EUobserver.com / Political Affairs / Juncker 'furious' with talkative Austrian minister

COPENHAGEN - Eurogroup chief Jean-Claude Juncker in a fit of pique on Friday (30 March) cancelled a planned press conference to announce an increase in the eurozone firewall because the Austrian finance minister spilled the beans first.

_{*Lunatic*, n.
One whose delusions are out of fashion.}

Italy blames Germany, France for eurozone debt culture | Business News | DW.DE | 28.03.2012

Mario Monti believes 'irresponsible' former political leaders in Germany and France laid the foundation for the eurozone debt crisis. By setting a bad example, they weakened fiscal discipline, the Italian leader said.

The eurozone's two biggest economies had not "abided" by the currency area's deficit rules, thus setting a "bad example" for the rest of the continent, the Italian Prime Minister said Wednesday.

"The story goes back to 2003 and the still almost infant life of the euro," Monti told reporters in Tokyo, where he is currently holding political talks with Japanese leaders.

Let's blame it all on Schröder & Chirac, not on Merkel & Sarko.

_{*Lunatic*, n.
One whose delusions are out of fashion.}

France arrests suspected Islamists in dawn raids - FRANCE - FRANCE 24

Days after French President Nicolas Sarkozy ordered a crackdown on radical Islamists following the deadly Toulouse shootings, French police arrested at least 17 people in early morning raids Friday in several cities, including Toulouse.

France's DCRI domestic intelligence agency, along with the national police's elite RAID unit, conducted the swoops in the southwestern city of Toulouse as well as the western cities of Nantes and Le Mans, and in the Paris region, according to police sources.

Speaking to FRANCE 24 shortly after the arrests, Cédric Delage, the Toulouse regional secretary for the French police union, UNSA-Police, said the DRCI conducted Friday's raids "to look for groups or individuals who may be dangerous to the French state."

_{*Lunatic*, n.
One whose delusions are out of fashion.}

First Contacts with Hollande Camp: Merkel Braces for Possible Sarkozy Election Defeat - SPIEGEL ONLINE - News - International:

But as his victory against Nicolas Sarkozy seems more likely,...

Neither more, nor less likely than last month, or two months ago or three months ago...

OK, election day (1st round) is in 22 days; it may be time to be pragmatic.

Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.

Bookies lose out in Galloway rout - UK Politics - UK - The Independent

George Galloway's unlikely victory in Bradford West has sparked the biggest ever bookies' by-election payout in history, a leading firm said today.

Ladbrokes said punters were walking away with up to £100,000 after the new Respect MP beat odds of up 33/1.

...Alex Donohue, of Ladbrokes, said: "Galloway has hit us for six. His supporters have pulled off a political gamble of epic proportions.

"We naively assumed the money at big prices was an attempt to slash the odds for the campaign. We couldn't have been more wrong."

_{*Lunatic*, n.
One whose delusions are out of fashion.}

DoDo:

"I'm going to lead that. I'm going to be going back to the constituency in the coming weeks to talk to people there about why this result happened.

LOL.

you'll need some experts to help you get a clue, ed. really high paid ones...

start a quango!

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

Poland, still scared of the USSR.

The demise of NATO would be the best thing for global security since ....errr.... the formation of NATO

keep to the Fen Causeway

Quatremer: Jacques Delors : Herman Van Rompuy est le « right man at the right place » (30 novembre 2009)

Europolitics: "Van Rompuy is not the right man for the job" (4 June 2010)

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

This is still absent from French media.

Send them our "pink slime". Oooooo ... protein with added ammonia.

http://www.youtube.com/watch?v=_wp4O7v5320

To quote Jake:

JakeS:

But this is quite comprehensively wrong, even within the neoclassical picture. This is essentially narrative one, when even his fellow neoclassicals have moved beyond that to narrative two in their actual academic work. For that matter, I strongly suspect that Krugman has so as well in his actual academic work, just as I suspect that many of his fellow-travelers who model narrative two are actually conceptually stuck in narrative one.

Narrative one (that Krugman supports) is where banks lend out money people deposit. Narrative two (that he says is more like it) is where banks lend a sum of money from the central bank and then lend it out over and over because it gets re-deposited. Then Krugman argues in favor of narrative one against narrative two.

The MMT version - that appears to be backed by empirical data on how banks actually act - says that banks create money when they create a loan and then turn around and borrow with the loan as collateral from central bank and interbank market to fulfill regulatory demands. Banks ability to create money is then limited by (and only by) regulatory demands and the need to make a profit on the difference between the rent they charge and the rent they pay.

Follow the link in the quotebox for longer version on the narratives vs reality. Also longer discussion on Krugman and the narratives can be read here.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

You could read the comments. Krugman is obviously not going to listen to all the commenters who tell him he's empirically wrong.

First of all, any individual bank does, in fact, have to lend out the money it receives in deposits. Bank loan officers can't just issue checks out of thin air; like employees of any financial intermediary, they must buy assets with funds they have on hand.

There is a difference between a bank buying an asset and a bank giving a loan. When the bank gives a loan it doesn't write out a check. As I said on a different occasion, it creates two assets and two liabilities: the loan is a bank asset and a customer liability, and the loan amount becomes a new deposit which is a bank liability and a customer asset. The balance sheet is expanded by the loan amount.

Yes, a loan normally gets deposited in another bank

or in the same bank, that makes no difference to the argument

but the recipient of the loan can and sometimes does quickly withdraw the funds, not as a check, but in currency.

And here's the rub. A bank may give you a €15,000 consumer loan on the spot, but try and withdraw more than €3,000 in cash from a bank branch without giving them at least 24h notice and you probably won't be able to. That is a liquidity problem and a problem of logistically moving about large amounts of cash.

And currency is in limited supply

Precisely!

So there is in fact no automatic process by which an increase in bank loans produces a sufficient rise in deposits to back those loans

Krugman seems to be unaware that deposits doesn't equal currency. There is a lot more money in deposits than there is currency in circulation, precisely because liquidity preference makes people not want to hold all their assets in cash

and a key limiting factor in the size of bank balance sheets is the amount of monetary base the Fed creates -- even if banks hold no reserves.

Here Krugman is confusing monetary base with circulating currency. The two are not the same thing.

So how much currency does the public choose to hold, as opposed to stashing funds in bank deposits? Well, that's an economic decision, which responds to things like income, prices, interest rates, etc.. In other words, we're firmly back in the domain of ordinary economics, in which decisions get made at the margin and all that. Banks are important, but they don't take us into an alternative economic universe.

Right, but if everyone decided tomorrow that they want to empty their bank accounts and hold paper bills, there wouldn't be enough paper bills in existance to satisfy that cash preference. As to liquidity preference that's the difference between wanting to hold your money as demand deposits or as time deposits, not the diference between cash and bank deposits.

Now, under current conditions -- that is, in a liquidity trap -- the monetary base is indeed irrelevant at the margin, because people are indifferent between zero interest public liabilities of all kinds. That's why there are no immediate policy differences between some of the monetary heterodoxies and what IS-LMists like me are saying. But that's not the way things normally are.

Being at the zero interest rate bound may mean that there's reduced demand for interest-bearing illiquid holdings, but it does not mean that people want to hold 100% of their money as currency.

Which is why I said

I'm talking about the financial instability hypothesis only. Whether purchasing power is created or not is immaterial. What matters is the interconnectedness of economic units and the more or less leveraged financing postures. What makes banks peculiar is that, unavoidable according to Minsky, banks are "speculative" [Minsky's term] financing units. Banks are also connected to a much larger number of other entities than average economic units.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

Krugman:

Feel free to start yelling.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

Banks can't conjure loans out of thin air. (If they could, they'd never have to borrow from the wholesale market). All they can do, is aggregate money they've borrowed, and lend it out again. Ideally on better terms that what they borrowed it at, so as to make a profit on it. In particular, banks can do interesting things with rolling together lots of short-term deposits, and lending out long-term, thus pushing the borrowing further along the yield curve, where rates are higher. And banks can take lots of deposits that would otherwise sit idle, and put them to work elsewhere in the economy. In each of those two ways, banking increases liquidity, which is all the measures of narrow and broad money are measuring - they're just statistics of liquidity. But oh, how much online angst gets spent on fretting about the meaning of these liquidity statistics!

However, a bank doesn't necessarily need to worry about that on a minute-by-minute scale, because "making a loan" is just creating numbers on a balance sheet, as Migeru says, and it can do that at the press of a button. However, people don't take loans just to leave them in a deposit account at the same bank. And overdrafts, mortgages and credit cards don't work like that at all. Loans are taken to get used in transactions, and those will typically be with other banks. As soon as that happens, then the bank needs backing for that loan. Now, it may be able to back it in the form of a debt with the destination bank, at least overnight. Or it can back it with savers' deposits. However, if it went for the debt with the destination bank, then that's just a temporary measure, and it will either, over the next few days, get the money from depositors, or from the wholesale market, or conceivably from the lender of last resort, the Central Bank.

This "loanable funds" narrative is just an explanatory narrative. Historically, it's had the problem that it didn't predict or explain why expansions in broad money seemed to precede, rather than follow from, expansions in narrow money. So we end up with misleading memes like the phrase "loanable funds fallacy", which goldbugs, Austrian-schoolers and other fruitbats have fastened on to.

The full narrative is much larger. Some loans create deposits. Some deposits create loans. Money circulates. You can view depositing at a bank as "money creation" if you like, and some measures of money are based on exactly that. Alternatively, you could view taking a loan from a bank as "money creation", and some measures of money are based on that. Or you could take what I understand is the MMT narrative, and view government nominal deficits as being the only things that create money, and all the other changes in broad and narrow liquidity are just manifestations of changes in the velocity of money. The trouble is that all of these different narratives have got caught up with, and welded to, particular political narratives too.

New economic perspectives: Krugman's Flashing Neon Sign (April 1, 2012)

The debate between Paul Krugman and my friend Steve Keen regarding how banks work (see here, here, here, and here) has caused me to revisit an old quote.  Back in the 1990s I would use Krugman's book, Peddling Prosperity (1995), in my intermediate macroeconomics courses since it provides a good overview of what were then contemporary debates in macroeconomic theory as well as Krugman's criticisms of various popular views on macroeconomic policy issues from that era.  One passage near the very end of the book has always remained in the back of my mind; in it, Krugman critiques a popular view that was and still is highly influential regarding productivity and trade policy.  He writes: "So, if you hear someone say something along the lines of `America needs higher productivity so that it can compete in today's global economy,' never mind who he is or how plausible he sounds.  He might as well be wearing a flashing neon sign that reads:  `I DON'T KNOW WHAT I'M TALKING ABOUT.'" (p. 280; emphasis in original)

In his latest post in this debate (which Keen replied to here), Krugman demonstrates that he has a very good grasp of banking as it is presented in a traditional money and banking textbook.  Unfortunately for him, though, there's virtually nothing in that description of banking that is actually correct.  Instead of a persuasive defense of his own views on banking, his post is in essence his own flashing neon sign where he provides undisputable evidence that "I don't know what I'm talking about."

...

A digression is in order here on the central bank and the payments system.  According to the Fed's data in 2011 payments settled using Fedwire (the Fed's main settlement system) averaged $2.6 trillion per business day, or about 17% of annual GDP each day.  A significant percentage of these payments are themselves settled a still larger dollar volume of transactions on private netting payments systems.  And the US is not unique in this regard, as I explained here (see Table 1), in other countries payments settled on the central bank's books each business day routinely average between a low of about 10% and a high of over 30% of annual nominal GDP.  As the monopoly supplier of reserve balances (since the aggregate quantity can only change via changes to its balance sheet), it is the central bank's obligation to ensure the stability of the national payments system.  All central bank's therefore provide reserve balances to their banking systems on demand at a price of the central bank's central bank's choosing.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

How far up does airspace extend?

And I assume North Korea is going to fire it so it passes over Japan on its way up, but is there any particular reason to do so other then to upset the Japanese?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

EUobserver.com / Belarus / Earthquake zone on EU border to host Belarus nuclear plant

Located near the Lithuanian frontier, the nuclear facility will be just 50 kilometres away from Vilnius. The first of its two reactors is to go online in 2017. The second in 2018.

"The decision to build the station was entirely political ... It makes no sense to build it here. It's a fault line and the closest water source is 10 kilometres away," a Belarusian geologist - who does not want to reveal his name and who lost his job last year because a close relative spoke out against President Alexander Lukashenko - told this website.

Another, better-suited, location had been identified in the east of the country, he noted. But Russia pushed for the Lithuania-border site to "test" the Europeans.

_{*Lunatic*, n.
One whose delusions are out of fashion.}

My friend used to say "hope is not a plan," but that's apparently the current official plan for the Japanese nukes...in many dimensions.

The fact that the drywell at No. 2 has so little water could mean that technicians will need to develop a new technique. "With levels of radiation extremely high, we would need to develop equipment that can tolerate high radiation," Junichi Matsumoto, an executive at Tepco, said Tuesday.

In other words, they have to invent something that has not been invented yet in 100 years of nuclear research.

To gauge water levels inside the drywell at reactor No. 2, workers in hazmat suits inserted an endoscope equipped with a tiny video camera, a thermometer, a dosimeter for measuring radiation and a water gauge. It is unclear if they will be able to perform the same test at the other badly damaged reactors -- No. 1 and No. 3 -- because nearby radiation levels are higher there.

And invent new magical methods of instrumentation.

Experts also worry about a fourth reactor that was not operating at the time of the tsunami, but nevertheless poses a risk because of the large number of spent nuclear fuel rods stored in a pool there.

The spent fuel rods pose a particular threat, experts say, because they lie outside the unit's containment vessels. Experts have become especially worried in recent weeks, as earthquakes continue to hit the area, that the damaged reactor building could collapse, draining the pool and possibly leading to another large leak of radioactive materials. Tepco has been working to fortify the crumpled outer shell of the building of that reactor, No. 4.

"The plant is still in a precarious state," said Kazuhiko Kudo, a professor of nuclear engineering at Kyushu University in southwestern Japan. "Unfortunately, all we can do is to keep pumping water inside the reactors," he said, "and hope we don't have another big earthquake."

Sure, no more earthquakes in Japan--for the next few decades while all the magical inventing is going on...

The only remaining question is when will it be admitted that this is a worse disaster than Chernobyl?

http://www.nytimes.com/2012/03/30/world/asia/inquiry-suggests-worse-damage-at-japan-nuclear-plant.ht ml?_r=1