Posts Tagged Italy
What Is The Markets?
Posted by Richard Chapman in Politics on November 16th 2011
*This* is a market. Accept no substitutes
We’re hearing a lot about how ‘the markets’ are reacting to changes in the Greek and Italian governments. It would seem the broad assessment is ‘unhelpfully’. Mysterious beasts, these markets. The only clear thing is that they’re damnable tricky to please. Whatever you do, it turns out to be not even close to what they wanted. Basically, the markets are a dreadful girlfriend. I know, in reality they are just bunches of people. But you can never trust people in bunches.
The other day I heard someone say that markets are powerful mechanisms for finding the correct price of things because they depend on the ‘wisdom of crowds‘. This is a real and very interesting phenomenon. If you ask a crowd to estimate something, it often happens that the average of their guesses is more accurate than even the closest individual one. In other words, the crowd as a whole seems to know better than any one of its members. It’s as if all their ignorance, being distributed randomly, cancels itself out – leaving nothing behind but the smart.
Which in fascinating and useful to know. It’s not however how markets work. And particularly not financial markets, where what is being traded isn’t a tangible commodity but – when it comes down to it – promises. People making promises to repay a certain amount of money in the future (or, thanks to some of the more complex financial instruments, the past) in return for money now. People packaging up those promises and re-selling them as promises about promises. People trading on promises yet to be made. All for money – which is of course itself only a promise. It’s not a crowd trying to estimate something objective. It’s a crowd all trying to second-guess each other – a deeply unstable situation. It could turn into a stampede at the first peal of thunder. Yet this is what we’re depending on now, so soon after our experience with the property market. We’re incurable.
Related articles
- From the Wisdom of Crowds, to the Wisdom of Friends (futurelab.net)
How The Euro Exploded, Part 2
Posted by Richard Chapman in Politics on November 8th 2011
Money. It's the root of all ****-ups
Why has the Eurozone gone awry? Why have the economies of Ireland, Greece and – it looks likely – Italy shot off the precipice like runaway trains? Well as in any transport disaster, several things had to go wrong at the same time. Yesterday we looked at Problem one, the credit boom. That was hardly surprising. The next piece of the jigsaw though may be a little more unexpected…
Problem two: The success of the euro. Mad I know, but in many ways the euro crisis was caused by it acting exactly as intended. It immediately improved the economic prospects of the poorer countries of Europe. Well, the poorer ones that were rich enough to join. Currency stability made the ‘peripheral’ economies attractive to money from the richer ‘core’. They became more profitable places to find investment opportunities.
But there were downsides. When a small economy with its own currency enjoys boom times, one immediate consequence is of course inflation. This reduction in the effective purchasing power of the currency generally causes it to drop in value – as if there was a divine law saying the more money you earn, the less it’s worth. But though that’s frustrating, it at least exerts some moderating influence on the economy. It wasn’t long before a strong currency was the very last thing the rapidly-growing peripheral economies of Europe needed. But adjusting it for their sake was out of the question, their interests were secondary at best. The primary goal of the euro, nearly its entire raison d’être indeed, was to be strong. With no possibility of the currency falling it was almost inevitable that these economies would badly overheat.
This was a foreseeable structural problem with the euro. Loosely-attached economies at the fringes were bound to get yanked about violently by the slow but inexorable movements of such a leviathan currency. Yet we still haven’t decided how to deal with it. Had the credit bubble not coincided, we might have had greater time to adjust and put compensating mechanisms in place. But with the bubble and the fluctuation-amplifying mechanism, well, what we got was bursting boilers and third-degree scalding.
And you know what’s the crazy part? With all this turmoil on the bond markets, with all this panic and fear that countries won’t be able to pay their debts, need international aid from the IMF, be forced out of the euro, you might be forgiven for thinking that the euro itself was in trouble. Yet it sails on, imperturbable, as strong as ever. Indeed, many would argue, quite overvalued. Which is really not what you want from the currency that you have enormous debts denominated in.
There is no escaping this: The euro was devised mainly for the benefit of the larger economies, and it is those economies that have benefited most. Yet it is we in the smaller and more vulnerable ones who are being made to suffer for its failings. Here, we’re even expected to return the investments that outside institutions made into our over-inflated property market – the very money that caused it to explode. They want it back.
The enormity of that has still not really sunk in.
Related articles
- How The Euro Exploded, Part 1 (i.doubt.it)
- The Pound fell against the Euro by the most in two weeks (torfx.com)
- Latest Big Mac Index Suggests the Euro is Overvalued (aht.seriouseats.com)
- Euro zone trouble – Italy bond yields soar and EFSF bailout fund seeing higher interest rates (nextbigfuture.com)
How The Euro Exploded, Part 1
Posted by Richard Chapman in Politics on November 7th 2011
"I have no idea what I'm doing!"
Italian stock markets rally on rumours that Berlusconi may step down. That says everything really. Usually the forced resignation of a head of government sends the markets plummeting, as a country switches from general predictability into leaderless chaos. But it seems even leaderless chaos would be more relaxing than Silvio Berlusconi. You can actually calculate the millions he’s costing his country every minute he hangs on.
If he does go though, he will be the third national leader directly forced out by the financial crisis. I don’t think there’s been such a wave of regime change across Western Europe since 1968. How did it come to this – and to ask the question that everyone really wants answered, whose fault is it?
You can’t pinpoint a single cause in these things of course, but surprisingly I think we can narrow it down to just three:
Problem one: The credit boom. We’ve spoken of this before, but its origins can be traced back to the liberalisation of the US banking industry, and the creativity this consequently introduced into a previously staid profession. In particular, the creativity about what the term ‘asset’ means.
It’s always been quite acceptable to loan someone some money and then consider their promise to pay you back as an asset you own – as long as the value you give to that asset realistically reflects the risk of them not paying you back at all. Be unrealistic however, and you’re in trouble. Though many complex and obscure mechanisms were applied to the task, I don’t think it’s grossly oversimplifying to say the basic problem was that overvalued loans were used as collateral to raise more money, which was then turned into more overvalued loans, which were used to raise more money, which was… Et voilà, magic money from nowhere. Inevitably this reached the point where it was mutually profitable for everyone involved to overvalue the loans they were all giving to each other.
This free money fountain naturally encouraged borrowing throughout the US and Europe, and indeed about everywhere with access to currency markets. The first I knew something had gone badly wrong was when I got a letter from my bank telling me I’d been ‘pre-approved’ for a loan I hadn’t asked for. I’m a freelance artist for God’s sake. When banks go round pushing loans on poor people, the Emperor is out waving his dangly bits to a cheering audience.
But it wasn’t just private borrowing that got out of control. Countries too found credit temptingly cheap. What’s more, easy credit helped fuel a consumption boom, which upped tax revenues, which encouraged governments to ease off rates and make more promises. The problem is that largely fictitious revenues can dematerialise overnight. Public borrowings and spending commitments on the other hand are not so easily gotten rid of.
This though merely sets the global scene; in Europe specifically there was further trouble brewing. To follow…
Related articles
- Euro lifted by talk Berlusconi weighs resignation (marketwatch.com)
- Forget Greece. Italy is the new focus of eurozone worries (thestar.com)
Patents – The New Rock ‘n’ Roll
Posted by Richard Chapman in Technology on October 6th 2011
Phone patent litigation in US courts alone ©The Daily Beast
With what I want to believe was ill-disguised glee, Samsung has taken out injunctions against sale of the iPhone 4S in France and Italy over alleged patent infringement. Why just there? It’s difficult not to believe that they’re keeping it commensurate with Apple’s blocking of Galaxy Tab sales in Germany and the Netherlands, that basically they’re saying “If you want to go there, we can go there”.
Do they have a case? Who can tell. The only thing certain is that patents are the new Rock ‘n’ Roll.
And not in a good way. Like Rock ‘n’ Roll in its heyday, the mobile technology world is turning into a filthy quagmire, with pretty much everybody accusing everyone else of stealing about everything – as the illustration shows. The main reason Google purchased Motorola‘s mobile arm was that otherwise the two companies could have sued each other out of existence¹. R&D is rapidly becoming the new A&R, with phone makers patenting about anything in the hope of finding the one elusive hit technology that will rake in unimaginable sums. This wasn’t very good for music, and it won’t be so good for technological innovation either.
While being able to profit from research and invention is a good thing, current law allows companies to charge exorbitant fees or even refuse to license their patents, essentially granting them a monopoly to a lucrative technology. While this was fine in the days when you might patent a tangible device like a mousetrap, now they can be used more or less as intellectual property land-grabs, claiming rights to possible designs. A cause célèbre of course is the granting to Apple of patents so fundamental to a multitouch interface on a mobile touchscreen device that it is hard to see how anyone can now create one without infringing them. Yet Apple did not invent either the multitouch interface or the mobile touchscreen, they were merely the first to put one on the other. Does that really mean they deserve to control the entire concept for the next twenty years?
What might work much better is a short period – maybe only a year or two – of exclusive use. That would decrease the incentive to take out speculative patents on everything, and greatly increase the incentive to, you know, innovate.
- To give the actual science of this: When two corporations collide at sufficiently high financial energies, they either fuse into a single entity or annihilate one another in a shower of fundamental business particles known as “happy lawyers”.
Related articles
- Samsung goes bonkers with iPhone 4S injunction (techeye.net)
- Apple vs. Samsung: Behind the patent fight (macworld.com)
- Samsung seeks to ban iPhone 4S amid patent row (hazima.wordpress.com)
- Samsung targets iPhone 4S in France, Italy (news.cnet.com)
Faster Than Light
Posted by Richard Chapman in Cosmography on September 26th 2011
What something travelling faster than light would look like, if you could see it
But it’s not only in a Galway coroner’s court that the laws of nature have been suspended. They’re just as dysfunctional at the world’s most advanced scientific establishment – CERN.
Europe’s premier physics lab has measured particles travelling faster than light. Fancy that. This is a little troubling to them though, because for a physicist, matter moving faster than light makes about as much sense as God knocking on the door, presenting you with an iguana wrapped in newspaper, saying “Call me Susan, I have no legs for hosepipe” and turning into a forest of lemon trees. It doesn’t happen, it can’t happen, it won’t happen.
So as they make their lemonade, the boys and girls at CERN have to try to figure out where things went awry. Those particles can’t really have gone faster than light, can they? They have mass – which is a technical way of saying they weigh something – and a thing with mass can’t travel even as fast as light, never mind faster. This is because…
Well, this is because the world is a lot freakin’ weirder than it looks. You may not have noticed this – actually you couldn’t possibly – but the faster you move, the heavier you get. It isn’t detectable at the speeds even spacecraft travel at, but the effect gets more pronounced as you approach the speed of light. So pronounced in fact that if you ever travelled at the speed of light, you’d weigh an infinite amount. Which can’t be pleasant.
To make it worse, as you go faster you shrink in the direction of travel. (So much for the symbolism of the sports car then.) At the speed of light, your length front-to-back would be zero. Something with no length at all but which weighs more than the whole universe isn’t really a possible thing, so matter never can go as fast as light. The only reason light itself can manage is that it has no mass and no length to change.
Another way to think of it: The speed of light is the infinity of speed. Saying “faster than light” is like saying “more than infinity”, it’s a meaningless statement. So if this experiment showed particles of matter going from A to B in less time than light could, you’re forced to conclude that, well, perhaps A isn’t as far from B as you thought. Or maybe the particles found some sort of short cut. Or… the universe just shrunk or… something.
Those are actually genuine suggestions. Most modern theories of the universe tend to have a few extra spatial dimensions lying around; not just the Up-Down, Forward-Back and Left-Right we know, but also Hoo-Hah, Abba-Dabba and Hosni-Mubarak. Say. Maybe those extra dimensions form hidden spaces that the particles (called neutrinos) can cut through.
Or maybe not. Frankly no one knows. Any theory that accounts for a deviation from such a fundamental law has to be so darn theoretical that it may as well just be a particularly pretty form of hand-waving. Most likely explanation? They’ve simply made a mistake. They are some of the most intelligent people on the planet, they have the best lab in the world, and they’ve spent the last six months re-checking their results, but still the best explanation is that they put a decimal point in the wrong place somewhere. Almost anything is more likely than that their results are actually right.
I have a theory of my own. Of course.
CERN is headquartered in Geneva, Switzerland. That’s good, we expect things to be done with precision there. But in order to measure such high speeds, the neutrinos have to be sent to a target that’s some distance away. Quite a distance actually. Further than Switzerland is big. In Italy in fact.
Italy. Of course they’re getting figures that don’t reflect reality. Berlusconi is probably pocketing some of those neutrinos himself.
Related articles
- Faster Than LIGHT: CERN Presentation (infosecurity.us)
- CERN claims to have discovered particle that travels faster than light (boingboing.net)
- Faster-than-light back with surprising CERN discovery (go.theregister.com)
- CERN Experiment Indicates Faster-Than-Light Neutrinos (science.slashdot.org)
The End Of The Euro Crisis?
Posted by Richard Chapman in Politics on July 13th 2011
Economic Growth - Or Lack Thereof
I hate the silly term double-dip recession. It makes it sound like there is some sort of mathematical explanation for this graph, a predictability about it. What we have is false recovery, the kind that only happens because markets work on the assumption that recessions will come to an end out of some sort of natural pattern. Would-be investors wait for the whole boom-bust cycle to start all over again so they can get in at the bottom. The brief spurts of growth we see are like sprinters waiting too long for a race to start. They dash off alone, only slowing to a halt when they realise no one’s joining in.
We are not recovering yet because, simplistically put, we have not yet reached the bottom. More accurately though, we can’t rebuild an economy when there is so much non-existent money in the way.
We need to face up to the fact that the western economy is still stuffed to the ears with bad debt. We are treating bad investments that will never yield a damn thing as real money that somehow must be paid back to the investor – even if the taxpayer has to be made to do it. But it’s not real money. These are failed investments. The money has been lost. It no longer exists.
This blog post is highly speculative, but it argues that the sudden willingness of European banks to take a loss on Greece is because they foresee things getting much worse, soon. One of Italy’s largest banks is stuffed with bad debt, and it seems more than likely that if it goes, the Italian economy will go with it. The Eurozone cannot afford to bail out a country that large.
But this is actually a good thing. We will finally have to stop pretending this can be fixed with bandages, and do the major surgery necessary. It will hurt, but not as much as treating innocent taxpayers like reckless debtors hurts.
Related articles
- Italy Crisis, Ireland Downgrade Intensify Euro Nightmare (huffingtonpost.com)
- Ireland’s Rating Cut to Junk as EU Seeks to Contain Debt Crisis (businessweek.com)
Facebook and Microsoft?
Posted by Richard Chapman in Technology on July 7th 2011
May I be the first to run around the room with my arms flailing? Facebook may merely be working with Skype to introduce video calling, and Skype may have only been recently bought by Microsoft, but it immediately makes you fear that Microsoft are on the point of buying Facebook. And that would be almost unthinkable. The lumbering old PC monopolist, owning the nimble new social network. The folks at Redmond, with their hands on our personal profiles. Shiver.
Yet… It seems a compelling match. Though not officially on sale yet, the estimated asking price of Facebook is The Largest Number You Can Think Of – a sum which Microsoft just happens to have.
Will they? Would they? They may have to. If Google actually begins to rival Facebook with its Google+ network, it is going to have a fantastically powerful strategic position. And remember, as the main way that the world interacts with the Web and the maker of what is going to become the world’s most popular phone OS, Google has a strategic position already far in advance of anyone.
It’s clear already what they’re planning to do with Google+. They’re going to blend social networking in. They want a person’s online activities, their socializing and their Web searching, to merge casually and seamlessly together. Search for an air fare to Italy, let your friends (or a certain group of friends) see that you’re searching, get their comments and tips. It’s amusing that just after all the browser-makers introduced an “In Private” feature so that you could explicitly search without being seen, Google realised that an “In Public” option would be even better.
This will work. People will like their social networking being blended into their general online activities. It will make using the Web as a whole a much more social thing, a lot more like being with people. It will be great and Google will become even more fantastically powerful.
So if Microsoft want to stay in the game, they need Facebook. The chances of them successfully introducing their own social network system seem poor. There’s really just one question. If Facebook becomes a property of Microsoft, will it instantly become uncool? It seems likely that being owned by Mr. Fox contributed to the demise of MySpace, possibly a similar effect could strike down Facebook. Especially if Google are successful in selling Google+ as the cooler alternative. I’m not sure. Facebook is so big now that it seems almost unimaginable that it could falter. And yet, anything can happen on the Web.
Then again, Microsoft could actually improve Facebook’s image. MS is not exactly the world’s most trusted and loved company, but it is at least known to be businesslike. Facebook is so good at giving the impression of being fundamentally unreliable that Microsoft could actually make it seem a lot more trustworthy.
What’s more, if MS keeps blundering around with the sense of direction it’s displaying right now, if Apple and Google keep running rings around them like this, it’ll soon be able to portray itself as the loveable underdog.
As I say, anything.
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