4-13 Microbes maketh man

http://www.economist.com/printedition/2012-08-18

Free exchange

On the origin of specie

Theories on where money comes from say something about where the dollar and euro will go

I have been to Myanmar in July. It was surprising that I can use dollar almost anywhere in the country. Myanmar’s currency is kyat but all the people know the rate and can accept the foreign currency. In Japan we cannot buy things in dollar, or rather we buy dollars.  

Discussion: Why is the dollar accepted in outside of America?

           Should the Yen aim at “the international currency”?

Summary:

Origin of money is mystery. (1) Does it have its root in the power of state or (2) a purely private matter? This is long running debate.

*3 functions of money: medium of exchange / a store of value / a unit of account => Lots of things can do these jobs

(1) The origin of money is a market led response to barter (物々交換)cost.

Karl Menger, an Austrian economist (1840-1921)

Monetization of an economy starts when agricultural communities move away from substance farming and start to specialize when trade with others becomes necessary. Money evolves to reduce barter cost, with things working better than others. Spices and shells can be used as money.

(2) The state plays a bigger role in the origin of money

Charles Goodheart, a professor of LSE (1936-)

Metals are used as money because they are durable, divisible and portable but raw metals are hard to assess the value so there is another reason why metals are used as money. Metal money has circulated as coins. Minting(鋳造) developed not as a private sector attempt but government operation. It means the state plays a bigger role in the origin of money. The fiscal wing of government has a huge incentive to move its economy away from barter because it needs to measure income and expenditure to set taxes.

Dollar and euro

The columnist suggests that only “informal” monies can spring up purely privately. And he points out that a good example of “informal” money is the dollar that is used in outside of America. Because of informality, the shift from dollar to Yuen or other currencies is swifter than many assume. He explains the euro has a deeper problem because it lacks a foundation in the power of ether market or the state. 

富岡八幡宮大例祭

職場のある深川・門前仲町の三年に一度の一大イベントであり、江戸三大祭りの一つである富岡八幡宮例大祭に神輿の担ぎ手として参加した。横浜のニュータウンで育った私にとっては、神輿を担ぐのは初めての経験であったし、下町の熱気を感じることができた。去年は震災の影響で祭りを見合わせており、それもあってか今年は非常に盛り上がったようだ。

このお祭りは別名「水掛け祭り」と呼ばれている。神輿は永代通りをメインに江東区、中央区を一周して永代橋を渡って富岡八幡宮まで戻ってくるのだが、沿道に並んだ見学の人々が、バケツやホースをもって、神輿と担ぎ手に水をかけようと待ち構えているのだ。そのため、担いでいる間はずっとびしょぬれである。ただ、この日は真夏の晴天で水掛けは非常に気持ちがよかった。天気がよかったが、日中一瞬だが雨がぱらぱらと降ってきて、「神様も水掛けに参加したいんだな」なんて思ったものだ。

はっぴに鉢巻き姿は爽快で、神輿は前々から聞いていた通りずっしりと重く、肩は真っ赤になった。足も痛くなったが、地元の方々に混じって参加できたことは忘れがたい貴重な経験だった。

4-11 Another fine mess

http://www.economist.com/printedition/2012-07-28

Spain and the markets

The Spanish patient

A full bail-out of the euro area’s fourth-largest economy is looming

Why I picked up the article

We are not so interested in and surprised with EU’s current bail-out situation. “Again? Yes, I know” this is our frank impression. “The next country is Spain…” We always heard about that. But we don’t know so much “Why Spain? “ This article explains why Spain is patient and why they need a full bail-out.

Discussion:

Why is Spain in hard situation and who should be responsible for a bail-out?

Summary:

(1) Spain’s ten-year bond yields touched 7.75% on July 25th.

Previous bail out of Greece, Ireland and Portugal occurred not long after rates has surpassed 7%. (Japan’s ten-year bond yields is around 0.74% on August 3rd.

(2) Spain’s situation does not look bad since their government continues its effort.

Public debt, 69% of GDP is lower than Italy’s 120% less even than Germany’s 81%. The budget deficit is high but prime minister announced more tough austerity measures. European finance ministers approved to put €100 billion partial bail-out for Spanish bank.

(3) Why does Spain need full bail out?

Mario Rajoy failed hard choices at the beginning, notably cleansing of the banks. Spain’s high external debt (the highest in euro area) is the biggest worry. Foreign capital has been fleeting over the past year. That has weakened the banks and its economy.

(4) Choices

The European Stability Mechanism (ESM), their new permanent rescue fund would be a hope but ESM cannot come into force until September (Germany’s court will rule) They have some cash reserve and can still borrow at short maturities and can use the euro area’s temporary rescue fund. It may possibly survive the summer. But Spain needs €385 billion to cover its budget deficit and will consume almost all of their rescue fund. If the European central bank (ECB) starts buying their bond, nerves will calm but it doesn’t want to.

Comments
6 members and 5 articles we had this week. Last week I tripped to Vietnam and Myanmar so I was absent 10th discussion in season 4.