Focus on Thailand: Dr. Kriengsak Charoenwongsak 2013

Focus on Thailand

I thoroughly enjoyed reading Dr. Kriengsak’s book “Focus on Thailand” (published April 2013). Dr. Kriengsak is a prolific author, having written over 4,000 newspaper and magazine articles on a wide variety of issues. Many of his articles focus on public policy and development issues. Dr. Kriengsak has also authored over 200 books and has presented more than 500 academic papers at international conferences.

I had the privilege of first meeting Dr. Kriengsak in March 2015 when he was a Facilitator for the Thai Institute of Directors “Director Certification Program”. His course topic was “Board Decision Making.” I was quite impressed with his presentation, so I was very pleased to later have the opportunity to read his book “Focus on Thailand.”

This book is a compilation of twenty newspaper articles which Dr. Kriengsak published during the period 2010 through 2012. I was both surprised and pleased to see that nearly all of these articles, though several years old now, still contain insights and wisdom which are relevant to Thailand today. I would suggest that history is the best judge of opinions and observations, and I find that Dr. Kriengsak’s writings still mostly ring true, despite the very significant economic and political changes which Thailand has witnessed since the publication of his articles and this book.

The twenty articles presented in “Focus on Thailand” cover a broad spectrum of Thailand’s issues and opportunities. Dr. Kriengsak skillfully uses his background as a PhD Economist and his training as a Master of Public Administration, along with his years of experience as a Thai Member of Parliament (MP),  as an advisor to a Thai Prime Minister, and his experiences serving on national and international committees dealing with issues such as Labor, Social Welfare, Human Rights, and Foreign Affairs, to offer well balanced comments and recommendations to address pressing economic, social, and political problems facing Thailand.

Topics addressed by Dr. Kriengsak include populist policies, privatization of state-owned enterprises, corporate income tax reductions, nationwide minimum wage rate policy, welfare systems for the elderly, water management, conflict resolution in Thailand, Thailand competitiveness and readiness to join the AEC, and National Branding.

If you are genuinely interested in the future development of Thailand, and seek a better understanding of the challenges and opportunities facing Thailand, I highly recommend reading Dr. Kriengsak’s book “Focus on Thailand.”

Frank T.

Bretton Woods 1.0: An Essay in Constructive Retrieval: Hockett 2011

Bretton Woods 1.0

This article is actually a follow-up on my review of “The Age of Oversupply” by Daniel Alpert. During Alpert’s review of the Bretton Woods conference and J.M. Keynes’ proposal for an “International Clearing Union”, he referenced a research paper published by Robert Hockett in 2011. Hockett’s paper was titled “Bretton Woods 1.0: An Essay in Constructive Retrieval”, published by the Cornell Law School as part of their Legal Studies Research Paper Series.

I found myself more than casually interested in learning more about Keynes’ International Clearing Union” proposal, so I downloaded Hockett’s paper.

In recent years I have found myself increasingly dissatisfied with Keynesian Economic Theory, as I understood it. It seems clear that monetary stimulus has failed in many cases to restore the economic performance of several economies. Japan is certainly a very noteworthy 20 year example, and both the US and Europe have gone to extremes with monetary stimulus including very historically low interest rates, massive quantitive easing, and various other stimulus initiatives. Fiscal stimulus has likewise produced at best lackluster results. Countries have been accumulating massive debts in pursuit of Keynesian stimulus solutions which were at best ineffective.

Alpert’s book gave me a new perspective on the oversupply of labor, productive capacity, and capital relative to the demand for all three”This condition of oversupply explains why classical Keynesian monetary stimulus is ineffective, and why only massive fiscal stimulus carefully targeted at creating sustainable long lasting productive economic infrastructure can stimulate an economic back to a balanced growth condition.

Hockett’s paper digs much deeper into the historical foundations of Keynesian Economics. I was absolutely fascinated to read Hockett’s description of “bastard Keynesianism” as described by Keynes’ student Joan Robinson. American economists such as Hicks, Hanson, and others at Harvard and M.I.T. effectively simplified and distorted the original theory which Keynes  documented in his “General Theory of Employment, Interest, and Money” (1936).

In many ways, the International Monetary Fund (IMF) is itself a bastardized, severely compromised implementation of the “International Clearing Union” which Keynes had originally proposed at the 1944 Bretton Woods summit.

Hockett does a great job of patiently and thoroughly explaining the core fundamentals of true “Cambridge” Keynesian Economic Theory. He explains how multiple individually rational acts of decentralized economic decision making can aggregate into recursively self-amplifying, collectively self-defeating outcomes. This is the core of the “Boom and Bust” cycle, and explains why a “collective action problem” requires a “collective agent” to act in the name of all interested parties to ensure a stable and sustainable economic outcome.

The International Clearing Union was Keynes’ recommended collective agent. The International Clearing Union would effectively be a “Central Bank for Central Banks” and would act as a countercyclical monetary and financial regulator for the world economy. Most simplistically, the International Clearing Union would regulate exchange rates to prevent individual economies from either hoarding massive Foreign Exchange Reserves, or running massive Current Account Deficits. Exchange rates would not be regulated on a bilateral basis, but rather on a multi-lateral basis, to permit more efficient exploitation of the international division of labor and comparative advantage between economies.

Hockett uses examples of the Tech Stock Bubble, the Real Estate Bubble, and the Global Contagion Bubble as examples of the costs and negative effects of unbalanced, unregulated global trade.

Finally, Hockett proposes using present day global Infrastructure  including the Bank for International Settlements and the International Monetary Fund to implement Keynes’ global monetary regulatory function to restore sustainable balance to the Global Economy.

Hockett packs a lot of valuable historical information, technical explanation and analysis, and practical solutions into his 74 page research paper. His paper is well organized, well written, and very interesting and informative. I enthusiastically recommend this paper for anyone interested in macroeconomics, or just seeking a better understanding of our global economic system.

Frank T.

The Age of Oversupply: Daniel Alpert 2013

Age of Oversupply

It is not very often that I have the privilege of reading a book which completely changes my perspective on some key topic. Daniel Alpert’s 2013 book “The Age of Oversupply” has managed to do just that.

Alpert postulates that “the central challenge facing the global economy is an oversupply of labor, productive capacity, and capital relative to the demand for all three.”

The root of this oversupply is in the historic opening up of the former Soviet states, the Peoples Republic of China, and India to the global market. This has effectively added three billion people and trillions of dollars of wealth onto the world scene. The global economy has never experienced such an “earth-shattering” change in such a short period of time.

Alpert observes that “the developed world has descended into a waiting game punctuated by intermittent (mostly monetary) stimulus-induced economic activity and periods of relapse as the underlying economic disease remains largely undiagnosed, misunderstood, and inadequately treated—much in the way a doctor treating the wrong illness can cause his or her patient’s health to rally temporarily as a veiled core problem continues to worsen.”

Alpert explains that “monetary policy—historically a critical tool for fighting economic downturns—simply doesn’t have, in a world of easy money, the bite it once had.” He further argues that fiscal stimulus can help restart growth, but developed nations need to use fiscal stimulus “on a much larger scale than ever before if we are to put the advanced nations’ huge surplus of workers back to work.”

Alpert offers detailed recommendations to address the current economic situation and restore balance to the global economy. I was especially fascinated to read about Keynes “Clearing Union” plan, presented at the Bretton Woods conference in July 1944, to prevent global hoarding and to ensure balanced, sustainable growth worldwide. Basically, the Clearing Union was a “an incredibly well-thought-out plan for the creation of a global central bank for central banks. But unlike the European Central Bank (arguably, the closest thing we have to a regional super-central bank), Keynes’s International Clearing Union (ICU) would have required a relatively continuous trueing up of large trade imbalances among fully sovereign independent currency-issuing nations.”

Alpert does a great job of introducing and explaining many complicated macroeconomic concepts. He provides a great deal of evidence to support his observations and opinions. Overall, I found his book to be very interesting, worthwhile, and thought provoking. Highly recommended reading!

Frank T.

The Fourth Turning: Strauss and Howe 1997

The Fourth Turning

We are all acquainted with the concept of “Generations”, and are familiar with some of the names given to various recent generations such as the Baby Boomers, the X Generation, and the Millennial Generation.

People generally agree that different generational groups develop defining characteristics which distinguish them from other generations. We are of course aware that each person is a unique individual, and that no generational generalization applies completely or universally to any member of a group. However, when characteristics are aggregated and analyzed, we can observe that each new generation has common traits.

In 1997, William Strauss and Neil Howe published the book “The Fourth Turning, An American Prophecy” to summarize their research into generations. I sought out this book to better understand the scientific basis for generational traits, and also to see if this research could be applied to the professional and business endeavors, strategy, management, and decision-making.

The authors propose that history follows the concept of “cyclical time”, which ancient scholars first linked cycles of human activity to natural cycles of planetary events. This is in contrast to the concept of “chaotic time”, in which history has no path and “events follow one another randomly, and any effort to impute meaning to their whirligig succession is hopeless.”

The authors introduce the concept of the “saeculum” which is actually an ancient concept roughly defined as the length of one long human life, roughly eighty to one hundred years. Studying modern western history, seven saeculum have been identified:

  • Late Medieval (1435-1487)
  • Reformation (1487-1594)
  • New World (1594-1704)
  • Revolutionary (1704-1794)
  • Civil War (1794-1865)
  • Great Power (1865-1946)
  • Millennial (1946-2026?)

The authors further postulate that each saeculum is divided into four “turnings”, which “comprise history’s seasonal rhythm of growth, maturation, entropy, and destruction.” The four turnings are:

  • High: an upbeat era of strengthening institutions and weakening individualism, when a new civic order implants and the old values regime decays (the American High, 1946 – 1964, witnessed America’s ascendancy as a global superpower).
  • Awakening: a passionate era of spiritual upheaval, when the civic order comes under attack from a new values regime (the Consciousness Revolution, 1964 – 1984, began with urban riots, Vietnam War protests, and gave rise to feminist, environmental, and black power movements, leading to New Age lifestyles and spiritual rebirth).
  • Unraveling: a downcast era of strengthening individualism and weakening institutions, when the old civic order decays and the new values regime implants (the Culture Wars, 1984 – 2005?, opened with “Morning in America” individualism, but drifted towards pessimism, widening inequality, pervasive distrust of institutions and leaders, and a debased popular culture).
  • Crisis: a decisive era of secular upheaval, when the values regime propels the replacement of the old civic order with a new one (the previous saeculum Crisis was the Great Depression and WW II, 1929 – 1946, which began with the Black Tuesday stock-market crash and culminated with America’s post war demobilization).

Each saecular turning gives rise to a generation of people “whose common location in history lends them a collective persona.” Generations typically start four years prior to the corresponding saeculum turning. The four generations are:

  • Artist: born in the Crisis turning, and enters young adulthood in a High (the Silent Generation, born 1925 – 1942, grew up as the suffocated children of war and depression, coming of age too late to be war heroes, became risk-averse technicians and professionals, and civil rights advocates).
  • Prophet: born during the High turning (the current Boom Generation, born 1943 – 1960, were raised with Dr. Spock permissiveness, suburban conformism, and Sputnik-era schooling. Many became yuppies with mainstream careers but perfectionist lifestyles.
  • Nomad: born in an Awakening turning (the current 13th Generation, born 1961 – 1981, survived a hurried childhood of diverse, open classrooms, and a shift from G to R movie ratings. Coming of age in a sexual battleground of AIDS and blighted courtship rituals, they date and marry cautiously. They embrace risk and prefer free agency over loyal corporate careers.
  • Hero: born in an Unraveling, and is entering young adulthood in a Crisis turning (the previous saeculum Heroes were the GI generation of WW II war heroes born 1901 – 1924. The current Millennial Generation, born 1982 to 2002?, first arrived when “Baby on Board” signs appeared, active parenting, child safety, and child-friendly havens gained renewed importance, and best selling books taught virtues and values.).

The book goes into extraordinary detail defining, explaining, and defending the concept of the saeculum, the four turnings, and the four generations. The extensive detail does lend scientific legitimacy to the technical concepts. It is clear that a great deal of exhaustive research underpin both the historical observations of cyclical turnings, and the technical and philosophical mechanisms which give rise to historical cyclicality. Unfortunately, this same exhaustive data makes this book at times ploddingly difficult to read and occasionally unnecessarily repetitive.

Most interestingly, the authors predict that the coming Crisis turning will begin around the year 2005, climax around 2020, and reach the crisis resolution around 2026. The authors have no prediction for what the crisis will entail; possibilities range from a nuclear exchange, incurable plagues, terrorist anarchy, or high-tech dictatorship. The authors also offer no predictions as to whether America will survive victorious as in the case of the previous WW II crisis, or if America might be wiped off the map, ground into submission, or worse.

The authors conclude the book with recommendations to prepare for the coming crisis. They also note a famous quote from Hemingway “Old men do not grow wise. They grow careful.”

The Fourth Turning is certainly a very interesting and informative book for those with the patience to endure a great deal of academic and historical detail to discover the fundamental concepts of the saeculum, cyclical turnings, and generations.

Frank T.

When Money Dies: Adam Fergusson

When Money Dies

Last week I finished reading the book “When Money Dies” originally published in 1975 by Adam Fergusson (reissued 2010).

I sought out this book primarily due to my concerns about Quantitative Easing, but as I read this book I found myself frequently wondering and worrying about Greece.

Fergusson relates the axiom that “if you wish to destroy a nation you must first corrupt its currency. Thus must sound money be the first bastion of a society’s defense.”

Fergusson’s book is a fascinating economic (and political) history of Germany from the end of WW1 in 1918 through 1924. The book frequently goes into granular detail, and at times has a near daily accounting of the tribulations of the German state and its people.

I was especially fascinated by the wildly varied responses and impacts of various economic segments of German society. At various times, despite near continuous devaluation of the Mark, much of German industry remained operational and in fact continued to expand. Not unlike today’s Quantitative Easing, continuous printing of ever greater values of Marks stimulated the economy, allowing Germany to maintain both high levels of employment and  economic / industrial expansionary investment. Also much like today’s experience with QE, the challenge for Germany was how to stop printing money without causing a total collapse of the Germany economy (which eventually was Weimar Germany’s fate).

I doubt that most people today are aware that Austria also suffered hyperinflation during this same period, and in fact Austrian currently devaluation preceded Germany’s. At the risk of oversimplification, it is interesting to note the stark similarities between Austria and present day Greece. 1918 Austria (population 6.5 million) had more state employees than Germany (population 50 million), tax collection was entirely ineffective, and all state enterprises ran at a huge loss. Austria, despite its effective bankruptcy, was “even supplying cigars to the population at far below the cost of production.”

One very interesting labor market outcome during this period was that “labour, wholly or partially educated labour, has already begun to rule in Germany, and there is no demand for brains: that is to say, brains have no longer a marketable value.”

The devaluation of the Mark was absolutely staggering, and at times the author struggles to document the unrelenting pace of devaluation. Periodically the book becomes rather repetitive, which accurately mirrors the historical events being described. The author  struggles with tragic adjectives; after a few chapters it simply becomes impossible to find creative new ways to describe the ever greater depths of unfolding economic tragedy. The reader gets a taste for the experience of the Germans during this period; each time it seems that things can get no worse, and that a bottom must certainly be reached, Germany prints a new larger denomination of Mark and the deflationary spiral plumbs new depths.

The events summarized by Fergusson happened less than 90 years ago, and were experienced and suffered by a well developed Western economy. However, a century is a long time. Could these events be repeated in this modern era? Certainly (hopefully)our learned Government and Global leaders are far more enlightened and sophisticated than 1920’s Germany. Or are they arrogantly (misguidedly) confident in their collective ability to ride the fiat currency tiger without getting eaten?

It is interesting to note that hyperinflation in the 21st century is not simply an obsolete historical tale. Zimbabwe was in the news as recently as mid-June 2015, when its central bank announced that the old Zimbabwe dollars can still be exchanged for US dollars, at a rate of 100 trillion Zimbabwean dollars per $40 USD. 100 trillion Zimbabwean dollar notes are actually more valuable on Ebay, where collectors have recently paid up to $159 USD.

If (or perhaps more likely expressed as when) Greece exits the Euro and resumes printing Drachmas, I am very concerned about the valuation of this newest fiat currency. Will Greece be able to successfully deflate away its serious debt and liability issues, or will the Drachma, along with Greece’s long suffering citizens, experience the German Mark’s hyper inflationary fate?

Frank T.

The Death of Money: James Rickards 2014

Death of Money

 

I recently completed reading “The Death of Money”, which is a fascinating book that explores the Global Monetary System and the dangers inherent in the current system of Fiat Currencies.

I found the book to be entertaining, informative, and in some cases, frightening. I am very pessimistic about the current stability and sustainability of our Global Financial System, and I genuinely believe that the past century has witnessed a number of terrible economic decisions which have led directly to our current unstable “house of cards” monetary system. I continue to be amazed at the resourcefulness of the US Fed and other Central Banks to keep the house of cards from collapsing. However, I am also convinced that the fundamental problems that led to the 2008 Global Economic Crisis have yet to be addressed or resolved, and the day of reckoning has merely been postponed.

James Rickards argues quite effectively for a return to the Gold Standard. He successfully debunks the assertion that the Great Depression was caused by the Gold Standard. He clearly explains that the monetary system at the time of the Great Depression was not based on the Gold Standard, but in fact was based on the “Gold Exchange Standard”, which was “at best, a pale imitation of a true gold standard and, at worst, a massive fraud. …”

Rickards explains that “A gold standard is the ideal monetary system for those who create wealth through ingenuity, entrepreneurship, and hard work. Gold standards are disfavored by those who do not create wealth but instead seek to extract wealth from others through inflation, inside information, and market manipulation.”

I highly recommend this book to executives and managers who have any interest or curiosity in our current global monetary system.