All entries for October 2008

October 31, 2008

Another one about the crediy crunch

I took that one from today`s Financial Times. Great article, not so easy as the other one, more technical but very enlightening...

What the British authorities should try now

By Martin Wolf

Published: October 30 2008 19:31 | Last updated: October 30 2008 19:31

The UK is in recession. The estimate of a decline of 0.5 per cent in the third quarter, after stagnation in the second quarter, ends the debate. This is the beginning of a lengthy and, quite possibly, deep recession. How long and how deep? The answer depends on what the authorities do.

This is the moment at which David Blanchflower, an external member of the monetary policy committee and professor of economics at Dartmouth College in the US, is entitled to say “I told you so”. Prof Blanchflower has voted for a cut on every occasion since October 2007. In retrospect, he was right to push strongly in this direction, usually against majority opinion on the MPC. His views on the economy deserve respect now.

Prof Blanchflower laid them out this week in aspeech delivered, quite appropriately, at Keynes College, University of Kent*. In this, to his credit, he avoids crowing too loudly. His principal points are that, first, the UK economy is likely to follow a downward path similar to that of the US; second, the risks of a sustained rise in inflationary expectations are non-existent; and, finally, the consequences of “constrained credit conditions” on an economy with rapidly declining asset prices are likely to prove devastating.

Thursday’s report from Nationwide that house prices dropped 14.6 per cent in the year to October underlines the last danger. Prof Blanchflower also relies on his experience as a labour economist to argue that the risks of a pass-through of higher prices of imports to price expectations were always small. Now, with collapsing commodity prices and the onset of the recession, the danger is falling prices, instead. Despite unprecedented recent intervention by governments, led by the UK, further tightening of credit has occurred. Even Charles Bean, deputy governor of the Bank of England for monetary policy, describes what is happening as “possibly the largest financial crisis of its kind in human history”.

So what is to be done? The starting point has to be monetary policy. My increasingly strong view is that the MPC must, at this juncture, rethink its stance from scratch. It cannot make sense for US rates to be at 1 per cent, while the UK’s are 4.5 per cent. In present circumstances, I would like to see UK rates down to 2.5 per cent.

Obviously, there is some risk of a further sterling collapse. In current circumstances, this has to be ignored. In fact, determined action may strengthen sterling, not weaken it. In his Mais lecture on Wednesday, Alistair Darling, the chancellor of the exchequer, helpfully gave the MPC the green light to ignore short-term inflation overshoots. He went out of his way, instead, to stress that the Bank enjoys “discretion about the horizon over which inflation is brought back to target”.**

So long as the Bank enjoys room to cut interest rates, it seems unnecessary to take any large discretionary fiscal actions, particularly since the fiscal position is sure to look ghastly. The chancellor states rightly that “to increase borrowing in a downturn is sensible”. He is right, too, to argue that the UK’s stock of debt is low by the standards of large high-income countries. But the deficits are large and sure to become far larger. Against this background, the absence of a clear strategy for returning to a more sustainable position in the medium term is a worry. Such a strategy is promised for the forthcoming pre-Budget report. It must be good. The UK cannot presume indefinitely on the patience of its creditors.

Both the Bank and the Treasury will also need to examine what they would do if official interest rates fell to zero. This looks highly likely for the US and is conceivable for the UK. That would be the moment for “helicopter money”, with cash sprayed around like confetti.

More pressing than discretionary fiscal action is getting the banks to lend. This is why they have been helped, in the first place. Unfortunately, their marginal cost of funds, plus required margins, is above rates they are expected to charge. This is why sharp cuts in official intervention rates are vital. Beyond that, the government may be forced to encourage direct lending by the Bank of England to large non-financial corporations or to offer temporary partial guarantees of loans to small businesses or households. The government must also understand that it may have to recapitalise the banks again. What is being raised so far is some 1 per cent of the combined assets of the principal banks. As the crisis unfolds, the needs could prove far bigger than that.

These are historic times. Given the origins of the crisis in the collapse of an asset price bubble and consequent disintegration of the credit mechanism, the way the recession will evolve remains obscure. The authorities must now focus all their attention on reducing its likely scale. But then they must ask themselves how such a gigantic mess occurred. On this the Mais lecture is silent. Yet every important safeguard failed. A government in power since 1997 cannot ignore this grim truth forever.

* Where next for the UK economy?; **

October 27, 2008

Keynes and the credit crunch

For those who like economy an amazing article I found about the credit crunch, more specifically about how to deal with it using Keynes ideas. Keynes was a British economist that became the most influential economist of the 20th century (some might say that Friedman was more important, but I prefer by far Keynes and for the reasons specified on the article the reason for that is getting more obvious now).

So if you like economy and finance, and would like to learn a bit more about Keynes, Keynesianism and hos his ideas are probably going to help taking us out of this economy problem, see the link bellow. Very simple and well written article.


October 26, 2008

Communication, honest, true, direct

Writing about web page /alanhung/entry/turnover_/

Writing about an entry you don't have permission to view

From my experience I think the most powerful tool one can use with people is straight, honest, complete communication. People are not dumb and don`t like being treated as such. I hated when I had bosses or I received any corporate communication and it was very clear that this was not true, was not complete information.

Many years ago I attended a meeting where we had a presentation from a senior manager of the company. The company was going through a tough moment and was not easy to get promotions, to hire people to positions where we had lost people etc. In the end of the presentation a colleague asked about it to this manager. Instead of going straight he engaged in a word-game, meaning of specific words in the question trying to say that everything was normal and that this moment was just a wrong impression we had (worth to say the whole sector had problems and anyone who watched the news knew that!). That made him look silly and we land lost confidence in him and felt stupid. he should have been straight saying something like: "All the companies of our sector are going through a complex moment and we are not different, so now we will have to hold for a while, to keep together working as a team patiently because it will pass and them we will grow together, we will remember those who have been through it together. That would have been honest.

I`ve had honest relationships both with my bosses and with the teams I managed. Once I had a boss that was a very open person,  and once he made a decision that affected me and a fully desagreed. I`ve got to his table and held my opinion. We could not agree, he kept his, but the simple fact that we were able to hold a honest straightforward conversation made both feel better.

When I managed people it was the same thing. I`m proud to say I always had very honest and direct conversations and always had some very good feedback's because of that. Of course some truth must be said with care, choosing well the words and making very clear that the objective is to grow together, to improve together. Another important thing is when you have a piece of information that for any specific reason you can not talk about, and you are asked about, how to deal with it? That`s another thing I`ve learned from a  previous boss. If you usually have a straight and honest communication most people won`t mind if you just tell them that unfortunately you can not talk about that now, but that as soon as you can you will give her an answer. That has worked with me many times as both an manager as a managed.

I`m just writing that to say that sometimes, a very simple and obvious tool such as good, clear, honest communication works betters them other complex things in order to have a low turnover rate.


October 24, 2008

About the imperial discussion


1. of, like, or pertaining to an empire.
2. of, like, or pertaining to an emperor or empress.
3. characterising the rule or authority of a sovereign state over its dependencies.
4. of the nature or rank of an emperor or supreme ruler.
5. of a commanding quality, manner, aspect, etc.
6. domineering; imperious.
7. befitting an emperor or empress; regal; majestic; very fine or grand; magnificent.
8. of special or superior size or quality, as various products and commodities.
9. (of weights and measures) conforming to the standards legally established in Great Britain.


10. a size of printing or drawing paper, 22 × 30 in. (56 × 76 cm) in England, 23 × 33 in. (58 × 84 cm) in America.
11. imperial octavo, a size of book, about 8 1/4 × 11 1/2 in. (21 × 29 cm), untrimmed, in America, and 7 1/2 × 11 in. (19 × 28 cm), untrimmed, in England. Abbreviation: imperial 8vo
12. imperial quarto, Chiefly British. a size of book, about 11 × 15 in. (28 × 38 cm), untrimmed. Abbreviation: imperial 4to
13. the top of a carriage, esp. of a diligence.
14. a case for luggage carried there.
15. a member of an imperial party or of imperial troops.
16. an emperor or empress.
17. any of various articles of special size or quality.

an oversized bottle used esp. for storing Bordeaux wine, equivalent to 8 regular bottles or 6 l (6.6 qt.).

As I said I liked very much Lila`s/team 3 presentation. And that`s because I like bold statements that arise controversy. My team tried that a bit on our presentation discussing the prescriptive/not-prescriptive classification and the philosophy bit.

But I`ll give my explanation about why I do not agree with classifying the leadership style in Demings work as "ïmperial. The word imperial refers to an emperor/empress. In my mind this connects quite closely to Kings. In the old times, before the adoption of the republic by most countries the base of the emperor/king power was based on the assumption that he had some kind of support from god, he was some kind of divinity. That`s why he didn`t have to be elected, did not have to obey regular human rules, and his power was just gone if he died. And when he died his son inherited it! Of course an emperor, like a king, could not be questioned or challenged because he had god and all his wisdom with him. God choose him, therefore he could not be wrong.

Well...that`s exactly what came to my mind when I saw imperial. That`s the classic definition I remembered. I rest my case. But do i rest my case?

When I left the lecture I was talking about that with Aykut, and even though we did not finish our conversation he gave me an insight. He was talking about the Ottoman empire, and that perhaps it was not like that, etc etc. And them two things came to my mind:

1st Perhaps that is a cutural bias. I`m interpreting through my culture`s point of view and being prejudicial. Therefore perhaps there was another sense I had not picked up and that could make a lot of sense relating to Demings work.

2nd We could give another interpretation for imperial, and think it as not related directly to an emperor, but to an empire. So the leader in Deming would be a great leader able to built and related an empire. I still don`t think that would be appropriate but it would be closer to what I think.

Them I said, in England, let`s go with the English! So I researched in two places. First the dictionarys and them the Britannica Encyclopedia ( could not copy the second one here because of copyright issues0 for definitions of imperial (and in the encyclopedia Emperor). And I must say that after doing that I`m back to my old thought. Looking specifically at the dictionary definition there`s one point the could be argued that is definition 5:

of a commanding quality, manner, aspect, etc.

One could say that a leader could resemble an emperor in this commanding quality, manner or aspect. But I still don`t think that would suit Deming. I don`t think Deming thinks a leader that way, he talks about lot`s of qualities a leader should have but none of them look similar to those stated, even though I think you can have a leader applying Deming`s lessons and having some of the characteristics described in the 5th definition.

But the main thing is I think imperial takes us to a non-challenging, not learning together  kind of thinking that does not fit in Deming`s views. I think Deming`s leader fit`s more in the image of a visionary, someone who is not intrinsically more clever or superior, but someone who has a vision and knows how to share it. Someone who helps a tem produce more that the simple addition of it`s individual abilities and who promotes coletive growth.

Well...just some thought really!

Tks guys!


October 20, 2008

SLLC, let`s work together.


Thank you for choosing me to represent our group. I`m proud of it. Thanks for Louis (Kang) that would have also been a great choice.

I`d like to find a way to communicate with all of you, but I`d not like to use the FT MSC mailing list, because our colleagues from the other programs don`t need to receive our messages. I`m ask Paul to create a forum linked to the MBE page for us to discuss ways to improve our learning experience. I`d also think we should have a mailing list of our own. What do you think? What`s your opinion?

We can also use our group in Facebook, but I think we should prioritise the usage of Warwick tools. 

By the way, in order to do a nice work I`ll need the help of everyone. I`d like to know what do you think about WMG, about the program, what we can do to improve our experience this year. I`m completely open to any need or opinion, I might not agree with it and I have my point of view, but I will certainly pass forward any vision I receive even if that is not my vision. So please, raise the question, communicate, ask. That`s what I`m here for. 

If you wanna talk with me, you can write ( , this blog, forum, facebook group), or come and talk to me.

Once again tks a lot and let`s work to create a continuous improvement process on our program!

Some real examples of greed.

Writing about Greed from Kang's blog

I was reading Kang`s (Louis) entry on his blog about greed. I`m sure he was inspired by the lecture we  attended on Friday about the credit crunch (by the way, great lecture this time the tutor spent quite sometime explaining some basic economy concepts that are fundamental to the understanding of the whole thing). I have my personal opinion about the CC, but I wanna talk about two things I`ve seen in my life, real stuff, real experience that will help illustrate both what the professor and Kang said.

1st. I`ve been working in banks for quite some years now. I`ve always worked on international Banks from different countries. I`ve worked in several different areas and projects. I`ve worked in some different cities as well. All these things change people. For example, working for a British bank is very different from working in an North-American one. Several differences in recognition policies, pace, style, priorities, etc etc. But there`s something that is ABSOLUTELY the same in every bank (and from my experience it is the same all over the world). The traders (these are the guys who really decide what to make with the banks money, were to lend, from whom to borrow, what rates to pay, what rates to accept, etc etc ) are young, addicted to gambling and taken risks, self-confident and VERYYYYYYYYYYY well paid. I`ve seen people with 28, 29 years old, little experience and no managing of people getting paid as much as people with a 25-30 years career, managing structures with hundreds of people, etc etc. They usually don`t have a high paycheck, but they`re bonuses.....It`s funny because most of them don`t stay that long as traders. They usually make a lot of money in a few years and them go to open they`re own business, go to work in other areas of the financial industry with a different profile (Mergers & Acquisitions, counselling, etc etc). I `ve asked many people (and human resource professionals as well!) why there was such a difference. The logical explanation is that it`s hard to find appropriate and qualified people from the job, and there are only very few spots. I think that explanation is not complete. It sure has it`s logic, but I don`t think it fully explains this because even though a certain profile (personality wise) is needed, the technical knowledge itself can be learned by anyone with a reasonable background in maths. The rest is pretty much a consequence. There`s another interesting explanation. It says that people are paid not for the amount of the money they bring to the organisation, but by the amount of money they can make the company loose. In the light of the credit crunch recent facts, that second explanation does make a lot of sense, doesn`t it?

2nd. I had a brilliant teacher on my MBA.  He is a reference in finance in Brazil and currently he is living in China, working as the head of the office for the second biggest Brazilian bank, working with corporate finance ( He lectured us on International Iinance. In the place where I had my MBA we used the Harvad method, therefore we had a case to be studied for every class. We had 13 lectures with him, and 11 case studies, all of them about countries and companies that had somehow been through crisis. In the last day we did some discussion about the common causes. In this day he said something that I always remember when I think about the credit crunch
He got to us and he sad:
"We are all very clever now. Pointing the mistakes of several government officials from all over the world, several very senior economists. We must all been thinking that we would have been able to avod it because we are hear criticising it. But it`s not. First because each crise has it`s own dynamic, and as we all know history is really a mirror looking at the past. And besides that, that`s not how things work in real life. When these crises arrived, people knew there were problems coming but they could not do much to avoid it. First because we are eternal optimists, but mainly because all companies are driven by results, that`s not what they say and how they would like it to be. But when you look at your competitor making money, even though he`s taking more chances and risks, you just can`t say you are not going to make money because you think that this is dangerous., that can bring additional risks (off course respecting the law and all the banks regulations). That`s not how most companies work. You are always compared to your competitor. And don`t think another crise is not about to come, they`re always about to come because we are always relaxing our controls and thinking we are safe"
And he went on and talked about several potential crises we could face including the risk of a buble burst in the housing market in America (even though I`ve been hearing about the chance for YEARSSSS now..)..
But the point is, companies are frequently driven by short term greed in here too.
Well, that are two real stories I saw/heard that I hope will help illustrate Kang`s points.


October 16, 2008

About the books of the last entry

I was asked this morning about the books that I`ve talked about in the last post. Sorry about it, I forgot to list them. I`ll put a few of them (I won`t remember them all since all my books are in Brazil...)

The Wealth and Poverty of Nations 

By David S Landes '

Wonderful book. The writer is a British historian and economist that does some brilliant analysis about why some countries became rich and some poor. Landes has a very liberal/rightist way of looking at the history and is everything but politically correct. Great book.

Guns, Germs & Steel

By Jaired Diamond 

Espectacular. About the development of the great civilisations, how they appeared and why they appeared where they did. I`m a big fan of Jared Diamond is an American evolutionary biologist,physiologistbiogeographer...

Another great book by him is


The history of civilisations that collapsed. Some for not taking care of the environment, some for because of wars, some because of bad political decisions...fantastic! 

Age of Extremes

Eric Hobsbawn

A famous ans classic book about the history of the XX century

That are some of the books that is some way refer to the subject I wrote on the post bellow.

October 15, 2008

Knowledge in civilizations, societies, forums, blogs, MBE Students….

I like reading. I think like is not the word, I LOVE reading. But I`m not crazy about any particular subject, but again that`s quite  unfair. I`m crazy about almost all subjects. But my taste is quite seasonal. For a while I decided I just wanted to read classical novels (Don Quixote, Moby Dick, Karamazov Brothers, etc etc), and them just biographies, etc etc. There was a moment on my life when I just read history books specially about how some societies have developed quicker  and some didn`t, how some empires fall, what is usually the difference between success and failure in societies (I suggest a few books about that matter in the end of the post). There are a few common reasons in all the histories, but there`s one point that is almost always present in all the history of success and in failure.  That point is about the degree of importance given to research and education in the societies. The more valuable knowledge is for that society, the more important it is, the better that society goes. I`m not going to get in the details about the fact that real knowledge requires free thinking , acceptance of mistakes , no fear of trying, etc etc. But there is one detail I`d like to get into. That`s the fact that even though knowledge is perhaps the most valuable asset it is one of the only (if not the only asset) that the more you use, the more you give and the more you share the more you have. 

That`s clear in the history of the human kind. All the civilisations and societies that have given attention to knowledge and that have opened they`re doors to knowledge sharing have evolved. When China was de most advanced society in the world, Europe imported fundental knowledge from there (powder, paper, etc). At the same time, China was not interested in learning from other places because the thought that by being the most advanced the have nothing else to learn. That was the main cause of the decrease of the importance of the Chinese science ans economy for a long time (that is being reverted in the last decades). The same thing happened to several countries in the middle east. For centuries the science in those countries was very advanced in all areas. They invented the numeric system we use today (and the fundamental creation of the concept of the number 0), knew a lot about astrology, metal welding, etc etc. However due to several political and religious restrictions many of those countries have decided to close themselves to foreign knowledge and science. hat certainly has a major effect in the decay of many of those civilisations. Even within Europe that can be found. One of the theories that explains the industrial revolution and the economical growth it brang states that protestant countries were more open to experiments, science, knowledge them catholic ones due to persecution made by the catholic church  to  scientists (Galileo Galilei being a great example) that`s one of the reasons why England, German became richer countries them Spain or Italy for example.

The bottomline is that it`s is important to share knowledge. And that`s is very easy to explain. The more people sharing they`re experiments and explanations the more work is being done in the same direction, smaller possibilities of commiting the same mistakes, etc etc.

Well, vey nice. Sharing knowledge is certainly something desirable, etc etc. And MBE students with it? 

Well, something that Paul stimulates us to do is sharing knowledge. Blogs, team work, forums...I completely agree with it and specially with the argument he uses. But I have a suggestion. Why don`t have a coletive forum? Instead of each team discussing on one forum, why don`t having all of us talking in just one forum? I understand that the basic idea is being able to better evaluate and mark the work. But that could be made by analysing the contributions each one of us made on it. Of course it would be harder to do, but it`s possible. I know we are going to share our knowledge during the presentations, but I still think we should share it by writing, exchanging files, etc. Another reason for that would be following one of Demings principles that states that cooperation is better them competition...

Just to finish that post, something interesting happened. I began writing this post yesterday. Today I went to the tutor dinner and had the chance to talk to several great colleagues. At one moment I was the only non-Chinese in the table. And I had the chance to learn a lot about China, to talk about some sensible questions, etc. It`s funny that in a determined moment we talked about the history of China and we got to the point about China having closed they`re doors several centuries ago and having payed for it (as we said above). The nice thing is that they agree with that, and knowing were you get it wrong is the first step to get it right next time!

Anyway, I`d like to thank all colleagues for all the knowledge sharing so far. I hope that I`m able to contribute to that sharing as well! 

October 10, 2008

Quick one about questioning ouserlves!

Just a quick one (actually I`d have many entries I`d like to put in here, but pretty tired today)

I`ve also worked during my whole academic life, and coming here for that degree have a lot to do with that. And you work you usually kind of build some "certainties"some stuff that you are pretty sure that you know. Of course you try fighting this kind of behaviour, but is very hard to avoid it always.

So I`m really enjoying questioning some of my beliefs. Lot`s of examples but the thing that I am really not accepting easily is Deming saying we should not have targets, numerical targets. I`m not crazy about targets and I do think that you have got to be very careful when setting one. The wrongly set target can surely work against what you really wanted any "target using defender" would agree with that. But no target at all is something I still have to read more, understand better. I`ve already understood the logic, the philosophy behind it, but I`m still not fully convinced one should not use numerical targets when they are goodly designed (for instance instead of having month targets having longer terms ones so that some of the problems of having them are avoided...)

Gotta think more about that



October 07, 2008

China, India, Turkey, Greece, Venezuela, Taiwan, Honk–Kong, Brazil – Diversity and Brazilian stories

We are all different and there`s nothing clever about saying that. However in a day by day basis that is not a problem since we most of the time don`t have any specific serious urgent thing to work out together. However when you are working together, differences can be very hard to work out. That`s true in any situation, but imagine in our situation. We all came from different countries, meaning different cultural backgrounds, different ages, experiences, social and intellectual backgrounds, etc etc. We all meet here in a place that`s also different for all of us (and since I came from a so called "western" with all it`s latin-greek-anglo-saxon common origin and philosophy country, I can only imagine that for our colleagues from the east is even more complicated since they have a background that is so different from the western one) to study for one year something that is fairly complex and have to work together, have to understand, cooperate, test our leadership skills. That`s quite a chalenge (and Paul talked about that today after the end of the discussion. He is right!).

But there`s something else that make things even more complex. The language. We all speak English fairly well. Some of us (Lila for example) find it a bit easier (I am not going to talk about Luis because being a Kiwi/New Zealander his speaks perfectly) but I`m pretty sure they also have they`re challenges with understanding the English accent, culture, understanding us speaking English.....So we are going through a great challenge and my feeling is that we are doing pretty well. Is going to get easier and easier to work together and understand, and communicate. Again I`d like to say that I have an special admiration for my friends from the East (Chinese, Taiwanese, Indian, etc) because once again the culture makes it even harder. The connection between language and culture is very strong so when you came from a different culture it makes much harder to understand and communicate in a particular language and I think you are doing very very well.


Now some curiosities. Last week I was having lunch with some friends and a subject arose. I started to think about sayings that we have in Brazil and that somehow included they`re countries. For example, when you want to say that you are not understanding anything you say "that`s Greek to me!" (I think they have something quite similar in English). Another one for the Greek. When you say "that`s a Greek present!" it means that`s an awful present, one that`s going to give you a lot of work (probably it comes from the whole Trojan Horse thing...).

When you say someone is Turkish in Brazil it means that they are very tight fisted, they don`t like spending money at all. Another possible interpretation is that that person has talent for commerce, for selling things.

Two sayings with Chinese (but the second one is not very nice, please don`t get upset with me, is just a Brazilian saying I did not create it!) . When you say that you made a Chinese Business, or a Business out of Chine means that you made a fantastic, a very good deal, that was really worth it. The second one (remember, don`t get upset!) goes that when you can`t make any difference among people , when you think everyone is similar, or dresses similarly you say " they are all Chinese to me" .

When you say that something or someone is very ponctual you talk about British ponctuality. On the other hand when you say that a football game is horrible, hard to see, poor technically you say that`s English Football!

There`s a great deal of information about how we all see each other on those sayings (even though the are mostly simplistic and are filled with prejudice since they tend to classify all the population of a country in just one way (even if it is a quality, not all of the population of one country have that quality).

Anyway, do you have any sayings about other countries in your place? Anyone about Brazil (very unprobable....).

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