Tag: greece

The Art of Drawing Spectacular Graphs

Bloomberg Business has a feature on the decline of the Euro after the Greek “No” vote last night. As you might expect, the feature is accompanied by a graphic which shows a “precipitous fall” in the European currency.

I’m in two minds of whether to screenshot the graphic (so that any further changes are not reflected), or to not plagiarise by simply putting a link (but exposing this post to the risk of becoming moot, if Bloomberg changes its graphs later on. It seems like the graphic on the site is a PNG, so let me go ahead and link to it:

You notice the spectacular drop right? Cliff-like. You think the Euro is doomed now that the Greeks have voted “no”? Do not despair, for all you need to do is to look at the axis, and the axis labels.

The “precipitous drop” that is indicated by the above graph indicates a movement of the EUR/USD from about 1.11 to about 1.10. Or a fall of 0.88%, as the text accompanying the graph says! And given how volatile the EUR/USD has been over the last couple of months (look at graph below), this is not that significant!

eurusd

 

I won’t accuse Bloomberg of dishonesty since they’ve clearly mentioned “0.88%”, but they sure know how to use graphics to propagate their message!

The fundamental problem with the world economy

… is that wages are sticky.

With increased globalization, it has become significantly cheaper to produce certain goods and services in countries that were hitherto “low income” or “less developed’ or whatever you call it. In the past, in part due to protectionism at various levels and in part due to high transaction costs (transport, communication, etc.) “developed economies” such as the US or Europe had got adjusted to a reasonably high wage structure. In fact, it is possible that in the absence of trade with the rest of the world these countries might still be able to support that structure.

However, with the walls of protectionism and transaction costs falling, these traditionally high wage economies haven’t been able to compete with the up and coming economies where production costs are significantly lower. And because wages are sticky, i.e. it is impossibly hard to cut wages across the board, this has resulted in unemployment. Worse, a lot of other benefits (such as Social Security or Medicare in the US) have been set based on the high wage structure these countries used to enjoy.

And then you have unions, which makes it even tougher for you to cut wages which might make you competitive. It’s a combination of sticky wages and unionism that the various austerity measures in Greece haven’t managed to go through (of course, Greece has another set of problems in terms of law enforcement and tax collection).

And so, in short

1. Wages are sticky. Even though your current wages are not competitive enough, you can’t cut wages

2. That leads to high unemployment

3. That leads to lower economic activity and thus depression

4. The government needs to spend more to “stimulate” the economy, but hasn’t collected enough in good times. And the “level” of the economic cycle itself has gone down now. And the government itself has other obligations linked to the high wage levels

And so it goes. One thing I can think of is “devaluation” (in these times of floating currency rates, that term has lost all meaning), but then now these countries import so much that will again not be a good idea.

Fun!

PS: please note that this post has been filed under “Arbit”

Photo Essays

Over the last 2-3 weeks I’ve been uploading photos on to Facebook from my recent trip to Italy and Greece. I’ve been doing it in bits and parts since I wouldn’t want to flood my facebook watchers with too many pics at a time. So I’ve been uploading them by city.

Looking at the photos I’ve uploaded, I realize I’ve given fairly lengthy captions to most of them. There are a few photos which don’t have any descriptions,  but they are a minority.

I realize I’m a writer first, and the photos I take are there only to enhance the story. I don’t think I’m ever capable of replacing a thousand words with a picture. I might put a picture in their place, and still write five hundred words.

And I keep this in mind every time I take a picture, I realize. I think about what story I can build AROUND the photo that I’m taking. It’s never about the story that the photo itself will tell. Perhaps this means I’ll never improve that much in my photography..

On Hating Talisker

I must thank Mohits Senior and Junior for introducing me to the wonderful world of Single Malts in general, and to Talisker in particular. If I remember right, this was at a meeting of a certain secret society in Senior’s house, where Junior had procured the said substance. I remember being floored by it, and thinking I’d never thought liquor could taste so good. And till yesterday I used to think no one can ever hate this drink.

The first time I got down to buying a bottle of it (though I’d had it by the glass a couple of times outside) was in a duty free shop on my way back from my honeymoon last winter. The wife, as I’d expected, took a huge liking for it. In fact, it seemed like she liked it much more than I did. I must also mention here that for a very long time, that bottle of Talisker was the only liquor available at home.

So whenever we would fight (in our early days of marriage it was quite often, I must admit) the wife would want to distract herself and cool off by “lightening” herself. And would gulp down some Talisker straight from the bottle, as I stood aside, aghast. The subject matter of the fight would be  quickly forgotten, with my foremost thought being “what a waste of such fine booze”, and she being distracted by the contents of the said booze.

That first bottle of Talisker didn’t last too long.

So on our way back from Italy and Greece this summer, I bought another bottle of Talisker. And even before I got it billed, I told the wife that it wasn’t for gulping down, and especially not she was angry. I’ll keep a bottle of cheap whisky at home, I said, for her to drink when angry, and the Talisker should be accessed only when we’re looking to savour our drink.

So last night, on the occasion of her birthday, we decided we want to savour some drink, and down came the bottle of Talisker. She had hardly taken a couple of sips, when she handed the glass back to me. “I can’t take this any more”, she said. “Now, every time I drink Talisker, I get reminded of those times when I was angry and we would be fighting. I don’t want this any more’. So finally there exists a person who hates Talisker, for whatever reason!

For the record, I finished the rest of her drink last night.

What Should Mexico Do?

If Mexico and Uruguay draw their last league game, then both of them go through to the second round irrespective of what France and South Africa do. However, on account of a better goal difference, Uruguay will qualify as group winners and face the second-placed team from Group B, while Mexico will qualify second and meet the Group B winners, likely to be Argentina.

Uruguay’s option is clear. Play for a draw. If Mexico go for a win, Uruguay should just sit back and try hit back on the counterattack (and in terms of players and style, they are very well equipped for that). Simple case of getting men behind the ball and putting gaaji.

Mexico’s strategy is not so straightforward. The “greedy” thing to do would be to play for a draw, in which case they will most likely end up facing Argentina in the second round (if you remember, Mexico went out last World Cup by losing to Argentina at the same stage). On the other hand, if Mexico beat Uruguay, they will top Group A and meet a potentially inferior team (Korea or Greece) in the second round.

As mentioned earlier, if Mexico go for a win, Uruguay will simply defend and play a counterattacking game which they are good at, so I don’t know if they are going to go for it.

Thinking about it, it comes down to Mexico’s payoff function. I’m sure their payoff is an increasing function of how far they progress in the tournament. However, we should be able to identify one particular “jump” in payoff – some kind of a discontinuity, where the payoff increases considerably for one additional round of progress in the tournament.

If this “jump” is for the second round, Mexico can afford to put Ranatunga Principle, get a peaceful draw against Uruguay and claim their “jump reward”.

If the “jump” is for the quarter-finals, however, then Mexico will want to take the risk at this round in order to get themselves easier opponents in the round of 16 (I’m assuming here that Mexico consider Korea or Greece as much easier opponents than Argentina).

If the “jump” occurs further down in the tournament, I think there is way too much randomness about their potential quarterfinal opponents (especially given the fuzzy results in Groups C and D) and opponents as hard as  (or harder than ) Argentina cannot be ruled out. Nevertheless, they would rather face one tough opponent than two (and I’m assuming here that no team is significantly “harder” for Mexico than Argentina) and so they should put fight to avoid Argentina and thus go for a win.

Considering that they have reached the Round of 16 with reasonable regularity in the last few World Cups, I presume that their “payoff jump” will occur later in the tournament. And based on the above reasoning that means they should go for a win against Uruguay, so that they can try avoid Argentina.

And it is on this thin thread that the French are hanging their hopes (though first they need to thulp South Africa, no easy task).