Friday, June 22, 2012

Rio +20 Summit: the expected outcome

Brazil is a nice place to visit, Brazilians are nice people to meet. Rio de Janeiro has nice beaches and touristic attractions. It is all add up to the expected outcome of the Conference on sustainable development , held this week in Rio: No real progress to deal with the implications for global warming, of economic growth without environment restrictions. Because of their upbeat mood ,Brazilians are the only ones capable of getting involved in events like this one, with no expectations of meaningful outcome .It was the same in 1992 (just coincidence?), when the world was anxious about the new expectations arising from the new scenario ,after the collapse of east Europe regimes. Twenty years later Dioxide of carbon emissions have gone up by 40%, and there still no deep rooted consciousness about the risk of doing nothing about climate change. However, each event means a step forward, although the issue of climate change, will not be strongly addressed ,because there is no incentive to be the first, whether the next one do not care about it .Global climate is a global public good , which like many public good in economics end up in market failure. It means its overexploitation and destruction. The only way this failure might be fixed, is with a global institutional framework with the proper tools to deal with the implications of breaking the universal environment laws. The ones which says, that as the inputs apply over a fixed resource, the outcome will diminish. It follow that there is also a technological variable to take into account to deal with the problem. Faster Technological progress, matter. It will allow not only cleaner production process, but also to capture dioxide emissions. Thus, the problem of global warming have more chance of decisive action, when it come to individual action dealing the application of the new technologies, mainly those ones environment friendly. It also helps to get further progress, to have new international laws for market exchange mechanism of green bonds, or to consider environment protection into the productive process . All of these is hard to get by, with massive deployment of opinion. It might work better based on case by case approach.-

Friday, June 08, 2012

The euro perspectives: A Matter of cost

The alternatives for the Euro zone debt countries, has been progressively narrowing to the evaluation of two cost: a.- The cost of keeping the membership in the Euro club (I) b.- The cost of walking away from the Euro Club (II) The lower any of these costs ,decide whether it is better to stay in or to stay out. So far, it seems obvious that the second kind of cost, has been higher than the first one. Thus, there has not been a clear and explicit intention of leaving the euro zone .This the case of the smaller countries, which do not have the capabilities to deal on its own with the consequences of breaking apart from a framework which even with its weakness has been useful to improve the chance of collapsing and panic.- But what about those countries which do have the capabilities to deal on its own, with the consequences of leaving the Euro. Besides , these countries might have the resources to master the immediate effect on the financial sector and expectation, of a decision of such magnitude. With no clear policies to maintain the membership ,other than to adhere to strict rules few countries can afford, the euro at this point is no longer what it was expected to mean: A mean to get together the diversity. Instead it has become a burden for the recovery following the impact of the financial crisis of 2008, specially in the case of smaller countries of the euro zone. What comes next?: a.- It is unfeasibly the massive implementation of the Eurobonds. At most it might follow a selective approach. b.- Those bigger size countries of the Euro zone, still in trouble because of the heavy adjustment under way to keep the membership ,might decide to leave the Euro as soon as the cost (I) is higher than cost (II).- c.- Given the current probably scenario of breaking the euro apart, it is more feasible the implementation of the two speed euro zone. Thus , even within the euro framework and its rules, there would be the chance to allow those countries capable ot moving at a lower speeed, to works in some areas (specially the trade sector one) , with its own currency at an euro exchange rate , given by the European Central Bank.- d.- The austerity approach , is not longer a substitute for growth. The German engine running, is a guarantee to go further beyond austerity.-