Yesterday, twelve Catalan newspapers fired a shot across the bow of Spain's Constitutional Court by publishing a hard-hitting joint editorial. El Pais, Spain's largest newspaper, quoted the editorial in full, here excerpted, in its online edition:

La dignidad de Catalunya · ELPAÍS.com		Catalonia's Dignity - ElPais.com
Después de casi tres años de lenta deliberación y de continuos escarceos tácticos que han dañado su cohesión y han erosionado su prestigio, el Tribunal Constitucional puede estar a punto de emitir sentencia sobre el Estatut de Catalunya, promulgado el 20 de julio del 2006 por el jefe del Estado, rey Juan Carlos, con el siguiente encabezamiento: "Sabed: Que las Cortes Generales han aprobado, los ciudadanos de Catalunya han ratificado en referéndum y Yo vengo en sancionar la siguiente ley orgánica".		After nearly three years of slow deliberations and continuous tactical skirmishes which have damaged its cohesion and eroded its reputation, [Spain's] Constitutional Court may be about of issuing a sentence on the Catalan Statute [of autonomy], enacted on July 20th 2006 by the Head of State, King Juan Carlos, with the following header: "Know: That the Cortes Generales have approved, the citizens of Catalonia have ratified in referendum, and I come to sanction the following Organic Law".
...		...
El Alto Tribunal va a decidir sobre la dimensión real del marco de convivencia español, es decir, sobre el más importante legado que los ciudadanos que vivieron y protagonizaron el cambio de régimen a finales de los años setenta transmitirán a las jóvenes generaciones, educadas en libertad, plenamente insertas en la compleja supranacionalidad europea y confrontadas a los retos de una globalización que relativiza las costuras más rígidas del viejo Estado nación. Están en juego los pactos profundos que han hecho posible los treinta años más virtuosos de la historia de España. Y llegados a este punto es imprescindible recordar uno de los principios vertebrales de nuestro sistema jurídico, de raíz romana: Pacta sunt servanda. Lo pactado obliga. Hay preocupación en Catalunya y es preciso que toda España lo sepa. Hay algo más que preocupación.		The High Court is going to decide on the real dimension of the framework in which Spaniards live together, that is, the most important legacy that the citizens who lived and were protagonists the change of regime at the end of the 1970s will pass on to the younger generations, educated in freedom, fully inserted in the complex European supranationality, and facing the challenges of globalization which relativizes the most rigid trappings of the old Nation state. At stake are the deep paacts which have made possible the most virtuous 30 years of Spain's history. And, arrived at this point it is necessary to recall one of the core principles of our legal system, of Roman roots: Pacta sunt servanda. Agreements are binding. There is a worry in Catalonia and it is necessary that all of Spain knows it. There is more than worry.
Hay un creciente hartazgo por tener que soportar la mirada airada de quienes siguen percibiendo la identidad catalana (instituciones, estructura económica, idioma y tradición cultural) como el defecto de fabricación que impide a España alcanzar una soñada e imposible uniformidad. Los catalanes pagan sus impuestos (sin privilegio foral); contribuyen con su esfuerzo a la transferencia de rentas a la España más pobre; afrontan la internacionalización económica sin los cuantiosos beneficios de la capitalidad del Estado; hablan una lengua con mayor fuelle demográfico que el de varios idiomas oficiales en la Unión Europea, una lengua que en vez de ser amada, resulta sometida tantas veces a obsesivo escrutinio por parte del españolismo oficial, y acatan las leyes, por supuesto, sin renunciar a su pacífica y probada capacidad de aguante cívico. Estos días, los catalanes piensan, ante todo, en su dignidad; conviene que se sepa.		There is an increasing weariness over having to stand the angry look of those who continue to perceive the Catalan identity (its institutions, economic structure, language and cultural tradition) as a fault which prevents Spain from attaining a dreamed and impossible uniformity. Catalans pay their taxes (without historical privileges); they contribute with their effort to the transfer of income to the poorest parts of Spain; they face economic internationalization without the many benefits of hosting the State capital; they speak a language with more demographic weight than many official languages of the EU, a language which, instead of being loved, is so often subject to obsessive scrutiny by the official Spanish nationalism, and they uphold the laws, of course, without giving up their peaceful and proven ability to withstand with civility. These days, Catalans think, above all, of their dignity; this should be known.

Explanation and commentary after the fold.

Zapatero fue el muñidor del pacto sobre la alta representante · ELPAÍS.com		Zapatero forged the pact over the High Representative - ElPais.com
El presidente español, José Luis Rodríguez Zapatero, mantuvo el jueves en Bruselas una reunión que no se ha hecho pública y resultó crucial para el acuerdo de la cumbre europea. Nada más bajar del avión que le traía de Holanda, se reunió en el aeropuerto con el primer ministro británico, Gordon Brown.		Spain's PM, José Luis Rodríguez Zapatero, on Thursday held a meeting in Brussels which had not been made public and which ended up being crucial for the agreement at the European Summit. Just off the plane bringing him from the Netherlands, he met at the airport with the British Prime Minister Gordon Brown.
Para entonces, Zapatero ya sabía que Brown había renunciado a mantener la candidatura de su antecesor, Tony Blair, a la presidencia permanente del Consejo Europeo, lo que desbloqueaba el nombramiento del belga Herman Van Rompuy, apoyado por Merkel y Sarkozy. Brown le confirmó, además, que la negativa del ministro de Exteriores británico, David Miliband, a optar al puesto de alto representante para la Política Exterior era firme. Sin embargo, Brown le ofreció tres candidatos británicos como alternativa: Peter Mandelson, ex comisario europeo y uno de los pesos pesados del laborismo, Geoff Hoon, ex ministro de Defensa, y Catherine Ashton, comisaria de Comercio. Brown y Zapatero se dirigieron a la sede de la representación austriaca ante la UE, donde esperaban los líderes del Partido Socialista Europeo (PSE).		By then, Zapatero already knew that Brown had given up on keeping the candidacy of his predecessor, Tony Blair, to the permanent Presidency of the European Council, which unblocked the appointment of the Belgian Herman Van Rompuy, supported by Merkel and Sarkozy. Brown confirmed to [ZP], in addition, that the refusal of the British Foreign Minister, David Miliband, to opt to the position of High Representative for Foreign Policy was firm. However, Brown offered him three British candidates as an alternative: Peter Mandelson, former European Commissioner and one of Labour's heavyweights, Geoff Hoon, former Defence Minister, and Catherine Ashton, Trade Commissioner. Brown and ZP went to the site of the Austrian Representation before the EU, where the leaders of the PES were waiting.
Antes de la reunión plenaria, Zapatero, por encargo de Brown, se reunió por separado con los líderes socialistas y, especialmente, con los pocos que (como los de Portugal y Grecia) gobiernan en sus países y tienen voto en el Consejo Europeo.		Before the plenary meeting ZP, on Brown's charge, met separately with the Socialist Leaders and, especially, with the few who (like the Portuguese and Greek ones) are in government in their countries and have a vote in the European Council.

Globe-trotting the stormy present is coming to Barcelona for a week so we have arranged a mini-meetup for Saturday the 5th of September. If you can be there on such a short notice you're more than welcome.

Attendance list below.

Certifiably unreasonable, at least.

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.

In a throwaway blog entry last week, Krugman links to an old piece of his written in 1996 and looking 100 years ahead (or, rather, pretending to look back from 100 years later), calling it the closest I've ever come to actually writing science fiction. But it is not science-fiction if he means it in a slightly self-deprecating tone... It is a very good piece of futurism which is the basis for the setting of any good science fiction novel.

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

I read the news today, oh, boy...

Adiós, clase media, adiós · ELPAÍS.com		Good-bye, middle class, good-bye - ElPais.com (31/05/2009)
Ridiculizada por poetas y libertinos; idolatrada por moralistas; destinataria de los discursos de políticos, papas, popes y cuantos se suben alguna vez a un púlpito en busca de votantes o de adeptos; adulada por anunciantes; recelosa de heterodoxias y huidiza de revoluciones; pilar de familias y comunidades; principal sustento de las Haciendas públicas y garante del Estado de bienestar. La clase media es el verdadero rostro de la sociedad occidental. En un mundo globalizado, en el que hasta en el más mísero país siempre se puede encontrar a alguien con suficientes medios para darse un paseo espacial, sólo la preeminencia de la clase media distingue los Estados llamados desarrollados del resto. Los países dejan de ser pobres no por el puesto que ocupan sus millonarios en el ranking de los más ricos -de ser así, México o la India estarían a la cabeza del mundo dada la fortuna de sus potentados-, sino por la extensión de su clase media.		Ridiculed by poets and libertines; idolised by moralisers; recipient of the speeches of politicians, popes, patriarchs and anyone who steps on a soapbox looking for voters or followers; flattered by advertisers; wary or revolutions; pillar of families and communities; main support of public finances and guarantee of the Welfare State. The middle class is the true face of Western civilisation. In a globalised world, in which one can find someone with enough means to take a spacewalk in any country, only the dominance of the middle class distinguishes the so-called developed states from the rest. Countries don't cease to be poor because of the position of its millionnaires in the ranking of the wealthy - in that case, Mexico or India would be on top of the world given the fortunes of its tycoons - but because of the size of their middle class.

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

A funny thing happened on the way to systemic fiscal reform...

Chris Cook posted a diary on how the current financial, monetary and fiscal system is as broken as Humpty Dumpty and, as of right now, upwards of 80% of the comments are in a subthread about developing an online simulation game to teach people political economy (quotations below the fold).

So, as the title of this diary suggests, let's get cracking.

I caught the following when roaming the internet aimlessly the other day...

Javno.hr: Croatia's PM: Bosnian Croats Must Have All Rights (March 31, 2009)

Croatian Prime Minister Ivo Sanader said ahead of his trip to Bosnia's Mostar that he is taking a message there that Croats living in Bosnia-Herzegovina have to be secured complete equality with the other two constitutive peoples, as well as that it is high time for solutions for the country's future to be found.

- This is a turning point and permanent solutions for Bosnia-Herzegovina should be made. One should keep in mind that it is also the homeland of the Croat people and that Croat people must be sovereign, equal and constitutive with the other two peoples in Bosnia-Herzegovina - Bosniaks and Serbs - Sanader told the Bosnian issue of the Vecernji list daily on Tuesday.

He said that Croatia, as a signatory to the Dayton peace treaty, wants Bosnia to remain integral and sustainable and is giving it all the necessary support on its way towards Euro-Atlantic associations.

I find talk of Bosnia Croats' sovereignty by the Prime Minister of Croatia hair-raising, especially in this context...

I guess I'll be a lone voice in the wilderness and defend US Treasury Secretary Geithner and his Financial Stability Plan. It's not all that bad.

First of all, let's look at what Geithner said introducing the plan on February 10th:

I am going to outline the key elements of this program today. But before I do that, I want to explain how we got here. The causes of the crisis are many and complex. They accumulated over time, and will take time to resolve.

Governments and central banks around the world pursued policies that, with the benefit of hindsight, caused a huge global boom in credit, pushing up housing prices and financial markets to levels that defied gravity.    

Investors and banks took risks they did not understand. Individuals, businesses, and governments borrowed beyond their means. The rewards that went to financial executives departed from any realistic appreciation of risk.

Haven't we been heaping praise on bloggers for saying these things for a few years? Shouldn't we be happy to hear it from the mouth of the US Treasury Secretary?

frontpaged by Jerome

Or whizzes through, anyway, on his way to Madrid.

The situation surrounding International Letters of Credit doesn't seem to be getting any better more than two weeks after I first posted about it on the front page (This is where it gets real on October 13)

In my opinion the solution is going to have to be to create an international trade credit guarantee society. The WTO could organize this. It could be capitalised (maybe to the tune of $1 trillion) with a loan from the World Bank denominated in the IMF's "Special Drawing Rights" currency. Users of the guarantee (either traders or their countries) would pay an insurance fee for the use of the guarantee, which would be used by the guarantee society to pay the loan back. Come to think of it, instead of a loan this could be one of Chris Cook's 'capital rental' arrangements where, as long as the guarantee society uses the money from the WB (or from member states themselves) it pays a fraction of the 'insurance fee' revenues back to the capital contributors.

Below the fold I relate this situation to Chris' earlier writings on 'peer-to-peer finance'.

John Kenneth Galbraith's The New Industrial State (1967-85) is allegedly too much about sociology to be considered proper economics by this year's Swedish Bank Prize winner. In the last 30 years political economy hasn't progressed in the direction that he foresaw in the 1960's, and so probably his book has to be seen more as a description of what things were like in the 1950's and 60's than as a general theory. But still it contains gems like the following extended quotation, which to me goes a long way towards explaining working-class conservatism in the US.

Much may be learned of the character of any society form its social conflicts and passions. When capital was the key to economic success, social conflict was between the rich and the poor. Money made the difference; posession or nonpossession justified contempt for, or resentment of, those oppositely situated. Sociology, economics, political science and fiction celebrated the war between the two sides of the tracks and the relation of the mansion on the hil to the tenements below.

But by the 1960's things had become different...

For some reason I cannot quite put my finger on, I am dissatisfied about the exchange between Jerome and Martin Wolf on Bernanke's savings glut theory.

To paraphrase, Wolf takes a cue form a 2005 speech by Bernanke and blames East Asia's (and especially China's) mercantilist policies for the credit crunch. Jerome replies that wealth capture is not wealth creation. I guess part of my problem is that the two positions are not incompatible, and Jerome 1) doesn't refute that East Asia has been mercantilist; 2) doesn't refute the argument that this is the root cause of the asset bubble now deflating. Even if Wolf were to accept Jerome's contention that the bubble was a Western policy choice, Wolf's argument seems to be that there was no good policy path out of the situation created by China's dollar peg and that deflation and recession were inevitable and Jerome doesn't address that.

So I read Wolf's piece over a couple of times and then had some discussions with Metatone, Drew and Colman and here's the result.

Like many people I have been following what has been called Paulson's Authorisation for the Use of Financial Force. One of the most interesting developments around it has been a counter-proposal by Chris Dodd, Chairman of the US Senate's banking committee.

I have found Paul Krugman's blog very useful and I encourage you to read his analysis. Here I'll just quote his reaction to Paulson't and Dodd's plans.

I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.

...

And there's no quid pro quo here -- nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

I hope I'm wrong about this. But let me say it again: Treasury needs to explain why this is supposed to work -- not try to panic Congress into giving it a blank check. Otherwise, no deal.

I've had more time to read the Dodd proposal -- and it is a big improvement over the Paulson plan. The key feature, I believe, is the equity participation: if Treasury buys assets, it gets warrants that can be converted into equity if the price of the purchased assets falls. This both guarantees against a pure bailout of the financial firms, and opens the door to a real infusion of capital, if that becomes necessary -- and I think it will.

Jerome has written against the Paulson plan today, as have many others which you can see linked in that thread. Here I want to focus on how the Dodd plan plugs the holes in the Paulson plan, how it's supposed to work, and how it might yet fail.

I just read George Soros' latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means. My original interest was in reading about his theory of Reflexivity and his associated model for financial bubbles. Then I thought I would quote what he has to say about Market Fundamentalism and how the current Crisis might spell the end of it. But I think today I'll just quote him on what he calls "the Postmodern Idiom" and how it makes Popper's "Open Society" vulnerable.

Yet, in spite of my preoccupation with the concept of reflexivity, I failed to recognize a flaw in Popper's concept of open society: that political discourse is not necessarily directed at the pursuit of truth. I believe Popper and I made these mistakes because of our preoccupation with the pursuit of truth. Fortunately, these errors are not fatal because the case for critical thinking remains unimpaired and the mistakes can be corrected: we can recognize a difference between the natural and social sciences, and we can introduce the pursuit of truth as a requirement for an open society.

I'm reading JK Galbraith's The New Industrial State, whose 3rd Chapter ends on the following note:

The modern large Western corporation and the modern apparatus of socialist planning are variant accommodations to the same need. It is open to every free-born man to dislike this accommodation. But he must direct his attack to the cause. He must not ask that jet aircraft, nuclear power plants or even the modern automobile in its modern volume be produced by firms that are subject to unfixed prices and unmanaged demand. He must ask, as just noted, that they not be produced.

While I finish the book and digest it and other recent readings such as Veblen's The Theory of Business Enterprise, I thought I would throw the quotation out there and ask for your reaction/interpretation of it. I see a large number of handles to go into favourite themes of ET.

Brought across by afew

I don't know why the World Oil Congress is being held in Madrid but, given that it is, the Spanish press has access to the participants. Here's an interview published by El Pais today, in which the Secretary General of OPEC blames everyone except themselves: speculators, US foreign policy, US environmental policy, the subprime crisis, you name it... But he also claims that this is not a supply-and-demand problem as there is no unsatisfied demand.

"Muchos se están haciendo ricos con el mito de que falta petróleo" · ELPAÍS.com		"Many are getting rich with the myth that there is an oil shortage" - ElPais.com
ENTREVISTA: La nueva crisis energética		INTERVIEW: The new energy crisis
ALEJANDRO BOLAÑOS - Madrid - 02/07/2008		By ALEJANDRO BOLAÑOS - Madrid - 02/07/2008
El Congreso Mundial del Petróleo que se celebra esta semana en Madrid se ha convertido en un zoco en el que todos tratan de vender la misma mercancía averiada: que la culpa de la brutal subida del precio del oro negro es de otro. Abdalla Salem El-Badri, secretario general de la Organización de Países Exportadores del Petróleo (OPEP), rebate a los que, como algunos Gobiernos occidentales y varias multinacionales, culpan a la falta de producción. Para El-Badri, libio de 68 años, el precio coge impulso en el exceso de especulación financiera.		The World Oil Congress held this week in madrid has become a souq in which everyone tries to sell the same broken merchandise: that the brutal rise in the price of black gold is someone else's fault. Abdallah Salem Al-Badri, secretary general of OPEC, refutes those who, like some Western governments, blame lack of production. For Al-Badri, a 68-year-old Libyan, the price is propelled by financial speculation.

Monetarists are at it again...

[Murdoch Alert] Mervyn King moves to calm fears of imminent rate rises

Mr King re-iterated that the Bank still expects inflation to rise to more than 4 per cent before the end of the year and highlighted that controlling inflation was the Bank's only concern.

"I am confident that we will bring inflation back to the target, but I cannot tell you what level of interest rates we will need to set to achieve that, " he said.

Economists say that while there is widely expected to be an increase in interest rates, it is not expected as soon as next month.

(my emphasis)

That's paragraph 9 of the Times' story (which includes a video of King speaking to the Commons), which chooses to obfuscate by headlining the reassurances that no, interest rates will not rise next month while deep in the article we learn that King is getting ready to pull a Volcker.