December 2nd, 2010
05:51 PM GMT
Share this on:

30x30.lake.maggie

When I arrived at the offices of start-up Jumo I was surprised by just how young Chris Hughes looks in person. Though he is now 27 years old, he looks like he could still be in college. As we set up for the interview I tried to reconcile this mild mannered fellow with the person some credit with getting Barack Obama elected (he spear-headed Barack Obama’s online fundraising and social networking efforts).

And then Hughes started talking. He is sharp, focused and confident beyond his years. I guess I would be too if I had helped launch Facebook – that is a pretty big resume booster. Still, Hughes has set himself a formidable task. Getting people, especially young people, to engage in charitable giving at a time when jobs are scarce and the future looks bleak. Crazy?

“I never underestimate the generosity of the American people,” says Hughes. “Obviously people are suffering at home and are having trouble making ends meet, but especially around the holidays they are thinking about their communities.”

It is that community part that Hughes thinks is missing from the charity equation. When disasters like the tsunami in Indonesia or earthquake in Haiti strike and news images flood our lives we connect in a personal way with those in need. Donations surge. But when the story moves on so does the help. Hughes thinks the social network framework of blogs, news feeds and video can establish more lasting relationships. People can also tap into special interests more easily and find a niche they want to get involved with and support.

There is huge potential. The New York Times points out that only 6% of the $300 billion donated in 2009 was done online.

It is a leap of faith, but Hughes is an optimist. “What is at our core is our sense of solidarity, our feeling that we are all in this together…….that American resiliency is at the core of what has gotten us through hard economic times before, it will get us through this time and probably the ones to come.”

At a time when many dismiss the competitive ability of the U.S. and are so gloomy about the future of the global economy, it is a breath of fresh air to talk to Hughes. While some industries and jobs may be gone for good, Hughes and his peers are focused on new frontiers. He calls the rate of invention on the web, awe-inducing. Applications exist now that didn’t exist five years ago. Hughes sees endless possibility in that and for the short time I am with him…so do I.

Posted by:
Filed under: Business


December 2nd, 2010
04:39 PM GMT
Share this on:

Anyone who’s ever visited the Emerald Isle will confirm that humor always lies just beneath the surface.  Even in these tough times, with the “Celtic Tiger” reduced to the status of a bemused kitten trying hard to look cute beside a begging-bowl, the Irish can fall back on their love of irony and their taste for gallows humour.

So it’s hardly surprising that the following droll story is now hurtling round the email circuit at breakneck speed.  It’s actually quite hard to find the original source, but this particular yarn does seem to have been spinning around for at least a few weeks – before the Irish government was forced into a painful climb-down in the shape of a bailout deal with the EU and IMF.  In fact, I suspect it’s an older story which has been dug out, brushed off and tweaked to make it fit the current circumstances.

Whatever the source, the events of the past few days have sent this tale zooming round cyberspace all the faster, so much so that I received it from two quite separate sources on the same afternoon:

“It is a slow day in a damp little Irish town.  The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.

“On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

“The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

“The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him ‘services’ on credit.

“The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.

“At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

“No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

“And that, Ladies and Gentlemen, is how the bailout package works.”

It’s a neat little story, but I have two problems with it.

First, nobody in it is actually in debt – not net debt, anyway. Their net balance sheet is zero. Take the butcher. He owes the pig farmer €100, but is owed the same amount by the hotel owner. And so on for all the Irish characters.

Second, I am not sure how appropriate it is to dwell on the underlying message of the story.  What does the story really tell us? For one thing, it reveals the way a bit of liquidity (the German's ready cash) oils the wheels of the economy.

That is a perfectly sensible thing to point out - normally.  But you don’t have to be a Ph.D. in economics to realise that pumping in too much cash will overheat the economy.  Too much liquidity will jack up demand and ultimately create a bubble.

Sound familiar?  Well, of course that is what happened in Ireland in the boom years: the housing sector floated high on oceans of liquidity, and then when someone pulled the plug the result was a bust, and a bunch of crippled banks.  The rest is Irish history.

So moral of the story, if you will, is actually a dangerous one – and certainly not the one the story-teller had in mind.  Mind you, if the rich German had had the presence of mind to demand an interest rate based on the average of 5.83 percent the Irish will have to pay for their bailout, the conclusions might be different.

But it’s still a good story – so why let dreary old economics spoil it?

Posted by: ,
Filed under: BusinessRecession


December 2nd, 2010
02:03 AM GMT
Share this on:

Inflation has been far from our minds when following the BRIC economies on World Business today.  However, the sell-off in emerging market equities that followed Chinese inflation data last month is a reminder that inflation remains a risk in the world’s hottest emerging markets known as BRIC.

China has announced a two year high in its year-on-year increase in consumer prices, at 4.4 percent.  India’s inflation is running at 8.6 percent, 7.5 percent in Russia, and 5.2 percent in Brazil.  Brazil’s consumer prices rose 5.5 percent in November, the biggest jump in 20 months, and that’s with the central bank’s overnight lending rate at 10.75 percent, up from 8.75 percent.

Here’s the concern:  If the BRIC economies try to control rising inflation by hiking rates and slowing growth, who will carry the economic growth banner for the rest of the world?  Will these economies sputter?

In addition, it is often the poor who suffer with inflation in emerging markets because they spend a large portion of their income on food.  Food inflation is high in the BRIC block, for example, 10.1 percent in China, and 15.7 percent in India.

Brazil, Thailand, and Taiwan are among countries that are trying to tame inflation through capital controls, and economists say there is increasing pressure for more measures.

Russia may be a notable exception.  It’s struggling compared with the other BRICs, so much so, that social media is awash with suggestions that Indonesia or South Africa replace the “R” in the acronym.

So we’d have BIIC?

Or BICSA?

Not so fast says David Spegel, global head of Emerging Markets with ING.  “Russia is the only major energy exporter among the BRICs,” he says. It’s a large equity market, “and Russia has the largest market for external bonds (US$211bn)…  so for financial markets it would be difficult to extract.”

Spegel says don’t expect a re-branding of BRIC any time soon.  And let’s keep our eyes on inflation and capital controls in the block.



About Business 360

CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.

 
 
Powered by WordPress.com VIP