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Mon Apr 20th, 2015 at 02:20:13 AM EST
Frances Coppola reposts these charts in an article on Pieria:
It was tweeted by RBS, who captioned it: One of these is an Optimum Currency Area. And the other isn't.
Not so simple, says Coppola.
Optimising the Eurozone
Robert Mundell, the inventor of the Optimum Currency Area (OCA) concept, defined the essential requirement for an OCA as free factor mobility. Since his rather vague definition, though, the concept has been developed further. Economists now generally agree that four criteria must be met for a group of regions or countries to qualify as an OCA:
- regions/countries should be exposed to similar sources of economic disturbance (common shocks);
- the relative importance of these shocks across regions/countries should be similar (symmetric shocks);
- regions/countries should have similar responses to common shocks (common responses)
- if regions/countries are subject to local economic disturbances (idiosyncratic shocks), they must be able to adjust to them quickly.
In practice, this means that regions/countries need a high degree of economic, political and cultural similarity to qualify as an OCA.
It is now generally understood that the Eurozone does not qualify as an OCA.
But what about the USA?
Sat Apr 11th, 2015 at 08:05:52 AM EST
In this third instalment of my series on the state railway of the Swiss canton of Graubünden, the metre-gauge Rhaetian Railway (RhB), I follow the line to winter sports centre Davos. This is both the oldest part of the network at 125 years and one of the most heavily modernised (due to rising traffic in recent years). It is also the first in my series to leave the valleys and climb up into the mountains.
ABe 8/12 No. 3507 "Benedetg Fontana", a powerful steep-mountain version of Stadler's "Allegra" electric multiple unit family, just left the Cavadürli horseshoe tunnel on its way to Klosters Platz, high above the valley of the Landquart river
You can actually see three levels of the line: I stood on the highest, which threw the shadows at bottom left, and the lowest runs next to the road visible deep below in the valley
Thu Mar 26th, 2015 at 07:50:39 AM EST
If economic crisis were a venereal disease, would we continue to engage in risky economic behavior?
Does short-term gratification always trump long-term health?
Are we just children in the marshmallow experiment?
Are our economic systems doomed by the insufficiently stoic character of the majority of human beings?
Eight years and eighteen days ago, das monde wrote a diary titled Is Civilisation A Pyramid Scheme? in which he remarked:
As I write, financial markets are having a bad day across the world, after a rocky week. Can we make more sense of this than a combination of factors?
The hypothesis is that the modern economy is dominated by ever increasing and ever expanding speculation in stock and real estate markets. These markets will grow just as long as the volume increases. The markets are vastly overvalued due to a pyramid-style growth of the number of players. The markets will fail when there won't be any bottom to add to participants' pyramid.
promoted by afew
Fri Mar 20th, 2015 at 05:08:30 PM EST
Over the past week, the conflict between Greece and the creditors escalated again. On one side, the ECB and the IMF exposed Greece to a liquidity crunch, further boosted by the inflammatory statements and Grexit speculation of German finance minister Wolfgang Schäuble and the capital controls speculation of Eurogroup president and Dutch finance minister Jeroen Dijjselbloem; all the while lower-ranked representatives of the Troika openly expressed their hope of forcing the Syriza government to fall in line. On the other side, the Greek government set on a collision course by putting Troika technocrats in their place and pushing through its first poverty-alleviating measures in open defiance of calls for prior consultation and approval by the institutions, seemingly excluding any possibility of getting ECB funds released.
Now, after the mini-summit-within-the-Council-summit on the night from Thursday to Friday, the sides mended fences (somewhat). What were the results? I claim that, in spite of no immediate alleviation of the credit crunch and the continued rhetoric from the creditors, all the significant changes are wins for Greece:
- Commission President Jean-Claude Juncker declared that there is a humanitarian crisis in Greece, a recognition earlier refused by the Eurogroup. This is also an effective after-the-fact approval of the 'unilateral' anti-poverty package.
- Greece got explicit approval for not going through with reforms agreed by the previous government (drawing up its own instead), breaking with pacta sunt servanda.
- Reportedly, Tsipras wanted his colleagues to talk down the chances of Grexit rather than talk it up like Schäuble and Dijsselbloem. In subsequent press conferences the participants seemed to heed that call.
What happened? To me it seems like the Greek government played hardball because they expected the hawks to blink first. This is supported by a week-old Spiegel article, which, in spite of lots of anti-Syriza rhetoric, claims that neither Mario Draghi of the ECB nor Juncker of the Commission wanted to threat the Greek government with Grexit, and Juncker in particular continued his subversive war for influence against German chancellor and European Council alpha dog Angela Merkel.
Thu Mar 19th, 2015 at 02:31:59 AM EST
On the national holiday today [15 March], it was another day of grim protests in Budapest. For the first time in five years, hecklers attended the speech of right-populist prime minister Viktor Orbán, and there were some fights between pro- and anti-Orbán protesters. However, what I want to tell more about is a new low in authoritarian behaviour preceding the protests, and the fate of an acquaintance I ran into at the main opposition protest.
by Upstate NY
Sun Mar 15th, 2015 at 03:03:23 AM EST
Greece: Phase Two | Costas Lapavitsas | Jacobin
Schäuble is on record, or at least Greek ministers are on record, stating that Schäuble offered an aided exit to the Greeks already back in 2011. I can see, from the perspective of the German power structure, why they might be tempted by this idea, and I can see it as an objective worth fighting for by a Greek left government, for obvious reasons.
Whether there are divisions within the German establishment on it, I don't really know, because I don't understand the details of the German political debate. But the argument can be so compelling at the general level that I can be reasonably optimistic.
If the Greek side fought for it, and indicated that they wished to accept it, I think that a compromise could be reached that would be in the interests of Greek working people as well, not just the Greek elite, because you would avoid the difficulties of the contested exit.
That is definitely worth fighting for. And I would argue that this is what the Syriza government should be gearing itself for in the coming period. But, I repeat, if that proves impossible, even contested exit is better than a continuation of the current program.
While I accept his implied criticism of Varoufakis and Tsipras is likely right on target (bad strategy, personality clash with EU), this critique and reading of Syriza's strategy is based on the very idea that the EU is at all amenable to a soft Grexit.
promoted by afew
Sat Mar 14th, 2015 at 08:20:22 AM EST
In the last few weeks, I made excursions to two castles that have been in ruins since Ottoman times, both of them destroyed in somewhat inglorious fashion. So here is a light diary that is a bit of travelogue, a bit of history, and a bit of train blogging.
The partly rebuilt northern bastion and the remains of the exploded main tower of the castle of Nógrád, with the Börzsöny mountains in the background
Thu Mar 12th, 2015 at 01:39:46 PM EST
Ireland is among the states proposing that tobacco should be sold in plain packaging. Given the reaction from assorted industry pressure groups I can only assume that there is very good evidence that this is an effective way to reduce sales.
This is especially charming:
“We’re trying to advise countries around the world to hold off fully implementing a ban on packaging until the WTO case against Australia is settled. New Zealand has done that and other countries are also considering it and it would be good if Ireland also waited,” he added.
Admitting that the body he represented included a tobacco company as members, Mr Reinsch said the issue of plain packaging went beyond those firms who had most to lose from the its introduction.
“We believe trade rules should trump health and other policies and generally this is the kind of thing that makes people raise an eyebrow and find worrisome.”
Seriously, it's about IP rights in tobacco marketing.
Thu Mar 12th, 2015 at 02:56:50 AM EST
It's an all too common story across the world: a government tries to boost its green credentials with a support scheme for renewables, but when it proves an unexpected success and established power companies see a serious market share threat, the nascent industry is choked to death one way or another. Stark examples include the ceiling for total wind power introduced in Austria and Hungary about a decade ago, or the end of the support scheme in Bulgaria just recently. Under the cover of austerity, the transition to renewables can be killed even when they already reached a high penetration, as demonstrated by the example of Spain's retroactive elimination of subsidies.
So is it possible to create a momentum for renewables that carries on even when facing opponents with the worst intentions?
One can argue that Denmark comes close: while Anders Fogh Rasmussen's government did manage to bring new wind power installations to a near-stop over a decade ago, that was only temporary as they found the two big utilities became supporters and off-shore wind took off. Now, looking at the latest numbers from Germany, I see something similar at work.
Sun Mar 8th, 2015 at 01:27:43 PM EST
FT.com: Jean-Claude Juncker calls for creation of EU army (March 8, 2015)
The president of the European Commission has called for the creation of an EU army in order to show Russia “that we are serious about defending European values”. In an interview with German newspaper Die Welt,
Jean-Claude Juncker, who leads the EU’s executive arm, said an EU army would let the continent “react credibly to threats to peace in a member state or a neighbour of the EU”.
Mr Juncker said an EU army would “help us to develop a common foreign and security policy, and to fulfil Europe’s responsibilities in the world”. Nato was not a sufficient protection for the EU as not all EU members are part of the alliance, according to Mr Juncker.
And it's a great excuse for military Keynesianism, too!
Thu Mar 5th, 2015 at 06:54:08 AM EST
I've often wondered. From Seamus Milne's piece in the the Guardian today:
As the academic Richard Sakwa puts it in his book Frontline Ukraine, Nato now “exists to manage the risks created by its existence”.
Of course. Silly me.
Sat Feb 28th, 2015 at 04:23:41 AM EST
Considering the interest in alternative currencies, I did not want to leave the discoveries of this community sitting inside a long comment thread. In particular since a write-up I did in Swedish got some attention.
front-paged by afew
by Frank Schnittger
Thu Feb 26th, 2015 at 03:29:43 PM EST
I once wrote a diary on the The negotiation Process and even considered making it the topic of a putative Phd. research proposal before deciding that the gulf between academia and practice was too large to bridge: there simply wasn't any good academic literature on the negotiating process that I could find, and no one could be found with the interest and expertise to supervise such a research topic. I raise the topic here because I am fascinated by the negotiating style adopted by Yanis Varoufakis and am still wondering whether he will ultimately be found to have been an effective negotiator on behalf of Greece.
Yanis Varoufakis interview: `Anything's better than austerity'
When asked whether Greece could have achieved more had it adopted a more conciliatory approach at the euro group, as his counterpart Michael Noonan and other Irish Ministers have suggested, Varoufakis delivers an emphatic "absolutely not".
While he declined to respond directly to Noonan's recent comments likening him to a rock star and to academic economists and experts that were very good in theory but not good in practice, he said Greece's previous experience in Brussels meant a robust approach to negotiations was essential.
"My predecessors in this job went along with the eurogroup's policies to the full. They bent over backwards to accommodate the memorandum and the policies of internal devaluation and fiscal consolidation, and the so-called reforms that were imposed on Greece."
And he points to where that has landed Greece. "It has been a complete and utter catastrophe. There's humanitarian crisis is on the boil because they were so `good in practice', this is quoting Michael Noonan. And I hope that I'm not so good in practice."
Regarding Noonan's other criticism that he was too theoretical, the Greek minister says he understands that "my colleagues in the eurogroup were disconcerted that one of their members insisted on talking macroeconomics".
"One of the great ironies of the eurogroup is that there is no macroeconomic discussion. It's all rules-based, as if the rules are God-given and as if the rules can go against the rules of macroeconomics.
"I insisted on talking macroeconomics."
But Varoufakis said he welcomed Noonan's comments, made at a conference in London on Wednesday, that he agreed in principle with the idea of swapping Greece's official debt for growth-linked bonds.
"Michael Noonan is quite right. We need to restructure Greek debt. My proposal for GDP-linked bonds has one purpose: to increase the amount of money we give back to your partners by encouraging them to allow us to grow."
front-paged by afew
Mon Feb 23rd, 2015 at 07:27:12 PM EST
The gvt of Greece had, according to the February 20 deal in the Eurogroup, until today to send a list of "reforms" to its creditors, which would form the basis of a revised program. This has been agreed to be postponed until tomorrow morning [Tuesday 22]. According to a SYRIZA non-paper, translated by Damian Mac Con Uladh here is a general description of what the Greek government will be sending to the Eurogroup FinMins Tuesday:
front-paged by afew
Sat Feb 21st, 2015 at 04:38:34 AM EST
While the Greek finance ministry is busy preparing their reform program to be presented to 'The Institutions' by close of business on Monday, the press is busy adjudicating victory in the
deathmatch between Schäuble and Varoufakis.
This is the Varoufakis view:
And this is the Schäuble view.Now, my own opinion is that Varoufakis got what he wanted. On Sunday night he had a draft proposed by Moscovici which he was ready to sign and to which he "added come conditionalities of their own" as a show of good will and to sweeten the deal for the other side. To this the Eurogroup reacted with a different, "unacceptable" draft. And so on Thursday Varoufakis presented a blend of the Moscovici and Dijsselbloem drafts, together with his own conditionalities. This was rejected out of hand by the German finance ministry.
The fact that the agreed draft is fairly close to Varoufakis' letter on Thursday is a German climbdown from that flat out rejection. But judge for yourselves: the two texts are side by side below the fold.
Fri Feb 20th, 2015 at 03:13:07 PM EST
Eurozone ministers gather to decide Greece's fate - live updates | Business | The Guardian
Deal to extend Greek bailout by four months "done"
Looks like a deal on Greece has been reached. Reuters reports that Greece and eurozone finance ministers have agreed to extend the Greek bailout by four months. One official said:
It’s done. For four months.
Greece Open Thread.
Mon Feb 16th, 2015 at 04:01:26 PM EST
Greece bailout talks break down after Athens rejects 'unacceptable' eurozone demands | World news | The Guardian
Talks between Greece and its eurozone creditors collapsed in disarray on Monday night, heightening concerns that the country is edging closer to a disruptive exit from the eurozone.
The breakdown of discussions in Brussels over the Greek bailout programme appeared to leave both sides as far apart as ever, although eurozone finance ministers said a last-ditch summit could be held on Friday.
However, the Greek delegation was told in no uncertain terms that talks would recommence only if the country was willing to extend its bailout package, which carries a list of austerity measures that the new left-wing government in Athens has vowed to pare back.
Effectively presenting Greece with an ultimatum, the eurogroup of eurozone finance ministers said Athens had until Friday to agree to maintain the current bailout under the auspices of the European Union, the European Central Bank and the International Monetary Fund – something that Greece has said is unacceptable.
Greece’s finance minister, Yanis Varoufakis, made it clear in the acrimonious discussions in Brussels on Monday that Greece would not accept prolonging the bail out for six months unless the other 18 members of the eurozone agreed to water down the austerity conditions attached to the deal.
Thu Feb 12th, 2015 at 05:14:04 AM EST
Inspired by the discussion of a Europe after the EU, the war in the Ukraine, and Michel Houellebecq's deplorable new book Soumission, I put myself into alt.history.what-if mode.
Let's start the annals two years from now:
22 May 2017. On the day after the second round of the French presidential election, the winner, Marine Le Pen of the Front National, announced France's exit from the EU.
1 July 2017. After the exit of all Southern European countries from the EU, Great Britain, the BeNeLux countries, Germany, Austria, the Visegrád countries, the Baltic states and the Scandinavian countries agree on re-launching the EU as a free-trade zone. Bulgaria and Romania protest at their exclusion.
Mon Feb 9th, 2015 at 01:55:30 AM EST
I'm lifting a comment from talos to introduce a new Greece thread:
Tsipras today (8 February) presenting the programmatic statements of the new government, pretty much retreated on - not very much. He's not asking for a headline hair-cut, but that's old news, he's willing to slowly implement some of the measures. But it seems that the sum total of the Thessaloniki program is on the table. And aggressively so.
Tsipras favours Greek jobless over creditors in defiant policy speech:
"...Declaring his administration "a government of national salvation", Tsipras said he would also pursue claims to win back from Germany wartime loans that Greece had been forced to make to Nazi occupiers. "I can't overlook what is an ethical duty, a duty to history ... to lay claim to the wartime debt."
Tsipras did signal a new round of belt-tightening - but on the part of ministers and MPs. He promised to sell half of all government limousines and a government jet in a money-raising exercise, as well as trimming back on security. Tsipras said Greece's new class of politician would set the example of frugal living. "We do not need three government aircraft. Politicians can do away with the privilege of having a car," he said...
...The first priority of this government ... is tackling the big wounds of the bailout, tackling the humanitarian crisis, just as we promised to do before the elections," he said. "The bailout failed. The new government is not justified in asking for an extension ... an extension would be a mistake and a catastrophe. We want a new deal, a bridge programme that would give us the fiscal space that a sincere negotiation requires," he said.
Syriza's pledges to the electorate include a freeze on pension cuts, a property tax overhaul, free electricity to those who have been cut off, reinstating jobs and raising the minimum wage. But it remains to be seen how quickly the measures are introduced - a phased approach could save the broke government money, officials have indicated.
Tue Feb 3rd, 2015 at 02:14:48 AM EST
In an ideal world, Greece's new finance minister Yanis Varoufakis would succeed in negotiating with the Eurogroup on the basis of his own Modest Proposal. However, we live in this universe and the immediate question arises of how Greece is going to fund its foreign commitments, in particular the redemption of 7bn's worth of bonds held by the ECB and maturing in 6 months. According to the Wall Street Journal,
The next hurdle will be 7 billion in bonds held by the ECB that mature in July and August. Greece doesn't have the cash to repay them, and failure to do so could ultimately lead to Greece's exit from the eurozone.
Syriza Win in Greek Election Sets Up New Europe Clash (January 26, 2015)
Here I outline a plausible (based on the published opinion of Greek government ministers and their associates) plan for Greek economic recovery, consisting of:
- a universal job guarantee program at the new minimum wage
- the introduction of a parallel currency in the form of transferable tax credits
- capital controls
Cross-posted on The Court Astrologer
front-paged by afew
by DoDo - Oct 5
by ATinNM - Sep 24
by DoDo - Sep 12
by DoDo - Sep 10