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Notes of a curious mind

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The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

This is a general impression and overview of the book as my knowledge on economics is rather limited.

“For many centuries, money and banking were financial alchemy, seen as a source of strength, when in fact they were the weak link of a capitalist economy,” writes Mervyn King in his book The End of Alchemy.  He must know something about it. As Governor of the Bank of England for a decade, and before that a leading academic economist, Mervyn King has long been at the heart of the British policy-making establishment.

We have seen this alchemy when subprime mortgage bonds were given triple A-rating and more recently, when John “Mac” McQuown created a hybrid security, called  eBond, which would embed credit default swaps (CDS) into corporate debt and will be able to transform junk-graded debt into the equivalent of AAA-rated notes. What could possibly go wrong?

Mervyn King says he is not interested in the blame game, which is probably just as well considering that he was governor of the Bank of England at the time of the great crash of 2007-08.

“Blaming Individuals is counterproductive, he says….. A generation of brightest and best were lured into banking, and especially into trading, by the promise of immense financial rewards and by the intellectual challenge of the work that created such rich returns and the crisis was a failure of a system, and the ideas that underpinned it, not of individual policy-makers or bankers, incompetent as greedy though some of them undoubtedly were. There was a general misunderstanding of how the world economy worked.”

Apparently, the “brightest and best” somewhere, somehow, lost their way.

Disequilibrium, radical uncertainty, the prisoner’ s dilemma and trust, are the four concepts that Mervyn King have run through this book in order to explain the nature of financial alchemy and the reasons for the present disequilibrium of the world economy.

Even though the largest banks in the biggest financial centres in the advanced world failed, triggering a worldwide collapse of confidence and the deepest recession since the 1930s, King insists “that nothing much has really changed in terms of the fundamental structure of the Western banking industry”. Just increasing the money supply after a crisis “only perpetuate the underlying disequilibrium.” Without reform of the financial system, another crisis, bigger than the last one, is certain, he adds.

King insists the merging of risk-taking investment banking with retail and commercial banks handling the taxpayer-guaranteed deposits of households and firms altered the business model and culture of banks during the Eighties and Nineties. Rather than breaking up banks retail and investment divisions, he suggests a reform based on the “Chicago Plan” of the 1930s. It is, basically, the IMF’s “Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof, which envisages the separation of the monetary and credit functions of the banking system, by requiring 100% reserves.

In addition, he argues, it is necessary to embark into a major programme of raising productivity. It should be a global effort that would take many years, and will require small and deferent measures in each country, but as long as people believe that there is a coherent plan to boost productivity in the future, then they will have more confidence in willing to spend more today.

It won’t be easy. Faith in capitalism, understandably, has been badly shaken, and will require bold action to restore this faith. “Capitalism is far from perfect – it is not the answer to the problems that require collective solution, nor does it lead to an equal distribution of income or wealth.” But it is the best way to create wealth because it provides incentives for the innovation that drives productivity growth. Only when people are free to pursue, develop and market new ideas will they translate those ideas into increased output.

The End of Alchemy is mostly a book about ideas.  A significant attempt to reach not only the economists but also a broader, more general audience.

Relentless rains from Tropical Storm Harvey

One of the worst flood disasters in modern U.S. history unfolded on Sunday in the Houston area, driven by relentless rains from Tropical Storm Harvey. The disaster is unprecedented and at this point, as Bob Henson writes,  “it may make little difference whether Harvey stays just inland or moves just offshore, since rainbands would continue to be funneled toward Houston either way.” The overall message is consistent: Harvey will be a devastating rainmaking presence in southeast Texas for days to come.

In the meantime, the situation on the ground in Houston is gaining uncomfortable resonance with 2005’s catastrophic Hurricane Katrina. As with Katrina, there have been numerous reports of people trapped in attics, and countless roads across the city are impassable. 

Climate change amplifies the three primary hazards associated with hurricanes: potential wind speed, rainfall, and storm surge. Although it is too early to say, Harvey is sure to inflict a massive economic toll as well. Katina, in 2005,was around $100 billion and Sandy in 2012, around $75 billions.



Mammoth Flood Disaster in Houston: More Rain Yet to Come, August 27, 2017, Weather Underground.


Oι Ασκήσεις Ελευθερίας του Νίκου Δήμου

Όταν ένας Αθηναίος κατηγόρησε τον Αναχάρση ότι είναι Σκύθης, αυτός απάντησε: «Εγώ ίσως πρέπει να ντρέπομαι για την πατρίδα μου, η δική σου όμως πατρίδα πρέπει να ντρέπεται για σένα».

Τον Νίκο Δήμου τον ανακάλυψα το 1977. ‘Εφηβη, μπερδεμένη, προσπαθούσα να ανακαλύψω τον εαυτό μου και τον κόσμο, μέσα από τα βιβλία. Δεν ήταν και ο καλύτερος  τρόπος, αλλά στην μπερδεμένη Αθήνα της μεταπολίτευσης, δεν είχαμε και πολλούς τρόπους διαθέσιμους. Η γραφόσουν σε καμμιά πολιτική νεολαία (ΔΑΠ-ΝΔΦΚ  και ΚΝΕ ήταν τότε στο φόρτε τους), ή το’ ριχνες στη μουσική και στο διάβασμα. Rock και βιβλία ήταν ο δικός μου τρόπος.   Όχι ότι ήμουν εντελώς απολιτίκ, δεν ήταν δυνατόν να είσαι νέος και απολιτικ στην Αθήνα του 1977, απλά, από τότε είχα μια αντιπάθεια σε οτιδήποτε είχε να κάνει με εξουσίες, εντάξεις κόμματα, παρατάξεις, παρέες, κ.λ.π.

Μια μέρα, ψαχουλεύοντας τα ράφια της  Πρωτοπορίας, βρήκα το Η Δυστυχία του να είσαι Έλληνας. Δεν ήξερα τίποτα για τον Νίκο Δήμου. Άνοιξα το βιβλίο και

Ορίζουμε σαν ευτυχία την (συνήθως προσωρινή) κατάσταση, όπου η πραγματικότητα συμπίπτει με τις επιθυμίες μας

Σε αναλογία, δυστυχία πρέπει να είναι η μη σύμπτωση ανάμεσα σε επιθυμία και πραγματικότητα.

Με άλλα λόγια, δυστυχία μπορούμε να ονομάσουμε την απόσταση ανάμεσα σε επιθυμία και πραγματικότητα.

Όσο μεγαλύτερη η απόσταση, τόσο πιο δυστυχισμένοι είμαστε.

Αξίωμα: Ένας Έλληνας κάνει ότι μπορεί για να μεγαλώσει το άνοιγμα ανάμεσα σε επιθυμία και πραγματικότητα.

Αυτό ήταν, κόλλησα. Αγόρασα το βιβλίο και πέρασα τις επόμενες ώρες χωμένη στις σελίδες του. Άρχισα μάλιστα να γραφω, σε ένα τετράδιο που, ευτυχώς, εχει χαθεί εδώ και δεκαετίες,  τους δικούς μου επαναστατικούς εφηβικούς αφορισμούς

Συνέχισα να διαβάζω το Νίκο Δήμου για αρκετά χρόνια. Κάποια στιγμή τον άφησα, πίστεψα ότι είχα πάρει ότι είχε να προσφέρει. Άρχισα να διαβάζω πιο σύνθετους, παλαιότερους και πιο νεώτερους, στοχαστές. Όταν έφυγα από την Ελλάδα, πήρα μαζί μου ελάχιστα αγαπημένα βιβλία, ένα από αυτά ήταν Η Δυστυχία του να είσαι Έλληνας.

Ο Νίκος Δήμου είναι ξεχωριστή περίπτωση συγγραφέα – στοχαστή. Μακριά από σχολές και ρεύματα, αυτό που χαρακτηρίζει το έργο του είναι η αγάπη για την ελευθερία. Η ελευθερία  για τον Δήμου είναι ανάγκη, είναι ηθική στάση ζωής. “Στη μία και μόνη αξία της ελευθερίας (όλων) εδράζεται κάθε άλλη πολιτική αρετή  – και η δικαιοσύνη.” Mόνο που πρέπει να γίνει κατανοητό ότι «η ελευθερία του άλλου» είναι εξίσου σημαντική με την δική μου.

Άρχισα να ξαναδιαβάζω τον Δήμου όταν ανακάλυψα την ηλεκτρονική ιστοσελίδα του. Και ξανακόλλησα. Κάθε φορά που βρίσκομαι στην Αθήνα ψάχνω να βρω τα βιβλία του. Πολλά είναι πλέον εξαντλημένα.  Πριν ένα-δυο χρόνια, σε ένα από τα ταξίδια μου στην Αθήνα,  βρήκα, σε ένα πάγκο με μεταχειρισμένα βιβλία, το Ασκήσεις Ελευθερίας, μια σειρά κειμένων, από τα μέσα περίπου του 1970ς μέχρι και το 2005. Πρόκειται για μια καταγραφή απόψεων και θέσεων για την Ελευθερία και τον ολοκληρωτισμό,  τον εθνικισμό και το ρατσισμό, τη μισαλλοδοξία και τον ορθολογισμό.

Τους τελευταίους μήνες, το χέρι μου πήγαινε συνεχώς στο ράφι που βρίσκεται τοποθετημένο. Το έβγαζα, το ξεφύλλιζα, το άφηνα, και  άντε πάλι από την αρχή.

Αυτόν τον Αύγουστο όμως δεν το άφησα. Το πήρα και άρχισα να το διαβάζω. Η χρονική περίοδος δεν είναι τυχαία. Η οικονομική κρίση έφερε στο φως,  μια κοινωνία που αν την ξαπλώναμε στο ντιβάνι του ψυχαναλυτή, θα ξεδιπλώναμε μια ασταθή και διχασμένη προσωπικότητα – με κύρια χαρακτηριστικά την  έλλειψη ανοχής, την ανασφάλεια και αρκετές φορές την παράνοια.

Το Ασκήσεις Ελευθερίας είναι μια ανθολογία κειμένων, αναλύσεις, φιλοσοφικά και πολιτικά δοκίμια, ημερολογιακά επίκαιρα, που γράφτηκαν από τα μέσα περίπου του 1970 μέχρι και το 2005. Πρόκειται για μια καταγραφή απόψεων και θέσεων για την Ελευθερία και τον ολοκληρωτισμό,  τον εθνικισμό και το ρατσισμό, τη φενάκη του έθνους και τη βία. τη μισαλλοδοξία και τον ορθολογισμό.  Είναι μια ιδιότυπη ιστορία γεγονότων και ιδεών της μεταπολιτευτικής Ελλάδας.

Το διάβασα, κυρίως, για να θυμηθώ και να καταλάβω.  Γιατί φτάσαμε εδώ που φτάσαμε. Γιατί φερόμαστε σαν κακομαθημένα παιδιά , περιμένοντας ‘ειδική μεταχείριση’ από τους πάντες. Γιατί ψηφίζουμε αυτούς που ψηφίζουμε. Και γιατί σήμερα, έχουμε αυτή την ευτελή κυβέρνηση.

Εκλεισα το βιβλίο και ένα αόρατο ερωτηματικό έμεινε στο τέλος. Αυτό το ερωτηματικό είναι η ελευθερία μου.

Climate Histories: Environmental Bilateral – An Agreement to Study Global Change Between U.S. and U.S.S.R.

In the mid-1970s, the evidence about the greenhouse effect and its effect to climate change was growing. Data showed that during the twentieth century, there has been a steady increase of CO2, at a rate of 25 times the historical average. Warming in the climate system was clear and since the 1950s many unprecedented changes had been observed throughout the climate system. The scientists were becoming more convinced that human influence had been the dominant cause of the observed warming since the mid-century. They had also discovered that the biological productivity of the oceans was an important regulator of the way the CO2 built up in the atmosphere, and that the water vapour which had been found to be an important factor in the formation of clouds, could also play a role in the modulation of weather and climate.

Despite the progress, or maybe because of that, the questions about the causes of global warming multiplied, and with them, the concerns about global climate change.   The scientists were starting to realise that only an international interdisciplinary research programme could provide the answers to these questions.

As early as October, 1970, at a conference on “Technological Changes and the Human Environment” at the California Institute of Technology, Thomas Malone, founding Secretary General of International Council of Scientific Unions’s (ICSU) Scientific Committee on Problems of the Environment, asked, in his keynote address, for an “intensive study” of the “greenhouse effect” which is generated by the combustion of fossil fuels. In 1977, Roger Revelle highlighted the same issue in the Geophysics Study Committee  report. More specifically, in his report, Revelle indicated that the industrial civilisation,

“may face a major decision over the next few decades – whether to continue reliance on fossil fuels as principal sources of energy or to invest the research and engineering effort, and the capital, that will make it possible to substitute other energy sources for fossil fuels within the next 50 years”.

In the meantime, other environmental issues, like deforestation and desertification, the degradation of environmental quality accompanied by an increase in the overall volume of pollution, and a rapid population growth, grabbed the attention of the scientists and alarmed citizens, environmental groups, legislators, and diplomats alike.  A series of natural disasters across the world, such as droughts and famine in Africa, the collapse of the Soviet grain harvest, and extreme winter and summer weather in the U.S., made headiness all over the world and draw the attention of environmental groups. Both in the West and the East the public opposed the degradation of the environment and the introduction of serious pollutants into lakes and rivers.



Connecting and understanding the various ways that human actions can contribute to global environmental changes was vital. So, by 1970, both the U.S. and the U.S.S.R. enacted sweeping new statutes to try to deal with the situation, and in 1972, during a global “Conference on the Human Environment” convened by the United Nations at Stockholm, recognising the significance of climate change to earth’s viability,  both the U.S. President Richard M. Nixon and the General Secretary of the Communist Party of the U.S.S.R., Leonid I. Brezhnev,  agreed to inaugurate a bilateral programme to address, what scientists come to call “Global Change”. On 23 May, 1972, at a Summit Meeting in Moscow, the Soviet and American heads of state signed the Agreement on Cooperation in the Field of Environmental Protection, generally known as the “Environmental Bilateral”. Furthermore, a Working Group was formed (Working Group VIII) to deal with the human influence on climate. Its activities included the study and the monitoring of the changing levels of atmospheric constituents that might modify climate, the study of the effects of contamination of the upper atmosphere on climate and the development of climate modelling. One of the Group’s scientific priorities was the study on the climate of the late Pleistocene and Holocene eras, as a way to understand natural climate variability.

The “Environmental Bilateral”, is considered to be the most successful of the several cooperation agreements between the U.S. and the U.S.S.R. In a report which was published both in English and Russian, after a workshop which was held in Leningrad (now Petersburg), between 13 and 21 June 1981, the Working Group VIII, concluded that the concentration of greenhouse gases in the atmosphere is gradually increasing as more and more fossil fuels are burned. By studying climate models, the Group showed that that as carbon dioxide levels continue to rise, global temperatures will rise too, and they warned that such warming could have important consequences on the biosphere, agricultural and other economic activities. They added that in order “to anticipate these consequences in useful detail” it was necessary to understand climate and that required “the full effort of the international scientific community”.

As weather satellites and highly sophisticated space and data management technologies were the most technologically advanced tools to use, the Group proposed the development of a ring of five geosynchronous satellites that would be monitored through international cooperation. It was an ambitious proposal, but the technology was already there and the increased computer power had made possible to process the data from space-based observations. For the first time, the scientists would be able to simultaneously  observe and study all the parts that affected the earth system and their interactions, the atmosphere, the oceans and the solid earth, the plants and the animals,  and the impact of human activities to climate.

Sources and further reading:

D. Kennedy, “The U.S. Government and Global Environmental Change Research: Ideas and Agendas”, Case C16-92-1121.0, (John F. Kennedy School of Government. Cambridge, MA: Harvard University, 1992):2

Thomas. F. Malone, “Reflections on the Human Prospect”, Annual Review of Energy and the Environment 20, (November 1995), 16

National Research Council (NRC), ‘Energy and Climate’ Geophysics Study Committee, (Washington, DC: National Academy Sciences,1977),5

W. Henry. Lambright and Rosemary. O’Leary, “Governing Global Climate Change. Can We learn From the Past in Designing the Future?’, Policy Studies Journal 19:2, (1991): 54-55

Eugene W. Bierly & John A. Mirabito, “The US-USSR Agreement on Protection of the Environment and its relationship to the US National Climate Program” Bulletin of the American Meteorological Society, 65(1) (January 1984): 17



Όταν ανήκεις μόνο στον εαυτό σου

To πάθος του ανήκειν δεν το έζησα ποτέ, ούτε ποτέ το κατάλαβα. Κατά αραία και μικρά διαστήματα συμμετείχα σε πολιτικές ή περιβαλλοντολογικές ομάδες, όχι γιατί ένιωθα ότι ανήκα, αλλά γιατί πίστευα ότι από εκεί θα μπορούσα να δώσω την μάχη για αυτά τα οποία πίστευα. Η ιδεοληψία, η εμμονή, ο φανατισμός, απ’ όπου κι αν προέρχονται, με απωθούν.

Με τα χρόνια, οι αντιπάθεια μου για κόμματα, παρατάξεις, παρέες, και κάθε είδους σωματείο, γίνεται όλο και πιο βαθιά. Εχω εντελώς περιθωριοποιηθεί.

Βαρέθηκα και τις αντιπαραθέσεις, ιδιαίτερα με ανθρώπους που δεν είναι διατεθειμένοι να ακούσουν και, ακόμα πιο δύσκολο, να καταλάβουν, αυτό που λες. Κάθε προσπάθεια να έχεις έναν διάλογο, είναι διαβρωτική για τη σκέψη και χάσιμο χρόνου.  ‘Η θα σου κολλήσουν μια ταμπέλα, οπότε ότι κι αν πεις θεωρείται αναμενόμενο και δεδομένο, ή θα είναι οπαδοί μιας συγκεκριμένης παράταξης ή ιδεολογίας, οπότε θα διαφωνήσουν, χωρίς καν να κάνουν το κόπο να σε ακούσουν, ή να διαβάσουν αυτά που γράφεις.

Κάθε προσπάθεια ουσιαστικού διαλόγου καταλήγει να θυμίζει ποδοσφαιρική αντιπαράθεση. Ολυμπιακός vs Παναθηναικός.  Συνθήματα, παλαιολιθικές ατάκες και στερεότυπα, λες και ο κόσμος δεν εχει αλλάξει καθόλου τα τελευταία σαράντα χρόνια.

“..the alley is certainly an ancient relic and a precious one.” Midaq Alley by Naguib Mahfouz

Naguib Mahfouz, one of the most prominent literary figures in Egypt, became known with the publication of The Cairo Trilogy in 1957 and acquired international recognition when he awarded the Nobel Prize for Literature in 1988. Through his novels, Mahfouz chronicled the historical and social issues of his own time in Egypt, and in Cairo, his city, in particular.

Midaq Alley, written in 1947, is an extraordinary depiction of the microcosm in a poor alleyway in Cairo during World War II. It is an engaging book that revolves around the people living and working in this old alley.

“Many things combine to show that Midaq Alley is one of the gems of times gone by and that it once shone forth like a flashing star in the history of Cairo. Which Cairo do I mean? That of the Fatimids, the Mamlukes, of the Sultans? Only God and the archaeologists know the answer to that, but in any case, the alley is certainly an ancient relic and a precious one.”

The inhabitants of the Midaq Alley live in ‘almost complete isolation from the surrounding activity’. But the World War II was a period of social transformation in Egypt. Strong emotions and feelings, poverty and gossip keeps them closely connected and alive, but the political turmoil and the changes brought by the war and the British Army, entice them away, it feeds their aspirations and hopes of material gains and a new comfort life, away from the alley. Their dreams and ambitions make the reality  in the alley all the more difficult.

The emotions, the motivations, the desires and the strangles of the characters make the novel timeless. Among them are the middle-aged, homosexual and hashish-smoking cafe-owner Kirsha, who lives with his fiery wife and  his cynical and materialistic son. There is also the pious mystic Radwan Husseini, and Zaita, a dirty, old beggar whose specialty is creating other beggars.  Salim Alwan, an elderly and rich perfume merchant with a voracious sexual appetite, has an intense lust for the young Hamida, the beautiful daughter of Umm Hamida, a marriage broker in her mid-60s. Hamida, driven by ambition and a desire for beautiful clothes and wealth, falls for a pimp who turns her into a prostitute. Moral depravity is her rebellion against poverty and lower-class life.

Midaq alley is a wonderful and rich novel.  Morality, depravity, class conflict, politics, corruption, and oppression are exposed calmly and with subtle humour. Women are empowered, they have a voice and the capacity to make decisions and fulfill their aspirations. Naguib Mahfouz does not judge the choices his characters are forced to make. Dispassionately, he presents their idiosyncrasies, their desires for money and sensual pleasures and the  consequences of their actions. Despite the tragic events Midaq Alley survives, the next day, and the next. Life must go on.

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