Is The Euro At Risk?: A 'Newsweek' article

Is The Euro At Risk?

Holger Schmieding

NEWSWEEK

From the magazine issue dated Mar 23, 2009

Is the death of the euro possible? As the global recession deepens, investors are certainly starting to worry that Europe's most ambitious integration project to date, the common currency shared by 16 sovereign nations, could break apart under the strains. The fact that the euro zone, far from decoupling from a U.S. recession, is now contracting at least as fast as the U.S. and the U.K. has added to the concerns. But the notion of a full-scale euro breakup looks vastly overblown.

The key reason the euro zone is not doing well is external, not homemade. Because companies around the world can slash their investment plans in times of uncertainty much faster than households can scale back their expenditures, the traditional exporters of top-quality machinery such as Germany are now suffering the brunt of the global downturn. This, in turn, weakens the euro. At some point, however, the worst of the global crisis will be over—with luck, sometime later this year. Once that happens, trading nations with a focus on investment goods, like Germany, should be able to recover lost ground.

The medium-term outlook for core Europe is still encouraging. German consumers had never joined in the credit-fueled party thrown by U.S. and U.K. consumers. While these consumers will probably need to restrain their consumption for years after the crisis, core continental Europe, as well as China and Japan, could enjoy an almost normal consumer upswing once the crisis is over.

Of course, we have to get to the medium term first. The global turmoil has hit the euro zone as a symmetric shock. All economies in the region are now contracting. In this sense, the euro area looks more and not less cohesive than it did a year ago, when regional real-estate booms were already turning to busts in some euro-member countries such as Spain, Greece and Ireland, while Germany was still enjoying strong export growth.

That said, markets are still shunning all kinds of perceived risks, and thus drawing a much clearer distinction between supposedly strong countries such as Germany and supposedly weak euro members such as Greece, Ireland, Italy and Spain, whose governments now have to pay much more than Germany to borrow on global capital markets.

This has led to speculation that some weaker nations might drop out of the euro, perhaps even solving funding problems the Zimbabwean way, by printing all the money the government wants in a new national currency. But Zimbabwe, which has taken this tactic to its extreme and is now reeling under hyperinflation and economic collapse, proves that this strategy doesn't work. Any country leaving the haven of the euro would risk devaluing its new national currency, and bond markets would demand very hefty risk premiums. These countries would thus find it much more expensive to borrow.

The occasional speculation in corners of the financial markets that a strong country like Germany might abandon the euro makes little sense either. Just imagine what would happen if Germany reintroduced its old Deutsche mark amid the current turmoil. Foreign-exchange markets would probably bid the independent German currency up quickly and strongly, further crippling the growth prospects of a country that exports half of what it produces. Given the extreme economic environment, a German currency might soar even more than in past crises.

The political logic also argues very strongly against a demise of the common currency. All member countries have invested a lot of political capital into the European venture. European leaders meet almost once a month to discuss a huge range of issues. If one country had to ask for urgent help in a particular financial crisis, it would be very difficult for its partners to refuse such a request. After all, that country's vote may soon be needed again in decisions on other matters.

Skeptics have expressed doubt that the euro zone has a pot of money large enough to bail out multiple European member states simultaneously. Yet there are various ways in which euro-zone members could help each other. For example, some European institution backed up by the member states may temporarily guarantee issues of new government bonds by a euro country in trouble. In a similar way, many national governments are already guaranteeing new bank bonds against a fee and for a limited number of years. A similar guarantee to another euro nation would give that member time to ride out the crisis and put its own house in order.

The bottom line: global investors have bigger things to worry about at the moment than a breakup of the euro zone. In the medium term, the crisis may even enhance the position of the euro. Many European countries outside the euro, like Poland and Hungary, are now suffering as their currencies are battered badly. They are trying to get as close as they can to the protective umbrella offered by the euro. The lesson for them is that they should work harder to qualify for Europe's most exclusive club. If they can meet the requirements, their entry will eventually strengthen the common currency.

Schmieding is chief European economist at Bank of AmericaMerrill Lynch.

Source: Newsweek

In search of clarity: Unravelling the complexities of executive decision-making

In search of clarity: Unravelling the complexities of executive decision-making
A report from the Economist Intelligence Unit Sponsored by Business Objects

EXECUTIVE SUMMARY

Decision-making is at the core of all business activity, as executives set strategy and manage operations by weighing a vast array of factors to arrive at the desired balance of risk and reward. The enormous growth of companies’ size and operations in recent years—particularly across borders—is making this process increasingly complex. It is cause for alarm, then, that executives themselves perceive the quality of decision-making at their companies as mixed at best.
Well over half of executives surveyed for this report—61%—characterise management decision-
making at their companies as moderately efficient or worse, a figure which climbs to 72% for large organisations. Nearly one in five—rising to over one quarter in North America—thinks that management frequently gets its decisions wrong. This may result in part from the greater challenges of running a business in a period of rapid growth, such as many of the surveyed companies are experiencing, but it suggests deeper problems as well. This is the key finding of a major programme of research, conducted by the Economist Intelligence Unit and sponsored by Business Objects, into how senior executives in different regions make decisions for their companies. It is based on a survey of 154 senior executives from around the world, as well
as a series of in-depth interviews conducted with practitioners. Other major conclusions of the research include the following:
Poor data leads to poor decisions. By far the most important input into decision-making identified by surveyed executives is good data. As one expert interviewed for this report remarks, “You cannot make proper decisions without proper information.” But the timeliness and quality of this information leaves much to be desired. Less than one in ten executives
in the survey receive information when they need it, and 46% assert that wading through huge volumes of data impedes decision-making. Worse still, 56% are often concerned about making poor choices because of faulty, inaccurate or incomplete data.
Approaches to decision-making vary by region. There are distinct geographic differences among respondents when it comes to how they take decisions, and to their reliance on technology in doin so. For example, Asian executives appear more likely than those in other regions to trust their own intuitio and judgement, while Europeans look more strongly
to the opinions of their peers. Asian executives also make greater use of technology to support decision-making. Companies need to take these cultural differences into account as they seek to improve decision-making tools and processes. Detailed, uniform decision-making processes may be hard to apply across different cultures; broad frameworks describing missions and values may work better.
The challenge only increases as companies grow. Executives at smaller companies are more confident in the efficiency of their decision-making than peers at larger companies, more reliant on people over process, more consultative, and less worried about data overload. This is an advantage of being small. The ability to retain these qualities is an important management challenge for companies in a period of rapid growth.
Too much art, not enough science? Senior management decision-making at the majority of
surveyed companies (55%) is largely informal and unstructured, with executives consulting others largely on an ad hoc basis. Most executives seem comfortable with these arrangements: only 29% think poor decision-making structures are a common cause of bad choices. This reflects a view expressed by several interviewees that strategic decisions always require a strong element of intuition or judgement.
Nevertheless, there can be no doubt that better data and processes would take some of the guesswork out of decision-making. Common metrics and greater use of automated information tools such as dashboards would also help to support better quality decisions.
Decision support tools need to be easier to use. Executives believe that technology can play a key role in improving decision-making, by making it quicker and easier to access and organise large amounts of information. This is hugely important as companies become larger and more complex and as the volume of data available rises. At the moment, however, too many executives do not feel comfortable using dashboards and other IT tools that could sharpen
their decision-making. Companies therefore need to develop decision-making tools that are sufficiently reliable and user-friendly to appeal to even the less technology-savvy members of the management team and wider workforce.

Who took the survey?
A total of 154 executives from around the world took part in the Executive decision-making survey, conducted by the Economist Intelligence Unit. The survey sample was cosmopolitan: 40% of respondents hailed from Europe, 31% from North America and 23% from Asia-Pacific. It was also senior—50% of respondents were C-level executives such as CEOs, CFOs and CIOs or board members, with the rest consisting of heads of business units and other senior managers. The majority of organisations were large: 53% had annual revenue of over US$500m, and 25% earned more than US$5bn. The main industry sectors represented were manufacturing (16%), technology (16%) and financial services (14%). For more detail on the sample and results, see the Appendix to this report.

Source: Economist Intelligence Unit

Confessions of a Economic Pundit: A Newsweek Story

Confessions Of A Pundit

Economic commentators may be insightful, but they're not neutral. Market forces shape their views.

By Zachary Karabell |

With the financial system in tatters and trillions of dollars of public financing at stake, economic experts have become a priestly caste. Every day, on air, online and in print, dozens of economists and strategists proclaim their views on how bad the crisis will get and how long it will last. But there's reason to be skeptical. Even though a fair number of these economic forecasters are informed and astute, they are not objective or neutral. I should know, because I've been one. And while I have always said what I believe, what I believe sometimes has been subtly shaped by who pays the bills.

Economic experts should be viewed much the way we treat politicians and corporate executives—or anybody else with something to sell. Howard Schultz, the CEO of Starbucks, recently made the rounds of television news programs to announce a plan to sell instant coffee. He talked at length about trends in coffee consumption and consumer tastes. No one disputes his knowledge of the industry, but we understand that he's in the business of selling coffee.

Many professional economists are employed by major investment firms. Some are on staff, while others have their own research firms that sell analysis to hedge funds, mutual-fund companies and pension-plan managers. They are rarely interested in abstract academic questions, but instead apply economic data to investing decisions, such as what effect rising unemployment will have on bond yields or stock prices. Yet they are often called on by the media to comment on precisely those questions.

Like Schultz, all of these experts have agendas—not pernicious, but still instrumental to how they view the world. For many years, I was the chief economist for an investment firm that focused on growth stocks. By nature, managers who invest in growth stocks focus on the potential upside. They look for companies who are on an upswing. In representing the company, I tended to emphasize the cup-half-full view of the world, which was both in sync with how I actually view the world and in harmony with the imperative of the organization to convey to current clients a level of confidence and to inspire new ones.

Now take an economist or strategist employed by a bearish manager or a bond manager. They are likely to look for companies that appear strong but are actually weak, or at the relationship between interest rates, inflation and government policy. They may look to the credit markets rather than the stock market for signals and may be more cautious, conservative or pessimistic.

Other experts are in the business of selling their research. Alan Greenspan made his reputation and career as a partner of Townsend-Greenspan, whose clients were a who's who of old Wall Street. Successful research firms can command substantial fees, and buyers demand clear, succinct and unequivocal analysis and predictions. Investors want "actionable" ideas, not vague academic musings. Greenspan presented himself as someone who saw what others do not; he offered his clients clarity, not ambiguity, and they paid well for it.

Being wrong in the past is not much of a liability as long as one is right in the present. Known as Dr. Doom, Nouriel Roubini is nothing if not unequivocal in his views. His firm, RGE Monitor, has seen demand for its offerings soar after Roubini's predictions of plunging home prices and systemic collapse were vindicated. The ubiquitous Mark Zandi, who sold his consultancy to Moody's and now serves as their chief economist, has been a steady voice about the need for massive stimulus, and as the Obama administration has enacted much of what he has been recommending, that in turn has amplified demand for his input.

Such input can be quite lucrative. Financial-services analyst Meredith Whitney has graced magazine covers for her acerbic and blunt evisceration of the banks she has covered. Several weeks ago, she left her well-paid post at Oppenheimer to start her own economic consultancy, where she will charge many of her former employer's clients for her own unambiguous analysis.

There may be "experts" who knowingly skew their analysis to serve their own bottom line. But I believe they are rare. The issue is less the integrity of those selling their wares than the market forces that choose them. When times are good and people feel confident, experts who support that view find more traction—and more demand—than those who don't. When times turn troubled, as they most certainly are now, those whose perspective rhymes with the prevailing gloom appear wiser than those who do not.

Prominent experts, therefore, are often simply those whose voices are in harmony with today's mood and who have an easier time selling their stories. That doesn't mean that the analysis is inherently flawed—only that it is inherently market-driven. So the next time you hear from an "expert" on the market or the economy, bear in mind that at day's end, he or she is more Howard Schultz than Delphic oracle.

Karabell is president of River Twice Research.

Source: NEWSWEEK, issue dated Mar 9, 2009

New digital library of Islamic manuscripts online

New digital library of Islamic manuscripts online

Princeton University has placed a new digital library of 200 Islamic manuscripts online for scholars to consult and study.

These manuscripts were selected from some 9,500 volumes of Islamic manuscripts in Arabic, Persian, Ottoman Turkish and other languages of the Muslim world in the University Library's Department of Rare Books and Special Collections. Princeton's extraordinary holdings constitute the premier collection in the Western Hemisphere and among the finest in the world, according to Don Skemer, curator of manuscripts.

The digital library is a major component of the Islamic Manuscripts Cataloging and Digitization Project, begun in 2005 with the generous support of the David A. Gardner '69 Magic Project. Eventually, all of the manuscripts will be cataloged online, which involves creating bibliographic records containing basic descriptive information that helps researchers decide whether to order microform copies or to visit the library in person.

"The Islamic Manuscripts Cataloging and Digitization Project was conceived specifically as a way for the library to improve access to these rich collections and share them worldwide through digital technology," Skemer said. "It is hoped that the project will make a contribution to international understanding and serve as a gesture of good will to a critical part of the world."

Michael Cook, the Class of 1943 University Professor of Near Eastern Studies and one of the leading Islamicists in America, said, "Princeton has 9,500 Islamic manuscripts in Arabic and other languages in a location that is very convenient for scholars based in North America, but far less so for those based in the Islamic world or Europe. Most of the collection is described in printed catalogs, and scholars can always obtain microfilms of the manuscripts. But the printed catalogs are old and not available everywhere, while microfilms often provide images of poor quality. The online digital library thus marks a major advance in providing up-to-date descriptions of the manuscripts to anyone who can log onto the Web, and in making at least some of the manuscripts available online in fine-quality digital images."

The digital library includes this Arabic botanical manuscript from the 15th century that is from the Robert Garrett Collection donated to the University in 1942.

Approximately two-thirds of the manuscripts were donated to the University in 1942 by Robert Garrett, a member of Princeton's class of 1897. But the library has continued to build this collection since then.

The digitized manuscripts date from the early centuries of Islam until the fall of the Ottoman Empire. They originated in all parts of the Islamic world, from Moorish Spain and northern Africa in the West, through the Middle East, and to India and Indonesia in the East. Subject coverage is fairly encyclopedic, including history, biography, philosophy and logic, theology (based both on the Quran and tradition), law and jurisprudence, language, literature, book arts and illustration, magic and occult sciences, astrology, astronomy, mathematics, medicine, and other aspects of the spiritual and intellectual life of the Islamic world.

While the digital library emphasizes rare or unique texts of academic research interest, it also includes a selection of Persian illuminated manuscripts and Mughal miniatures, such as a magnificent 18th-century Indian album of miniatures and calligraphy.

Princeton expects to add more manuscripts to the digital library in the future, besides producing the online bibliographic descriptions.

Click here for access to the digitized manuscripts. From this webpage, click on "View the Digital Library" and select any of the 200 manuscripts, which are listed both alphabetically and by subject and genre.

For more information about the project, contact Skemer at dcskemer@princeton.edu.

Source: Indonesian Islamic Philology

Interesting Story - Map of Knowledge and more

A new map of knowledge has been assembled by scientists at the research library of the Los Alamos National Laboratory. It is based on electronic data searches in which users moved from one journal to another, thus establishing associations between them.

The map includes both the sciences and the humanities in a hub and wheel arrangement, with the humanities at the center and the sciences arrayed around them. The arrangement fell out naturally from the data and is not contrived, said Johan Bollen, the leader of the research team.

In the map, published in the current issue of PLoS One, the journals are color-coded as follows: physics, light purple; chemistry, blue; biology, green; medicine, red; social sciences, yellow; humanities, white; mathematics, purple; and engineering, pink. The interconnecting lines reflect the probability that a reader will click from one journal to another on the computer screen.

Similar maps have long been constructed on the basis of footnotes in one journal’s articles that refer to articles in other journals. Dr. Bollen believes that his electronic click map better represents scholars’ behavior than does citation analysis, as the footnote method is called.

One reason is that footnotes are often added for a variety of social reasons, like to flatter possible reviewers, improve one’s own citation count or impress colleagues with one’s breadth of reading. The clicks represent scholars’ actual use of information. Also, the clicks capture access to an article to use it for practical purposes, rather than just following citations, Dr. Bollen said.

A reader may click from one journal to another based on many other kinds of links besides citations, like a text search or an e-mail message, Dr. Bollen said.

“What we have is a map of worldwide scientific activity,” Dr. Bollen said. He plans to make his data publicly available so scholars can assess the impact of their or others’ articles and the degree of influence of scientific journals.

Source: The New York Times