Mon Oct 20th, 2014 at 08:46:21 AM EST
Color the staff at The Economist confused. Writing on the current situation in Catalonia, they note:
A three-way game of brinkmanship between Mr Rajoy, Mr Mas and the separatist Catalan Republican Left (ERC) party that props up his government in Catalonia is creating uncertainty. Mr Rajoy has used the constitutional court to block the referendum, though it may take another five months to rule definitively that it is illegal. He offers little else beyond a readiness to talk. ERC proposes civil disobedience, an illegal referendum and, eventually, a unilateral declaration of independence. If it cannot have these, it wants an election that it is likely to win.
While the results are uncertain, the probability of a snap election is increasing daily. As is the collapse of CiU dominance of the Catalan regional politics, and the emergence of a form of polarized pluralism in the region as the political center flattens out, and the fringes rise. The term postmodern 1930s certainly springs to mind. Stage set.
Thu Oct 16th, 2014 at 07:50:26 AM EST
Ireland has had its first “post-Austerity” budget, with modest decreases in taxes and very modest increases in social support payments and spending. The economy is growing, slowly, and is expected to accelerate. Unemployment is falling, a little, and not just because of emigration.
The prophets of austerity tell us that “The volcano has settled down! The Gods have been merciful! Throwing those virgins in was worth it, just like we told you! Never doubt us again!”
Of course, just as volcanoes eventually stop erupting, economies eventually recover, especially ones with demographics like Ireland: lots of young people, lots of immigrants, lots of stuff that needs doing. Eventually businesses will work out how to deal with the recession and start making money.
The recovery isn’t a sign that the medicine worked: in fact its weakness and its lateness is a sign that the medicine made the patient much worse, delaying recovery by, in my reckoning, two or three years. At least.
Austerity measures took 30B out of the Irish economy, 20% of government spending, in the depths of a recession. How much growth has that prevented? How much labour has it wasted? How much better off would the Irish economy and the Irish be if the government, at the behest of the Troika, hadn’t stifled the economy every time it naturally tried to recover? 10%?
It’s not even clear, given the multiplier effects, that the debt/GDP ratio wouldn’t be better now if we’d grown the economy than it is.
All throwing virgins into volcanoes achieves is dead virgins. Austerity creates much longer term damage.
Tue Oct 7th, 2014 at 02:12:55 AM EST
Since those with great wealth hold most of the debt issued by the US Government in the form of bonds, and since they have disproportionate influence on Congress via large campaign contributions they could insist that the government buy back their bonds and retire them. But they don't because that is not what they really want. The main reason they hold this debt is that there are no alternative investments they find attractive. The USA desperately needs to build a renewable energy and transportation infrastructure before the cost of fossil fuels makes such an investment much more expensive, and building that infrastructure now would cap the cost of electricity, as there is no fuel cost for renewables, so renewables come on line first, per the Merit Order Effect. But this would cut into the profits from their fossil fuel holdings. The real reason they are pushing this faux debt crisis is to provide a reason to cut program they despise - namely anything that benefits the average citizen: food stamps, long term unemployment, Social Security and Medicare.
Fri Oct 3rd, 2014 at 02:12:25 PM EST
When the expanding transcontinental railroads completed the conquest of Native American lands in the Western USA from the 1860s, the owners of these exclusively private companies weren't exactly popular. The public's view was that they are selfish money-men seeking to cash out fast while they provide a crap service on shoddily-built infrastructure, seek monopolistic power and blackmail farmers, and buy politicians: the perfect example of the excesses of unfettered capitalism. The public backlash against the railroad Robber Barons led to anti-trust laws (Sherman Act, 1890).
More than half a century later, philosopher and cult leader Ayn Rand sought to re-interpret the Robber Baron era of US railroads by blaming those excesses of capitalism on state meddling, in the form of land grants. Her counter-example was one of the most successful railroad barons in the West: James J. Hill, nicknamed "The Empire Builder", who built his empire without directly receiving any land grants.
Reading up on the history of the transcontinental railroads another half a century after, I drew the conclusion that neither of the two views was entirely correct, and see the importance of a different key factor: a general shortage of capital of these private companies. In this respect, the railroad baron I see as most noteworthy and significant is one of the last: E. H. Harriman, nicknamed the "The Railroad Czar", whose legacy lasts to this day.
Tue Sep 30th, 2014 at 04:15:33 PM EST
A number of Jean-Claude Juncker's proposals for the new European Commission are causing quite a stir as the designated commissioners come up for review before the European Parliament.
Schulz flashes red light for Juncker: Put in sustainability | EurActiv
EXCLUSIVE: European Parliament President Martin Schulz has sent a letter to Jean-Claude Juncker, urging the European Commission President-elect to include sustainable development in the portfolio of Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness.
Schulz has taken on the request introduced by the Parliament’s chair of the Committee on the Environment, Public Health and Food Safety, Giovanni La Via, and by the coordinators of the five main political groups (EPP, S&D, ALDE, GUE/NGL and Greens/EFA).
Lawmakers are flagging a clear risk that environmental, climate and fisheries policies are demoted in the Juncker Commission, as the President-elect seems to put more emphasis on economic growth than protecting the environment.
The feeling that the environment in general is more than low priority for Juncker is underlined by his intention to bring together the Energy and Climate Change portfolios into one, and to hand it to Miguel Arias Canete. Canete will be up before Parliament tomorrow. More below the fold about why he should be rejected and what you can do to help bring that about.
by Crazy Horse
Mon Sep 29th, 2014 at 02:13:21 PM EST
I haven't read through (or listened to) a story Michael Lewis is pushing regarding the NY Fed's "Regulation" of Big Banks ; with a transaction between Goldman and Santander as a highlight.
I don't know if this story appears elsewhere on ET in the past days, but immediately felt I should post it here.
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Wed Sep 24th, 2014 at 02:11:24 AM EST
In his New York Times column, Paul Krugman reports on two new studies, both of which indicate that limiting carbon emissions would be much cheaper than initially thought, and may actually increase economic growth. This would be in part because fossil fuels have negative side effects over and above global warming, in particular health effects that "drive up medical costs and reduce productivity".
Further in his column, he takes a swipe at those on the left who claim that "saving the planet requires an end to growth" (a position he calls "climate despair", such as groups like the degrowth movement and the Post-Carbon Institute. This, he reckons, is in large part due to a misunderstanding of what growth is, where those making such claims probably see it as a "crude, physical thing, a matter simply of producing more stuff, [not taking] into account the many choices -- about what to consume, about which technologies to use -- that go into producing a dollar's worth of G.D.P."
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Sun Sep 21st, 2014 at 03:47:43 AM EST
Now that Scotland voted 'no' in its independence referendum, the focus should shift to Catalonia and its campaign to hold an independence referendum on November 9. The referendum is opposed by the Spanish government. The Catalan regional parliament petitioned the Spanish parliament for the right to hold an independence referendum but was rejected. The Catalan parliament has just passed a "consultation law" intended to legalize the vote, which will be challenged shortly by the Spanish government in the Constitutional Court, which is expected to strike it down, at which point all bets are off.
It is my opinion that Catalan Premier Artus Mas of CiU jumped on the independence bandwagon two years ago only because his government was on the verge of collapse from the independentist challenge from the street and the looming insolvency of his government brougth about by the crisis and his own austerity policies. The Spanish government took the chance to bail out the Catalan government with austerian strings attached.
Below the fold, an enumeration of possible scenarios for the coming autumn of discontent.
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Thu Sep 18th, 2014 at 02:46:24 AM EST
Today's the day. Use this as an open thread on Scotland and all things Scottish. But, please, no photos of Braveheart.
Sun Sep 14th, 2014 at 01:41:41 AM EST
Here from my Eagle's Nest in Linlithgow, in Scotland's Central Belt, I thought it would be rude not to chip in my thoughts as to next Thursday's referendum vote.
My first data points are historic election turnout figures in Scotland covering both UK & Scottish Parliament Elections.
Election Turnouts 1997 to 2011
Then there's the 2011 Scottish Parliament Election outright win for the SNP which the voting system had pretty much been gerrymandered to prevent. I assume that very few of those voting SNP in 2011 will either abstain or vote No.
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by Frank Schnittger
Thu Sep 11th, 2014 at 04:18:10 AM EST
Luis de Sousa's excellent diary has provoked a long comment by me saying a lot of things I've been meaning to say for some time, but which are not all a direct response to his thoughts. So I think a separate diary is merited analyzing what has changed in the Scottish Independence debate.
What I think has shifted the debate in Scotland is the realization that institutions and assets which they had always been told were British, were in fact English.
Thus the Pound Sterling belongs to England (the central bank name: Bank of England should have been a giveaway). The military bases and manufacturing facilities in Scotland will be moved south - proving that the Army and associated industries belong to England not all of Britain. And the general sense that the Scots will have to develop all institutions and skills of Governance from scratch - as if Scots have had no hand act or part of the Departments of State in Whitehall.
In other words the implied blackmail of taking all these things away has only confirmed that Scotland was being ruled not just from, but by, England in the first place. Parties to a divorce normally split their joint assets and one party cannot claim virtually all the house and contents as their own: and yet this is partly what the No campaign have been claiming.
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by Luis de Sousa
Tue Sep 9th, 2014 at 04:28:55 AM EST
Thursday the 18th Scotland is going to vote what may well be the most important political decision in several centuries for itself and the UK. The reasons that prompted this process are many: the perception of a slow derision of Scottish identity and culture, the crystallisation of the UK's democracy (where non elected individuals still retain important powers), natural resources, budget sharing, NATO, just to name a few.
I am not Scottish, nor do I live in Scotland, thus I can not possibly fathom everything driving the vote. But one exercise I can make: assess the economic risks associated with the decision. And by doing so the complexity of this question becomes apparent, as so how uncertain is the outcome.
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by Crazy Horse
Sat Sep 6th, 2014 at 08:23:01 AM EST
A US judge has ruled that BP is guilty of gross negligence in the Deepwater oil catastrophe. If upheld (of course BP will appeal) it will increase the fine from $1100/barrel to $4300/barrel, totaling an estimated $18 Billion.
BP had already plead guilty to 14 felonies, with a fine of $4.5B in a plea bargain with the US Gov! (Yes, felonies.)
So how does one count the number of barrels already spilled, especially when BP publicly stated it was leaking 5000 barrels/day, while internal reports stated the leak could be between 62,000 and 146,000 barrels per day?
A colleague of mine has now reported for the first time the effects of using as "dispersant" Corexit, both on the health of some 47,000 cleanup workers, and how the amount of oil spilled was camouflaged.
Read on to discover why I continue to use the word poison in describing fossil fuels.
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Thu Sep 4th, 2014 at 08:46:17 AM EST
If you thought the ECB setting its deposit rate at negative 0.10% was the end of the road for interest-rate policy, you got another think coming:
4 September 2014 - Monetary policy decisions
At today's meeting the Governing Council of the ECB took the following monetary policy decisions:
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.
- The interest rate on the main refinancing operations of the Eurosystem will be decreased by 10 basis points to 0.05%, starting from the operation to be settled on 10 September 2014.
- The interest rate on the marginal lending facility will be decreased by 10 basis points to 0.30%, with effect from 10 September 2014.
- The interest rate on the deposit facility will be decreased by 10 basis points to -0.20%, with effect from 10 September 2014.
How deep does the rabbit hole go?
Wed Sep 3rd, 2014 at 04:21:58 AM EST
Hoisted from the Newsroom, this New Europe leader:
Europe Expects | neurope.eu
The Ukraine crisis is a real challenge. The situation in Syria, Lebanon, Iraq is a serious problem. The refugees arriving at Europe's borders if they escape drowning in the Mediterranean is a serious problem. The Eurozone's real economy refusing to be convinced by ideological platitudes is a serious problem. Germany's deeply rooted bipolar insecurities shaping core European policies is a serious problem, so is France's debility and UK's tangential blundering. The divide between the European North and South but also East and West is a serious problem. The resulting estrangement of European societies is a serious problem.
What, if anything, would you add to this list, what would you take away? How correct do the assessments seem? What outcomes should Europe be aiming at on these points?
Europe Expects | neurope.eu
All these combine to create Europe's most important existential challenge, a challenge that needs to be faced during the next five years, the life-span of the new Parliament and the new Commission.
The new Parliament that contains, in its strong far-right contingent, a reminder of what awaits us all if real problems are not faced. And a new Commission that must not repeat the behind-doors genuflections to powerful interests that have been typical of the flabby Barroso Commission. Any hope?
Sat Aug 30th, 2014 at 04:09:42 AM EST
Posted by Frances Coppola on Aug 27th 2014, 2 Comments
This is the first of several posts covering topics discussed at the recent Lindau Meeting for Economic Sciences.
Several economists at the Lindau meeting were severely critical of central banks' conduct of monetary policy in the light of continuing depression in the US, Japan and much of Europe, and called for greater use of fiscal policy to bring about recovery. Among the most critical was Christopher Sims, who gave a trenchant presentation on "Inflation, Fear of Inflation and Public Debt".
He started by announcing the death of the quantity theory of money, MV=PY. Due to interest on reserves and near-zero interest rates, "money" can no longer be clearly distinguished from other financial assets. This is a fundamental point which requires some explanation.
These days, nearly all forms of money bear interest, which makes them indistinguishable from interest-bearing assets. For Sims, the paying of interest on bank reserves, coupled with the decline of physical currency, all but eliminates the distinction between interest-bearing safe assets such as Treasury bills and what we traditionally call "money". All assets can be regarded as "money" to a greater or lesser extent: the extent to which assets have "moneyness" is really a matter of liquidity.
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Mon Aug 25th, 2014 at 05:15:19 AM EST
French Minister for the Economy (for fake, the real powers being elsewhere) Arnaud Montebourg came out over the weekend with clear criticism of Hollande's leadership. Hollande's 2012 promise to get the economy and employment on the move again had clearly failed, he said; supply side policies could not work without demand-side stimulus, and he solemnly called on Hollande to change course. And he broke the big taboo:
A la Fête de la rose, Montebourg et Hamon mettent la pression sur Hollande
La France est un pays libre qui n'a pas vocation à s'aligner sur les obsessions de la droite allemande
(France is a free country that is not meant to align itself on the obsessions of the German right)
Ooh, he said Germany and obsessions! "France is Germany's friend", that is the only kind of phrase in which a French government official (under Hollande or Sarkozy) is supposed to mention that country.
Manuel Valls (according to Le Parisien) told Hollande "It's him or it's me". This morning he tendered the resignation of his government and was immediately reconducted as PM by Hollande. The new government will be named tomorrow, and, apart from Montebourg, probably other heads (Benoît Hamon, perhaps others) will roll.
Hollande and Valls confirm their centre-right alignment on austerity. Whether they will now avoid a split in the Socialist Party, and how significant the split might be, are other questions.
Thu Aug 21st, 2014 at 09:52:49 AM EST
Continuing my review of Wolfgang Streeck's Buying Time : The delayed crisis of democratic capitalism. (The first installment is here)
I want to strongly recommend reading the book. Streeck is a philosopher and sociologist, and his take on economics is a refreshing re-injection of the social element that orthodox economics so rigorously excludes and ignores. My feeling is that, in the fightback against neoliberalism, "Buying Time" is as important as, and convergent with, Thomas Piketty's "Capital".
Chapter 2 : Neoliberal reform : from tax state to debt state
Streeck documents the progressive disenfranchising of actual electors, as each nation's creditors gain the whip hand after the transformation of our "tax states" into "debt states", and aggressively counters the neo-liberal meme that the slide into debt has been the product of demagogic profligacy.
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Tue Aug 19th, 2014 at 08:04:19 AM EST
European Commissioner for Employment Laszlo Andor gave an interview to German conservative newspaper Die Welt (behind subs wall, and not much available in Eng-lang media as of posting):
Luxemburger Wort - Brussels pleads with Germany to let wages rise
AFP) Germany must increase workers' salaries to help its neighbours out of the economic slump, the European Union's employment commissioner Laszlo Andor said Saturday.
The Hungarian said Berlin's big foreign trade surplus was hurting its European partners, and urged it to stimulate domestic demand by increasing wages and public expenditure.
"The rise in salaries has fallen behind the rise in productivity in Germany" for more than a decade, Andor told the German conservative daily Die Welt, in an interview due to be published on Sunday.
Brussels was now urging Germany, the EU's economic powerhouse, to relax its iron grip on wages, which he said was "indispensible" for the recovery of the rest of the region.
"It would be better if salaries rise in parallel with productivity," Andor added.
His comments come amid signs of stalling growth in the 18-member eurozone, particularly its largest economies Germany and France, as the bloc struggles to recover from years of financial crisis.
Brussels now appears to be taking a view long championed by France that a rise in German salaries would give the struggling eurozone a much-needed stimulus.
France's President Francois Hollande this month called on Berlin to boost spending as "the best favour Germany could do for France and for Europe" to help growth.
"It's very important that Germany increases public spending, stimulates demand and reduces its excessive trade surplus, which is hurting its European neighbours," Andor said.
Hollande (as reported) made feeble noises in this sense at the beginning of the month. Official communications in France, echoed by the MSM, say that Hollande's policy is to bring together European social democrats to militate for a change of direction on austerity. But Andor is particularly clear... and a Commissioner.
The ball is in Angie's court. Will she smash it? Ignore it? Send back a spin shot? Place your bets.
Fri Aug 15th, 2014 at 12:53:53 PM EST
Wolfgang Streeck, leading figure of the Frankfurt school of philosophy, has published an incisive and compelling analysis of the interplay between capitalism and democracy in the developed world over the past forty years or so : Buying Time : The delayed crisis of democratic capitalism.
Eurotrib having been offered a copy, I have undertaken to review it. I feel suited to the task because I have nothing but an autodidact's random smattering of economics, sociology and philosophy, and will mostly restrict myself to a naïve synthesis of Streeck's theses, leaving my far more erudite and insightful readers to do the serious work. I will resist quoting directly from the text because I wouldn't know where to stop; everything is eminently quotable, written with admirable clarity and humour, nicely translated, a constant pleasure to read.
The book, based on the 2012 Adorno lectures, was published last year in Germany, and the English translation (by Patrick Camiller) has just been published by Verso, an imprint of New Left Books. It can be ordered in physical form from the publisher, or electronically from Amazon, iTunes, or Nook. (Yes, it's buying "Buying time" time).
The three chapters correspond to the three lectures on which they are based. Despite the book's relative brevity (less than 200 pages, excluding the extensive bibliography and index) I propose to do a diary on each chapter; each one is of sufficient density to merit discussion.
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