"Dormant Membership"

Hans Werner Sinn and Friedrich Sell have a shining new idea for the eurozone: let the struggling eurozone countries freeze their membership, re-introduce their national currency, and return to the euro through ERM II. Exchange rate can then re-enter as a tool to restore competitiveness. They cite good historical examples, such as the time Germany decoupled the D-mark from its link to the dollar in October 1969 and later resetting it at a rate 9% lower or Argentina breaking its peg. MR=MC would question the legal aspects of putting a freeze on struggling Eurozone countries' membership to the euro though. How would bonds be re-denominated? At what rate?

Economics Shall Prevail

"Equally, economics is not the only social science engaged in this race: our friends in political science and sociology use similar tools; computer scientists are grappling with “big data” and machine learning; and statisticians are developing new tools.  Whichever field adapts best will win.  I think it will be economics.  And so economists will continue to broaden the substantive areas we study.  Since Gary Becker, we have been comfortable looking beyond the purely pecuniary domain, and I expect this trend towards cross-disciplinary work to continue."
- Justin Wolfers, UPenn

Points Against Sarbox

Francis McKenna provides the following points about Sarbox:

- PwC was unable to detect Satyam's $1bn fraud

- Big Four audited the banks before the crisis.

- PwC has been paid $500m in fees over the five years but J.P. Morgan's trades mistakes still happened.

- Audit companies still encourage partners to sell additional services to audit partners.

- They are paid by the companies they audit.

Economics of Scale in Finance and Independence

Mr. Weil, who caught the headlines last week for calling the break-up of banks, discovered something else in 2001 -that economics of scale in financial firms could have the effect magnifying risks. As you "cross-sell" to customers (for example to the subprime mortgage owner Joe Citi's car insurance), the independence of risk between those two events perish. That is, in simple terms, bad. No wonder that Citi is less than half its book value. It's worth more dead than alive.

Tower Dumps and Privacy

- Foreign Intelligence Surveillance Act (FISA) allows intelligence agencies to eavesdrop on people. And from 1979 to 2011, it rejected only 11 applications and is subject to no other review.

- Between July and December, Google received 4,601 requests for information about its users. Google has complied with 93% of the requests from American authorities.

- The Electronic Communications Privacy Act (ECPA), passed in 1986, still remains the main law governing access to electronic communication.

Greek Government Spending ALlocation, 2012

According to the Greek Finance Ministry, 

43% on wages and pensions

33% on health and welfare

14% on operating expenses

8% on transfers

2% on reserves

Total spending:  €47.7bn 

Lethargy and Development

According to a paper in the Lancet, insufficient activity has nearly the same effect on life expectancy as smoking. Bad thing that another paper in the Lancet, this one by Pedro Hallal of the Federal University of Pelotas in Brazil, finds that 31% of adults across the world are not getting enough exercise. Malta wins the prize of being the laziest, exercise being defined as 30 minutes of moderate exercise five days a week or 20 minutes of vigorous exercise three days a week.