22 Jul 2009 - Meten is weten

Generally I do not support the positions of Geert Wilders and his Freedom Party. Actually, I find his party’s success in popular polls and the June 4 election for European Parliament quite nauseating. But I do not object to the Freedom Party’s request to outline the costs and benefits of immigration. It may in fact help to improve current integration policies. After all, meten is weten.

It’s not a very elegant analogy, but one reason crime rates in New York City are down so spectacularly is because the NYPD started to collect detailed statistics on the crime rates per neighborhood on a weekly basis. Maps of crime trends help the police department decide how, when and where to deploy its officers.

The bottom-line is that immigration can be beneficial to society, as long as you help immigrants to make best use of their talents. New York City mayor Mike Bloomberg calls immigrants “the lifeblood” of the City and their contribution “beyond measure”. New York’s immigrant community has very little unemployment and very low crime, particularly the undocumented (illegal) immigrants.

Mike Bloomberg knows best. After all, the mayor is a smart business man. In 1981 he founded Bloomberg LP, a 25 billion dollar financial news organization that employs more than 10,000 people in over 135 offices around the world. Bloomberg’s personal net worth is an estimated 16 billion dollar, according to the most recent Forbes 400 ranking. That makes him the richest man of New York City and the eighth-richest American.

So don’t trust my word on immigration. Trust Mike Bloomberg’s.

Mike Bloomberg on New York City Immigrants

posted under Immigration, Netherlands, New York City | 5 comments

19 Jul 2009 - New York City’s Jaw-Dropping Crime Rate

Crime rates in New York City keep dropping like autumn leaves despite having fewer police officers on the streets. The New York City Police Department (NYPD) will shrink to little over 34,000 officers within a year, compared to 41,000 officers a decade ago. The crime rate fell from 10,000 crimes per 100,000 people in the late eighties to 2,000 crimes per 100,000 people last year. Murders, which hit 200 on July 1, are heading toward a fresh low.  In 1990 the murder rate reached its peak at more than 2,200 murders a year. If New York City were to end this year with 400 murders or less, its murder rate will be quite comparable to that of Amsterdam (which hit 35 in 2005) and Rotterdam. Much will depend on the weather, it seems. According to a recent New York Times article, the number of killings in the City rises with the heat. And there are fewer homicides on a rainy day as well.

The ever-dropping New York murder/crime rate is remarkable in a number of ways:

1. New York City has fewer police officers than Amsterdam (34,000 police officers for a population of 9,000,000 compared to 6,000 police officers for a population of 900,000);

2. One would expect an exponential rather than a linear relationship between murder rate and a city’s population size; 

3. New York City is bound by the constitutional right to keep and bear arms despite every New York City mayor opposing it (including Rudi Giuliani, before he ran for president).

If the murder rate hits a record low this year, we may have to thank the crappy weather for it. Last month was the coldest and wettest June on record.

posted under New York City | no comments yet

14 Jul 2009 - Goldman Sachs Set to Pay Record Bonuses

After today’s earnings report, Goldman Sachs employees may be eligible for average pay packages of as much as 900,000 dollar. Second-quarter earnings reported today were up 65 percent compared to 2008, totaling 13.76 billion dollar. Last year the average pay package at the Wall Street bank was a mere 363,000 dollar.

Last month Goldman Sachs repaid 10 billion dollar of government aid (TARP) that it received after the collapse of Lehman Brothers in September 2008. As I suggested in Friday’s column, Goldman Sachs may have done so in order to get rid of the US Treasury’s interference with its pay practices.

However, Goldman Sachs also received 14 billion dollar from AIG, after the US government came to the insurance conglomerate’s rescue with 178 billion dollars. No word that it will repay that money to the US government as well.

posted under Executive Pay | no comments yet

10 Jul 2009 - China is at it again

Following earlier statements by Zhou Xiaochuan of the People’s Bank of China in March, China renewed its criticism of the dominant role of the US dollar as a global reserve currency at the meeting of the G-8, The Financial Times reports today. In front of President Obama, the Chinese state councilor Mr Dai unequivocally called for the world to diversify the reserve currency system. The country that holds an estimated 2 trillion dollar in U.S. T-bills clearly doesn’t shy away from using its leverage in the international political arena.

posted under China, Economics, International, United States | no comments yet

06 Jul 2009 - Financial Wizards of Oz

The Financial Times reports today that investment banks, including Goldman Sachs  and Barclays Capital, are inventing new schemes to reduce the capital cost of risky assets. Financial innovation, which brought about the current economic crisis, is far from dead.

Instead of shifting risk to the economic agents and institutions most willing and able to bear risk, financial shifted risk to the imprudent, the reckless, and the fraudulent. As recent history showed us, this may cause costly financial crashes, defaults and bankruptcies. As Willem Buiter pointed out in his Maverecon blog, financial innovation does not only distribute risk in the economy inefficiently, but also increases the total quantum of risk as it increases the likelihood of abnormal times—panics, manias and crashes—occurring, and the scope and severity of financial crises.

posted under Economics, Financial Reform | no comments yet

02 Jul 2009 - Financial Warfare: And the Winner is…

The CIA has established a special unit to investigate economic and financial threats to the United States’ security. The unit sends President Obama daily briefings with an assessment of the economic risks. In March the Department of Defense already organized an economic war simulation. The Pentagon invited hedgefund managers, bankers and economic scholars to assess different scenario’s that might shift the balance of power in the world. Quelle surprise… China turned out to be the smartest economic warrior. Perhaps China’s decision to accumulate over two trillion dollar in foreign currency reserves wasn’t such a blunder after all.

posted under Economics, International | no comments yet

29 Jun 2009 - Way to Go, Maddy

A judge in Manhattan today sentenced 71-year old Bernard Madoff to 150 year in prison for running a 50 billion dollar Ponzi-scheme. 

Okay, the AHOLD financial scandal was of a different scale, but the reasoning of the Court of Appeals was as fraud as the growth strategy Cees van der Hoeven and Michiel Meurs pursued. The sentences (Van der Hoeven 30K euro fine and Michiel Meurs 100K euro fine plus 240 hours public service) were a farce.  The court (Hof Amsterdam) focused solely on the number of investors that might have been influenced by the fraudulent side-letters and simply ignored the outrageous growth projections Van der Hoeven made at road shows.

posted under Executive Pay | 2 comments

22 Jun 2009 - A Gentler Islam?

Would a successful Iranian revolution turn the Islam in a gentler, less orthodox, religion? All prerequisites for a revolution to succeed (critical mass, some independent media, money, a rigged election, a divided ruling elite and a sense of revolutionary momentum et cetera) are now present in Iran, according to Gideon Rachman, the chief foreign affairs commentator of The Financial Times .

Since the revolution of 1979 Islamic orthodoxy has been on the rise, not only in Iran but in other countries in the Middle East (e.g. Egypt, Jordan, Syria and Morocco) and within the Muslim community in Europe as well. Both the reformists and the conservatives in Iran today seek Islam’s banner, using religious slogans (“allahu akbar”) and symbolism. Both sides proclaim to be pursuing the ideal of the just Islamic state. But the reformists are fed up with current theocratic, authoritarian rule and want freedom.

If the 2009 revolution were to succeed, will we see more or less burqa’s in the streets of Paris (provided that President Sarkozy does not ban the religious garb from French soil beforehand)?

posted under International, Politics, Religion | 2 comments

19 Jun 2009 - The Land of the Sick, Weak and Unemployed

The Dutch Central Planning Bureau (CPB) foresees in its  June 16, 2009 Forecast a historic contraction of the Dutch economy: a 4¾ percent decline in GDP this year and a further ½ percent for next year. Unemployment will go up sharply according to the CPB: an average of 5½ percent of the labor force will be out of work in 2009 and 9½ percent in 2010. These unemployment rates correspond with 430,000 unemployed persons in 2009 and 730,000 unemployed persons in 2010.

A couple of weeks ago I wrote in Going Dutch? Not So Fast! that in the Netherlands ‘more than one million and a half people under 65 are living on some type of state benefit. If the crisis persists, and chances are that it will, this number will likely increase to two million people, or a quarter of the working population.’ Some readers questioned these numbers.

According to the Dutch Central Bureau for Statistics’ (CBS)  most recent dataset there were in September 2005 1,727,000 persons in the age range of 15-to-65 living on welfare. At that time the number of unemployed persons stood at 456,000.

The CPB uses the same definition of ‘unemployed’ as the CBS does. That is to say: the criteria to be classified as unemployed concern availability for work (at least 12 hours per week) and actively seeking work. Being counted as unemployed does not imply eligibility for benefits (e.g. married women seeking to reenter the labor market count as unemployed but aren’t eligible for benefits) and vice versa (e.g. women with young children living on welfare are exempted from the job-search requirement).

Since most people losing their job will be eligible for benefits for some period of time under the unemployment act (WW) and economic downturns generally discourage people from actively seeking work, the number of people in the age range of 15-to-65 living on some type of state benefit can roughly be expected to rise to about 2,001,000 in 2010. That is almost 30 percent of the employed labor force (7,020,000 persons).

Furthermore, by 2010 there will be about 2,900,000 persons receiving old age benefits (AOW), which puts the welfare recipients to employed persons ratio in the 70 percent range. If you bear in mind that employment in actual labor years is expected to be 6,442,000 in 2010 (Source CPB, no link), the actual ratio comes closer to 80 percent.

The good news is that, while Europe seems to be going off the cliff, elsewhere  (most notably in China and the US) the economy is picking up. As Willem Buiter put it Wednesday in his Maverecon-blogpost Green Green Shoots of Home: ‘I’ve been down so long, it looks like up to me.’ Given the better-than-expected unemployment figures that the CBS released yesterday, that may even ring true for the Low Countries.

posted under Economics, Netherlands | 2 comments

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