The Second Parchment

On Economics, Finance, Politics and Music

Category: Uncategorized

The Small Handbook of Short-run Macroeconomics

All students of macroeconomics should definitely refer to this PDF document written by Professor David Romer to relearn/refresh the basic framework behind how monetary & fiscal policies interact in the short run.

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Sinking Strategies

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Earlier in class my professor said something that’s been sitting in my mind while I review my notes for my risk management exam tomorrow. He said: “Sometimes, when you’re drowning, keep drowning. Don’t look for ropes and branches to pull you out of water.” He was referring to a strategy once employed by the financial strategists of General Electric (G.E.) prior to and after President Obama’s rescue stimulus given to the firm. In times when the firm suffered from losses (or intentionally sought losses?), G.E. took advantage of the U.S.’ tax credit laws to generate positive cash flows. Although irrelevant to this particular discussion, here’s a representative paragraph on G.E.’ accounting strategies quoted from The New York Times:

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

G.E. generated positive cash flows from the U.S.’ I.R.S. tax credits under circumstances in which profits weren’t in the firm’s favor. The maintenance of positive cash flows for a certain time period, holding other relevant variables constant, increased the firm’s asset values. With G.E.’s impressive business model and human resources, the firm can then switch gears to the conventional profit-seeking strategies whenever it deems optimal.  So when you’re sinking, the most intuitive solution might be getting out of the lake as soon as possible. But it doesn’t imply optimality. Sometimes you just need to hold your breath a little bit longer and simply enjoy the aquatic scenery surrounding you.

On Banda Neira

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My favorite music style has always been simple different-gender duets: a male and female singer, harmonizing each other with their melodies, singing while playing their favorite instruments. Typically, the guy plays the guitar while the girl plays the piano. The Swell Season is a perfect example–Hansard (guitar) and Irglova (piano) went famous for their low-budget movie, Once. Another would be The Civil Wars.

I was pessimistic about the existence of such duets in Indonesia, until my friend Afu mentioned Banda Neira, a xylophone-guitar duet formed by Rara Sekar and Ananda Badudu. Not only does the duet write beautifully crafted melodies, they also emphasize the poetic nature of the lyrics in their songs. Rumor has it that Ananda is the grandson of  Jusuf Sjarif Badudu, one of Indonesia’s most esteemed linguists. I don’t doubt this. He definitely inherits his language skills. Listen to ‘Di Beranda‘ and ‘Hujan di Mimpi‘, read the lyrics, and you’ll get what I mean. Afu told me that “Rara’s voice resonates clearly like a flute, while Ananda’s is close to a viola.”

The band’s sense of profundity doesn’t end there; even the word ‘Banda Neira’ has a special meaning. Though I haven’t met either Rara or Ananda, I’m pretty sure that, after doing a quick Google search, they named their duet after a settlement located in the islands of Banda, Malacca, Indonesia. Indonesia was once a colony of the Dutch, and Banda Neira was a portal of global trade. What’s so profound about naming a duet after a port?

Around 1621, Most of its local residents were forced out and exterminated for the purposes of natural resources exploitation. Locals of the Banda Islands were massacred for wealth, some were forced to be slaves to the ruler. Those who don’t know such history of Banda Neira would definitely be deceived by Josias Rappard’s subliminal painting of the port. When he was serving as an infantry unit of Koninklijk Nederlands-Indische Leger (translated: Army of the Kingdom of the Dutch East Indies), Rappard painted Banda Neira with such beauty that people like us would disregard how grim the port was during a certain period of history.

Rara and Ananda can make the argument that this is exactly why they named their duet Banda Neira, a historically dark port, but in the same time wrote their heartfelt songs: to remind us of how peripheral appearance can conceal something whose inner meaning is relatively more dismal. But this is just me over interpreting, because as written in their blog, they chose ‘Banda Neira’ because of the following reason:

During the period of Indonesia’s strive for independence, several national heroes and founding fathers were extradited by the Dutch to Banda Neira. They included Sutan Sjahrir and Muhammad Hatta . . . as Hatta was preoccupied with his books, Sjahrir enjoyed playing with the local kids. He then wrote in June 1936, “this place is heavenly.”*

*Sutan Sjahrir served as Indonesia’s first Prime Minister when Indonesia was a federation. Muhammad Hatta was Indonesia’s first Vice President.

June 1936–hundreds of years after the massacre. Had Sjahrir known what happened on the land he stood, would he still write the line he wrote? Regardless, Banda Neira is a cool duet and they deserve to get famous. Or don’t get famous–just keep writing great songs.

 

Reid Hoffman’s Advice

Hoffman’s presentation is one of the most simplistic, direct, yet substantive presentations I’ve ever seen. This one focuses on what sort of skills college graduates should hone and what actions to take to be a step ahead in the advancement of their careers.

I particularly find his third point appealing: to take intellectual risks. Unlike most self-proclaimed career gurus out there, Hoffman emphasizes that taking risks is important as long as its negative repercussions (which emerge in a worse-case scenario) don’t severely impact on one’s main career path.