Or the worst of threads.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

Reuters: Screws tighten on Slovenia as budget votes shelved

Slovenia's parliament postponed voting on reforms the government says are crucial for securing its financial stability, taking the country one step closer to seeking an international bailout.

Lawmakers had been due to vote on Friday on one rule to enforce balanced budgets in coming years, and on another on setting up a state holding firm to take over bad loans in the state banking sector.

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The yield on Slovenia's 11-year sovereign bond reached 5.5 percent on Friday, according to Reuters data, above most of its euro zone peers but still well below equivalent debt yields for Spain, the other single currency state flirting with a full-blown bailout.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

Vox: Tradable sectors in Eurozone periphery countries did not underperform in the 2000s (Guillaume Gaulier, Daria Taglioni, Vincent Vicard, 19 Jul 2012)

Some economists view the Eurozone crisis as driven by the deteriorating competitiveness of periphery countries (see Chen et al. 2012). Specifically, some analysts suggest that low competitiveness in the south is driven by exceptional growth of unit labour costs (Dadush and Stancil 2011). According to this view, increases of wage costs adjusted for productivity differences, or in short adjusted wage costs, made the exports of these countries uncompetitive.

Policy prescriptions to improve competitiveness that are based on this view have therefore focused on how to regain lost export market shares (see, for example, Dadush and Wyne 2012). Structural reforms may help but they take time.1 In the shorter term, increasing market shares can be achieved by increasing price competitiveness. Typically this is done by depreciating the currency. Since Eurozone countries cannot devalue their currency, policymakers should instead try to restore competitiveness through internal devaluation, i.e. by reducing adjusted wage costs.2 One estimate for Greece, for example, is that adjusted wage costs need to be reduced by 31%, effectively reaching the level of Turkey (Sinn, 2012).

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A basic premise underpinning these prescriptions is that exporters from Eurozone crisis countries underperformed. In this article we argue that loss of export competitiveness is likely to be the main determinant of growing current account deficits only for France.3 In the Southern EZ countries current account deficits reflected an excessive increase in imports. In the run-up to the crisis, exporters from these countries could perform well on the international markets despite the rise in their countries' adjusted wage costs, because the bulk of the rise in wage costs occurred in the non-traded sector.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

NoahPinion: Microfoundations would be nice if we had them (19 July 2012)

Matt writes:

And crucially the key test a purported effort to provide microfoundations for gravity must pass is that it has to explain gravity well. The trend in economics since the Lucas Critique seems to be the reverse. If a theory lacks adequate microfoundations, it's rejected out of hand while you get a lot of wriggle room in terms of accounting for the data properly...

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Gravity is different from macroeconomics in several ways. One way is that we don't actually know if there is any phenomenon "underlying" gravity. Gravity might not be explainable in terms of any broader, more general phenomenon. But we know for a fact that macroeconomics is the result of a whole bunch of little economic decisions by individuals and companies. This, not the Lucas Critique, is the real reason we look for microfoundations for macroeconomics. Now, maybe some macroeconomic phenomena don't have microfoundations; maybe they are emergent. But we don't know that yet.

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Once again, let me reiterate that the big problem with "microfounded" macro, as I see it, is that the "microfoundations" are bad: not credible, and generally not consistent with anything microeconomists have actually found. Bad microfoundations are worse than none at all.

And a very good comment thread.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

I was on a pub crawl yesterday distributing advertising for the Great British Beer festival which is coming up in august.

Aside from discovering a couple of good pubs I'd not been to before, it was yet more evidence for Helen's Law which reads "Popular pubs may sell bad beer, but no pub selling good beer is unpopular".

There were a couple of pubs I went to that were deserted, yet seemed to have considerable potential, yet neither had any beer worth drinking. People blame supermarkets for selling cheap booze, but surely that should suggest that pubs offer products which can't be found in supermarkets, such as decent real ale. You can get Stella, fosters, Guinness etc perfectly well in a supermarket, but you can't get a decent real ale.

keep to the Fen Causeway

From an EU Council press officer: @Dana_Council

Do you blog on European issues & cannot be in Brussels for #cy2012eublogs? Tweet me if interested in joining one of the G+ hangouts! RT plz

Bloggers meet Cyprus presidency

On 26 July the Cyprus Presidency of the Council of the European Union will organise an event in Brussels bringing together European bloggers. Starting from today those wishing to participate may register for the event.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

Yoda

I'm going to--of course--ignore the prequels.

There's a great SMBC comic exploring the geopolitical consequences of having Superman turn a crank to provide an unlimited source of energy. We could imagine Yoda using the Force to run a similar generator. But how much power could he really supply?

Any idiot can face a crisis - it's day to day living that wears you out.

I like: "Don't worry, I don't have low self esteem.  I have low esteem for everyone else..."

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne

they've just been broadcasting a footie friendly between the GB team and Brazil.

Brazil were running rings around the GB team, it was beyond awful. At least it doesn't hurt in the way that watching England be clueless hurts, but it's distressing to discover that, despite years of diminished expectations, I still had hopes of something better

keep to the Fen Causeway

I'm currently in a small town in Bavaria. I just saw a restaurant with a sign in the window stating that GEMA employees are not allowed in, and anyone who does enter is subject to a 1.000 Euro fine...