Category Archives: Economics in Brief

THE GREEK ECONOMY AND THE GREEK UNIVERSITIES

Without effective higher education that includes significant R&D, it is very difficult for Greece to achieve economic development and social progress at rates that will accelerate her convergence with the other European Union partners.

The picture at Greek universities is very disappointing. Universities in Greece do not have the necessary autonomy. They hardly conduct any R%D. They have no continuous “dialogue” between universities and society. The universities produce graduates without the education / training required to work for the country’s progress. Graduates are not absorbed by the labor market while the country is losing ground in both educational level and competitiveness, holding down its growth rates and undermining convergence with the other EU countries. The universities should continuously search for the trends and requirements in society and economic life with a view to their graduates’ integration.

Progress and development should not only be measured by whether Greece has, for instance, more roads or cars than in the 1970’s, but also by its present situation in relation to other countries. Greece’s position on this comparison is not at all flattering, but what is worse is the inability of the system to adapt and keep abreast with present requirements.

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The U.S. Budget Problem

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.

The current U.S. Budget deficit and the projected growth rate of the deficit, if it remains at the same level, is clearly not sustainable.  According to the Congressional Budget Office, the U.S. is currently spending about $3.7 trillion while taking in about $2.2 trillion a year a difference of $1.5 trillion or almost 50% of spending.  The four big budget items are healthcare ($820 billion); social security ($720 billion); defense and wars ($700 billion) and income security, interest, and federal pensions (totaling $840 billion).  The sum of these four items already equals about $3.1 trillion – representing 141% of revenues.  Simply speaking everything else adds up to about $600 billion meaning that even if we were to literally cut these “miscellaneous” expenditures to zero, we only get a 16% reduction in spending and the U.S. will still face huge and unsustainable budget deficits of $900 billion a year or about 6.5% of GDP.

At current projections, budget deficit in 2015 is estimated to be about $2.3 trillion (or 13.5% of the estimated $17 trillion GDP in 2015), while the U.S. debt is on track to reach $23 trillion.  We currently are pointing a finger at Greece and accusing them of irresponsible fiscal policy, yet this deficit level would surpass that of Greece, and is therefore not sensible.  The debt level in 2015 would equal 135% of the GDP.  Any loss of confidence and associated increase in U.S. interest rates on $23 trillion of debt would truly present a serious risk to the U.S. Budget and the economy.

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Debt-Ceiling: Is It Armageddon, Really?

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.

 

The budget and debt-ceiling negotiations between the White House and Democrat and Republican leaders of the Congress have not been especially fruitful so far.  Based on Treasury estimates, the United States Government will run out of money sometime around August 2 unless the $14.29 trillion debt ceiling is raised.  According to many financial market commentators, the consequences of a United States default are nothing less than catastrophic. If a default occurs, U.S. will not be able to pay principal plus interest on some maturing debt.  In addition, it will not be able to fully meet its payroll obligations.  Yet, in spite of all the potential doomsday scenarios, we are within three-weeks of August 2, and the 10-Year benchmark Treasury Note has barely budged.  It is actually yielding slightly less today (at about 2.91%) than a month ago (2.95%).  Even the 30-year Treasury bonds have hardly moved.  The yield on the 30-year Treasuries has only increased from 4.20% to 4.30% over the past month.  What explains this curious phenomenon?

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