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Wed Sep 5th, 2012 at 02:23:28 AM EST
In the context of the second saga-length thread about religion, I pointed out that
secularism, separation of church and state, and freedom of conscience are three separate concepts.
I was of the opinion that, by and large, the US had freedom of conscience and separation of church and state, but it wasn't a secular society; on the other hand, Europe tends to have freedom of conscience and a secular society but no separation of church and state.
Is this one of those cases where you can pick two out of three?
A third mode is where you have a secular society and no state church, but also no freedom of conscience (the "compulsory atheism" of "real existing socialism" in the erstwhile Soviet bloc).
Eurogreen commented that maybe France is an example where the three features coexist.
And I am just now wondering whether the classification extends outside of Western (i.e. Mesopotamian) civilization. How about the Chinese and Hindu cultural matrices?
Wed Aug 29th, 2012 at 05:53:51 AM EST
Eurointelligence is running another column of mine: The Eurozone's giant sucking sound (28.08.2012)
As reported two weeks ago, Germany's current account surplus is projected to exceed 6% for 2012, likely triggering a warning from the European Commission. Such large German current account surpluses are not new, what's new is that since November 2011 the European Commission's Macroeconomic Imbalance Scorecard includes a 6% threshold on the three-year moving-average current account balance (the threshold for deficits is 4%). Here I will argue that Germany's persistently high current account surplus is dangerous for the stability of the Eurozone and corrective government action is needed (in principle concerted Eurozone government action, but in practice requiring that the German government 'own' the policy).
You can read it there, and comment here.
Tue Jul 17th, 2012 at 07:01:15 PM EST
A long time ago, in a galaxy far away, Drew gave me his copy of Keynes' Treatise on Probability, which he had acquired at some point thinking it would be relevant to his economist education but which might be more profitable to me, who had an academic interest in probability theory and had read a number of classic works already. The book languished on my shelf (and travelled in a box, and was stacked on another shelf where it languished, and so on through three separate moves) until one day last week I decided to finally read it (in fact encouraged by a conversation I had with another participant in the Minsky Seminar last month). I think it was worth it, but then again I have weird tastes in reading material.
To Keynes, probability is a branch of logic: the theory of rational thought under uncertainty. Ordinary logic is just the subset of rational thought dealing with certain (or certainly false) propositions. I think this is a really interesting approach. Probability to Keynes is relative but not subjective. That is, probability is always relative to some data (or hypotheses), and so it is in a way subjective since each of us has different data/knowledge/experience, even different mental acuity. However, Keynes' probability is not subjective in the sense that a correctly formed probabilistic reasoning, being enunciated relative to explicit hypotheses, should be valid independently. Keynes writes at length about the problem of induction (reasoning from particular, though possibly numerous, observations to general statements) and he stresses that, contrary to what has been asserted by philosophers in the past, the fact that an inductive conclusion turns out to be false does not invalidate the inductive reasoning relative to the information available at the time the conclusion was formulated.
Anyway, back in 2009 in the context of a discussion of a journalistic piece about David Li's killer formula (the gaussian copula approach to CDS pricing) I said I should probably write a diary about the arbitrage pricing theory that underlies a lot of the ongoing Global Clusterfuck. At the time I was probably thinking that I might use the preface of a popular book on derivative pricing, Financial Calculus by Baxter and Rennie. They begin their book with a parable of the bookmakers intended to disabuse the reader from the get-go that market prices are expected future values. That's right: market prices are not average values as normally understood. However, after having read Keynes on Probability I don't have to infringe Baxter and Rennie's copyright or even retype their text from my hardcopy of the derivatives book, because I can simply lift a section from the Project Gutenberg version of Keynes...
Sat Jul 7th, 2012 at 07:51:17 AM EST
Two weeks ago I attended the annual Minsky Summer Seminar at the Levy Institute. There, Scott Fullwiler of Krugman's flashing neon sign fame made a very nice presentation on Central Bank Operations. He was unfortunate enough to have to compete for the audience's attention with the Germany-Greece Euro 2012 quarterfinal, and he bravely disregarded Bob Barbera's advice to just talk for 5 minutes and then take everyone to the bar to watch the game. In the end I think he managed to keep everyone's attention as his presentation was really nice. You can now see the slides online: @stf18
My Prezi on central bank operations from the Minsky conference a few weeks ago http://prezi.com/bv0dpvapapht/m ...
The companion paper, for those interested, is Modern Central Bank Operations - The General Principles
(June 1, 2008)
There are sharp differences between the two approaches that nonetheless remain. Among neoclassicals, the literature on central bank operations is not integrated into models of financial asset pricing or into the so-called "new consensus" model of the economy. Though the latter assumes interest-rate targeting, new consensus models are concerned with the strategy of monetary policy, not the tactics or daily operations; though well-established as a research topic for journal publications, monetary policy implementation remains "a side issue" in neoclassical monetary theory graduate textbooks like Walsh (2003) (Bindseil 2004, 1). Further, neoclassicals still do not consider money to be endogenously created in the banking system, as Marc Lavoie repeatedly notes; indeed, as Charles Goodhart has argued in a series of recent papers, there is in fact no private banking system whatsoever in the new consensus model (e.g., Goodhart 2008a).
This is disappointing, naturally, since the evidence published in the recent neoclassical literature on central bank operations has in fact been remarkably consistent with the endogenous money view of central bank operations. The horizontalist view that central banks only target interest rates directly (not reserve or monetary aggregates) and can do so as precisely as desired has been in particular repeatedly supported by this literature. While the relevant literature could fill several volumes, of special note here is the book by Ulrich Bindseil (2004), former Head of the ECB's Liquidity Management Section, which describes in substantial detail the operations of the Fed, ECB, and Bank of England in a manner that very nearly resembles the horizontalist story.
The purpose of this chapter is to describe ten general principles of modern central bank operations. These ten principles are not intended to be exhaustive or comprehensive; neither are the discussions of the individual principles necessarily exhaustive. Rather, these principles represent "what every economist should now be expected to know" given the large quantities of orthodox and heterodox research in this area and the empirical or anecdotal evidence contained in speeches and publications of central bank officials. As noted already, this research generally confirms the earlier points made by Moore (1988) and other authors associated in one way or another with the horizontalist literature
So hopefully (hah!) that settles the debate on endogenous money creation. Anyway, I think the single most important point (here I'll quote from the flashing neon sign
blog) is that
a central bank defends the payments system every day, every hour, every minute, at some price. This is the essence or fundamental truth of central banking, and anyone who fails to grasp it doesn't understand central bank operations
here is the rate that the central bank targets. In the US it's the federal funds rate
, and in the Eurozone that's probably the overnight interbank rate known as EONIA. And what's being defended is a safe and sound payment and clearing system, which is the lynchpin (though not the be-all and end-all) of financial stability. However, it appears that the ECB has been doing a crap job of targeting EONIA, or at any rate they are lazy. It's also possible that the ECB has been targeting money aggregates, which would be the ECB's own (and worrying) flashing neon sign. Seriously, does this look like the ECB has been targeting a rate?
For an explanation of the various rates in this chart (EONIA, deposit, marginal, etc) I refer you to my earlier post Central Banking 101: the EONIA heartbeat (February 26th, 2011). The present post will be based upon updating the charts from that article with the last 16 months of data: from February 2011 to June 2012. Much has happened in that time and I'll comment on all that below the fold. I encourage you to read the old post at this point.
Mon Jul 2nd, 2012 at 05:31:02 AM EST
A few days ago, Brad DeLong wrote a piece on Project Syndicate complaining about freshwater economists' refusal to admit that the last five years of economic history run counter to "new classical" economic theory: The Perils of Prophecy (Project Syndicate, 27 June 2012)
Of course, we historically-minded economists are not surprised that they were wrong. We are, however, surprised at how few of them have marked their beliefs to market in any sense. On the contrary, many of them, their reputations under water, have doubled down on those beliefs, apparently in the hope that events will, for once, break their way, and that people might thus be induced to forget their abysmal forecasting track record.
It is commendable that Brad DeLong has been honest about "marking his beliefs to market"
But we - or at least I - have gotten significant components of the last four years wrong. Three things surprised me (and still do). The first is the failure of central banks to adopt a rule like nominal GDP targeting or its equivalent. Second, I expected wage inflation in the North Atlantic to fall even farther than it has - toward, even if not to, zero. Finally, the yield curve did not steepen sharply for the United States: federal funds rates at zero I expected, but 30-Year US Treasury bonds at a nominal rate of 2.7% I did not.
However, the following paragraph where he enumerates representatives of "we historically-minded economists"
So the big lesson is simple: trust those who work in the tradition of Walter Bagehot, Hyman Minsky, and Charles Kindleberger. That means trusting economists like Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers. Just as they got the recent past right, so they are the ones most likely to get the distribution of possible futures right.
prompted Steve Keen to cry What utter self-serving drivel, Brad Delong!
(June 30th, 2012)
Where to begin? For starters, "the last five years" includes June 2007-just before the commencement of the financial crisis. But this time, people like Wynne Godley, Ann Pettifors, Randall Wray, Nouriel Roubini, Dean Baker, Peter Schiff and I had spent years warning that a huge crisis was coming, and had a variety of debt-based explanations as to why it was inevitable. By then, Godley, Wray and I and many other Post Keynesian economists had spent decades imbibing and developing the work of Hyman Minsky.
(Keen continued after the fold)
Mon Apr 30th, 2012 at 05:06:35 AM EST
There was a somewhat interesting discussion on war and European civilisation (such as it is) and colonialism in the comments to a recent diary by afew on the French presidential election. In it featured:
- the argument by Steven Pinker that we have become "more civilised" since WWII and so the kind of genocidal warfare of the 1930s and 40s is unlikely to be repeated
- the question of whether large wars should be considered as a fraction of total world population (in which case WWII ranked only 6th according to wikipedia - and estimates about older conflicts were called into question in the comments) or in absolute numbers.
In that context, I compared WWII to the 30 years' war in terms of how "traumatic" it had been to the peoples of Central Europe, as well as making the rather cryptic comment "complex systems have lulls, diary tomorrow". This is that diary, with a little delay.
frontpaged with minor edit - Nomad
Wed Apr 11th, 2012 at 07:06:27 AM EST
The speed of the decomposition of Rajoy's government is astonishing. It's been only 111 days since his investiture vote on 20 December 2011, and today... (the linked story has video)
|Salida por el garaje para evitar a la prensa | Política | EL PAÍS||Exit through the garage to avoid the press | Politics | El Pais|
|Regresan a los pasillos de las Cortes las huidas a la carrera de Mariano Rajoy cuando se encuentra con la prensa, habituales en su etapa en la oposición cada vez que había asuntos polémicos. El presidente del Gobierno, que lleva dos semanas sin contestar ninguna pregunta de los periodistas, precisamente en el momento más delicado de su mandato, con la prima de riesgo a 430 y la Bolsa cayendo un 3%, huyó este martes de la prensa de una forma especialmente ostensible.||The running escapes of Mariano Rajoy when he meets the press are back in the corridors of the Parliament, as was usual during his time in opposition every time there was a controversy. The Prime Minister, who hasn't answered a press question in two weeks, precisely in the most delicate moment of his tenure, with [Spain's] risk premium at 430 [hundredths of a percent] and the stock market down 3%, fled from the press this Tuesday in a particularly ostensible way.|
And #CorreMarianoCorre (run, Mariano, run) is now a trending topic on twitter.
Sun Apr 8th, 2012 at 06:48:14 AM EST
I saw the news today, o, boy...
ElPais.com: Rajoy prepara "medidas contundentes" para espantar el fantasma del rescate
[Spanish PM] Rajoy prepares "hard-hitting measures" to banish the spectre of a rescue
- Guindos adelanta que el Gobierno ultima reformas de servicios públicos
- "España tiene un problema de credibilidad", afirman fuentes de Bruselas
¿Debe quedar en prisión preventiva el que se resiste a un policía?
- [Economy Minister] Guindos advances that the government is giving the finishing touches to public service reform
- "Spain has a credibiity problem", claim sources in Brussels
¿Cómo hay que castigar al que insulta a un policía? ¿Al que ocupa la vía pública en la calle en una manifestación sin autorizar? ¿Al que no se marcha cuando un agente se lo indica? ¿Al que causa destrozos y quema un contenedor en una protesta callejera? El Gobierno, en previsión de futuras movilizaciones en protesta por los recortes económicos, ha lanzado un mensaje claro: el mantenimiento del orden público es una prioridad y estas conductas no quedarán impunes. "Lo que sucedió en Barcelona el día de la huelga general son hechos gravísimos que no pueden estar castigados solo con una pena mínima de un año de prisión, y tampoco es razonable que no se pueda acordar la prisión provisional para los que actúan de esta forma", defiende el secretario de Estado de Seguridad, Ignacio Ulloa. "Es necesario que la gente sepa que acometer a los agentes es algo grave y que el Estado actuará en consecuencia".Must there be preventive prison for someone who resists the police?
How must one punish those that insult a police officer? Those who occupy the public right of way on the street in an unauthorised demonstration? Those that do not leave when an officer tells them? Those that cause damages and burn garbage containers in a street protest? The Government, foreseeing future mobilizations in protest against economic cuts, has sent a clear message: keeping the pubic order is a priority and these behaviours won't go unpunished. "What happened in Barcelona on the day of the General Strike are very serious acts that cannot be punished only with a minimum penalty of a year in prison and it's also not reasonable that preventive prison cannot be ordered for those who act in this way", defends the Secretary of State for Security, Ignacio Ulloa. "It's necessary that people know that assaulting an officer is a serious matter and the State will act accordingly".
The most disturbing thing about this is the casual mixing of nonviolent civil disobedience with street battles, and I can't tell if the conflation comes form the government, the press or the opposition.
This is what the General Strike looked like in Barcelona. Nothing like it happened elsewhere in the country.
Sun Apr 1st, 2012 at 04:53:53 AM EST
Not six hours had passed last Friday since the press conference at which the Spanish Finance Minister Cristóbal Montoro had introduced the new budget after Spain's Council of Ministers that the ECBuBa was already on record saying that it was good, but not good enough.
Details below the fold.
Thu Feb 16th, 2012 at 10:02:13 AM EST
Today I took my girlfriend to the hospital for a test, and while she was being seen I went to give blood. I'm a habitual but irregular donor, possibly best described as an "opportunistic donor". I usually give blood at mobile units or when I go to a hospital to accompany a relative or friend.
While giving blood, people in Spain are given water to drink, and afterwards a sandwich and another drink. The latter used to be done on-site, but today the staff gave me a cafeteria ticket. Ostensibly this change of procedure has been adopted as a cost-saving measure, occasioned by the generalised austerity policy.
The result of this policy is that the donation event is much more impersonal, as the giving and receiving of food and drink was an excuse for chit-chat between donors and staff. In addition, there is less time for recovery on-site after the donation and the donor is now forced to leave earlier than hey otherwise would, make their way to the cafeteria, stand in line to get food, compete with other cafeteria users for a seat to consume the food and drink, and generally be in a crowded and stressful environment within minutes after having been drained of a pint of blood. At a minimum it is inconsiderate towards the donor, and it can be a contributing factor to increasing the frequency of post-donation fainting spells.
Fri Feb 10th, 2012 at 03:34:35 AM EST
On February 9th a guilty sentence was handed down in the first of three ongoing trials of Spanish investigative judge Baltasar Garzón.
ElPais.com in English: Crusading Judge Garzón thrown off the court bench for 11 years
Specifically, the 56-year-old Garzón was convicted of breaching his duties and violating the constitutional rights of several public corruption defendants by ordering phone taps of their jailhouse conversations in 2009.
In a strongly worded 69-page ruling, the justices said that Garzón caused "a drastic and unjustified reduction in the defense's strategy" and trampled on the constitutional rights of alleged Gürtel corruption network ringleaders Francisco Correa and Pablo Crespo, and other suspects in the conspiracy.
Using the same words as in a preliminary inquiry by investigating Justice Alberto Jorge Barreiro, the Supreme Court also accused Garzón of "practices typical of totalitarian regimes."
Judge Garzón is a flamboyant, attention-seeking judge who, by some accounts, happens to be a shoddy investigative judge when all is said and done. However, it would appear that he's being subjected to a judicial lynching. I am not a lawyer, but it would appear that none of the three cases he's undergoing actually have merit (I'll go into the salient features of each). Garzón has made lots of enemies along his judicial (and political, see below also) career, both on the left and on the right. This is therefore a fully bipartisan ejection from the judicial career.
What makes this situation rather serious in my opinion is that Garzón has been judged already by public opinion, which is divided mostly along partisan lines. The more radical left has gone as far as to go out on the streets today under the slogan ni respeto ni acato, i.e., "I neither respect nor abide" (by the Supreme Court's ruling). I think it is dangerous when a substantial portion of the population (including parlamentarians from the United Left and the left wing of the PSOE) decides that the Supreme Court is corrupt. There are even op-eds in ElPais (still the country's paper of record) saying as much (Google translate version). This at a time where the indignados continue to agitate (after 9 months) on the streets under the slogan no nos representan ("they do not represent us"), an explicit rejection of representative democracy as currently practiced in Spain. About 5 months ago, the Constitution was urgently reformed over the objections of all parties except for the PP and PSOE, which led to claims by parlamentarians that "the constitutional consensus" (of 35 years ago) was "now broken". Recently the newspaper El Mundo published a director's letter (i.e., a signed editorial - see google translation) suggesting that Garzón will eventually emerge as a populist leader for the indignado movement. I think that's off the wall, but equally I think the situation is becoming explosive, with the state institutions losing legitimacy before a large section of the population while at the same time the conservatives have a comfortable hold on power at all levels of government and may be quite ready to crack down.
Sat Dec 24th, 2011 at 04:26:06 AM EST
Spain has a new Government since this week. The investiture vote was on Monday and Tuesday, Wednesday and Thursday the Cabinet swore their positions, and yesterday there was a first Council of Ministers.
The government is relatively small, with only 13 ministers and only one vice-president. Prime Minister Mariano Rajoy hasn't felt the need to pay back favours or accommodate political families within his party and so the government is composed of faithful, technocrats and safe hands. Rajoy has separated the Finance and Economy ministries and will take for himself the Economic vice-presidency to mediate between the two ministers. In this area, he has brought the traditional Ministry for Public Administrations under Finance, and Research and Development (dropping the old Science label) under Economy. However, what's become clear is who the real person to watch is in this government, and it's not Rajoy but Soraya Sáenz de Santamaría. Here's her with a look on her face like she's just stolen her portfolio:
Wed Nov 30th, 2011 at 06:27:06 PM EST
The markets were up today on the following news: Markets surge as Fed and central banks step in to try to prevent credit crunch (the Guardian)
The European Central Bank, which has come under intense pressure over its role in the eurozone crisis, said it would now be able to provide liquidity to struggling banks in yen, sterling, Swiss francs and Canadian dollars if necessary.
Sir Mervyn King, governor of the Bank of England, chaired the teleconference involving six central banks at which the measures were agreed in his capacity as chairman of the economic consultative committee of the Bank of International Settlements - the club of international central bankers.
The Bank joined the Federal Reserve, the Bank of Japan, the ECB, the Bank of Canada and the Swiss National Bank in making the announcement.
Something is fishy, though.
Tue Nov 15th, 2011 at 02:41:25 AM EST
Eurointelligence has published a new article of mine: The role of ideology in this crisis
The eurozone has a pervasive bias against the public sector, from the level of policy down to its institutional makeup. If it does not allow itself common action in the public interest, then crisis resolution efforts are either wasted or a cover for national goals or special interests.
You can read the full article there, and comment here.
Sat Nov 5th, 2011 at 04:49:55 AM EST
Consider the following account of the Bretton Woods summit towards the end of WWII:
When Keynes began to explain his idea, in papers published in 1942 and 1943, it detonated in the minds of all who read it. The British economist Lionel Robbins reported that "it would be difficult to exaggerate the electrifying effect on thought throughout the whole relevant apparatus of government ... nothing so imaginative and so ambitious had ever been discussed"(5). Economists all over the world saw that Keynes had cracked it. As the Allies prepared for the Bretton Woods conference, Britain adopted Keynes's solution as its official negotiating position.
But there was one country - at the time the world's biggest creditor - in which his proposal was less welcome. The head of the US delegation at Bretton Woods, Harry Dexter White, responded to Lord Keynes's idea thus: "We have been perfectly adamant on that point. We have taken the position of absolutely no"(6). Instead he proposed an International Stabilisation Fund, which would place the entire burden of maintaining the balance of trade on the deficit nations. It would place no limits on the surplus that successful exporters could accumulate. He also suggested an International Bank for Reconstruction and Development, which would provide capital for economic reconstruction after the war. White, backed by the financial clout of the US Treasury, prevailed. The International Stabilisation Fund became the International Monetary Fund. The International Bank for Reconstruction and Development remains the principal lending arm of the World Bank.
The consequences, especially for the poorest indebted countries, have been catastrophic. Acting on behalf of the rich world, imposing conditions which no free country would tolerate, the IMF has bled them dry. As Joseph Stiglitz has shown, the Fund compounds existing economic crises and creates crises where none existed before. It has destabilised exchange rates, exacerbated balance of payments problems, forced countries into debt and recession, wrecked public services and destroyed the jobs and incomes of tens of millions of people(7).
(Clearing Up This Mess
, George Monbiot, November 18, 2008)
Sun Aug 28th, 2011 at 07:52:40 PM EST
ElPais.com in English: Spain's main parties agree constitutional amendment capping public deficit
The draft law was filed with Congress on Friday and is due to be approved on September 2 without recourse to a referendum, allowing it to be in place before general elections called for November 20 in which Prime Minister José Luis Rodríguez will not be standing, and which are expected to be won by the PP.
The government's latest effort to ward off attacks on its sovereign debt also affords a de[g]ree of flexibility in cases of "natural disasters, economic recession and situations of exceptional emergency out [of] the control of the government that considerably prejudice the economic or social sustainability of the state."
At a news conference after the regular Friday Cabinet meeting, government spokesman José Blanco "categorically" denied that reform had been carried out under heavy pressure from the European Central Bank. "The ECB never brought up the reform of the Constitution," he said. "You can't respond to a demand that never existed."
Sun Aug 21st, 2011 at 06:42:31 AM EST
ElPais.com in English: Regions' unpaid bills reach the 50-billion-euro mark (14/08/2011)
The total sum of bills unpaid by regional and local governments has hit the 50-billion-euro mark, five percent of GDP and four times more than two years ago, according to EL PAÍS' calculations.
The non-payments most affect construction companies working on public projects - which are owed a collective 15.05 billion euros, according to industry employers' organization Seopan - and freelancers - 14.983 billion - as well as the pharmaceutical, waste collection and cleaning industries, 5.450 billion and four billion and one billion, respectively.
Municipal administrations are those that delay the longest in handing out the checks, according to all the business leaders consulted by this newspaper. They take an average of 238 days to pay construction companies, for instance, more than three times what it takes a company to repay its loans to a bank (75 days), according to the Platform against Late Payments. Central government takes an average of 140 days to pay and the regions 155 days, says Seopan.
Wed Aug 17th, 2011 at 04:17:31 AM EST
According to EUObserver.com: Merkel and Sarkozy plan 'true economic government'
Following the two-hour talks in Paris, President Nicolas Sarkozy and Chancellor Angela Merkel said they would work towards a common corporation tax by 2013 and to co-ordinate their annual national budgets.Update [2011-8-18 4:21:25 by Migeru]:
More generally, they suggested eurozone leaders should meet twice a year and that all single currency countries should enact constitutional changes requiring balanced budgets.
The two leaders pledged to revive the idea of a financial transaction tax - a proposal that has been regularly mentioned in Brussels in recent months but has failed to get traction among member states.
The two measures that many analysts believe will help ease the eurozone's debt crisis - the issuance of eurobonds and increasing the size of the eurozone's 440 billion rescue fund - were not on the table, however.
The letter from Markel and Sarkozy to van Rompuy has now been made public. here
[PDF] is the copy hosted by ElPais.com
Wed Aug 10th, 2011 at 05:52:10 PM EST
For some weeks now I had been mulling a diary about the inevitable market attack on France, but today's events force me to write now or forever hold my peace. Things are happening so fast, today's planned diary may be tomorrow's outdated analysis.
The news today was a spectacular market crash. From Bloomberg: Societe Generale Leads Fall in French Banks as Credit-Default Swaps Climb
Societe Generale shares slumped as much as 23 percent and were down 16 percent at 21.89 euros at 4:27 p.m. in Paris. Credit-default swaps on the bank rose 29 basis points to a record 299 basis points.
Bank shares lost 5.3 percent, for the biggest decline among the 19 industry groups in the Stoxx Europe 600 Index and the steepest drop since May 2009. French and Italian banks led the retreat. BNP Paribas (BNP) SA shed 11 percent to 35.06 euros and Credit Agricole SA (ACA) sank 15 percent to 5.82 euros.
"If credit default swaps on France are under attack, that's not a good sign," said Yves Marcais, a sales trader at Global Equities in Paris. "That means that France is under attack and that's worrisome. French banks hold a lot of French bonds."
It's unclear what exactly caused the crash. What's ironic is that the attack on the French banks appeared to get under way a couple of hours after
Sarkozy rode into Paris in his shining armor to reassure the markets:
Telegraph: Sarkozy abandons holiday as downgrade fears rock France
French President Nicolas Sarkozy cut short his vacation and promised to pare down huge debts after growing fears it could be the next triple A-rated economy to suffer a downgrade sent bank shares tumbling.
I seem to recall it was before
and not after
but that's not too important now.
Societe Generale shares dropped as mush as 20pc, leading credit ratings agencies Fitch and Moody's to reiterate the eurozone nation's top rating, a day after Standard & Poor's had done the same.
Mr Sarkozy, who along with other European leaders has come under criticism for staying on holiday as the markets were gripped by fear, cut short his vacation on the French Riviera to summon key government ministers for an emergency meeting on the financial crisis.
No new measures were announced, but Mr Sarkozy insisted that "commitments to reducing the deficit are inviolable and will be maintained".
Meanwhile, we are informed (h/t afew
"There is only one sovereign in Europe, and that is Germany," said Stuart Thomson, who helps oversee about $120 billion as a portfolio manager at Ignis Asset Management in Glasgow. "Everything else is a credit and trades like a credit, even France."
Below the fold, the reasons why a market attack was entirely foreseeable, even if I doubt anyone expected it to happen so soon.
Mon Aug 1st, 2011 at 05:44:13 AM EST
As Drew put it
The whole idea of "TEA Party" rallies does have roots in the hard money movement, but most of those people view the Teabaggers as hypocrites who stole their schtick.
Some ways to thwart the hard money movement
's threat to cause the US government to default include (via Krugman
A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.
Fortunately for us, none of the loopholes available to the crassly Keynesian
spendthrifts at the US Treasury is available in the Eurozone, because the Fathers of the Continent
, in their infinite wisdom, hardwired basic tenets of the hard money movement
into the Maastricht Treaty so, thankfully, it's all deflation for us. Indeed
(ex Article 106 TEC)
1. The European Central Bank shall have the exclusive right to authorise the issue of euro banknotes within the Union. The European Central Bank and the national central banks may issue such notes. The banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.
2. Member States may issue euro coins subject to approval by the European Central Bank of the volume of the issue. The Council, on a proposal from the Commission and after consulting the European Parliament and the European Central Bank, may adopt measures to harmonise the denominations and technical specifications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Union.
And we all know what happens to people who, in the throes of a Great Depression, decide to reinvigorate the economy of their municipality by issuing local money thereby infringing on the Central Bank's monopoly on money issue: they get slapped back into Depression
Despite attracting great interest at the time, including from French Premier Edouard Daladier and the economist Irving Fisher, the "experiment" was terminated by the Austrian National Bank on the 1st September 1933 on the basis of the "Certified Compensation Bills" being a threat to the Bank's monopoly on printing money.
It is perhaps appropriate that the Central Bank involved in 1933 was literally Austrian
while in 2011 they're all figuratively so.
by gmoke - Dec 8
by marco - Nov 30
by Oui - Dec 6
by gmoke - Dec 8
by Oui - Dec 6
by marco - Nov 30
by afew - Nov 28
by Oui - Nov 23
by vbo - Nov 21
by gmoke - Nov 19
by Oui - Nov 19
by Oui - Nov 12