randform

A reader called Ingeborg was asking

>>>”Do you think that teaching did impair your research?”

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randform wishes a happy new year to everybody!

just be careful – in particular given the rather bleak economic outlooks it will get even more easy to loose oneself in dreamworlds, so I wouldn’t wonder if the boom of the game industry is going to continue. In this TED video (via serious games) David Perry describes the evolution of video games, however of special interest in this video may be an -what he calls opinion of a student- which is a (realistic?) documentary about a self acclaimed video game addict (second part of the talk, the whole talk is about 20 min). The documentary describes the cognitive changes which are due to excessive video gaming.

The following post is in part an answer to a question in a randform comment.

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This will be a post about cars, nuclear power and economic stimulus programs.

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shop widow in Munich’s Amalienstrasse

Today the german “stabilization law” mentioned in the last randform post, which was hastingly put together within a couple of days and which concerns an amount of money which is in the order of the costs of the german unity, is going to be passed.

With it

Since -with this law, it is on one hand in principle possible to adjust the time validity of remuneration obligations via Rechtsverordnung (which means in particular without the need of parlamentary involvement), however on the other hand as indicated on the webpage (same as in last post) there seems to be no intention to do this on a broad scheme. In particular I hereby repeat (like for those with an attention deficit syndrome..:)) the current legislation means that

(for more see last post)
This implies that probably no real changes in the banking system will take place and I am asking myself how this could possibly raise the trust of savers.

Due to the given financial crisis governments worldwide are busy to bundle up “care packages”. Oversimplifying a bit one can describe the current scenario as follows:

Banks lost trust among themselves, therefore they tend to cease lending out money, therefore capital flow is in danger, therefore economy is in danger. Hence governments put guarantees, buy up problematic assets etc., which in the turn buffer the risk for the banks, so that the banks will again have more confidence into themselves.

This would be funny if it wouldn’t be funny at all.

In particular the german government will issue a “stabilization law”, which is intended to be pushed through by the end of the week and which I find hard to accept. Why?

Lets first put together the main points of this law:
(english handout):

-the german government provides a fund with a volume of 500 billion Euros (operated by the ministry of finance and administered by Deutsche Bank) , with which “measurements” such as recapitalization (which means more or less bying parts of banks/sharevalues/etc.)(80 billion Euro) and putting guarantees (400 billion Euro + 20 billion security reserve) can be taken.

In exchange for this public donation one can read today on the webpage of the ministry of finance that:

Der Bundesregierung ist wichtig, dass Manager harte Auflagen in Kauf nehmen müssen, wenn sie unter diesen Absicherungsschirm wollen. Neben der angemessen Vergütung für die Hilfen wird es für jedes Unternehmen, das Unterstützung braucht:

* eine Höchstgrenze für Vorstandsbezüge von 500.000 Euro geben müssen
* einen Verzicht auf Bonuszahlungen geben müssen
* einen Verzicht auf Dividendenausschüttungen geben müssen.

(translation without guarantee)
It is important for the german government that managers have to accept firm obligations, if they want to be eligible for safeguarding measurements. Besides an adequate compensation for the help it will be necessary to demand for each corporation, which is in need that

*there exists an upper limit of 500000 Euro for remuneration of members of the management
*a disclaimer for bonuses
*a disclaimer for dividends

In their draft for the new law these obligations are not mentioned explicitly, but it is written (§ 10) that the obligations which have to be complied with (zu erfüllenden Anforderungen) can be later on specified in socalled Rechtsverordnungen.

The above described help package of the german government is valid until Dec. 31. 2009.

Among others (i have not really time for going into detail) it is the term “zu erfüllende Anforderungen” (demands which have to be complied with). Given that I understood correctly –

Given this is true, I find that quite unacceptable.

Or in other words:

It is fairly obvious that a big part of the current disaster is due to –yes one should call what it is — “profitable and riskless gambling with the ressources of others”. In other words most of the current remuneration systems reward those who are successfully pushing the limits without (almost) any personal consequences. In particular it does not reward those, who may step back e.g. for moral and other reasons.

In this statement by Hector Sants from FSA (UK Financial Services Authority) Criteria for good and bad renumeration policies are outlined.

They are a bit too weak for my taste, but well they give at least some indication on what is darned necessary.

see also article by Bettina Schulz (in german)