Triggering panic in the EU markets

In 2014 the stock markets slowdown was related to the shadow of Grexit.  And since last Friday, June 25th, Brexit vote and its implications have been threatening global markets.
There is no doubt that the Brexit referendum is a very important protest against the political elite, which is not taking into account the needs of the working class.  Consequently, EU policy makers are  afraid other people, such as Greeks, Spaniards and Italians, may follow the Britons. Politicians clearly foresee a situation in which Brexit  will cause a whole series of referendum through European countries, with the aim to leave the EU. In other words, the EU political elite foresees a domino effect of the Brexit referendum across Europe.
Moreover, Britain has voted to split up with the European Union in the same week Spain holds general election. And it may be interesting to underline that, according to surveys, 72 percent of the Spanish people do not trust the European Union.
In this perspective, there isn't any logical relationship between Brexit vote and market slowdown, considering that the British Stock market didn't fall so sharply, compared with Italian and Greek shares: it  dropped about 3 percent last Friday, although referendum has resulted in financial uncertainty and more than 60 percent of Scotland voters want to remain in the EU. On the contrary, broader European shares dropped by an average of 8.6 percent last Friday.
Is it  a conspiracy? It's to easy to see that a political elite has triggered panic in the stock market. EU policy makers have shown  to the people, who live in the EU countries, how a campaign to leave the EU will affect their savings. There is only a system of rule or government that may give them the right to do that to the European people: it's an authoritarian regime.  

Economic policy doesn't combat inequality anymore

Why policy makers don't understand the importance of an economic policy based on progressive redistribution? Flat taxation can't raise living standards and doesn't help economic growth.

As it is know, since the late 1980s the incomes of the very rich have been boosting. Consequently, the big problem for the bottom 90% of  Western countries workers  has been the rise inequality.

An interesting interview with the economist Joshua Bivens (https://www.washingtonpost.com) shows that fighting inequality may increase the rate of overall growth in the economy. 

Destroying the social state

One of  the most striking problems that social states everywhere must face in the twenty-first century is related to the achievement of social rights, such as education, health and retirement. This challenge may mark an immense step forward in historical terms. And those topics are strictly related to taxation and its choices between progressive, flat and regressive system.

Unfortunately, it's easy to see that economy is still working for billionaires, considering that:

• high managers and billionaires pay lower taxes than nurses or construction workers;
• the biggest banks around the world are bigger now than they were before the 2008 financial crisis;
• the richest 1% has captured 90% of all income growth since the recovery began.  

China's Summer slowdown

With regards to the recent Chinese stock market decline, Federal Reserve policymakers may confirme that conditions for the first rate hike are not yet been met.

 

Although U.S. growth is showing it is in better shape than we thought three months ago, and its unemployment rate fell to 5.1 %, a September rate hike is "less compelling" now.

Unfortunately, with China's devaluation of currency and Shangai Stock Market's slowdown, which we saw in August, the consensus is gradually shifting to December for a rate hike.
It world be the FED's first rate hike in almost a decade and show that the central bank is confident in the health of the first world economy. Global economic slowdown in Summer 2015 and volatility in stock markets seemed to have lowered the chance of a rate hike in September. It is still unclear if it will happen. 

When super-riches grow unchecked

I am so happy to see how the French economist Thomas Piketti began the New Year. After the world's leading expert on income and wealth inequality had criticised Mr. Hollande's policy, on January 1st he refused the award of the Legion d'Honneur. Mr. Piketti, who is the author "The Capital in the twenty-first century", said that "it isn't the government role to decide who is honorable". His main criticism is about the French tax policy: on the one hand, the French Prime Minister promised in 2012 a more progressive tax system. On the other hand, Mr. Hollande recently increased tax on the middle class.

As Mr. Piketti underlined in his bestseller, an apparently small gap between the return on capital and rate of growth can on the long run have powerful and destabilizing effects on the structure and dynamics of social inequality. In this perspective, the French economist wrote that a progressive tax on capital and income would be an "efficient response to the eternal problem of private capital and its return. A progressive levy on individual wealth would reassert control over capitalism in the name of the general interest while relying on the forces of private property and competition".

As mentioned in a brief article recently published by the Harward Business Review, no society should desire a class of super-rich. When super-riches grow unchecked, no one wins, not even the super-rich themselves, in the long run. Everyone possibility is stipled when the invisible line from rich to super-rich is crossed. When societies allow the rich to grow into the super-rich, they are limiting what those societies can achieve. Of course, if someone were to avoid that destructive trend about the future of economic inequality, she/he would not be the world last communist shaking her/his fist ridiculously :) 

Happy New Year.      

P.S.: the picture above shows the Conciergerie, which is a former prison in Paris, located in the west side of the "Ile de la Cité". I took the picture in 2010.

The need for new technologies

By The end of the 1990s, it has been easier to communicate through new technologies than to talk to someone in person. Many people, and young people in particular, do not seem to worry that certain types of contact disappear. They see transactions as just that with little or no need for direct human contact. And people who used to hang out together now "hang out" together online.

Actually, today's technology had cut of ourself from human interaction. One of its paradoxes is that it connects us and isolates us at the same time, and we can somehow feel less satisfied. New technologies revolution is having its effects on all of us.  

Statistics show that most people report a lack of communication and the generation coming online don't know conversation face to face. They are happy to hold conversation and transactions through WhatApp, Snapchat and Twitter. In addition, people sometimes get information through smartphone, Ipad or cellphone that they don'r really need.

As the British columnist Tony Schwartz says, information people ordinarily consume leaves they poorly nourished and still hungry and, consequently, their brains may feel overloaded and need time to clear they out. If we had a crazy busy  month at work, we would need a short vacation. But what we need most of all is a period of total digital disconnection. The greater the performance demand, the greater the need for recovery. And getting away from our job or town wouldn't be enough if we were to remain tethered to our online life. When I am on holiday I always decide not to bring my I pad or my cellphone: I soon realise how satisfying any adventure is when it is not interrupted.
I am always happy to know your point of view about this matter.     

  

2014 elections for the European Parliament

Thanks to the rise of China, India and other developing countries, Europeans feel as if they might be teetering on the edge of a serious crisis in their democracies. Illegal immigration, inequality and unemployment are still rising in the Southern side of the old continent. And while the post-2008 recession increased the ratio between South Europe's public debt and GDP to the same level it had attained in the early 1990s, Moscow prepares a further invasion of the Donestk metropolitan area after its takeover of Crimea, close to the Eastern European Union's border. Just because it isn't happening here doesn't mean it isn't happening!

Although between May 22nd and 25th the citiziens of the EU will vote in elections for the European Parliament, many Italians, Greeks and Spaniards still think that the politicians are all corrupt, nobody care and nothing can be done. That's why some alternative parties, which support an anti-European position, may do well. For instance, Nigel Farage in Britain, Marine Le Pen in France and Beppe Grillo in Italy dislike being in the European Union. They believe that there are too many people from Poland, Romania and Bulgaria in Western Europe, and that more millions will arrive thanks to the EU legal framework. It is known that many countries, such as Australia and Switzerland, have planned to impose quotas on the number of immigrants they will accept from abroad. From a demographic and economic point of view, European policy-makers would have to think about the carrying capacity of EU cities.

I'd like to know your point of view about this situation in Europe which is 

certainly interesting these days.