Social Media, the ultimate WMD.

When George W. Bush decided to invade Iraq one of the main reasons (of the public and politically correct ones) was not only to free the Iraqis from the oppression of Saddam Hussein, but to stop the menace Saddam's Weapons of Mass Destruction (WMD for short) posed to the stability of the Gulf region. After months long of thorough search for said WMDs none was found. Maybe they were looking for the wrong WMD...

If you look at all the civil unrest happening across Arab countries in the last weeks you can clearly see that the ultimate WMD is neither a nerve gas nor a new virus, but Twitter, Facebook and social media in general.

Going underwater? Learn to swim

With the housing boom and bust of the last years a fairly new phenomenon has been born, I am talking about 'underwater mortgages'. People were blind and naive to think that the housing market will incessantly go up. Banks, mortgage intermediaries, real estate salesmen, governments and even some economists (that is the most unbelievable part) helped uninformed people think this was true and was going to be for ever after. Of course they all had their own interests in making this fallacy last as long as possible, making the mother of all bubbles grow forever. "Buy a house! It pays by itself" Can you already see the problem with this?

Debt death spiral

Issuing debt when you have problems is not the answer. It is not the answer for today's problems and obviously it will not be the answer for your forthcoming problems... In fact it creates more problems for the future. Take the case of a struggling household, what is the wise thing to do if your income was to decrease for some reason: Keeping your spending as usual by borrowing money? or trying to optimize it and reduce expendables? Everyone on its right mind will tell you the later is the only responsible and logic way to go. Well, everyone but European governments or so it seems.

The euro, evolved. Europe's way out?

As we discussed in an earlier post, one of the possible solutions to the problems the single currency is causing to some eurozone members would be to split said currency into two different ones. The main purpose of this would be to better focus on the members' vastly different and diversified needs and demands. However this move would not be free of charge... 

Let's do a quick analysis of what this currency split would mean. 

Europe. Opposed realities, same currency

When the euro was born in the late 90's everybody (except for the UK and Sweden) thought that adopting it was the best way to boost the European Union (EU), to establish it as a competing power to the supremacy of the United States and its reference currency, the US Dollar. It was expected to facilitate intra-EU commerce and tourism, ease the access to credit and financial instruments and making them more stable at the same time. Purchasing power and exports-imports from EU companies would benefit from having a better reference instrument to compare their money against the rest of the world currencies, lowering the risk introduced by exchange rates fluctuation worldwide. It really had all of those benefits, at least at the beginning... 

Economic policy new year resolutions

Each and every new year people make bold statements about changes (for the better) they are decided to apply to their lives from the very beginning of said year. Now replace the word 'people' with 'government' and 'lives' with 'countries'. Does this sound familiar? Yes, every government promises to change the country for better, but as it happens with people, most of them end up doing the same thing, committing the same errors over and over again.

This year should different though, numerous countries are in a situation where, if they keep doing the same, they will not stay the same, but they will go deep down. When the global outlook was (artificially) good, governments' mistakes were easily eclipsed by the housing boom, low unemployment rates, easy money and a ridiculously big government spending. Not anymore.