the European Union. He succinctly summarizes the deep rooted nature of the crisis as follows:

“The Greek New Deal (joining the European Union) was not based on the redistribution of wealth created by the market since the market in Greece is highly regulated: it is a paradise for oligopolies, close shops and pressure groups where tax evasion is socially accepted and politically excused. Greece aggressive pressure groups, (unions, government agencies, cartels, close profession, etc.) seized big chunks of the E.E.C. transfers and government borrowing”. (NYT, June 14, 2011).

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AN AMERICAN SYNERGISTIC TRILOGY: The Space Program, The Free-Market Economy And Philanthropy

Dr. V.E.”Bill” Haloulakos is an AIAA National Distinguished Lecturer and a contibutor to The Business Thinker

The Space Program, The Free-Market Economy and Philanthropy, form the earth-shaking and world-shaping triumvirate of American Exceptionalism. The most important part of this “trinity” is The FreMarket Economy, for it is the beating heart that feeds everything else. Because of the aspects and practices of the free-market economy the space program was such a spectacular success and along with the numerous other attributes of the American System, to be enumerated later, vast wealth and prosperity were created that allowed an expandedphilanthropic activities, although they of themselves are the core of the greatest philanthropy known to man which is “Modern-Day Responsible Capitalism”.

A WORD ON SYNERGY 

Synergy is a mathematical concept, which specifies that one plus one is not always equal to two. Sometimes it is more in which case we say, “The total is greater than the sum of its parts”. This is known as positive synergism and there’s also negative synergism when the “total is less than the sum of its parts”.  The mathematical concept of one plus one is always equal to two is called “the principle of superposition”, i.e. putting one thing on the top of the other, so they just “pile up”. According to the principle of synergism, what the sum of one plus one is equal to depends on the particulars of the case, e.g. when one buys auto insurance as a bundle for two or more cars he saves money as compared to buying them separately. So, one can say that one plus one, synergistically, are less than two because of the lower cost or that it is more than two, because for a given amount of money one effectively buys more insurance. We have and we shall enumerate a multiplicity of items and activities within the American Exceptional System where positive synergism is at work and “like an invisible hand”, to quote Adam Smith, creates a multiplication factor that improves things and situations far and beyond any “normal” (whatever normal is) expectations.

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Are Treasuries Overpriced?

Dr. H. Nejat Seyhun, contributing writer to The BusinessThinker magazine, is the Jerome B. & Eilene M. York Professor of Business Administration and professor of finance, Ross School of Business, University of Michigan. He is an internationally recognized authority on financial issues and Derivatives.

All I read these days is how much Treasuries are overpriced.  At the beginning of 2011, Bill Gross, the famous bond fund manager at Pimco, predicted serious losses for Treasury investors and he publicly announced that Pimco had sold its massive Treasury positions.  In addition to fund managers and newspaper columnists, recently some well-known economists have also joined this chorus.  Their argument is simple and appealing:  At an annual yield of 1.9%, with actual inflation running over 2%, these experts are telling everyone that expected real Treasury returns are negative and that anyone who buys Treasuries is likely to be disappointed over the next ten years or longer.

Inflation worries are certainly real.  Some suggest and worry that faced with a massive and ever-increasing debt, the U.S. Government is likely to inflate even further in the future to reduce the real debt burden similarly to what it did in the 1950s by pegging the interest rates below the inflation rate.  In fact, Charlie Plosser, president of the Philadelphia Fed, has also publicly expressed his inflation worry. If the Fed were to carry out such monetary policy, this would further erode the real returns to long-dated Treasuries.

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