[YEDG] YEDG - May 25 - Topics
박종철
Hi there,
Here are articles that we will handle this May 25.
Article 1: Financial Times
Equity not debt is the key to a creditable recovery
Article 2: Financial Times
Lionel Barber memo to staff on reshaping the newspaper for the digital age
ciao,
Greg
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Article 1: Financial Times
Equity not debt is the key to a creditable recovery
Andrew McNally (April 8)
The elixir favoured by mainstream politicians has worsened inequality, says Andrew McNally
Politicians of all shades seem united on one thing at least: the need for banks to keep lending. Since the financial crisis, getting credit flowing has been the main goal of financial policy.
And policy makers have pursued it with energy and ingenuity. The Bank of England’s Funding for Lending programme, which gives banks incentives to extend new loans; the European Central Bank’s long-term refinancing operations; the British government’s Help To Buy scheme, which caps lenders’ losses on certain types of mortgage – the list goes on. All are products of the same belief, that credit is the elixir of recovery. It is a premise that no mainstream politician seems to doubt.
However, would they be quite so united, left and right, if they could see how the proliferation of credit has contributed to sharpening inequality? The link is real and damaging. Even if credit creation did boost employment for a while, this approach will deny most of society the returns to risk capital – the rewards of economic progress. We seem to be rushing into another credit-driven boom, with huge rewards for a few, and social and economic exclusion for the many. It is as economically destructive as it is socially poisonous.
Over the past 30 years, the ratio of bank assets to gross domestic product in advanced economies has roughly doubled. At the same time, inequality has become more pronounced. The income of the richest 10th is now more than the income of the bottom half combined – which puts inequality at the highest level for 30 years.
This expansion in credit is not purely the responsibility of the financial services industry. It was popular demand for government spending and housing assets – and the need for debt financing to pay for them – that triggered the credit explosion that lies at the root of inequality. The finance industry, with global investment banks at the helm, became this engine. Governments and the public were willing to do a deal on more or less any terms. But the pact became a Faustian one, with deregulation as its binding force. Financing of economic progress was not the only thing subcontracted to the banks; so was the decision over who takes the rewards.
When all the great economic theories are boiled down, claims on a valuable asset are of one of two kinds: debt and equity. The rest is detail. The equity financiers receive the returns to the capital after the interest on the debt has been paid; debt providers merely receive the interest. Equity can last forever; debt only until it matures. Returns to equity are the mechanism by which the financial rewards of economic progress are recycled in perpetuity.
The Faustian pact means society’s assets are debt financed as never before. Most people pay for implicit government guarantees for the banks. Meanwhile, equity financing is left in the hands of the very few, with the banking industry increasingly structured to redirect and detract from the returns.
This is the heart of a great denial; everyone is contributing to economic progress but few benefit. In a well-functioning capitalist economy, the rewards of economic progress would be channelled back to society as a whole, albeit in unequal measure. That is not happening as is should.
So instead of uniting to call for credit to flow again, we should call for equity to flow. While debt indentures most of society, equity makes us partners. As the so-called second machine age dawns, returns to capital can be expected to surge, while middle-class jobs are in danger of disappearing. We need to break free from a financial system that concentrates our long-term wealth in the hands of just a few.
Regulators should ensure that banks are efficient intermediaries but nothing else. Unleashing competition will soon bring down excessive complexity, inefficiency and fees. The tax system should stop rewarding companies for taking on excessive amounts of debt, and reward the use of equity finance instead. Savers should be encouraged to own equity so they can share in the success of the companies they help to finance.
Whichever way we vote, most of us are capitalists and believe that the pursuit of profit is a good thing. But we need to restate the basic case for capitalism and rebuild support for business. If not, we will inhabit an increasingly unequal world. And we will not recover and develop as we can and should.
The writer is chairman of Berenberg UK
Article 2: Financial Times
Lionel Barber memo to staff on reshaping the newspaper for the digital age
We are now ready to take the next steps in our successful “digital first” strategy. This is an exciting but also challenging opportunity for all journalists at the Financial Times. It means changes in work practices, a further shift of resources to ft.com and a significant reshaping of the newspaper.
Our plan is to launch a single edition, global print product in 2014. The new FT will be refreshed and updated to reflect modern tastes and reading habits. It will continue to exude authority and quality, delivering a powerful combination of words, pictures and data to explain the most important issues of the day.
The new FT will be a better paper to suit the times. It will remain a vital part of our business, contributing significant advertising and circulation revenues. But, crucially, it will be produced differently and more easily. The changes will impact the structure of the newsroom – and the way we practise our journalism.
Here are some pointers:
First, the 1970s-style newspaper publishing process – making incremental changes to multiple editions through the night – is dead. In future, our print product will derive from the web offering – not vice versa. The new FT will be produced by a small print-focused team working alongside a larger integrated web/day production team.
Second, the structure of our planned single edition, possibly single section newspaper means minimal late evening changes and more templating of standard pages. We will however retain flexibility for a tailored UK edition with UK news pages. Our main design effort will focus on “show pages” with accompanying rich data and graphics.
Third, our news editors and reporters will shift further away from reactive news gathering to value-added “news in context”, while remaining faithful to the pursuit of original, investigative journalism. News editors will need to do more pre-planning and intelligent commissioning for print and online. This will require a change in mindset for editors and reporters but it is absolutely the right way forward in the digital age.
Overall, these changes will mean that much of the newspaper will be pre-planned and produced. Production journalists will publish stories to meet peak viewing times on the web rather than old print deadlines. The process will be akin to a broadcasting schedule. Where once we planned around page lay-outs, we will now adopt a news bulletin-style approach.
Finally, the changes in newspaper production will require further changes in working practices. I understand that this will challenge those long been used to late evening work. But as we move into the next phase of digital first, colleagues need to make informed choices about their careers at the FT and where opportunities lie.
We will need to move more resources from late evening to day and from afternoon to morning, notably in London. Production journalists will be digitally focused. Online, we will concentrate on smart aggregation of content from our own journalists and third parties. However, the emphasis online will be on articles rather than section pages.
FT journalism must adapt further to a world where reporters and commentators converse with readers. Our goal must be to deepen engagement and ensure we meet readers’ demands whenever and however they turn to us for breaking news and quality analysis. FastFT, one of our most successful innovations this year, has shown our determination to do just that. More is to come.
Our approach to the newspaper and ft.com is a logical extension to the changes we have made in the newsroom over the past decade and more. Thanks to these changes, the FT has established itself as a pioneer in modern media.
We have transformed our business model, successfully charging for content and building a global subscription business. Last year, our online subscriptions surpassed our print circulation for the first time. Today, we have more than 100,000 more digital subscriptions than print sales.
This is no time to stand still. The competitive pressures on our business to adapt to an environment where we are increasingly being read on the desktop, smart phone and tablet – remain as strong as ever. The pace of change, driven by technology, is relentless as I was reminded once again during my recent conversations in Aspen and Sun Valley.
I want to thank all FT journalists for their dedication to the cause. These are challenging times. But as long as we embrace change and continue to innovate, we will continue to produce the world-class journalism of which we are all proud.
Lionel
(Optional & Related Article)
Qhttp://economix.blogs.nytimes.com/2014/03/11/qa-thomas-piketty-on-the-wealth-divide/?_php=true&_type=blogs&_r=0#
Q&A: Thomas Piketty on the Wealth Divide
By EDUARDO PORTERMarch 11, 2014, 6:21 pm27 Comments
Charles Platiau/ReutersThomas Piketty.
Income inequality moved with astonishing speed from the boring backwaters of economic studies to “the defining challenge of our time.” It found Thomas Piketty waiting for it.
A young professor at the Paris School of Economics, he is one of a handful of economists who have devoted their careers to understanding the dynamics driving the concentration of income and wealth into the hands of the few. He has distilled his findings into a new book, “Capital in the Twenty-First Century,” which is being published this week. In the book, Mr. Piketty provides a sort of unified theory of capitalism that explains its lopsided distribution of rewards.
Eduardo Porter’s Economic Scene column this week discusses Mr. Piketty’s work. Following is the transcript of an email interview he conducted with Mr. Piketty last week, lightly edited for length and clarity.
Q.
Your book fits oddly into the canon of contemporary economics. It focuses not on growth and its determinants, but on how the spoils of growth are divided. In that sense, it reminds us of similar concerns in a book of similar title written 150 years ago: Karl Marx’s “Capital.” What parallels would you draw between the two?
A.
I am trying to put the distributional question and the study of long-run trends back at the heart of economic analysis. In that sense, I am pursuing a tradition which was pioneered by the economists of the 19th century, including David Ricardo and Karl Marx. One key difference is that I have a lot more historical data. With the help of Tony Atkinson, Emmanuel Saez, Facundo Alvaredo, Gilles Postel-Vinay, Jean-Laurent Rosenthal, Gabriel Zucman and many other scholars, we have been able to collect a unique set of data covering three centuries and over 20 countries. This is by far the most extensive database available in regard to the historical evolution of income and wealth. This book proposes an interpretative synthesis based upon this collective data collection project.
Q.
For much of the last century, economists told us that we didn’t have to worry about income inequality. The market economy would naturally spread riches fairly, lifting all boats. Is this not true? Are you arguing that income inequality could grow forever? How so?
A.
History tells us that there are powerful forces going in both directions. Which one will prevail depends on the institutions and policies that we will collectively adopt. Historically, the main equalizing force — both between and within countries — has been the diffusion of knowledge and skills. However, this virtuous process cannot work properly without inclusive educational institutions and continuous investment in skills. This is a major challenge for all countries in the century underway.
In the very long run, the most powerful force pushing in the direction of rising inequality is the tendency of the rate of return to capital r to exceed the rate of output growth g. That is, when r exceeds g, as it did in the 19th century and seems quite likely to do again in the 21st, initial wealth inequalities tend to amplify and to converge towards extreme levels. The top few percents of the wealth hierarchy tend to appropriate a very large share of national wealth, at the expense of the middle and lower classes. This is what happened in the past, and this could well happen again in the future.
Q.
Inequality declined in the so-called industrial world through much of the 20th century. How did that happen? Does this not argue against the notion of ever-increasing inequality?
A.
The reduction in inequality was mostly due to the capital shocks of the 1914-1945 period (destruction, inflation, crises) and to the new fiscal and social institutions that were set up in the aftermath of the World Wars and of the Great Depression. There was no natural tendency toward a decline in inequality prior to World War I. During the 20th century, rates of return were severely reduced by capital shocks and taxation, and growth rates were exceptionally high in the reconstruction period. This largely explains why inequality remained low in the 1950-1980 period.
Q.
Why are you confident that the economy will grow slower than returns on capital?
A.
Over the 1700-2012 period, world output has grown at 1.6 percent per year on average, including 0.8 percent due to population growth and 0.8 percent due to per capita output growth. This may seem small, but in actual fact this was sufficient to multiply the world population by more than 10 — from 600 million to seven billion inhabitants. According to U.N. population forecasts, this seems unlikely to happen again in the coming decades and centuries. Indeed population has already started to stabilize or even decline in a number of European and Asian countries. Productivity growth can certainly continue forever, assuming we invent clean energy. But in any case it will probably not be faster than 1 to 1.5 percent. It is only in exceptional periods, e.g. when countries are catching up with other countries, that productivity growth rates reach very high levels — say 4 to 5 percent or even higher.
In contrast, rates of return on capital can be 4 to 5 percent over centuries, or even higher for risky assets and high wealth portfolios. Contrarily to what Karl Marx and other believed, there is no natural reason why rates of return should fall in the long run. According to Forbes’s global billionaires list, very top wealth holders have risen at 6 to 7 percent per year over the 1987-2013 period, i.e. more than three times faster than per capita wealth and income at the world level. Wealth concentration will probably stabilize at some point, but this can happen at a very high level.
Q.
The concentration of wealth and income in the United States seems to follow a different pattern than it does in Europe and other wealthy countries. Why does it look so different?
A.
Historically, and to some extent until the present day, higher population growth is the key force that has reduced the relative importance of inherited wealth in the U.S. as compared to Europe. In contrast, one observes in the recent period an unprecedented rise of top managerial compensation in the United States. This is a new form of inequality, which I attempt to explain in terms of the particular U.S. history of the social and fiscal norms over the past century.
Q.
Some economists argue that inequality, in the United States, at least, is a good thing. It acts as an incentive for entrepreneurs to take risks and innovate, thus driving economic growth. Is there anything to that argument?
A.
In theory, yes. But in practice you see inequality everywhere, except in the productivity statistics. The rate of productivity growth has not been particularly good in the U.S. since 1980. Inequality is desirable up to a point. But beyond a certain level it is useless. One of the key lessons of the 20th century is that you can have high growth without the inequality of the 19th century.
Q.
Might inequality in the United States be less damaging than it is in Europe because the very rich were not born into wealth, but earned their money by creating new products, services and technologies?
A.
This is what the winners of the game like to claim. But for the losers this can be the worst of all worlds: They have a diminishing share of income and wealth, and at the same time they are depicted as undeserving.
Q.
What are the risks from allowing an ever-increasing concentration of wealth and incomes? Is there a point when inequality becomes intolerable? Does history offer any lessons in this regard?
A.
U.S. inequality is now close to the levels of income concentration that prevailed in Europe around 1900-10. History suggests that this kind of inequality level is not only useless for growth, it can also lead to a capture of the political process by a tiny high-income and high-wealth elite. This directly threatens our democratic institutions and values.
Q.
You noted that the concentration of wealth was stopped in the 20th century by war, hyperinflation and growth. Are there other options? What could we do now to counteract the current accumulation of wealth into very few hands?
A.
The ideal solution is a progressive tax on individual net wealth. This will foster wealth mobility and keep concentration under control and under public scrutiny. Of course other institutions and policies can also play an important role: Inflation can reduce the value of public debt, reform of patent law can limit wealth concentration, etc.
Q.
Owners of wealth are unlikely to like this solution. And they probably have the political power to stop it. In this sense, do you think our democratic systems will be able to address and slow this trend?
A.
The experience of Europe in the early 20th century does not lead to optimism: The democratic systems did not respond peacefully to rising inequality, which was halted only by wars and violent social conflicts. But hopefully we can do better next time. At the end of the day, it is in the common interest to find peaceful solutions. Otherwise there is a serious risk that growing parts of the public opinion turn against
RYAN SHIN
오늘도 우리가 살고 있는 자본주의의 근본적인 구조를 생각해 볼수 있는 좋은 주제 감사드립니다.
http://m.news.naver.com/read.nhn?mode=LSD&mid=sec&sid1=101&oid=004&aid=0002137840한국 경제현상의 큰 흐름도 'Debtism 부채주의'로 대부분이 설명된다. 개인은 가계부채, 기업은 부실기업 구조조정, 국가는 재정적자와 고령화라고 요약된다. '자산'이 많은 것보다 '부채'가 적거나 '자본(현금)'이 넉넉한 개인과 기업, 국가가 '일류'로 통하는 시대라는 점을 부인하는 사람은 많지 않다.
RYAN SHIN
Mobile: +82.10.7760.5601