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Ever since the first humans walked upon the face of the Earth they have always shown an insatiable desire to know more about themselves and the world around them. A thirst for knowledge as it is often called. This thirst has developed over the millennia and today exists as a structured method, guided by well-defined rules, known as science. Science has taken humanity away from its harsh life only 5 centuries ago and is now universally embraced as a fundamental method of inquiry. However, this is not without its flaws as it will be further shown.

Although this may not seem obvious for everyone, humans actually live in two worlds. One world is the physical world, the world were science originated from, the world of physics, chemistry, astronomy, computer science and the like. The world were the laws are natural laws, completely independent of humanity, and where in fact human existence is dependent on them. For example most of the goods consumed in society are the result of humanity’s understanding and usage of these laws.

The second world is the world of humans. It is a world made up of social constructions like economics, politics and law. A world which is not independent of human existence, in fact it is the creation of humanity. From governments to economic systems and laws, all are products of human endeavours and will always be created and recreated based on what humans see fit. Yet this is where the problem of science arises, because being a universally embraced method it is also used in order to find the fundamental laws that make the world of humanity work (social sciences). Yet, these laws are not natural laws, these are laws created by humans themselves and as history teaches us, they can always change. Applying science in the world of humanity to understand why things are the way they are, is as if a person keeps forgetting the reasons for his or hers decisions and keeps asking himself or herself “why did I do what I did”? By no means is the scientific method useless in humanities (social sciences) but the task it sets to achieve, that is finding an explanation to why things are the way they are, is simply never in reach. Even after decades of research there is little hope for one to find fundamental truths or a certain set of laws, like the laws of gravity in science, on which all social scientists agree. If this is the case, then it must be that something is missing…

It just might be the case that for understanding the human world, something slightly different than the scientific method is needed. Although it may use the same tools, like logical deduction and empirical testing, it may have to look at the world from a different perspective then to simply understand it,  possibility by adding a drop of creativity. The closest analogy to a proper human science can be found in architecture. Where if someone tries to use the scientific method to study for example all the cathedrals in the world, he or she will never find some fundamental law that explain their construction or the factors that determined  each one of them to be different from the other and even if it did, the answer will have little usability for the rest of the world besides being a simple curiosity. This is because the correct approach would be not to understand why cathedrals are made the way they are, but to see how cathedrals can be built, how can they be improved and how can the knowledge used in their construction help in other  architectural projects. The same applies in social sciences, where the goal is not to decipher why we do things the way we do, but how they should be done. How can we make a better constitution, a better economic system, a better international order?  The world of humanity is a construction and social sciences are the art of constructing this world.Catherdal design

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Simply brilliant, our world in one day:

http://www.indavideo.hu/video/HP-tilt/

With all attention turned towards the struggling economies of the developed world it has become less and less important what happens to other parts of the globe. However, in the current economic downturn one must remember that globalisation has NOT disappeared over night. In fact we are pretty much in the same interconnected world we used to be before all this mess started. This means that what happens in one part of the world will, in one way or another, have repercussions on the other side of the globe. So taking this into consideration, we should then at least show some interest to what happens to other parts of the world, especially those which are strongly related to the West and its financial system/crisis.

The issue

Since November last year (2008) exchange rates across Central and Eastern Europe have been plummeting at unexpected rates. Some have even reached lows that have last been experienced in 2003. Obviously the first suspect is the world financial crisis, but this is just a simple explanation that overlooks the deep roots of the problem and what its repercussions might be on the Western countries.

Why are the rates plummeting?

There are 3 main reasons:

1. Western banks and investment funds have been investing heavily in emerging markets. This is because, as these markets are on the rise and many of their assets are under valuated, there is a good chance they could make a nice profit while maintaining a relative low amount of risk. And one of the best emerging markets is or used to be the former communist states of Central and Eastern Europe.

This means that a lot of western cash (dollars, euros and pounds) have been poured into this region. And now, as things have gotten worse back home, Western investors need that money to plug the holes in their own back yard. As a result, investors are just selling off what they have in Eastern Europe and taking the money home. However, their money is not in their home currency (USD, EURO, GBP) it is mostly hold in the local currency. So as they sell the local currency (the currency of Central and East European countries) for dollars and euros, these local currencies start to devaluate.

2. Losing confidence (risk aversion) – as now investors have a hard time knowing where to put their money, the economies of Central and Eastern Europe seem less certain than those they have back home. After all, they should know more about what happens in their home countries rather than what happens in some country all the way across the sea. Also investors tend to trust more the governments of the rich developed world, believing they are better prepared in taking good decisions than those of less developed countries. This means that less dollars and euros are sent towards less developed regions like Eastern Europe. As a result, there is less demand for the local currencies. Thus, the local Central and East European currencies slowly start to devaluate.

3. Growing western deficits – As the trouble in US and Western Europe becomes increasingly more acute, their governments try desperately to salvage the economies. One of the most used methods is to basically inject money into the system, hoping it will somehow stimulate the economy and bring it out of recession. But the money must come from somewhere…

One solution is to print more money but this can very well just lead to inflation and in combination with the economic crisis it might just spell the apocalypse of the capitalist world. The only other solution is to barrow the money from … somewhere, usually from some banks and organisation specialised in lending to governments. Nonetheless, these organisations also need to get the money from somewhere and that somewhere is the rest of the world. Also the money needed must be in western currencies. That means dollars, euros and pounds because you cannot stimulate your economy by injection some other random currency, you need your own. One of the places where a lot of dollars and euros have been poured into is Central and Eastern Europe and now the West needs those dollars and euros to finance their deficits. As more and more government lending organisations try to buy the dollars and euros from Eastern Europe, the local currencies again start to devaluate as they are being sold for the western currencies.

The implications for US and Western Europe:

Now that things have been explained it remains to understand what this tells to the rich developed countries. Going back to the previous points there are two which need more careful attention. Firstly that dollars and euros are leaving Central and Eastern Europe in order to plug the holes of struggling Western financial institutions and secondly to finance Western government deficits. This is not a major issue as long as there still is an easy way to get the dollars and euros from “somewhere” without creating inflation. But what happens if the money runs out? Money is not infinite…

The basic problem is simple, as long as the West can gather money from Eastern Europe, in other words, as long as the currencies of this part of the world continue to devaluate there is still hope for a sound economic recovery of the rich Western world (they will have from where to get the money to support their economies). HOWEVER, if the West does not show any signs of recovery by the time the devaluation stops and the Central and East Europe currencies start to evaluate again, we can safely say that we are probably experiencing the end of a chapter in human history. Hopefully this will not happen.

Other information:

Central and Eastern Europe is not the only region experience currency devaluation; countries across the global are experiencing this. From Kazakhstan, Tajikistan to Philippines and South Korea currencies have been losing ground against the dollar and the euro. But Central and Eastern Europe has a much closer tie to Western Europe and the US, receiving more foreign investment and thus being a better representative case.

The amount of money being drawn out of Eastern Europe is impressive. In the case of Russia, in less than 6 months, $ 800 billion left the country as western investors were bailing out from the Moscow stock exchange and other short term investments, this was in November last year. It was the period when most stock exchanges in the less developed countries collapsed as Western investors virtually fled these countries. These were short terms investments but now we are looking at medium and long terms investments and deposits, once these are out, there is virtually nothing left.

The amount of public deficit ran in Western countries is breaking historic records. In US, in 2008 government deficit was about $ 450 billion (3.4% of the GDP) and for 2009 it is projected at almost $ 1,700 billion (more than 10% of the GDP). In UK it was 4.6 % GDP in 2008 and projected at 9 % of GDP in 2009.

dollar gone crazy

Greece’s riots are a sign of the economic time

Well, it certainly seems that the predictions of this humble author were not entirely empty make-believes. One should keep in mind that riots and public unrest are in no way a novelty to Greece – in fact just about every major event spawns a series of unrest followed by looting and fighting – be it Olympics, EU summit or other thing. However, unrests that last for weeks at the time are indeed something the government should take as a sign to start worrying. If an average Greek Kostas can stay off Frape and the game of tavli for more than a couple of days to partake in some demonstration, it can only mean that this time he`s angry for real. And a kind word of reassurance that life would be better tomorrow would not work by that stage.

Change is needed, and not just a mere transition of powers between Pasok and their counterparts, but a full-time transition. And there is only one party left after the big two are gone – the communist KKE. Why, I can practically envision mass executions, the hand of KGB in every major country affair big and small and red draping hanging on every wall. This is, of course, what the Greek prime minister would like his people to believe in the last desperate attempt to cling to his big boss chair. Sadly for him, the time when his word was trusted is rapidly coming to an end. Do we have to point you to the door, Mr. Karamanlis? Don`t forget your shoes on the way out – someone might not resist the temptation of a modern shoe-tossing trend.



Guest article by Tovarish

Ukranian Defense Ministry claims its armed forces relocation has nothing to do with Russia specifically, but is a process of spreading army more evenly across the country (original article in Russian). Defence Minister Yuri Ekhanurov recently stated(rus): “The recent Caucasus situation development makes every country think about its ability to deal with new challenges. It seems it is not so quiet, and Europe can still have armed conflicts”.

Touché, Monsieur Ekhanuroff. The challenges indeed makes you think. It puzzles me, however, what kind of thoughts make you reinforce your army positions along all of the borderline. Perhaps you got a tip that a full-scale assault of two-headed reptilians from Alpha Centauri is due to start the coming Tuesday straight after morning tea? What kind of threats does Ukraine fear in Europe? Moreover, what kind of threats does it think it can REALLY tackle? It seems to me Mr. Obama would be more reluctant than his predecessor  to fish you out of the pot once the soup starts boiling.

og17_62_page_1_image_0001

The most probable threat Ukraine is preparing to face

Guest article by Tovarish

Once upon a time in a blissful place of forests, glades and lakes appeared a Dictator. He (of course it was a he) was greedy and evil beyond measure, and quickly made his mind to usurp the whole place where people knew no troubles. In no time did he gather everyone and proclaimed himself to be the new master of all, everpresent and evervigilant. The world was his, and nobody could object to his rule.

As he was gloating over the pathetic minions who lost their freedom to him, he was approached by his team of trusted advisors. “You are at great risk now” – said they. “We are the only people you can trust to shield you from danger of haters and rebels. You have to favour us – give us the share of your power, and we would be your trusted helpers always”. And so the Dictator did.

Next came the military of the country, and this they said: “We are many, and we have guns. We do not care for your rule or anyone else`s. But we don`t object to your presence either. Give us the share of your power, and we would serve you loyally from now on”. And so the Dictator did.

Next came the police of the country, and voiced their cliams: “Your enemies are many, and they all plot against you. We hunt them night and day, and it`s a hard job. Without us you are not safe, and for this we want to live better than the rest. Share your power with us – you have much of it as it is”. And so the Dictator did.

Next came the judges, and appealed to Dictator`s reason: “The criminals the police catch are fearless, for they know they did no wrong in plotting against you. Bars and chains do not break their spirits. We need harsher measures to punish them and make the rest fear you – and for this we need your power”. And so the Dictator gave them some.

Next came the aristocracy of the country, and complimented the Dictator: “Your Highness, we worked hard for our capital and social standing, and the same maggots who seek to overthrow you want to kill us too. Give us the share of your power, so we can keep the unwashed peasants in check”. And the Dictator reluctantly did this.

Finally came to Dictator his trusted Foreign Minister and said: “Your Highness, it is well known the rest of the world hate you, for you call yourself Dictator. In my opinion, we can prevent a war with all of them if we but do a few minor changes, for formality only. It is my suggestion that we change your official title to President, and hold elections once in a while (just to keep rebels in check, eh?). Also, there should be some sort of puppet opposition, let`s call it Parliament, where village elders would gather once in a while and debate on matters useless and uninteresting. You would still be our benevolent Dictator, but all the others would be fooled into thinking you are not, and you do not have to fear for your life no more. This would be a very wise decision”.

And so the dictator ruled the land of paradise from then on, untill one day he choked on a cherry from a jar.

Guest article by Tovarish

Prime Minister Costas Karamanlis spent his second consecutive weekend trying to convince people in the provinces that the 28-billion-euro support package for banks would benefit the real economy

Greeks are truly having a time of their lives being in EU. How else can you explain that, during the very agony of the world economy as we know it, Karamanlis spends days walking in mud in the middle of nowhere convincing locals they would have more goats as a result of some smart government move? He is talking to the same people that were offered money by EU agrarians not to grow their crops and sit all day in the sun for a few years now. During my time living there, even my schoolteacher got a couple of “suit dudes” coming up to his country house offering something on the line of 30 Euros not to grow olives on his almost dry tree in the backyard.  In a country flooded by archaic bureaucratic system, external enemies on all fronts and hundreds of unwelcome ethnic Greeks with no passports or jobs, there never seems to be a cloudy day.

Why, on the less sunny side of Greece we have a whole island network of  tourist industry that might just be breathing its last. With consumers in Europe saving their money in their pillows rather than in their holiday plan, a lot of places might not see tourists wobbling towards the beach in the next swimming season. Of course, Greek government does not have to address this problem – it is well known that 90% of people employed in the tourist industry are seasonal workers, and disappear into thin air once summer is over, creating no poverty, despair or votes for the opposing party.

Costas Karamanlis

Kostas Jabba Karamanlis the Hutt, as the world knows him

Guest Article By Tovarish

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