Tuesday, June 19, 2012

Dear politicians, I blame you!

Good morning everyone. I have watched with great interest the press wars between the former governor of the Central Bank of Cyprus and the government spokesman. I was initially planning to take on the topic of why people commit crimes in today's blog, but I cannot in good conscience leave yesterday's events without comment. This post was written in parallel to another over at Anglo Info forum, that will go live later today.

Dear Mr. spokesman, are you blaming the former governor for the current condition of the Cypriot economy? Do you believe that people are naive enough to believe that the Cypriot economy crumbled from the decisions of a single person? Is the governor the sole person to blame for the reckless investments of Laiki Popular Bank in Greek government bonds? Do you realize that the press wars are harming the Cypriot economy at a time of uncertainty?

Dear Mr. former governor, where were you when the Cypriot banks were exposing themselves to risky financial assets like the Greek government bonds? Where was the Cyprus Central Bank to monitor these investments? Why can't the Central Bank act as a lender of last resort now? Why aren't we in a position to sustain our financial system without foreign assistance? And would the president's disagreement on the shaving of Greek debt achieve anything of substance?

Gentlemen, the financial system has failed and this is your fault! All of you. If Adam Smith, the first economist was here, he would probably be dumbstruck. His book, the wealth of nations, was first published in the late 1700s and it contains the answer to our problems. I am a fanatic supporter of Adam Smith's invisible hand. That left alone, markets can reach equilibrium, in other words, the point where quantity demanded equals quantity supplied. When we are dealing with labor markets this translates to ZERO unemployment and in output markets, whatever is produced, is actually sold. BUT MARKETS NEED TO BE LEFT ALONE.

How can this be achieved? We do not need politics at this point. Politics are useful to solve political problems, but our problem now is purely economical. The answer for the Cypriot economy lies in the drastic reorganization of the structure of the economy, where decentralization and privatization take the center stage. Enough with the record losses amassed by the publicly owned companies. It is time to let in private investors in order to increase competition and benefit the consumer.

Enough with protecting natural monopolies like water and electricity. Open up the markets to private companies and allow private bidding for different geographical regions like in the United States. I guarantee you the price for these services will dramatically decrease.

Enough with sustaining a catalog system for appointing public primary and secondary school teachers. Isn't it obvious that the system has failed when one has to wait until he/she is 300 years old in order to be hired in the public sector? Are we going to keep this charade for a few more years or is it time to act now?

I say do away with the catalog system. It is an heirloom of another era and it does not belong in the contemporary economy. Instead of having hundreds of illegal private tutoring institutes, structure a system of private subsidized schools where a proportion of the tuition is paid by the government and decrease taxation so that the households will be in a position to pay for the remaining tuition.

This may cause certain people to react. Why do we need to pay for our kid's education, they may ask. What they do not realize is that they are already paying a fortune in private tutoring when this could have been avoided altogether by providing high quality educational institutions.

Gentlemen, allow us to work alone. Allow us to save whatever dignity the Cypriot economy has left.

Thank you, and have a high utility day! 

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