Surprise!!

According to the Portuguese Competition Autorithy, EDP (the electrical monopolist company in Portugal) practices unfairly high prices in the energy market due to lack of competition...

A keen eye of the EU Commission

The Comission announced today that it issued formal "Excessive Deficit Procedures" against a number of EU countries that overpassed the 3% limit (namely Spain, France and Ireland). This may be understood as a signal that the Commission will keep a keen eye on this issue, despite the deflactionary pressures and the mounting crisis. Still, some caution should be used on this procedures - after all, some public investment might be benefic to counterattack this crisis.

http://economia.publico.clix.pt/noticia.aspx?id=1377008&idCanal=57

Bad perspectives

An estimated 4.1% decline in the GDP, unemployment rate soaring to 11% in 2 years, low productivity, weak political leadership, a system plagued by corruption, slow and ineffective justice, low educational levels, low social commitment...

It seems Portugal is having a bad time. Let's see if it this is the low point, and work to ensure we can start climbing the mountain from the 'place' we are standing in.

http://economia.publico.clix.pt/noticia.aspx?id=1375905&idCanal=57

Microcredit in Portugal

Microcredit is a relatively new word, first used in the seventies to name a specific type of loan, of a relatively low amount, given to poor people, so they could gain some economical independence. It was initially designed to provide access to credit to people who were so poor they wouldn’t be eligible to any in the traditional banking system. Microcredit started in Bangladesh, through Muhammad Yunus and his Graemeen Bank, and since then (and supported on the positive impact it had on millions of Bengali households), it has spread over the entire World as a viable way to have a positive impact in the poor population, giving them credit to put their best efforts and creativity in action to run away from poverty claws – and all of this under an economical Liberal method!

As all new successful theories, some Portuguese banks have started their microcredit programs, crediting themselves as an adaptation to our country reality of Graemeen’s methods. The problem is, I must say, I am not sure if those programs were really designed to give a chance to Portuguese poor people or are just a good publicity stunt for the banks involved.

Of course microcredit in Portugal has been able to change lives. It provides the means (usually a €5000 limited credit) to people with good ideas and will to push it forward and make a new business that will get them out of poverty and into financial independence! And that is something absolutely amazing! My only question is why was it only conceded to 1100 persons since it started in 1999 in Portugal…

If we want it to work, we need to get it near ordinary people, make it simpler. That was one of the secrets of Graemeen’s success, and one of the most important things the Portuguese microcredit process was unable to capture…

On leveraging living standards through future generations earnings

What is happening now on the global economy had to be long awaited. The way we were improving our life was a "glass left on the beach". Not that living better, increasing our life standards has any problem - it is quite the opposite, really! But the way we have been doing it over the past decades is probably questionable.

There is nothing wrong is living better! But we should primarily do it by incorporating in our living patterns our own productivity rise, or the expected product that we will achieve through our life (and that is a mechanism of credit leveraging, that has a natural, but usually assumed risk). In the last few years (especially in the last decade), we have seen a strong surge in consumption, that was possible through debt leveraging - but one that was not only considering our own productivity, but the product of the future generations. Not that it would happen directly for a short term consumption (like a LCD TV screen or even a car)! No! What one would do was to buy a house, counting on its appreciation, that was supported by a general feeling and urge to buy - that's the market working full scale. But at one point, houses were not being bought in one's family actual income, but on what one (and the market) would believe it would value in the long run - hence, what one would believe future generations would be willing to give to buy it. If we really think about it, on the limit, one would be pricing the house at an infinite price.

But we know our planet lives on finit resources - is one of the basics pillards of the economic theory. We had real warnings on this issue - but only a few were able to relate the "ecological footprint" to its economic consequences. When you say that if everyone would consume like the US, then you would need 3 Earths, what you say, is that available resources aren't enough to withstand that consumption pattern! Of course, not everyone in the World is living like a western citizen - but the point is that the global economy was already consuming above its generational fairshare, above the share of resources it should to allow for its safe and sustainable replenishment (if you have any doubts, please, think about one of the pillards of our economy, our number one energy source, oil). Basically, we were (and we are) consuming part of the resources that should be used by our children, and our children children.

Another way to see it, usually more 'economy wise', is when you measure debt burdens on families. From 2001 to 2004, the debt burden of a tipical middle income American family rose 33.1%. 33.1% in 3 years! Such a growth increase was to incurred to support (not short term luxuries, as one should expect) but to cover for heavier borrowing in house investment. By 2004, american families were facing a 108.4% debt/income relation - the first time in the US (at least in modern times) that debt would exceed income. That meant the american family spent more than 18% of their income in servicing debt... (data from a "Center for American Progress" report, written by Christian E. Weller in... 2006). The same happened in Portugal and throughout the rest of the western economies. When we let debt climb to become such a burden, what we are doing is conditioning the future generations choices and living standards, by compromising nowadays the share of resources that should be theirs on their own time.

What we are seeing nowadays is a strong market correction. We have leveraged our living standard in the expected earnings of future generations - we are now stoping our irrational growth, and dropping it to more rocksolid nowadays production. And, as always has been, that is called a recession.

-12.7%

We just had news on Japan's economy performance on the last quarter. A 12.7 percent contraction is simply to bad of a figure to easily walk over. Specially when we are talking about the world's fourth economy. We all hope it is only an effect of what happened... and not a sign of what lies ahead!

Homosexual marriage

It is incredible how the Portuguese government has brought up this new subject over the last few weeks, as new flag to be waved and fought for the next legislative elections. It seems this new theme is just a way to introduce entropy in electoral debate, to divert from the more urgent debate on the economy and the country’s strategy for the next years to come. Don’t misunderstand me – I think the homosexual wedding is an important topic, and, as a matter of fact, I am for it. But, I also believe that we shouldn’t be diverted to focus on what we want our country to become, and how do we want to do it. Topics like economic strategy, corruption fight and legal system effectiveness and functionality are much more important and urgent to discuss.