"Those whom the gods would destroy, they first encourage to borrow cheaply"

Today's must read on the next financial panic.

Video: Ferguson, Rattner, Murray, etc. on What's Happened to the American Dream?

Video: Raghuram Rajan, Niall Ferguson, etc. on The Future of Capitalism

This video from the Milken Institute Conference unfortunately appears to begin after the panel has already begun and cuts abruptly, but still features a very good discussion of economic issues in the U.S., Asia, and Europe.

Chart of the Day: Generation U

Perhaps its time to rename Gen Y as Gen U, as in Generation Unemployed.

Not surprisingly, the PIIGS occupy five of the top seven spots in this primarily European country sample. Chronically unemployed young males are often a key ingredient in social unrest and revolution.

Source: The Economist

Was putting a man-on-the-moon peculiarly un-American?

First-image of ISS docking by a soon-to-retire U.S. space shuttle

The Economist has an interesting read on the 50-year anniversary of President Kennedy's speech which set a goal of putting a man-on-the-moon within a decade.

Here's the key excerpt:

He (Kennedy) set out to make America’s achievements in space an emblem of national greatness, and the project succeeded. Yet it did not escape the notice of critics even at the time that this entailed an irony. The Apollo programme, which was summoned into being in order to demonstrate the superiority of the free-market system, succeeded by mobilising vast public resources within a centralised bureaucracy under government direction. In other words, it mimicked aspects of the very command economy it was designed to repudiate. 

That may be why subsequent efforts to transfer the same fixity of purpose to broader spheres of peacetime endeavour have fallen short. If we can send a man to the moon, people ask, why can’t we [fill in the blank]? Lyndon Johnson tried to build a “great society”, but America is better at aeronautical engineering than social engineering. Mr Obama, pointing to competition from China, invokes a new “Sputnik moment” to justify bigger public investment in technology and infrastructure. It should not be a surprise that his appeals have gone unheeded. Putting a man on the moon was a brilliant achievement. But in some ways it was peculiarly un-American—almost, you might say, an aberration born out of the unique circumstances of the cold war. It is a reason to look back with pride, but not a pointer to the future.

Barring a crisis or existential threat, are the prospects for the U.S. undertaking an ambitious, focussed transition to a sustainable energy based system, or an affordable healthcare system, extremely remote?

In short, was the U.S.'s Race to the Moon success, as The Economist puts it, a 'glorious one-off'?

Video: U.S. Debt Limit Cartoon

What is Financial Repression and How Investors Can Protect Themselves

Carmen Reinhart

Financial repression, a subject last widely studied in development economics circles in the 1970s-80s, appears to be making a comeback. Bill Gross dedicated his May investment letter to financial repression, and an article by the FT's Gillian Tett describes how both policymakers and investors are having to refamiliarze themselves with its tenets.

Just what exactly is the ominous sounding 'financial repression'? Below is an abridged definition from Reinhart & Rogoff's This Time is Different:

Banks are vehicles that allow governments to squeeze more indirect tax revenue from citizens by monopolizing the entire savings and payment system. Governments force local residents to save in banks by giving them few, if any, other options. 

They then stuff debt into the banks via reserve requirements and other devices. This allows the government to finance a part of its debt at a very low interest rate; financial repression thus constitutes a form oftaxation. Governments frequently can and do make the financial repression tax even larger by maintaining interest rate caps while creating inflation.

The 'Era of Financial Repression'

Carmen Reinhart and M. Belen Sbrancia recently published a paper which analyses the extent of financial repression among advanced economies in the post-World War II period. Here's Reinhart's and Sbrancia's updated definition of financial repression, which now includes pension funds along with banks in their list of domestic captives:

A subtle type of debt restructuring takes the form of “financial repression.” Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.

They studied the post-WWII period:

In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s. Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt. 

And their key finding which has PIMCO's Bond King in a tizzy:

Continue reading the full article at SeekingAlpha here.

Chart of the Month: Healthcare Bang (or lackthereof) for the Buck

This one is so outrageous that it deserves more heft than the usual Chart of the Day, or Week title.

(click to enlarge)

In fact I almost dubbed it Chart of the Year, but to be prudent I wanted to to wait a little a longer to see how this chart plays out.

Education Site: Those interested in careers in healthcare and healthcare reform, might be interested in Guide to Online Schools degree and certificate programs in the medical field.

Video: Niall Ferguson -- Will the Financial Crisis Lead to America's Decline?

Courtesy of FORA.tv, a July 2010 panel discussion with David Gergen, Mort Zuckerman and Niall Ferguson at the Aspen Institute broken out in subject chapters in the links below.

01. Introduction      05 min 08 sec
02. Financial Crisis Accelerated West to East Power Shift     07 min 50 sec
03. American Business Culture Is Healthy     06 min 44 sec
04. Threat of Rapid Decline    03 min 53 sec
05. Complexity Theory and National Strength    02 min 30 sec
06. Debt and Stimulus    03 min 22 sec
07. Innovation Only Helps by Creating Domestic Jobs    02 min 59 sec
08. Growing Education Gap    02 min 38 sec
09. A World Without a U.S. Superpower    04 min 55 sec
10. Q1: U.S. Headed Toward Capitalism or Socialism?    02 min 48 sec
11. Q2: What Happened to Budget Surplus    02 min 00 sec
12. Q3: Coping with China Graduating Thousands of Engineers    02 min 37 sec
13. Q4: How to Manage the Deficit    05 min 05 sec
14. Q5: Low Birth Rate in China    02 min 52 sec
15. Q6: Federal Reserve and Treasury Contribution to Crisis    03 min 26 sec

Video: U.S. State Budgets - Day of Reckoning Upon Us

When to Pull the Plug

Is there another subject that is both more complex and deeply personal than medical ethics?

Seven years ago this subject came up in a conversation with World Business Academy Founder and President, Rinaldo Brutoco. In the dictionary next to the world 'polymath' there should be a picture of Rinaldo.

Rinaldo and I were going over a speaking circuit checklist, discussing the subjects he felt qualified to lecture on. It was a long, diversified list, and he confidently checked every box except one: medical ethics.

Realizing that this was a topic that not only stumped Rinaldo, but also left him uncomfortable or unable to defer to another expert, I promptly tabled further contemplation of the subject. For me, the topic reemerged during the recent health care reform debate when rumors of  "death panels" began circulating about.

Below is a preview from the highly regarded PBS program Frontline, which will be profiling medical ethics in an upcoming program.

Watch Facing Death on PBS. See more from FRONTLINE.

Here is the press release from the show:

"How far would you go to sustain the life of someone you love, or your own? When the moment comes, and you’re confronted with the prospect of “pulling the plug,” do you know how you’ll respond? Unfounded rumors of federal “death panels” grabbed headlines last summer, but the real decisions of how we die -- the questions that most of us prefer to put off -- are being made quietly behind closed doors, increasingly on the floors of America’s intensive care units. In this film, FRONTLINE gains access to the ICU of one of New York's biggest hospitals to examine the complicated reality of today’s modern, medicalized death. Here we find doctors and nurses struggling to guide families through the maze of end-of-life choices they now confront: whether to pull feeding and breathing tubes, when to perform expensive surgeries and therapies or to call for hospice. The film also offers an unusually intimate portrait of patients facing the prospect of dying in ways that they might never have wanted or imagined."

Venturing into a discussion of medical ethics often becomes deeply emotional. Perhaps there is no better illustration of the gap between the intellectual disciplines, such as economics, medicine and philosophy, which have attempted to provide insights into medical ethics, and our humanity.