The US Economy and Japan's Lost Decade - An Eerie Similarity

Nobel prize winner and economist, Paul Krugman, in his book "Depression Economics" describes how the current US economy bears a disturbing resemblance to Japan's lost decade from 1991 to 2000.

In the 1980's, during Japan's period of economic miracle, Japan experienced incredible levels of growth in GDP. This was fueled by low interest rates, and crony capitalism - similar to sub prime mortgage, only in this case, corporations with bad credit could also easily borrow from the banks. The abundant supply of cheap credit tripled Japanese asset prices and the stock market soared, leading to a giant asset bubble. Realizing that such astronomical asset prices were unsustainable, the Japanese central bank, suddenly began raising interest rates in 1990. The market responded quickly resulting in a steep market crash. The stock market went down 60% and asset prices took a nose dive. Japan went from a 2.4% budget surplus in 1991 to a 10% deficit in 1998.

In response to the impending recession, Japan's central bank lowered interest rate and increased the supply of money. Big banks were bailed out several times. Through quantitative easing (printing money and buying government and bank bonds to supply banks with cash to encourage lending and in turn hope that "deposit multiplication" leads to creation of more money) the government hoped for a market recovery. Despite several stimulus injections the economy did not respond favorably. Instead of borrowing money from the government, Japanese corporations decided to save more and pay down their massive debts. Corporations tightened their belts and unemployment went up and so did inflation resulting in a decade long period of flat GDP known as the lost decade of Japan.

The US economy seems to be following a pattern of asset bubble burst and liquidity trap similar to Japan. The question is whether the Fed's expansionary monetary policies (low interest rates, increase in money supply) and government's fiscal policy (taxation and expenditure) will have any positive sustainable effect on the GDP and unemployment rate or will the US economy slip into a period of stagflation. Stagflation is generally preceded by a supply shock event such as a steep rise in oil price (the gulf of Mexico spill could be a catalyst). If the US experiences a stagflation, it will be very difficult to counter it with measures suggested by Keynesian theory (since inflation and unemployment are supposedly mutually exclusive). Irrespective of the market response, the Fed and government should initiate policies to fix the economy. Inaction (mainly due to political disagreement)or policies such as "quantitative neutrality" will only make matters worse.

Columbia Pre-MBA career management

Take aways from Columbia's pre-MBA career management session on 22nd July, 2010.

Gina Resnick (Asst Dean & MD of career management center (CMS))-
1. The job market is a slightly better this year
2. There's a new normal in the job market. MBAs have to be on top of their game to get an internship.

Michael Malone (Director, Career Education & Advising, CMC)
3. Lots of resources available at columbia, make use of them NOW. Not much time for research when you join. School's moving from H,HPs,Ps to A,B,C grading system.

Bruce Llyod, Director, Employer relations, CMC
4. Researching the industry (who what when how, industry outlook), company (history, size, headquarters, biggest competitors, major players, stock price, market capitalization, major divisions, past problems/successes, future outlook, alumni) and function
5. Banking & consulting companies show up very early on campus. Sep 27th is the first corporate event (probably an info session). Be prepared to network effectively and talk intelligently from day one. PEs/VCs, etc show up in Spring.

Laurie Boockvar, Associate Director, Career Education & Advising, CMC
6. Find your i. interests (energizing vs draining jobs), ii. skills (strengths/weaknesses), iii. values (key drivers that you wont compromise on), iv. Style (preferences, e.g working with facts or big pic, individual vs team), v. Financial/work-life balance

7. Draw a map of your career in 10 years. There are many paths that lead to your final goal. Find a bridge job to align your background with the skills you need for your dream job.

Jay Corcoran, Asst Director, CM Lib & Dig media
8. Start looking at columbia's website for resources, career chronicles, coaching tips (video), industry resources, etc
9. Reach out to the alumni - look through the database

Frameworks for Investigating Careers (moderated by Pamela Wellington)
The panelists were 4 coaches who help candidates with their careers
Charlie Alum '72 (Started SWAPS) - Preparation is the key
Chris (healthcare consulting) - Networking with 1 or 2 people per session.
Anna (mgmg consulting) - show interest
Andrew (Banking) '01 - Info interviews are real interviews. Be ready. Exibit a lot of interest in industry and company.

Nayla Bahri (Ass Dean office of student affairs)
10. Take exemption exams but not too many. Dont miss out on cluster experience. Case study with learning team during orientation

1st Sem best practices (moderated by Loren Margolis, Associate Director)
Corey class of '11 - interning at Unilever, brand management
Sid class of '11 - interning at a hedgefund, background in hedgefund.
Lots of leadership positions available at various clubs.
High grades important to banks.

The White Tiger and The Interpreter of Maladies - Book reviews

The White Tiger by Aravind Adiga, is the winner of the 2008 Man Booker prize for fiction. It follows Balram Halwai, the ambitious son of a poor rickshaw puller, as he undertakes an incredible journey from darkness to light, from the bottom of the food chain to the top. It’s the story of an illiterate villager who makes it big in life despite facing huge obstacles such as an ancient feudal society, a primitive caste system, rampant corruption and nepotism, and extreme poverty and injustice. Balram Halwai though born to live with water buffalos, sleep with bugs, and die as another component of the "rooster coop", manages to change his destiny in one quick but dark moment. This reversal of fortune is certainly not achieved without stepping on a pile of innocent dead bodies.

The book is written in the form of 7 letters to the Chinese Premier, explaining Halwai‘s transformation from a servant to a master. Halwai presents himself as an embodiment of India’s abundant entrepreneurial talent; suggesting that China too can embrace and adopt this spirit if it follows Halwai's example.

The White Tiger definitely made for a very interesting reading, especially in the first half, though it does not turn out be as inspiring as it promises to be. Although, Halwai pretends to be a focused entrepreneur, he lacks originality of ideas and brilliance of planning. The harsh and extreme portrayal of individual characters and parts of society in only black and white colors is rather unconvincing. Overall, a humorous and fast moving novel, though unworthy of a Booker.

Jhumpa Lahiri’s, The Interpreter of Maladies, won the Pulitzer Prize for fiction in 2000. It’s a collection of nine short stories about the emotional experiences of Indians in India and abroad. The sleep inducing stories in this book leave you without feeling connected with the characters. There isn’t an inkling of humour as Lahiri churns out one dry sentence after another in a mechanical and completely uninspiring manner of storytelling. Not surprisingly, I was not able to bring myself to read beyond a third of the book. There are a couple of stories in this book that make you feel like the author’s been living in a bubble since 1970 and has no cognition of modern India. I was also a little irritated by small mistakes in the details such as calling the language spoken in Orissa as “Orissi” (a form of dance) instead of Oriya. The author was born and brought up outside of India and such mistakes, trivial as they may sound, reveal the author’s lack of intimate knowledge of India and cast doubts on the authenticity of her own experiences which are probably the foundation for this book.

Our obsession with food

America is obsessed with food. We have a higher percentage of obese population here than in any other part of the world. However, should the people be really blamed for their burgeoning weight? Maybe..to some extent...but not entirely. The food and beverage industry in America operates akin to "The Matrix" (film). They have pulled a virtual screen over everyone's eyes. We live under the illusion that food has this supreme significance in our lives and that it has a greater purpose than just supplying nutrients. Although, the marginal benefits of food reduce with increase in quantity, the food industry has managed to distort this equation brilliantly with applied human psychology. Wherever you go there are these colossal posters, banners, fancy pictures of greasy, super unhealthy calorie-laden burgers, pizzas, smoothies, ice-creams, pasted all over the place. Its impossible to avoid this excessive advertisement of food engulfing us, staring at us from bill boards and building tops, every time we go out. To make matters worse, they follow us right into our living rooms. Through the "idiot box" they have managed to invade our privacy even at home. They have succeeded in brainwashing us into believing that wolfing down buckets of fried chicken at KFC is somehow cool. In one hour of TV viewing we're bombarded with dozens of food and drink ads. Commercials with close-up shots of food taken from various angles have us hungry every time we watch TV. Images of food seep into our subconscious and take control of our minds, making us constantly crave for food.

Food has become the foundation of our social interactions and a lifestyle choice actually. Whether you're on a date or meeting a bunch of friends, celebrating your anniversary or out with colleagues, no event is complete without a 5 course meal at an expensive restaurant. Our intake of calories in excess of our body’s requirement is directly proportional to the importance and magnitude of the celebration. We start the meal with a salad to feel good about eating healthy (with tons of mozzarella in it). This is soon followed by an onslaught of drinks, appetizers, main course, dessert, coffee, all laced with an overdose of carbohydrates. If we can barely move at the end of this ordeal only then do we feel that we truly partied. Breaking free from this habit entails taking drastic steps and major lifestyle changes which many of us have undertaken and failed miserably.

It almost seems like we just can’t get away from food or get enough of it. When we’re not eating, we are probably watching it on TV. We are so obsessed with food that unimaginable reality shows like Gordon Ramsay’s Kitchen nightmares, Hell's kitchen and even dedicated food channels have become mega hits. Obesity is the obvious upshot of this compulsion to overeat. There are many statistics that suggest that more people die of diseases caused by obesity than by terrorist attacks. If that is true, may be should divert some of the funding for the war on terror to a new war on food and greedy corporate terrorists who aim to only further their pecuniary goals without any regard for the quality of human life. Just like there is an SEC for the financial services industry we need a regulatory body to rein in the food and beverage industry before its too late. Finally, its up to us to see through this smoke-screen and wean ourselves away from "our obsession with food".