Thursday, 30 April 2009

Presidente, dimisión

Hay muchos motivos para pedirle, José Luís Rodríguez, Presidente del Gobierno del Reino de España, que dimita, pida perdón a los españoles y convoque inmediatamente elecciones al Parlamento Nacional anticipadas. Apunto debajo unos cuantos motivos:

1. Por el aumento del paro hasta más de 4 millones de personas incluso manipulando las cifras para ocultar 1 millón de desempleados.
2. Por el incendio de Guadalajara donde murieron varios bomberos por la irresponsabilidad de su gobierno.
3. Por la negociación con ETA después de haber prometido no hacerlo.
4. Por liberar al terrorista De Juana Chaos sin que haya pagado de forma justa por sus numerosos asesinatos.
5. Por la incapacidad de su gobierno para evitar o siquiera alertar del incremento de los precios por la burbuja crediticia.
6. Por la crisis con Marruecos, que está derrotando a España en todas las batallas por las traiciones del partido político que usted dirige.
7. Por no enfrentarse a Hugo Chávez, a Evo Morales y a Daniel Ortega a pesar de sus repetidos ataques contra España.
8. Por el lavado de cerebro que supondrá la asignatura Educación para la Ciudadanía.
9. Por atacar a radios que le critican como la Cope.
10. Por los soldados españoles muertos en Afganistan, Líbano y en Yemen.
11. Por ser un cobarde ante los asesinatos de la banda terrorista Eta en el aeropuerto de Barajas.
12. Por no ilegalizar partidos defensores del terror como ANV y PCTV hasta que no le interesó políticamente.
13. Por la Ley de la Memoria Histórica con la que los que se consideran agraviados por la Guerra Civil del 36 intentan resucitar el odio entre españoles.
14. Por rendirse ante los regionalismos segregacionistas.
15. Por la ineptitud del gobierno que usted dirige para resolver los incendios en Galicia o las inundaciones en el Levante español.
16. Por los desastres de infraestructuras en Cataluña; por... (sigo otro día)

Love and freedom.

Wednesday, 29 April 2009

The Bernanke Reflation

Excerpt from The Wall Street Journal 03/03/2008
(summarised by Borjabrela)

The Bernanke Reflation

Fed Chairman Ben Bernanke told Congress that the Fed will do whatever it takes to stop the credit squeeze from becoming a recession. That's about as close as a central banker will get to saying he's thrown price stability to the wind. If inflation rises -as it now surely will- the Fed will worry about that after the econocmy is safely past the credit crunch.
Call it the Bernanke reflation, though it's more precise to call it the Fed's second inflation gamble of the decade. The first was Alan Greenspan's roll of the dice from 2003-2005, keeping interest rates too low for far too long in the aftermath of the dot-com bust. That spurred the first boom in commodity prices, as well as the subsidy for debt that led to the housing bubble and the credit mania whose collapse we are now dealing with. Mr. Bernanke was a Fed Governor during much of that time, and he seems to have learned his lessons all too well. He's now going all-in for round two.
Meanwhile, even the Phillips Curve is making a comeback. That's the notion -discredited in the 1970s- that there is a trade-off between inflation and economic growth. In its new version, argued by Fed Governor Frederic Mishkin, the Phillips Curve doesn't exist in the long term but does in the short term. Thus the Fed can afford to open the monetary flood gates now because the slower economy could lead to lower prices later this year. Then when the economy recovers, the Fed can afford to tighten money again.
The Americans aren't fooled by this, and they know their dollars buy less with each passing month. This explains their rising economic anxiety -and anger- better than trade or job losses do. Inflation is the great thief of the middle class.

Love and freedom.

Tuesday, 28 April 2009

Germany: Republic of Fear

Excerpt from The Wall Street Journal 03/03/2008

Republic of Fear
by Malte Lehming (summarised by Borjabrela)

Your heart rate sinks, muscles stiffen, you lose control of bodily functions: You're frozen with fear. This primal reflex to danger is a familiar phenomenon in nature but it's less common for it to strike nearly all of a political class in a democracy. Welcome to Germany.

The fall of the Berlin Wall was an event that was celebrated at the time as a triumph of freedom and hope over despair. Barely 20 years after the united Germany is frozen with fear. It's as if the East Germans have exacted a delayed revenge on their brothers and sisters in the West: "Your political model may have won, but we'll infect your society by reviving militant antimilitarism, a yearning for security at all cost, and a craze for distributive justice - until the whole country is paralysed."

Four electoral shocks show this. First, in the 2002 Bundestag elections, Social Democrats and Greens saved themselves from defeat with thunderous anti-Iraq war propaganda, playing upong strong anti-American resentments. They laid the groundwork for a new, left-wing German national consciousness that had not previously existed because of the country's Nazi past. "For the first time, I'm proud to be a German," went the refrain -proud to have resisted a war that no one had asked them to join in the first place. Gerhard Schroder ultimately won the elections. But no German government would ever change this: better to sacrifice NATO and give up on the fight against terrorism than advocate such unpopular notions as solidarity with one's allies.

Second, in the 2005 Bundestag elections Mrs. Merkel made the mistake of overestimating her countrymen's sense of reality. She announced economic reforms, which were urgently necessary, but was consequently accused of neo-liberalism. On the German scale of negatives, neo-liberalism come right after fascism. So instead of a reform-minded coalition with the Free Democratic Party, Mrs. Merkel was forced into a "grand" standstill coalition with the Social Democrats. The preliminary result of these two electoral shocks: No more war. No more reforms.

Third, in the 2008 elections in the Hesse state the incumbent Christian Democrat governor was defeated when he revived the old coservative slogan: freedom not socialism. So the third lesson: No more freedom. Anyone who asks Germans to choose between freedom and socialism risks their choosing the latter.

Fourth shock, the rise of the Left Party. The Left Party's slogans are extremely popular: Out of Afghanistan! More justice! Better protection from layoffs! Across-the-board minimum wages! No university fees! No privatisation of state-owned companies! On all these points, surveys show the ultraleft in sync with a majority of Germans.

To counter this, helpless Social Democrats are abandoning any sort of "Third Way" and the Christian Democrats are push into the center acting demonstratively unconservative, cuddly, impartial. Germany's political class is stunned by this effect. Those who become rigid with fear hope they won't be discovered by their predators. But this instinct designed to ensure survival can quickly spell their doom. Once discovered, motionless as they are, they become very easy prey.

Love and freedom.

Monday, 27 April 2009

City AM editor's reply to my letter

Allister Heath, editor of London morning paper City A.M., replied to the letter I emailed him on 26 March 2009 regarding the denationalisation of money.

To: Borjabrela
Date: 3 April 2009 19:22
Subject: RE: Comment to "Time running out for dollar dominance"

I am very familiar with Hayek’s IEA book. However, I much prefer the monetary alternative outlined in (for example)
The best explanation of the modern Austrian credit cycle theory is probably contained in
What I was trying to do was see whether SDRs could be turned into an alternative, sounder regime as a first step towards reform.
Thanks for reading City A.M.

Best wishes

I am very pleased with his reply. I have already ordered Roger Garrison's "Time and Money. The Macroeconomics of Capital Structure" via Amazon.

Love and freedom.

Sunday, 26 April 2009

Suceso doméstico

Suceso. Una tarde nublada de otoño.
Sucesos. A toda página y una foto
En la esquina.
El suceso más trágico del día, seguro.
Total: uno nada más. Uno más.
Ni ella cayó, ni yo huí: sucedió
al contrario.
En realidad la culpa es suya;
sí, señor, de usted, señor, no me mire
sorprendido, usted que lee y se calla.
(Pase página y perdone la molestia)

Love and freedom.

Thursday, 16 April 2009

Accounting standards under attack

Standard-setters should defuse the argument by making clear that their job is not to regulate banks but to force them to reveal information. The banks, their capital-adequacy regulators and politicians seem to dream of a single, grown-up version of the truth, which enhances financial stability. Investors and accountants, however, think all valuations are subjective, doubt managers’ motives and judge that market prices are the least-bad option. They are right. A bank’s solvency is a matter of judgment for its regulators and for investors, not whatever a piece of paper signed by its auditors says it is. Accounts can inform that decision, but not make it.

The, Messenger, shot (16/04/2009)

The Economist on April 16th 2009 has a piece (Messenger, shot) on banks and accounting standards in favour of the accounting standard-setters' independence and alerts that accounting rules are under attack by politicians and banks.

The centre of the problem is the 'mark-to-market' technique of pricing the fair value of the financial elements: assets and liabilities, income and expenses and the resulting equities.

Banks and other companies have been benefiting from this 'mark-to-market' pricing technique while the global economy was on the upbeat side of the credit cycle, since cheap credit allowed eager buyers and happy sellers inflate the asset price bubble while keeping the liabilities' side easy to service and re-fund if necessary. Thus banks and many other companies have been able to post ever-increasing profits in the past years since the dot-com crash in 2002.

Alas, what goes around comes around and bankers now face the problem of having to report big losses when that very same 'mark-to-market' pricing technique forces them to price down their assets uncovering many ill-fated investments and inefficiencies in many revenue models.

Now bankers and their purchased friends the politicians are whining that this 'mark-to-market' valuing of their assets is not fair because "market prices overstate losses, because they largely reflect the temporary illiquidity of markets, not the likely extent of bad debts." Well, indeed they are right, but they never complained when the market prices overstated profits and asset prices when they largely reflected the temporary cheap access to credit of markets!!

The Economist advises: "To get the system working again, losses must be recognised and dealt with. Standard-setters should defuse the argument by making clear that their job is not to regulate banks but to force them to reveal information. Banks’ regulators have to take responsibility. The FASB and IASB can help regulators to create whatever balance-sheet they want. But in doing so they must not compromise their duty to investors." I fully agree with this advice.


As an auditor and trainee accountant, I learnt that the main objective of the financial reporting is the provision of true and fair information about the status and performance of the company. And central to this is the valuing of the financial elements at a fair value, defined by the International Accounting Standards Board as the value of an asset or liability in an arm's length transaction between unrelated willing and knowledgeable parties.

There is an interesting debate around the 'mark-to-market' pricing technique as a fair value method to be used for financial reporting. I will comment it in future posts, but in the end it comes down to the two school of thoughts on markets: the efficient markets hypothesis and the behavioural markets hypothesis.

This is one of the reasons why I sign with my typical:

Love and freedom.

Wednesday, 15 April 2009

Launch of "Blogs Brela"

This is a personal note to announce the launch of, a simple aggregator of the blogs written by members of my family. As my father would say, they are to publish whatever their authors want and whenever they want, and they only seek to be read by their author and their family.

Love and freedom.