The comments come a week after China bought several hundred million dollars worth of Spanish bonds, signalling a return by Asian investors to the eurozone's peripheral markets after an absence of two months.

...

While there was a high level of concern in Beijing about the European economy when the euro first started to fall sharply in value, there have been signs in recent weeks that opinion was shifting. Even before Mr Wen's comments yesterday, several policymakers had made more upbeat statements about Europe, while influential economists have made the case for China providing some support for euro assets.

...

According to people familiar with Spain's recent bond issue, China's State Administration of Foreign Exchange, or Safe, which manages the foreign exchange reserves, was allocated up to €400m ($505m) of Spanish 10-year bonds in a debt deal last Tuesday.

originally posted 19 July

front-paged by afew

Originally published on June 29, 2010

promoted by Jerome

Zero Hedge: Ferocity Of Imminent Spain-Germany Cold War Will Only Be Second To Upcoming Fox Biz-CNBC No Holds Barred (by Tyler Durden on 06/18/2010)

One of the more ominous news of the day came from Reuters, which reported that the previously disclosed rumor that Spain was seeking a €250 billion bail out package, had in fact originated from high-placed German officials. The move, which will could easily set off an intraeuropean cold war, was prompted by the increasing schism between Europe's (so far) solvent core and the insolvent Club Med, and was intended "for Spain to take tougher austerity measures to cut its huge budget deficit." Instead, the tsunami of denial that resulted, only exacerbated matters and made it seems like Spain is truly on the brink. Compounding this animosity, was the disclosure that Spain's direct counterattack took the form of the El Pais story that "quoted Spanish government officials as saying Madrid wanted to publish the results of stress tests being conducted on its banks to reassure markets" a move which has been opposed by Germany and especially by Austria, which believes that publishing the true deplorable state of affairs of its Erste and Raiffeisen Bank would cause yet another bank run. At the end of the day, none of this helped either unlock Spain's frozen interbank or money markets, or encourage a sense of credibility in the euro (turns out that was only courtesy of the biggest short squeeze in Euro history). In fact, if such political low blows are to be expected, it is only a matter of time before all investors completely desert Europe and let it deal with its escalating vendettas on its own. Yet all of this pales in comparison with the very sweaty locker room war that was just unleashed by Fox Business' Charlie Gasparino against CNBC, and particularly its early morning anchor, Joe Kernen.

...

This is the kind of "accord" that is permeating Europe right about now: what initially was just a war of words between Germany and France, has escalated into a war of actionable attrition, as the German rumor most certainly had a very adverse impact on Spanish bond spread. The simple conclusion is that Germany is now actively trying to scuttle the European rescue, and will not stop before the euro plunges, or goes extinct. It is certain that this media circus will only get worse, although it will wipe out Spain first, before it comes around and test just how stable those sub 3% Bunds really are.

Migeru: In what economic universe does making layoffs cheaper for the employer promote employment?

related question

in what economicpolitical universe does it make sense for Spain to propose cheaper layoffs for troubled firms at a time when everyone is beating the government over the head with the unemployment figures?

JakeS:  well, cheaper layoffs reduce structural unemployment in the universe of rational expectations

Migeru:  right

relations between Turkey and Israel have deteriorated since the Israelis launched a three-week war on Gaza in 2008-09

A flotilla of eight boats carrying thousands of tonnes of construction materials, medical equipment and other aid is preparing to sail to Gaza in the next few days, setting the scene for a confrontation with Israel which has vowed to prevent the ships breaking the blockade on the Palestinian territory.

...

One of the organisers of the flotilla, which includes three vessels from Turkey, is IHH, a humanitarian aid group supported by Ankara. Diplomatic relations between Turkey and Israel have deteriorated since the Israelis launched a three-week war on Gaza in 2008-09. An attempt to block the flotilla is likely to increase tensions between the two countries. The Turkish prime minister, Racep Tayyip Erdogan, has called on Israel to avoid this be allowing the boats through.

NATO will hold emergency talks on Tuesday at Turkey's behest after the deadly Israeli raid on a flotilla of aid-carrying ships bound for Gaza ...

...

Turkish Prime Minister Recep Tayyip Erdogan told reporters in Santiago, Chile, that his government was demanding the NATO council gather to address a crisis that has already seen Israeli counterpart Benjamin Netanyahu cut short a visit to Canada and Washington where he had been due to meet with US President Barack Obama on Tuesday.

The UK should tighten fiscal and monetary policy now, in the depths of a slump. That, in essence, is what the Organisation for Economic Co-operation and Development calls for in its latest Economic Outlook. I wonder what John Maynard Keynes would have written in response. It would have been savage, I imagine.

...

Above all, the private sector is forecast by the OECD to run a surplus - an excess of income over spending - of 10 per cent of GDP this year. On a consolidated basis, the UK's private surplus funds nearly 90 per cent of the fiscal deficit. Thus, fiscal tightening would only work if it coincided with a robust private recovery. Otherwise, it would drive the economy into deeper recession. Yes, that is a Keynesian argument. But this is a Keynesian situation.

In Spain the government has the ability to legislate by decree, but the decrees must be validated by the parliament within a short time or they become null and void.

Promoted by DoDo

Originally published on May 22

Reportedly, Cajasur had losses of 114 million Euros last quarter and 596 million euros last year, so the Bank of Spain's claim that "creditors can be completely reassured" points to a bailout of at least 700 million Euros.

Promoted by DoDo

If Europe's single currency is really to be saved, fundamental reforms have to follow the emergency bailout by euro-zone members. The biggest danger comes, however, from the European Central Bank, which has given up its role as the protector of price stability. The risk of inflation is increasing. By SPIEGEL staff.

In a SPIEGEL interview, Jean-Claude Trichet, the 67-year-old president of the European Central Bank, discusses the largest financial rescue package in the history of Europe, the role and importance of speculators in the euro crisis and the weakness shown by politicians in the euro zone member states.

Looking at the Lib Dem Blogs aggregator, the mood seems to be cautiously positive, with some important endorsements such as Craig Murray (in his case almost entirely on the Civil Liberties part of the deal).

This Scottish MP candidate lists all the Lib Dem manifesto items which are included in the agreement (a list distributed by email to members by the party Chief Executive, Chris Fox) on: education, fair taxation and economic reform, political reform, sustainability, pensions and civil liberties; ending with

that is a great deal there to be proud of. I'm somewhat upset that more of our fair start for children proposals don't appear on this list especially the things that many young families were so enthused about like shared parental leave. Maybe we'll just have to lobby Iain Duncan Smith about going further.

frontpaged with minor edit - Nomad

... has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage, except by reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only.

I was reminded of Keynes' words when I read this (h/t Metatone): Bond traders ready gilt sell-off for hung vote (This Is Money [UK], 4 May 2010)

Let's start with Randall Wray's blog post Timmy-Gate: Did Geithner Help Hide Lehman's Fraud? where we read

Lehman used "Repo 105" to temporarily move liabilities off its balance sheet--essentially pretending to sell them although it promised to immediately buy them back. The abuse was so flagrant that no US law firm would sign off on the practice, fearing that creditors and stockholders would have grounds for lawsuits on the basis that this caused a "material misrepresentation" of Lehman's financial statements. (see here) The court-appointed examiner hired to look into the failure of Lehman found "materially misleading" accounting and "actionable balance sheet manipulation." (here) But just as Arthur Andersen had signed off on Enron's scams, Ernst & Young found no problem with Lehman. (here)

In short, this was an Enron-style, go directly to jail and do not pass go, sort of fraud. Lehman's had been using this trick since 2001. (here) It looked fine to Timmy's Fed, which extended loans allowing Lehman to flip bad assets onto the Fed's balance sheet to keep the fraud going.

China's National People's Congress meets for about two weeks each year at the same time as the Chinese People's Political Consultative Conference, usually in the Spring. The combined sessions have been known as the two meetings. Between these sessions, power is exercised by the Standing Committee of the National People's Congress which contains about 150 members.

The sessions have become media events because it is at the plenary sessions that the Chinese leadership produces work reports. Although the NPC has thus far never failed to approve a work report or candidate nominated by the Party, these votes are no longer unanimous. It is considered extremely embarrassing for the approval vote to fall below 70%, which occurred several times in the mid-1990s. More recently, work reports have been vetted with NPC delegates beforehand to avoid this embarrassment.

In addition, during NPC sessions the Chinese leadership holds press conferences with foreign reporters, and this is one of the few opportunities Western reporters have of asking unscripted questions of the Chinese leadership.

• The Guardian [UK] focuses on climate change and monetary policy
  
• AP focuses on the economy more broadly
  
• The LA Times on US-China trade and foreign relations, as does the Washington Post
  
• El Pais [ES] focuses on the Dalai Lama...

The book basically lays bare that the business community and the capital markets are two steps removed from the welfare of the community, and also how economic theory was devised for the "money economy" ca. 1800 and how its assumptions are inadequate for the economy of 1900 (and since). The book also touches on a topic that is popular here, which is how important narratives are and how they interact with institutions and the daily life people lead. The book resonates with Jerome's old dictum Wealth capture is not wealth creation.

Veblen (apparently following late-19th-century German economic historians) distinguishes between the natural economy, the money economy and credit economy. The natural economy is before trade fully develops, say Europe's Early Modern period. In the natural economy, most business is done on a small scale to earn a living. Then comes the money economy of the first Industrial Revolution, centering around the the market (commerce) and money (banking). In the money economy, you get partnerships and private ownership of industrial enterprises. And finally we get the credit economy, business is done by corporations and we see the rise of a management class. We're not talking about one kind of activity or firm organization replacing others, but about what is the main driver of the economy. Another way to refer to these three economies might be pre-industrial, industrial, and post-industrial.

Explanation and commentary after the fold.

Attendance list below.

Democrats Seem Set to Go It Alone on a Health Bill - NYTimes.com

Given hardening Republican opposition to Congressional health care proposals, Democrats now say they see little chance of the minority's cooperation in approving any overhaul, and are increasingly focused on drawing support for a final plan from within their own ranks.

Top Democrats said Tuesday that their go-it-alone view was being shaped by what they saw as Republicans' purposely strident tone against health care legislation during this month's Congressional recess, as well as remarks by leading Republicans that current proposals were flawed beyond repair.

Rahm Emanuel, the White House chief of staff, said the heated opposition was evidence that Republicans had made a political calculation to draw a line against any health care changes, the latest in a string of major administration proposals that Republicans have opposed.

I say the piece is about the end of the industrial state by reference to J K Galbraith's description of the sociology of the industrial economy in 1950-1970 and his (reluctant) forecasts about the direction society might take after that.

If Krugman is right, my generation (born in the 1970s) is in the unfortunate position of having been raised in the frame of the "industrial state" placing a high value on, say, higher education and centered on white collar work, only to live our adult life seeing that system dismantled. By the time 2096 comes around we may have been through a transition similar to that in 1790-1820 between the old regime/preindustrial economy and liberal democracy/industrial revolution.

I have read similar predictions about a change in the character of our social and economic system within a 70-year frame by Spanish economist Santiago Niño Becerra. (No English sources, unfortunately).

promoted by Nomad

This process is what I have called "the thirdworldisation of the first world". It seems to be well underway.