EUCOM Economic Analysis - Part I [Archive] - Page 2

Fuchs

06-08-2012, 11:32 PM

We like to organise problems away (http://defense-and-freedom.blogspot.de/2012/06/we-like-to-organise-problems-away.html)

My take on the 'German' position on the economic troubles.

edit: Considering that I'm the copyright owner, I guess a near-100% quote is no problem:

I've observed with some degree of fascination how Mr. Krugman - an economics Nobel laureate - discussed the Western economic troubles. It's fascinating to see a macroeconomic position with such a huge preference for the short term over the long term. It was also fascinating to see him fail to understand the German position on the economic troubles.
Mr. Krugman is no doubt a smart man - probably 20-30 IQ points superior to myself - but he appears to lack the cherished multi-disciplinary approach and the necessary wide angle of view. His look at the 'German' position (there is domestic dissent, most notably in the Financial Times Deutschland) is purely about macro. He misses the point.

Being a busy man promoting a book, having a newspaper column, having a blog and doing research all at once he'll 150% not look at this text. Still, I'd like to share my thoughts on this 'German' position with my readers. After all, it does provide some insights into German military history and doctrine (to some extent).

The following is merely my opinion and I cannot cite social science study reports as backup:

Germans have a lower than average tolerance for imperfections, and their preferred countermeasure to imperfections is to organise them away. This "organising" may be about creating an institution, enacting laws, enforcing laws or simply entering a treaty or other agreement. We don't wait for a glorious performance of a single person either - our preferred reaction to intolerable imperfection is a collective one.
We do not develop a convenient hypothesis (such as "lower taxes solve economic problems") and expect to get rid of an intolerable imperfection the comfortable way. Well, not as often as some other countries. It should be mentioned that almost all imperfections are intolerable to us.
An example; back in the late 19th century the socialist movement picked up steam in elections and became a major political force. The arch-conservative chancellor Bismarck reacted by introducing the anti-socialist social insurance system. Yes, social insurances are anti-socialist, even though many in the United States call them socialist. Fact is, people from the U.S. have on average no clue about all things socialist anyway.

To Germans, all major imperfections would be intolerable at home. The economic crisis directed our attention on the Southern European partners (mostly Greece, Spain, Italy) while we keep ignoring most of Eastern Europe. The Austrians look at Eastern Europe - most Germans don't. Eastern Europe - that's to us the non-allied Russia and our neighbour Poland. Poland is the place where we park our cars if we want to get the insurance money for our car because of theft. Such a dangerous life for cars would be intolerable to us at home, of course.

So we look at Greece and we see a country where nobody really pays attention to red lights in street traffic. A place where tax dodging is a national custom. A place where the government is a booty to be plundered, not an institution to address imperfections in society.
What we see when we look at Greece (or with other imperfections; Italy, Spain) is a country with intolerable imperfections.

It's inconceivable to us that these imperfections could be tolerated. It's likewise inconceivable that these imperfections will be addressed successfully once the pressure from the crisis' symptoms is gone. After all, this would imply that the pressure of the crisis' symptoms didn't suffice to force an organisational countermeasure!
So basically it's inconceivable to us that these countries address the short-term problems (symptoms) in a way people like Mr. Krugman advise - and then just go on. That's simply not our way of doing things, and we're not all that flexible in our way because after all, they kinda work well.
A superficial repair as strongly promoted by Mr. Krugman doesn't address the imperfections, and living with said imperfections is inconceivable. We couldn't.

Well, Germans and even Germans with access to widely distributed media are no macroeconomic geniuses. It doesn't matter that said imperfections are likely responsible for the economy having a lower natural gross domestic product growth path as opposed to being responsible for the short-term slump below said growth path.

Still, what Mr. Krugman doesn't get is that we don't care all that much about what he cares about. He doesn't care all that much about what we care about either. He would probably not be so flabbergasted by the 'German' position on the economic troubles if he understood this. All the macroeconomic data graphs and formulas he can throw against our position are not all that relevant to us - they're designed to be powerful arguments for someone who shares his preferences.

Mr. Krugman discusses how to apply a medication against the short-term problem (the slump far below the potential GDP growth path). The 'German' position mistakes reasons for a lower potential GDP growth path with roots of the current slump below it. Assuming a long-term focus, 'we' demand that the imperfections be addressed, for they won't be addressed any time soon if not under the current pressure. Thus the readiness to apply additional pressure.
'We' simply cannot understand how -even under huge pressure- tolerance for major imperfections could prevail over the desire to get rid of them through some organisational response.

Besides, we won't accept any fix of symptoms that includes major transfers from Germany to South Europe. We had that experiment with Western and East Germany and it sucked. Well, we won't accept it until our notoriously U-turning chancellor does a U-turn on the topic.

Surferbeetle

06-09-2012, 02:42 AM

Ordnung muss sein. :wry:

Doch Ordnung funktioniert nur, wenn ihre Strukturen flexibel bleiben: wandelbar, weil sich die Wirklichkeit wandelt, weil Inhalte und Bedurfnisse in Bewegung sind ;)

Fuchs

06-09-2012, 08:27 AM

Sometimes poll results can go straight into the joke department!

http://www.pewglobal.org/files/2012/05/EU0038.png

http://www.pewglobal.org/2012/05/29/european-unity-on-the-rocks/

Uboat509

06-09-2012, 09:29 AM

Again a new word. For some unknown reason I've begun to learn new English words recently. Strange, for I believed I had already almost all of them in my passive repertoire.

Telling the truth about extremists is rarely appreciated by those who tolerate and cooperate with them.

The U.S. has been so much isolated from the rest of the world (especially from the non-anglophone world) and has such a low opinion about learning from others (assuming it should still be the other way around) that extremism of many kinds is quite widespread by now.

* % population incarcerated
Mostly a result of poorly thought out "three strikes" laws that are being removed from the books in many places

* civilian gun ownership
There is not a lot of conclusive evidence that legal gun ownership leads to more violent crime. Many of the places that have been pointed to as proof that strict gun laws reduce crime have lower rates of all violent crimes suggesting that there is some other factor other than guns is at work.

* military spending
While the amount in real terms is high, the amount as a share of GDP is only %3.6 (http://www.politifact.com/virginia/statements/2011/aug/05/randy-forbes/forbes-says-us-defense-spending-measured-against-g/) which, considering the pressure that is placed on the US to play world peacekeeper is not especially high.

* small government vs. big government debate (next to non-existent in most countries)
I am not sure that this is true

* evolution vs. some nonsense (basically a rested case for almost a hundred years in Europe)
It is a ridiculous debate but it is not nearly as big an issue as some media outlets portray.

* evangelicals
What about them?

* anti-abortion (even the Irish aren't that crazy about it and no, I won't quote the newspeak used to describe the opposing sides of this issue)
This gets a lot of airplay but does not really have that much effect on politics overall. The economy is still the focus for most.

* de-industrialisation and over-emphasis of financial sector (OK, some European countries match this)
You play to your strengths. The UK for example, will never match the industrial capacity of Germany so they have concentrated a great deal of their economic focus on the financial sector which has made them the finance hub of Europe.

* campaigning against labour unions
Public sector unions have been the primary target though there has been a general backlash against nearly all unions. Unions in this country (and many others) seem to believe that their purpose is not to ensure that their members are paid a fair wage, are treated fairly and that they should have a safe work environment, rather they believe that their job is to squeeze every last cent out of the employer and enrich themselves.

* ludicrous ideas about what effects tax cuts can (supposedly) cause
Agreed but there are equally ludicrous ideas about what tax raises can accomplish in Europe (Hollande's %70 rate for instance.)

* fetishism about "small business" owners and the upper class
This is hardly a US only problem. Hollande made bashing the wealth a plank in his campaign and more than a few European states have protection of small businesses enshrined in their laws.

* about zero net savings nationwide (!)
Savings are down but a big increase in savings now could very well scupper the recovery.

* share of fat people
This is also not a US only problem but is rapidly becoming a world wide problem.

* executive empowerment, hollowing out of civil rights
This is a matter of opinion rather than fact.

* money in politics on a never seen before scale
True but it remains to be seen what the net effect of this money will be.

* lack of nature sciences and engineering studies graduations up to the point that about half of the manufacturing outsourcing is being justified by lack of skilled labour alone
I would need to see some stats on that. Labor costs have more to do with outsourcing than anything else.

* disrespect for the idea of compromise and deals (including utter disrespect for obligations once accepted voluntarily in treaties)
I am not going to argue about the extreme aversion to compromise that has gripped Washington of late but to which treaties are you referring?

* ludicrous tolerance for hypocrisy, incompetence, manipulation, deception and public lying
I believe the word you are looking for is politics.

* xenophobia, disrespect of foreign cultures/countries that do not bow to the U.S. Europe has about as much extremism, but only in regional pockets, not continent-wide.

Surferbeetle

06-09-2012, 10:06 AM

Niall Ferguson, from Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Niall_Ferguson

Niall Campbell Douglas Ferguson (born 18 April 1964)[1] is a British historian. His speciality is financial and economic history, particularly hyperinflation and the bond markets, as well as the history of colonialism.[2]

Ferguson, who was born in Glasgow, is the Laurence A. Tisch Professor of History at Harvard University[1]. He was educated at the private Glasgow Academy in Scotland, and at Magdalen College, Oxford.

Ferguson's books include Empire: How Britain Made the Modern World, The Ascent of Money: A Financial History of the World and Civilization: The West and the Rest,[3] all of which he has also presented as Channel 4 television series.

In 2004 he was named as one of the 100 most influential people in the world by Time magazine. He is currently[when?] a contributing editor for Bloomberg Television and a columnist for Newsweek.

Niall Ferguson: The 6 killer apps of prosperity, TED Global 2011, Filmed July 2011, Posted Sept 2011, http://www.ted.com/talks/niall_ferguson_the_6_killer_apps_of_prosperity.htm l

Over the past few centuries, Western cultures have been very good at creating general prosperity for themselves. Historian Niall Ferguson asks: Why the West, and less so the rest? He suggests half a dozen big ideas from Western culture -- call them the 6 killer apps -- that promote wealth, stability and innovation. And in this new century, he says, these apps are all shareable.

"It’s our generation that is witnessing the end of Western predominance. The average American used to be more than 20 times richer than the average Chinese. Now it’s just five times, and soon it will be 2.5 times.”

Fuchs

06-09-2012, 03:16 PM

@Uboat:

which treaties are you referring?

For starters, OIF was a violation of the Kellogg-Briand Pact, the Charter of the United Nations and the North Atlantic Treaty.

In fact, Italy staying on the sidelines as neutral when the red hordes overrun Germany during the Cold War would have been less of a violation of NATO duties than the actions in OIF by the U.S., UK and Poland was.
I gotta admit that the entire Kosovo Air War was a perversion of NATO (including by my country), though.

Surferbeetle

06-09-2012, 05:51 PM

El Eurogrupo dar hasta 100.000 millones para el rescate sin imponer nuevos ajustes al Gobierno, Carlos Segovia | Javier G. Gallego | Madrid | Bruselas
Actualizado sbado 09/06/2012 19:10 horas, El Mundo, http://www.elmundo.es/elmundo/2012/06/09/economia/1339227352.html

Despus de casi tres horas de conversaciones sobre el rescate de la banca espaola, los ministros de Finanzas de la zona euro han llegado a un principio de acuerdo en el que se aportar una ayuda mxima de 100.000 millones de euros, sin imponer condiciones de poltica econmica al Gobierno de Rajoy, segn ha podido saber ELMUNDO.es de fuentes prximas a la reunin.

Las condiciones se centran exclusivamente a la banca espaola. Entre otras incluye una limitacin en la poltica de dividendo y en la remuneracin de los directivos.

Conditionality, from Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Conditionality

Conditionality is typically employed by the International Monetary Fund, the World Bank or a donor country with respect to loans, debt relief and financial aid. Conditionalities may involve relatively uncontroversial requirements to enhance aid effectiveness, such as anti-corruption measures, but they may involve highly controversial ones, such as austerity or the privatization of key public services, which may provoke strong political opposition in the recipient country. These conditionalities are often grouped under the label structural adjustment as they were prominent in the structural adjustment programs following the debt crisis of the 1980s.

Structural adjustment, from Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Structural_adjustment

Structural adjustments are the policies implemented by the International Monetary Fund (IMF) and the World Bank (the Bretton Woods Institutions) in developing countries. These policy changes are conditions for getting new loans from the International Monetary Fund (IMF) or World Bank, or for obtaining lower interest rates on existing loans. Conditionalities are implemented to ensure that the money lent will be spent in accordance with the overall goals of the loan. The Structural Adjustment Programs (SAPs) are created with the goal of reducing the borrowing country's fiscal imbalances. The bank from which a borrowing country receives its loan depends upon the type of necessity. The SAPs are supposed to allow the economies of the developing countries to become more market oriented. This then forces them to concentrate more on trade and production so it can boost their economy.[1]

Through conditionalities, Structural Adjustment Programs generally implement "free market" programs and policy. These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Countries which fail to enact these programs may be subject to severe fiscal discipline. Critics argue that financial threats to poor countries amount to blackmail; that poor nations have no choice but to comply.

Boosting growth in high-debt times: The role of service deregulation, Guglielmo Barone | Federico Cingano, 6 December 2011, VOXEU, http://www.voxeu.org/index.php?q=node/7389

Many European countries face the challenge of credibly reducing their debt-to-GDP ratios. Boosting output growth is therefore an urgent and key political and economic priority. Given the existing constraints to demand-side measures, most observers see structural (supply-side) reforms as the main policy tool such countries have at their disposal to grow out of their debt problems (e.g. Ivanova et al. 2011, Fernandez-Villaverde and Rubio-Ramirez 2011, Amato et al. 2010). The specific measure they should focus on and the gains to be expected from such reforms are, however, less clear.

Based on recent research on OECD data, this column argues that increasing competition in the market for key upstream service activities in particular, energy and professional services could have sizeable effects on growth by improving the performance of downstream manufacturing industries.

In many countries, key inputs such as professional services, energy, transportation, and telecommunication services are not only scarcely traded internationally, but also sheltered from domestic competition by substantial administrative restrictions, including:

monetary and non-monetary barriers to market entry;
the integration of a priori competitive activities with natural monopolies (as in the case of energy); or
the existence of restrictions to market conduct (as in professional services).

Such restrictions have negative effects on growth in services, in particular because they reduce investments (Alesina et al. 2005). This direct negative effect is only part of the story, however. Combining service-regulation indexes with data on growth in manufacturing industries for a sample of OECD countries, we have shown that there are also sizeable indirect effects, from service regulation to the performance of downstream activities (Barone and Cingano 2011). Interestingly, similar findings are obtained by other works investigating the same issue with different approaches (see Bourls et al. 2010, Arnold et al. 2011).

The room for further service deregulation in Europe seems substantial. According to the OECD indices used in the research in 2008, for example, the number of restrictions in professional services in countries such as Italy and Greece (and Spain and France) was three (and two) times higher, respectively, than in the US and the UK.

Structural transformation and the sophistication of production, Rahul Anand | Saurabh Mishra | Nikola Spatafora, 3 June 2012, VOXEU, http://www.voxeu.org/index.php?q=node/8049

Recent literature emphasises that a key component of the economic growth process is an increase in the “sophistication” of a country’s production. What a country produces and exports matters for growth; indeed, it has been argued that “… not all goods are alike in terms of their consequences for economic performance. Specialising in some products will bring higher growth than specialising in others” (Hausmann et al. 2007; Lall et al. 2005).

This column makes four key contributions to the debate. First, it systematically documents changes in export sophistication over the past 20 years in low-income countries and middle-income countries. In particular, it describes differences in the performance of different geographical regions, as well as between resource–rich and other economies.

Second, it analyses to what extent an increasing sophistication of production and exports is associated with overall economic growth. A related question concerns what factors and mechanisms ultimately determine the magnitude of this impact. That is, what determines whether sophisticated sectors act as an engine of growth for the broader economy, or instead turn into isolated enclaves?

Third, we examine what enables a country to increase the sophistication of its production. In this context, we look at the relative importance of institutional factors, structural reforms, and policy measures (such as exchange rate policy).

Fourth, and perhaps most novel, the analysis moves beyond the usual focus on goods, and also considers services. Services are gradually becoming more productive and tradable, as reflected in success stories such as India’s software and business-process activities, Nigerian’s film industry, or Kenya’s call centres (Mishra et al. 2011). Reflecting this, the paper analyses the transformation of global production using a new measure of the sophistication of services, in addition to the sophistication of goods.

IMF, SPAIN, Financial System Stability Assessment, Prepared by the Monetary and Capital Markets and European Departments Approved by Christopher Towe and Reza Moghadam, May 30, 2012, http://www.imf.org/external/pubs/ft/scr/2012/cr12137.pdf

While there is a core of strong banks that are well-managed and appear resilient to further shocks, vulnerabilities remain. Substantial progress has been made in reforming the former savings banks, and the most vulnerable institutions have either been resolved or are being restructured. Recent measures address the most problematic part of banks’ portfolios (real estate developer loans). Going forward, a further restructuring and recapitalization of some of the remaining weaker banks may be needed as a result of deteriorating economic conditions.

A major and much-needed restructuring of the banking system is underway. Full implementation of the reforms—including thorough independent valuations, a credible backstop, further restructuring of weaker banks, and dealing with legacy assets—as well as an effective communication strategy are critical for preserving financial stability and laying the ground for recovery.

The assessment of the financial oversight framework identifies both strengths and weaknesses. Supervisory agencies have highly experienced and respected professional staff, and are supported by good information systems. However, a gradual approach in taking corrective action has allowed weak banks to continue to operate to the detriment of financial stability. The processes and the accountability framework for effective enforcement and bank resolution powers need to be improved.

Surferbeetle

06-13-2012, 01:12 AM

Spain’s Record Yields Show Italy Bailout Risk, By Ben Sills - Jun 12, 2012 4:01 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-12/spain-s-record-yields-show-italy-bailout-risk-as-crisis-spreads.html

Spain’s benchmark borrowing costs climbed to a record yesterday, raising the specter of sovereign bailouts for the government in Madrid and then Italy that would stretch European Union finances to their limit.

The yield on Spanish 10-year government debt rose for a third day, touching 6.83 percent, the highest since 1997, after Fitch Ratings predicted that Prime Minister Mariano Rajoy will miss budget-deficit targets he’s made the foundation of his economic policy. Italian 10-year yields rose to the highest in almost six months.

The bond rout wiped out the effects of 1.1 trillion euros ($1.4 trillion) in official funding for euro-region banks that has held yields in check since December. Spain’s 10-year yield is close to the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. Italy, the second-biggest sovereign borrower in the euro area, may need to seek a rescue within months, said James Nixon, chief European economist at Societe Generale SA (GLE) in London.

Credit Agricole Seeks An End To Its Greek Imbroglio, By Fabio Benedetti-Valentini - Jun 12, 2012 5:00 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-12/credit-agricole-seeks-an-end-to-its-greek-imbroglio.html

In 2006, Georges Pauget, then Credit Agricole SA Chief Executive Officer, bought Greece’s Emporiki Bank, calling it a “perfect fit.” Six years on, the purchase has put the French lender in the eye of a perfect storm.

A possible euro exit for Greece has made Credit Agricole the foreign bank with the most to lose. France’s third-biggest bank has 23 billion euros ($29 billion) of Greek loans on its books, the largest such holdings for a foreign bank. Although Greek loans represent about 3 percent of parent Credit Agricole Group’s lending commitments, they amount to at least 40 percent of the country’s private cross-border debt claims.

Gains made in the polls by Greece’s anti-austerity parties before the June 17 election have raised the specter of the country having to abandon the euro, driving Credit Agricole to reassess support for its unit. Costs from Greece’s euro exit may reach 6 billion euros for the bank, Citigroup Inc. analysts Kinner Lakhani and Florent Nitu estimated.

“The Greek vote’s outcome will influence Credit Agricole’s decision on whether to stay or to quit the country,” said Jerome Forneris, a Marseille-based fund manager at Banque Martin Maurel, which manages $8.5 billion euros, including Credit Agricole shares. “If Greece exits the euro, what’s the interest of keeping a unit there?”

Finland Wants Collateral For Spanish Bank Aid From EFSF, By Kasper Viita - Jun 9, 2012 3:00 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-09/finland-wants-collateral-for-spanish-bank-aid-from-efsf.html

Finland will demand collateral for its share of emergency loans to shore up the Spanish banking system should the money come from the euro-region’s temporary bailout fund, Finance Minister Jutta Urpilainen said.

“It remains undecided whether the bailout will be granted via the temporary facility, in which case Finland will require collateral,” Urpilainen told reporters in Kokkola, Finland, yesterday. The other alternative is to grant the loan through the European Stability Mechanism, the “permanent crisis mechanism, which will provide better security for taxpayers” and won’t result in demands for extra guarantees, Urpilainen said.

Euro-area finance ministers agreed to bail out Spanish banks in a rescue worth as much as 100 billion euros ($125 billion) after the country’s access to market funding narrowed. The exact amount will be decided after an audit of the nation’s banks is complete later this month, Urpilainen said.

Finland demands collateral for payments from the European Financial Stability Facility, the temporary rescue fund, because it lacks a preferred creditor status. The ESM’s preferred status and the rules on private-sector burden sharing in case of default mean the permanent fund is less likely to incur losses, Finnish Finance Ministry aide Martti Salmi said yesterday.

Cram down, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Cram_down

Informal use

The term (sometimes used in the phrase cram-down deal) has also gained currency to denote informally any transaction where existing investors (debt or equity) are forced by circumstance to accept an unappealing transaction, such as an expensive financing, a debt transaction that subordinates them, a dilutive equity raising, or an acquisition at an unappealingly low price.[7][8]

List of countries by tax revenue as percentage of GDP, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_ GDP

Estonia, 32.3%
Finland, 43.6%
France, 44.6%
Germany, 40.6%
Iceland, 40.4%
Ireland, 30.8%
Italy, 42.6%
Greece, 33.5%
Spain, 37.3%
United Kingdom, 39.0%

Switzerland, 29.4%

Washington must agree on the rules of fiscal engagement, By Dennis Hastert and Dick Gephardt, June 10, 2012 10:56 pm, Financial Times, www.ft.com

Federal budget revenues in the US have fallen from 18.5 per cent of gross domestic product in 2007 to a projected 15.8 per cent in 2012, while federal spending levels have risen from 19.7 per cent to a projected 23.4 per cent, according to the CBO.

Fuchs

06-13-2012, 08:57 AM

List of countries by tax revenue as percentage of GDP, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_ GDP

Such lists are rarely a good diea, for comparison is difficult.

For example, germany has multiple parafisci (social insurances) and the large churches have treaties which allow them to piggyback onthe tax system (you can opt oput, but then they stop beign ncie to you when you want something from 'your' church, no matter "christening is forever" or not).

Afaik U.S. social insurance revenues would appear in such a statistic, but would my two examples appear? Probably not. Yet, the social insurance spending is under control of the legislative, while church budgets are not. So should the latter apepar in such a statistic or not when you're itnerested in the share of the government in the economy? Then again, taxation causes distortion - which means you'd need them included for a proper statistical analysis.

In the end, even seemingly simple statistics oftene nd up beign no good for laymen.

Surferbeetle

06-14-2012, 12:52 PM

In the end, even seemingly simple statistics oftene nd up beign no good for laymen.

Appreciate the insights.

Some quick thoughts on taxation and how it fits into to the ongoing EU issues. I am a fan of recognizing and attempting to harmonize the 'technical', 'economic' and 'political' portions of a project and have found success more often than not when taking this route.

With respect to (taxation) data you bring up a needed cautionary point, the danger of taking a data snapshot solely on it's face. A range over time, for each nation, would be better with mention of the impacts of seasonal changes, political changes, demographic changes, and macroeconomic changes have upon the data (and this is not an all inclusive list). Statistics are fine, from where I sit, if one respects the strengths and limitations of the field (which implies that one has spent at least a bit of time practicing/problem solving in the subject, if not some formal classes). I would be interested in any references you would care to link to by the way.

With respect to the EU the range of taxation rates/economics, that I excerpted, is interesting to me in that it speaks to the priorities of a group of similarly minded nations - who value expenditures on social welfare more than on expenditures on military armaments. Do you know if the acquis communautaire (http://en.wikipedia.org/wiki/Community_acquis) speaks to economic ratios in way similar to, perhaps, Basel III (http://en.wikipedia.org/wiki/Basel_III)does for banking?

Politically, the history and practice of governance across Switzerland's 26 cantons is of interest as compared to the 27 nation EU's current trials and tribulations...

No rest for the wicked...off to work. :wry:

Fuchs

06-14-2012, 04:11 PM

First of all, let me put some unfair blame on my stupid keyboard for producing so many typos.

Second, I didn't understand your question.

Regarding preference for social welfare transfers; keep in mind that Iceland has no real military, Ireland has no real need for one and Germany has its social net largely organised in social insurances.

We don't have much talk about small government / big government or about how unemployment benefits come from government or something (which is partially untrue). The whole language about the social net is different than in the U.S. or the UK.

It's also my impression that the German news are very rarely about social nets; "Hartz IV" (benefits for long-term unemployed) is the only one that grabs headlines, and the term has become a derogatory term for what's essentially a subculture.

davidbfpo

06-15-2012, 02:15 PM

A BBC News report ends with:
So two moments of truth are approaching.

Will Greece gamble that Europe will agree to easier terms on its bailout, or will it go along with a rescue package that brings with it years of painful austerity?

Secondly, will Germany - under relentless pressure - accept it will have to pay more to ensure the euro's survival? Angela Merkel believes there will have to be a political union in the eurozone, but will she tell the German people they will have to contribute much more to save the currency?

Link:http://www.bbc.co.uk/news/world-europe-18454429

If anything the European political establishment will once again fudge any decisions. So we await a decision by a faltering EU member, Greece, on whether a tipping point is reached. As for a political union that is a dream, best kept close to the hearts of Angela Merkel and her EU bureaucrats hearts. The EU was always a grand scheme that had no democratic mandate. When national voters do have a choice, such as in Ireland recently, the issue is rather heavily weighed to the "Yes" vote.

It is strange to recall the concept of a common currency was supposed to enable a better, prosperous Europe free of the costs involved in multiple currency transactions. I have no doubt the price paid is rather high today.

Surferbeetle

06-16-2012, 08:45 AM

@Fuchs

You asked, more or less, 'what's the question'? To which i would respond, is there a EU-wide taxation framework, and how much cohesive force does it provide the EU?

@Davidbpfo

Geography (Pireaeus + Thessaloniki) + Probable Divided Political Coalition (PSAOK+New Democracy+Syriza) + Odious Debt (Escrow Account + Bailout # 3) = Muddle Through?

'Smart money' is also considering two additional scenario's just in case however, Grexit and GIIPS exit.

Port of Piraeus, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Port_of_Piraeus

Port of Thessaloniki, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Port_of_Thessaloniki

Greek Political Parties Seeking Entry To Parliament On June 17, By Eleni Chrepa and Natalie Weeks - Jun 14, 2012 7:41 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-14/greek-political-parties-seeking-entry-to-parliament-on-june-17.html

Euro zone officials eye Greek escrow account: Fekter, VIENNA | Mon Feb 20, 2012 3:37am EST, Reuters, http://www.reuters.com/article/2012/02/20/us-europe-greece-austria-idUSTRE81J09D20120220

Greek government-debt crisis, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Greek_government-debt_crisis

IFC Not Counting on Greek Exit From Euro Area, Ellena Says, By Gordana Filipovic on June 15, 2012, Business Week, http://www.businessweek.com/news/2012-06-15/ifc-not-counting-on-greek-exit-from-euro-area-ellena-says

Wie ein Euro-Aus die Schweizer Wirtschaft gefaehrdet, SCHWEIZ 15.06.2012 | 11:52, Handelszeitung, http://www.handelszeitung.ch/konjunktur/schweiz/wie-ein-euro-aus-die-schweizer-wirtschaft-gefaehrdet

Fuchs

06-16-2012, 09:05 AM

There's a drive for a harmonised (all at about 20%) value added tax 8still national taxes).

A more recent push is for a harmonised financial transaction tax, but the British don't go along with this.

The EU gets revenue only from the members, not directly through taxation.

Fuchs

06-16-2012, 12:13 PM

FAZ interview with industrial economist Daron Acemoglu

http://www.faz.net/frankfurter-allgemeine-zeitung/euro-krise-die-griechen-halten-sich-fuer-opfer-angela-merkels-11787448.html

http://translate.google.de/translate?sl=de&tl=en&js=n&prev=_t&hl=de&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.faz.net%2Ffrankfurter-allgemeine-zeitung%2Feuro-krise-die-griechen-halten-sich-fuer-opfer-angela-merkels-11787448.html

Surferbeetle

06-18-2012, 02:43 AM

It appears that the Kingmakers caught a wave today/Sunday 17 June 2012; we will see how long they can ride it. Out of the 300 Greek parliamentary seats in question, PASOK (center left - pro EU) appears to have clinched 33, while New Democracy (center right - pro EU) has claimed ~129 and Syriza (radical left - anti EU) ~71. In France, where an arguably just as important parliamentary election took place, Monsieur Hollande has firmly taken the mantle for the pro-growth southern European faction of the GIIPS countries and earned France further maneuver room. He has done so by securing a French parliamentary majority, consisting of ~300 out of 577 seats, which provides him (Socialists - center left) breathing space from the demands of the Left Front (left - Jean Luc Melenchon - ~10 seats), the Greens (left), the UMP (right -~ 304 seats), and the National Front (hard right - granddaughter Marion Marechal Le Pen - 2 seats). The largest Kingmaker of them all, Mr. Market, is starting to wake, with the EUR-USD initially rising to 1.2748 while the Euro bond markets have yet to open.

Will the past example of Jacques Delors, a member of the Madrid Club, inspire the drafting of a work-plan at the G-20 meeting and perhaps an unveiling at the upcoming European Council meeting in the interests of democracy, openness, and transparency? The calculus at a tactical level may not yet be entirely politically beneficial, but there are arguably some economic benefits to be gained...

Kingmaker, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Kingmaker

Panhellenic Socialist Movement, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Panhellenic_Socialist_Movement

New Democracy (Greece), From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/New_Democracy_(Greece)

Coalition of the Radical Left, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Coalition_of_the_Radical_Left

Socialist Party (France), From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Socialist_Party_(France)

Left Front (France), From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Left_Front_(France)

The Greens (France), From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/The_Greens_(France)

Union for a Popular Movement, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Union_for_a_Popular_Movement

National Front (France), From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/National_Front_(France)

Hollande party wins majority in French parliament, 17 June 2012 Last updated at 19:37 ET, BBC News, http://www.bbc.co.uk/news/world-europe-18471239

Konservative koennten in Griechenland Regierung bilden, Erstellt am: 17.06.2012 | 18:58, Handelszeitung, http://www.handelszeitung.ch/politik/konservative-koennten-griechenland-regierung-bilden

Hollande secures parliamentary majority, By Hugh Carnegy and Scheherazade Daneshkhu in Paris, Last updated: June 17, 2012 10:28 pm, Financial Times, www.ft.com

Mr. Market, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Mr._Market

Euro Gains As Pro-Bailout New Democracy Wins Greek Poll, By Keith Jenkins and Emma Charlton - Jun 17, 2012 5:30 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-17/euro-climbs-as-greek-pro-bailout-parties-could-form-coalition.html

Bloomberg, Government Bonds, Germany, http://www.bloomberg.com/markets/rates-bonds/government-bonds/germany/

Jacques Delors, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Jacques_Delors

G2012 Mexico, http://www.g20.org/en

European Council Meetings, http://www.european-council.europa.eu/council-meetings

G-20 Plans Push for Growth, Again, Leaders to Urge Euro Zone to Turn Focus Away From Austerity in Order to Stem Turmoil's Impact on Global Economy, By Sudeep Reddy, EUROPE NEWS, June 17, 2012, 7:31 p.m. ET, WSJ, http://online.wsj.com/article/SB10001424052702303379204577472600931805944.html

davidbfpo

06-18-2012, 06:06 AM

Surferbeetle,

You have to be careful with Greek election figures, especially when using the numbers of MPs in parliament:
Out of the 300 Greek parliamentary seats in question, PASOK (center left - pro EU) appears to have clinched 33, while New Democracy (center right - pro EU) has claimed ~129 and Syriza (radical left - anti EU) ~71.

Votes cast are a more accurate guide:
With more than 99% of votes counted, interior ministry results put New Democracy on 29.7% of the vote (129 seats), Syriza on 26.9% (71) and the socialist Pasok on 12.3% (33).

The largest party gets a bonus of fifty MPs, a bizarre twist.

The BBC has a table showing the pro-bailout parties have in votes 42% and the opposition 52%.

Link:http://www.bbc.co.uk/news/world-europe-18482415

Hardly a ringing popular endorsement of what is reportedly needed.

Bill Moore

06-18-2012, 06:52 AM

It would seem misguided to read too much into this election. It will provide temporary confidence/hope to investors, but it doesn't solve Greece's economic woes. At most it appears the Euro may survive a little longer, but it is still on artifical life support.

http://finance.yahoo.com/news/greece-election-whats-next-231700480.html;_ylt=AnGiAdF_7926vjia1kfc0nyiuYdG;_ ylu=X3oDMTQzbnBjaTFyBG1pdANGaW5hbmNlIEZQIEp1bWJvdH JvbiBMaXRlBHBrZwMwY2ZlM2QyMC0xMTQ4LTM3MzgtOTEyZS1m ZjRiMjFjMjZkNDAEcG9zAzEEc2VjA2p1bWJvdHJvbgR2ZXIDZj VkZmFjYzAtYjhkZi0xMWUxLTk3ZjctZGNjOTk2MDIzNDE2;_yl g=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3Rh aWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3

The government must identify additional budget cuts by the end of June to comply with the terms of its bailout program. If it fails to do so, analysts say the European Central Bank could cut off funding to Greek banks, which have already been drained of cash as deposits flee the country. (Related: Euro 'firewall' not big enough)

In addition, Greece is facing a €3.9 billion bond redemption in August.

The nation's economy is in deep decline, and analysts say Athens is in danger of running out of the money it needs to pay for basic necessities, such as fuel and medical supplies.

Watcher In The Middle

06-18-2012, 11:53 AM

The bigger (more important) stories (then Greece):

Monday, 06.18.2012:

1) Spanish 10Yr sovereign bond yield up 24bps to 7.12%. (There goes the 7.00% barrier).
2) Italian 10Yr sovereign bonds yield up 12bps to 6.05%

3) Spanish Banks May Need €150 Billion In Loan Loss Provisions.
Here's the Link (http://www.zerohedge.com/news/europhoria-fades-spanish-banks-may-need-whopping-%E2%82%AC150-billion-loan-loss-provisions)

4) FRENCH SOCIALISTS WIN ABSOLUTE MAJORITY IN PARLIAMENT. Expect a bond market revolt in 5-4-3-2-1.... (weeks, if not days - maybe even measured in hours).

Too many issues are all coming together all at once for the Eurozone - and almost all in a bad way (at least for the Eurozone).

This is like having to deal with a raging forest file where they finally get 10% containment (Greece), but there's a forecast of 35-40 mph winds, no rain, and those conditions existing continuously for the next 2 weeks (everybody else).

Some place, some where, some of the CDS obligations are going to default. The effects of defaults in the CDS marketplace are going to impact everywhere at that point....

Surferbeetle

06-24-2012, 09:37 PM

Relief, but little hope, At last there is a Greek government, but it faces immense problems, Jun 23rd 2012 | ATHENS | from the print edition, The Economist, http://www.economist.com/node/21557383

That Greece has a government at all is due to New Democracy’s better-than-expected performance in the June 17th election. It won 29.7% of the vote to 26.9% for Syriza, the radical left coalition led by 37-year-old Alexis Tsipras, a brash new political star whose claim that Greece could renegotiate its latest €130 billion ($164 billion) bail-out yet stay in the euro appealed to many voters. The PanHellenic Socialist Movement (Pasok) finished a distant third with 12.3%.

With 129 seats, New Democracy is much the biggest party in the 300-member parliament (thanks to an electoral law that gives the front-runner an extra 50 seats). By teaming up with Pasok’s 33 members and another 17 from Democratic Left, it will have a comfortable majority of 179 seats. Syriza has 71 seats in an otherwise fragmented house. Independent Greeks, the neo-Nazi Golden Dawn and the Greek communist party each have a handful of deputies.

Pour l'Allemagne, la Grèce doit arrêter de demander de l'aide, Par Les Echos | 24/06 | 19:43, Les Echos, http://www.lesechos.fr/economie-politique/monde/actu/0202136334524-l-allemagne-somme-la-grece-d-arreter-de-demander-de-l-aide-337043.php

Le gouvernement grec va demander un délai supplémentaire de deux ans, jusqu'en 2016, pour ramener le déficit budgétaire à 2,1% du produit intérieur brut (PIB). Il était de 9,3% en 2011. Ce nouveau délai coûterait 16 à 20 milliards d'euros supplémentaires en terme de financement international. « La balle est maintenant dans le camp de la Grèce », a ajouté Wolfgang Schäuble. « C'est à eux de regagner la confiance des populations en Europe. Ils n'y arriveront qu'avec des actes et des mesures concrets. »

Selon un sondage réalisé auprès de 4.000 personnes en Allemagne, en France, en Espagne et en Italie, 78% des allemands, 65% des Français, 51% des Espagnols et 49% des Italiens souhaitent une sortie de la Grèce de la zone euro. Une grande majorité dans les quatre pays, qui représentent 254 millions d'habitants, s'attend à ce que la Grèce ne rembourse jamais ses créanciers internationaux. « Ce sondage montre deux choses », a indiqué le ministre allemand. « Une majorité écrasante est en faveur de l'euro (...) et deuxièmement il montre à quel point la Grèce à perdu la confiance des Européens. »

Una operación del primer ministro griego retrasa el calendario de la austeridad, Actualizado domingo 24/06/2012 14:15 horas, El Mundo, http://www.elmundo.es/elmundo/2012/06/24/economia/1340527443.html

El nuevo gobierno griego, salido de las urnas del 17 de junio y formado la semana pasada, inicia su actividad obstaculizado por problemas de salud de su primer ministro y del designado titular de Finanzas, que impedirán a ambos asistir a la cumbre de la UE el 28 y 29 próximos.

Left bankers, A Socialist landslide, but trouble looms ahead, Jun 23rd 2012 | PARIS | from the print edition, The Economist, http://www.economist.com/node/21557386

OVER the past two months the French have been called to the polls four times: for two rounds of presidential voting, followed by two for parliament. On June 17th, at the fourth and last of these, voter turnout, perhaps unsurprisingly, reached a record low. But the result was far better than François Hollande could have hoped for. The French president’s Socialist Party took 314 parliamentary seats, well above the 289 it needed to secure a governing majority by itself.

This gives Mr Hollande a free hand to govern as he sees fit, without the need to turn either to the Greens, who took 17 seats, or to the Left Front, led by the fiery Jean-Luc Mélenchon, which got just ten. He has secured a bigger majority than those won by the Socialists in 1997 and 1988, although still short of the sweeping result achieved after François Mitterrand was elected president in 1981. The new parliament will be younger, more feminine and more ethnically diverse than the old one, which was dominated by grey hair and suits. Some 40% of deputies are first-timers.

Liste des sénateurs par groupes politiques, http://www.senat.fr/senateurs/grp.html

General election in France, http://www.elections-legislatives.fr/en/home.asp

Why Mario Monti needs to speak truth to power, WOLFGANG MUNCHAU, June 24, 2012 6:41 pm, Financial Times, www.ft.com

Just imagine it is this Thursday evening in the European Council’s gathering of Europe’s heads of state, and the Italian prime minister stands up and says this: “Mr President, dear colleagues. We are confronted with a simple choice: we can today either save the euro and build the foundation for a future political union, or we could flunk it and achieve neither. We all know what we need to do to save the euro. We require a banking union for Spain, a fiscal union for Italy and a political union for Germany.

“We can, of course, disagree on details. But we have to settle some of these differences this weekend, and take a decision on the steps that are needed right now. Our crisis resolution policies have failed time and again. We now need something that works fast. If we fail, I can assure you that I can no longer be part of this group, and my country can no longer be part of this project.”

Let me say first of all that I do not really expect Mario Monti to say such a thing, not even a more cryptic version. He is the leader of a technical government. His job is to fix things. Standing up to the German chancellor – grandstanding as some people might call it – let alone wagering Italy’s future is not part of his remit. Italy’s political parties appointed him because they needed a plumber to succeed the playboy, not a gambler. The last thing they wanted was a leader.

Berlusconi fällt Abschied schwer, NZZ, http://www.nzz.ch/aktuell/international/berlusconi-faellt-abschied-schwer-1.17276928

Dem früheren italienischen Ministerpräsidenten Silvio Berlusconi, der im vergangenen November unter dem Druck der Schuldenkrise und immer peinlicherer Skandale zurücktreten musste, scheint der endgültige Abschied von der Politik weiterhin schwerzufallen. Wie hiesige Medien am Wochenende berichteten, soll der «Cavaliere» am Freitag während eines Jugendtreffens seiner Partei Popolo della Libertà (PdL) die Ambition bekundet haben, der künftige «Anführer der gemässigten Italiener» zu sein. Der «Cavaliere» soll etwa ausgerufen haben, «gebt mir 51 Prozent der Stimmen und ich werde unser Land aus der Krise führen». Zudem habe er die Schuld an seinem Scheitern Bundeskanzlerin Merkel zugeschoben; sie habe verhindert, dass die Europäische Zentralbank wie das amerikanische Federal Reserve funktioniere.

EU Ministers Clear Way For Transaction Tax In Some States, By Rebecca Christie, Zoe Schneeweiss and Rainer Buergin - Jun 22, 2012 10:58 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-22/eu-ministers-clear-way-for-transaction-tax-in-some-states.html

European Union finance ministers cleared the way for a financial-transaction tax to move forward in at least nine member states after Austria said deadlock among all 27 could threaten the euro area’s rescue fund.

The European Commission’s tax proposal “does not, as required, have unanimous support,” Danish Economy Minister Margrethe Vestager, whose country holds the EU’s rotating presidency, said during a meeting in Luxembourg. Now that an impasse has been acknowledged, a smaller group of as few as nine nations can propose to coordinate a tax among themselves.

Germany and Austria today said a transaction tax needs to move forward in some form so their lawmakers will approve the the 500 billion-euro ($627 billion) European Stability Mechanism for it to start July 9 as planned. Austrian Finance Minister Maria Fekter urged nations to sign up to the next steps.

Maria Fekter, Wikipedia, http://de.wikipedia.org/wiki/Maria_Fekter

Maria Theresia Fekter (* 1. Februar 1956 in Attnang-Puchheim) ist eine österreichische Politikerin (ÖVP) und österreichische Finanzministerin.

ECB Said To Relax Requirements For Mortgage-Backed Collateral, By Jeff Black - Jun 21, 2012 2:54 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-21/ecb-said-to-relax-requirements-for-mortgage-backed-collateral.html

The European Central Bank will relax some rules on the collateral that banks can offer in exchange for ECB funds, said a central bank official.

The Frankfurt-based central bank’s Governing Council decided yesterday to lower the minimum rating threshold for mortgage-backed securities to BBB- from A-, said the official, who declined to be identified because the discussions were private. Spanish banks have been unable to use some securities as collateral because the rating is too low, the person said.

Banks Need ‘Push’ To Avoid Prolonging Crisis, BIS Says, By Boris Groendahl - Jun 24, 2012 8:00 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-24/banks-need-push-to-avoid-prolonging-crisis-bis-says.html

“Public policy must move banks to adopt business models that are less risky, more sustainable and more clearly in the public interest,” the BIS said in the report. “Governments can give the banking sector a healthy push in this direction if officials make sure that newly agreed regulations are implemented universally and without delay.”

davidbfpo

06-24-2012, 10:12 PM

Try this short video clip from the European Parliament, with Nigel Farage, the UKIP leader, who sums up the incredulous position:http://www.forexlive.com/blog/2012/06/13/van-rompuys-worst-nightmare-is-back/

I don't hold with UKIP's policies; the Brussels machine certainly doesn't.

Surferbeetle

06-24-2012, 10:30 PM

David,

Politicians are always trouble, but math is math....:wry:

Some unpleasant eurozone arithmetic, June 22, 2012 11:50 am by Gavyn Davies, Financial Times, www.ft.com

The next summit on June 28 and 29 will unveil a long term road map towards fiscal and banking union, which in better economic circumstances could appear highly impressive. But the market is currently focused on the shorter term. Unless there is some form of debt mutualisation at the summit, resulting in a decline in government bond yields in Spain and Italy, the crisis could rapidly worsen.

Debt mutualisation can come in many forms. The European Redemption Fund, proposed by the Council of Economic Experts in Germany (and discussed here) seems to have receded into the background this week but could still have an eventual role. More immediately, the main option on the table seems to be the use of the eurozone firewall (ie a combination of the EFSF and ESM) to buy secondary government debt, or inject capital directly to the banks. But the problem here is simple: a lack of money.

Perhaps I am outta line (no insult intended, just genuine curiosity), but I wonder why all of the media the pressure is on the Germans? There are 27 members of the EU (~16 trillion USD combined GDP) who can make structural changes and pitch in to pay the bills? The cost of the EU seems to be much cheaper than the summed cost of the wars we have seen on the continent?

davidbfpo

06-25-2012, 06:39 AM

Surferbeetle asks:
I wonder why all of the media the pressure is on the Germans? There are 27 members of the EU...

Yes there can be coverage of other EU members, it is rare true. I've heard on BBC radio mention of Finland, Slovenia and the Czech Republic. Plus the recent converts to the Euro, IIRC a Baltic republic.

It also shows how little we, in the UK and maybe the USA, understand the European economy, but we both are happier to look at Germany.

Back to UKIP's Farage his speech highlights the "bad boys" have to contribute to rescues by borrowing more money and lend it at less than they have to pay.

Surferbeetle

06-27-2012, 01:07 PM

TOWARDS A GENUINE ECONOMIC AND MONETARY UNION Report by President of the European Council Herman Van Rompuy, Brussels, 26 June 2012 EUCO 120/12 PRESSE 296 PR PCE 102, http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131201.pdf

The report proposes a vision for a stable and prosperous EMU based on four essential building blocks:

§ An integrated financial framework to ensure financial stability in particular in the euro area and minimise the cost of bank failures to European citizens. Such a framework elevates responsibility for supervision to the European level, and provides for common mechanisms to resolve banks and guarantee customer deposits.

§ An integrated budgetary framework to ensure sound fiscal policy making at the national and European levels, encompassing coordination, joint decision-making, greater enforcement and commensurate steps towards common debt issuance. This framework could include also different forms of fiscal solidarity.

§ An integrated economic policy framework which has sufficient mechanisms to ensure that national and European policies are in place that promote sustainable growth, employment and competitiveness, and are compatible with the smooth functioning of EMU.

§ Ensuring the necessary democratic legitimacy and accountability of decision-making within the EMU, based on the joint exercise of sovereignty for common policies and solidarity.

Cour des comptes, http://www.ccomptes.fr/Nos-activites/Cour-des-comptes

La Cour des comptes a pour mission de s'assurer du bon emploi de l'argent public et d'en informer les citoyens (selon l'article 47-2 de la Constitution).

2012 Article IV Consultation with Italy- Concluding Statement of the IMF Mission1 May 16, 2012, AN AGENDA FOR REVIVING GROWTH IN ITALY, http://www.imf.org/external/np/ms/2012/051612.htm

I. Structural Reforms to Jumpstart Growth
5. The potential gains to growth from deeper structural reforms are substantial.
6. The labor market reform bill should be passed quickly to reduce uncertainty and encourage new hires.
7. More is needed to bridge the gap between permanent and temporary workers and address the high unemployment of youth and women.
8. In product markets, priority should be given to accelerating reforms in the energy, public and professional services sectors with the broadest impact on growth.
9. Helping small and medium-size enterprises (SMEs) grow would facilitate the shift of resources to new growth areas.

Everything flows? The future role of monetary policy, Speech at the 2012 ZEW Economic Forum in Mannheim, Dr Jens Weidmann
President of the Deutsche Bundesbank and Member of the Governing Council of the ECB, http://www.bundesbank.de/Redaktion/EN/Reden/2012/2012_06_14_weidmann_everything_flows_the_future_ro le_of_monetary_policy.html

There is no doubt that the crisis has delivered important findings for monetary policy and for monetary union. However, my key message today is to make clear that the paradigms that have been valid to date have by no means suddenly lost their validity. On the contrary, given the challenges that we are facing today, we should not recklessly throw long-held principles overboard and turn our backs on the lessons from the past.

Ultimately, monetary union in its current institutional form was created as a result of lessons learned from past errors. And by that, I do not so much mean German hyperinflation at the beginning of the 1920s, as is all too often assumed by foreign observers. Instead I mean the monetary policy experience gained in the 1970s and 1980s with the extremely heterogeneous development of inflation in Europe. Countries with politically independent central banks and a clear primary objective of price stability, such as Germany, had much lower inflation rates than countries in which central banks were obliged to follow politicians’ instructions and were additionally called upon to pursue fiscal and economic policy goals. This is one of the reasons why the Bundesbank, with its culture of stability, was chosen as a founding model for the Eurosystem.

An independent central bank is necessary for stable prices, but more than that is needed. Price stability is also jeopardised by unsound public finances. If public finances get out of hand, the central bank can come under overwhelming pressure to jump to fiscal policy’s rescue and, in so doing, can undermine its primary objective of price stability.

This lesson is not just derived from theoretical models, it has been evidenced time and time again in the past. A particularly good example from history is the Latin monetary union comprising Italy, France, Belgium, Switzerland and Greece. Even before the treaty of union came into force, Italy’s debt exploded owing to the war with Austria. On 1 May 1866, the government took out a loan with the Banca Nazionale to finance this debt for which Italy departed from the bimetallic standard and imposed an enforced rate of exchange for its banknotes. This enforced monetary financing of war debts triggered the first severe crisis of the Latin monetary union and fuelled a permanent mistrust between the member states.

Uboat509

06-29-2012, 03:38 AM

Perhaps I am outta line (no insult intended, just genuine curiosity), but I wonder why all of the media the pressure is on the Germans? There are 27 members of the EU (~16 trillion USD combined GDP) who can make structural changes and pitch in to pay the bills? The cost of the EU seems to be much cheaper than the summed cost of the wars we have seen on the continent?

Germany is the economic powerhouse in the Eurozone. It has maintained low unemployment, low inflation, low debt to revenue ratio and it will have to provide the lion's share of any bailout or rescue funds that are paid out.

Surferbeetle

06-30-2012, 06:37 AM

Germany is the economic powerhouse in the Eurozone. It has maintained low unemployment, low inflation, low debt to revenue ratio and it will have to provide the lion's share of any bailout or rescue funds that are paid out.

Uboat,

Perhaps all 27 nations on a leaking (accumulation of debt) boat should bail out (generation of income) the boat if they want to stay afloat?

The combined GDP of the EU-27 is approximately 16 trillion USD per year while their current combined public debt is estimated at around 10.3 trillion USD. Germany's GDP is ~3.3 trillion USD/year, France's GDP is ~2.7 trillion USD/year, UK's GDP is ~2 trillion USD/year, Italy's GDP is ~1.6 trillion USD/year, Spain's GDP is ~ 1 trillion USD/year, etc.. The EU has previously offered 30 year bonds at 3.75%. Even if the total existing EU-27 debt were to be mutualized there appears to be no way to control future debt accumulation rates nor to balance or offset them with income generation rates for the entire EU-27. There are also a number of significant differences between the responsibilities and obligations of the Eurozone-17 and those of various EU-27 members which serve to further complicate things...:wry:

In contrast to the EU-27 both Switzerland and the US levy taxes across all of their cantons (26) and states (50 plus territories), and have mechanisms available to maintain some sort of fiscal and monetary balance for the whole construct. Neither Switzerland nor the US rely upon a single canton (such as Zurich) or single state (such as Texas) to primarily or exclusively fund the remaining cantons or states needs/wants/desires without any (engineering-style) controls. Neither does the international media fixate on Zurich or Texas as descriptor/proxy for the whole. Comparing the EU-27 to Switzerland or the US is probably a step too far given the way things seem to be going...

Nonetheless I am currently wondering about what the possible effects of EU-27 wide/harmonized structural changes such as retirement ages, employment policies, retirement benefits, unemployment benefits, etc. would provide in terms of stabilizing this crisis and how the associated timelines would run when compared to market timelines.

Here are some links that I looked at when thinking about this:

Eurozone, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Eurozone

European Union, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/European_Union

Multi-speed Europe, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Multi-speed_Europe

Greenspan Says Europe Like A ‘Leaking Boat’ With Holes, By Caroline Fairchild - Jun 29, 2012 4:54 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-29/greenspan-says-europe-like-a-leaking-boat-with-holes.html

Some unpleasant eurozone arithmetic, June 22, 2012 11:50 am by Gavyn Davies, FT, www.ft.com

More questions than answers after the summit, June 29, 2012 4:55 pm by Gavyn Davies, FT, www.ft.com

Understanding the European Crisis Now, Published: June 14, 2012, NYT, http://www.nytimes.com/interactive/2012/06/14/business/global/understanding-the-european-crisis.html?ref=world

Polarised prospects, May 10th 2012, 17:21 by The Economist online, http://www.economist.com/blogs/graphicdetail/2012/05/european-economy-guide

Europe government's debts: how much do they owe?, 30.06.12 Updated 06.30, The Guardian, http://m.guardian.co.uk/news/datablog/2012/feb/06/europe-government-debt?cat=news&type=article

EU successfully issued long-term bond with 30y maturity, funding loans of € 3 billion for Ireland and Portugal, Brussels, 9 January 2012, http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/12/4

How to calculate accrued interest, THURSDAY, DECEMBER 21, 2006, http://accruedint.blogspot.com/2006/12/how-to-calculate-accrued-interest.html?m=1

Europe’s Counterproductive Economic Policies Proceeding as Expected, FRIDAY, MARCH 23, 2012, Naked Capitalism, http://www.nakedcapitalism.com/2012/03/europes-counterproductive-economic-policies-proceeding-as-expected.html

ECB May Need To Buttress Bond-Market Respite Leaders Made, By Simon Kennedy and Rebecca Christie - Jun 29, 2012 5:01 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-29/leaders-grant-bond-market-respite-that-ecb-may-need-to-buttress.html

Surferbeetle

07-04-2012, 07:04 PM

Der Teufel steckt im Kleingedruckten, Eine Kolumne von Wolfgang Mnchau, 04.07.2012, Der Spiegel, http://www.spiegel.de/wirtschaft/wolfgang-muenchau-merkel-hat-auf-dem-euro-gipfel-nichts-aufgegeben-a-842488.html

Montis Triumph, Merkels Demtigung? Von wegen! Auf dem EU-Gipfel am Freitag hat die Kanzlerin in Wahrheit keine entscheidenden Positionen preisgegeben. Was auch bedeutet: Die Wahrscheinlichkeit, dass die Whrungsunion zerbricht, ist weiter gestiegen.

France Raises Taxes On Rich, Companies To Narrow Budget Gap, By Gregory Viscusi, Helene Fouquet and Mark Deen - Jul 4, 2012 5:19 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-07-04/france-raises-taxes-on-wealthy-companies-to-narrow-budget-gap.html

Frances two-week-old Socialist government unveiled 7.2 billion euros ($9 billion) of tax increases to meet deficit-reduction goals and avoid bond-market punishment.

The 2012 measures, approved at a Cabinet meeting today, presage even larger tax increases and spending cuts next year in an economy thats barely expanding.

Situation et perspectives des finances publiques 2012, Cour des Comptes, http://www.ccomptes.fr/Presse/Communiques-de-presse/Situation-et-perspectives-des-finances-publiques-2012

La France sest engage sur une trajectoire de retour lquilibre de ses comptes publics dont le respect est essentiel pour assurer sa crdibilit, la matrise de son destin et pour continuer de peser dans le concert europen. Ce redressement indispensable est exigeant mais possible. Les annes 2012 et surtout 2013 sont des annes charnires.

Pour lanne 2012, laudit dtaill men par la Cour la demande du Gouvernement montre que le respect de lobjectif de dficit public fix 4,4 % exige sans tarder des mesures correctrices, afin de compenser le risque de manque gagner sur les recettes que la Cour value ce stade dans une fourchette de 6 10 Md.

Leffort fournir en 2013 sera beaucoup plus important : dans lhypothse dune croissance de 1%, la Cour lvalue 33 Md de mesures nouvelles, qui devront tre partages entre conomies sur les dpenses et recettes nouvelles. Ces conomies ne pourront tre ralises que si toutes les administrations publiques y contribuent, ltat mais aussi la scurit sociale et les collectivits territoriales, dans le cadre dune nouvelle gouvernance densemble. Les dcisions qui devront tre prises appellent une volution en profondeur des modalits de laction publique, afin de clarifier les responsabilits et de remettre en cause les trop nombreuses dpenses publiques inefficaces.

La Cour publie chaque anne un rapport sur la situation et les perspectives des finances publiques en vue du dbat dorientation que doit tenir le Parlement. Cette anne, ce rapport inclut des dveloppements spcifiques pour rpondre la demande du Premier ministre du 18 mai 2012 dvaluer les risques pesant sur le respect des objectifs pour 2012 et de mesurer les enjeux du redressement pour les annes suivantes.

Libor affair shows bankings big conceit, By Dr. Gillian Tett, June 28, 2012 7:25 pm, FT, www.ft.com

Sometimes in life it feels sweet to say “I told you so”. This week is one such moment. Five long years ago, I first started trying to expose the darker underbelly of the Libor market, together with Financial Times colleagues such as Michael Mackenzie.

At the time, this sparked furious criticism from the British Bankers’ Association, as well as big banks such as Barclays; the word “scaremongering” was used. But now we know that, amid the blustering from the BBA, the reality was worse than we thought. As emails released by the UK Financial Services Authority show, some Barclays traders were engaged in a constant and pervasive attempt to rig the Libor market from 2006 on, with the encouragement of more senior managers. And the British bank may not have been alone.

What’s in a Number?, Donald MacKenzie on the Importance of Libor, Vol. 30 No. 18 · 25 September 2008, pages 11-12 | 4012 words, London Review of Books, http://www.lrb.co.uk/v30/n18/donald-mackenzie/whats-in-a-number

On 23 October, Donald MacKenzie writes: My article on Libor went to press just before Lehman Brothers filed for bankruptcy and governments in the US and Europe had to intervene to avert the collapse of much of the global banking system. As the article explains, Libor anchors contracts totalling about $300 trillion, the equivalent of $45,000 for every human being on the planet. It is calculated from banks’ reports of the rates of interest at which other banks are prepared to lend them money. This interbank lending has come close to drying up at each of the peaks of the credit crunch, and the failure of Lehman Brothers and the subsequent banking crisis caused it to do so almost entirely. Libor has therefore been attempting to capture conditions in what has become nearly a non-existent market.

Promises of massive infusions of government capital, and government guarantees that those who lend to banks will get their money back, seem now to have stabilised the international banking system somewhat, although no one imagines the crisis is over. One of the government’s priorities is to get banks lending to each other again, and if they succeed that will help repair the foundations of Libor. There are indeed signs that lending to banks is resuming, and Libor rates have gradually been edging downwards. On 13 October, for example, three-month US dollar Libor was 4.75 per cent; a week later it was down to 4.06 per cent.

The widespread state intervention in the banking system will, however, pose new questions, such as how to treat, when calculating Libor, those interbank loans that are guaranteed by governments. The interest rate on such loans will be lower (perhaps much lower) than loans without that guarantee, and that could affect the value of Libor considerably. For many years Libor was part of the unnoticed infrastructure of financial markets. Now, I expect, it will remain in the spotlight for some time to come.

Banker to the Bankers Knows the Numbers Are Lying, By Jonathan Weil Jun 28, 2012 4:30 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-06-28/banker-to-the-bankers-knows-the-numbers-are-lying.html

he Bank for International Settlements, which acts as a bank for the world’s central banks, should know fudged numbers when it sees them. What may come as a surprise is how openly it has been discussing the problem of bogus balance sheets at large financial companies.

“The financial sector needs to recognize losses and recapitalize,” the Basel, Switzerland-based institution said in its latest annual report, released this week. “As we have urged in previous reports, banks must adjust balance sheets to accurately reflect the value of assets.” The implication is that many banks are showing inaccurate numbers now.

BIS Annual Report 2011/2012, 24 June 2012, http://www.bis.org/publ/arpdf/ar2012e.htm

The global economy has yet to overcome the legacies of the financial crisis to achieve balanced, self-sustaining growth. In different ways, vicious cycles are hindering the transition for both the advanced and emerging market economies. After reviewing the past year's economic developments (Chapter II), the 82nd Annual Report addresses fundamental aspects of these vicious cycles: unfinished structural adjustments (Chapter III), risks in the current stances of monetary (Chapter IV) and fiscal policy (Chapter V), and the ongoing challenges of financial reform (Chapter VI). Chapter I underscores the themes and policy conclusions of the latter four chapters, and in a special section examines them in the context of problems in Europe's currency union.

Firn

07-09-2012, 12:16 PM

Uboat,

Perhaps all 27 nations on a leaking (accumulation of debt) boat should bail out (generation of income) the boat if they want to stay afloat?

The combined GDP of the EU-27 is approximately 16 trillion USD per year while their current combined public debt is estimated at around 10.3 trillion USD. Germany's GDP is ~3.3 trillion USD/year, France's GDP is ~2.7 trillion USD/year, UK's GDP is ~2 trillion USD/year, Italy's GDP is ~1.6 trillion USD/year, Spain's GDP is ~ 1 trillion USD/year, etc.. The EU has previously offered 30 year bonds at 3.75%. Even if the total existing EU-27 debt were to be mutualized there appears to be no way to control future debt accumulation rates nor to balance or offset them with income generation rates for the entire EU-27. There are also a number of significant differences between the responsibilities and obligations of the Eurozone-17 and those of various EU-27 members which serve to further complicate things...:wry:

The EU is quite a chapter on its own, with its powers very diverse from one area to the other. There is a lot of talk about "more Europe" but the healthier states seem to want quid pro quo, while the nations in crisis want the quid but hate the quo. The German-Greek conflict shows it in stark contrast.

We already discussed the issues of debt and there are some ways to handle it over the long term, from the haircut to inflation. Currently the spread makes it harder for nations like Italy to handle debt with the conventional means which increases the still remote likelyhood on unconventional ones.

To be honest I was rather shocked by the news in this article (http://www.corriere.it/economia/12_luglio_09/mutui-erogazioni-prometeia-assofin_7c6c1970-c99f-11e1-826a-3168e25ab050.shtml).

I FINANZIAMENTI - Succede la stessa cosa anche per altri settori come l'arredamento, l'elettronica, gli elettrodomestici, per cui i finanziamenti sono diminuiti sia nel 2011 (-5,8%) che nel primo trimestre 2012 (-11%). «In un contesto caratterizzato dalla perdurante incertezza derivante dalla crisi economica e finanziaria ancora irrisolta e da un clima di fiducia che resta su valori minimi - si legge nel rapporto dell'Osservatorio - le famiglie italiane hanno limitato i consumi e si sono dimostrate molto prudenti nell'accensione di nuovi finanziamenti. In particolare i consumi di beni durevoli, per l'acquisto dei quali più frequentemente si ricorre ad un finanziamento, hanno registrato una netta contrazione, mostrando una flessione in linea con quella rilevata per i flussi di credito al consumo».

It is the old story, the economy is bad and people are cutting back which makes the situation even worse. Keep in mind that Italy has little private but high public debt which makes, or would make, a stimulation of the economy difficult. Spain has also a debt problem but with high private and (formerly) low public debt. With more talk now about crescita/growth but never ending flow of "austerity", with cuts here and there and new taxes planned or confirmed combined with a bad job market it is absolutely no surprise that many people have become careful.

The mutui for houses are most likely hit that hard because it is such a big investment and painful new taxes concerning housing.

Fuchs

07-09-2012, 02:22 PM

Debt doesn't mean that much in macro as long as the creditors are domestic. The Euro area as a whole still has an accumulated trade surplus from '99 till today.
http://www.tradingeconomics.com/euro-area/balance-of-trade

Any look at Europe as if it's sick as a whole is laughable.There's no unusual problem on the whole.

Someday we will probably figure out how to tax correctly to finance the public services. To issue bonds instead of just grabbing the necessary revenue looks like a comfortable way for politicians, but it's clearly an inferior alternative.
The free capital flows to exotic countries and the international competition among labour has supposedly made it difficult to tax rigorously, but the more detailed you look at it, the more this assumption becomes implausible.

Firn

07-10-2012, 10:29 AM

ganulv

07-12-2012, 04:04 PM

From a Spanish friend of mine:

https://sphotos-a.xx.fbcdn.net/hphotos-snc7/428509_3668731231799_1609224915_n.jpg

Firn

07-13-2012, 07:50 AM

Well I have already written that in Italy you can pretty much graph the the rise of public sector employees along the north-south axis. As you can for the auto blu, the absentismo, legally blind and highschool marks. The south has just more of almost everything, not only the sun light.

The Corriere run yesterday an article about the surprising increase in productivity of a harbour in the deep South which was on the verge of a collapse. In this case la "Santa Fifa" ("holy fear") seemed to do the local economy good.

There is without any shade of doubt a vast potential for productivity which has to be unlocked. Italy needs many deep political and economical reforms and may a cultural one as well. Ideally there also would be strong deficit spending and lower taxes on the work force but we have managed to gets us into a tight bind in which escape becomes very difficult.

Surferbeetle

07-31-2012, 01:17 PM

...and make this week's ECB meeting fruitful?

Eurozone break-up would trigger £1 trillion of QE, see banks nationalised and deep recession, warns Fathom, By Philip Aldrick1:16PM BST 31 Jul 2012, The Telegraph, http://www.telegraph.co.uk/finance/financialcrisis/9441120/Eurozone-break-up-would-trigger-1-trillion-of-QE-see-banks-nationalised-and-deep-recession-warns-Fathom.html

The economy would shrink by 5.2pc in 2013 if the euro collapsed, according to Fathom Consulting – a projection that former Bank of England deputy governor Sir John Gieve described as “modest”. In 2009, the worst year of the recent recession, the economy shrank by just 4pc.

Sir John added that the Government will have prepared contingency plans “to nationalise the banking system, for example” and warned that a euro collapse would leave Britain vulnerable to an attack from the markets. Speaking about the UK at Fathom’s quarterly Monetary Policy Forum, he asked rhetorically: “If you [traders] think Europe’s going down the plughole, who’s next?”

Euro climbs, but gains seen limited before ECB, By Michael Szabo LONDON | Tue Jul 31, 2012 8:13am EDT, Reuters, http://www.reuters.com/article/2012/07/31/us-markets-forex-idUSBRE86E0JJ20120731

Investors are focused on Thursday's ECB policy meeting after bank chief Mario Draghi pledged last week to do whatever was necessary to preserve the euro. That raised expectations of a bold ECB response, a move that could boost the currency.

While the U.S. Federal Reserve is likely to hold off from adopting another bond-buying program at its two-day policy meeting that starts later in the session, some players think it might adopt such monetary stimulus in coming months. Investors will also eye Chicago PMI data for July, house prices for May and personal income and spending for June.

Firn

07-31-2012, 04:37 PM

To be honest reading the papers recently reminds me of the boy who cried wolf. In this case the wolf is ever present and certainly very dangerous, but it is a tiresome business to keep watch.

Why a country like the UK which can finance itself for basically nothing does not invest in such hard times is beyond me. It is obvious that the private sector has been fueled too much for too long and is, as basic macro predicts, enough unable to adjust itself smoothly. Those able to spend should spend - wisely for the own good. In this case the UK is more then Germany able to help others by helping itself.

A weak Euro would actually help the Eurozone quite a bit, sadly the internal "spread" will harldy be changed by external devaluation with the healthy & productive economies gaining most from it. But every bit helps, especially in the very cost-critical sectors in which the Italian and Spanish companies competed against countries with different currencies.

Surferbeetle

07-31-2012, 06:26 PM

It is curious that 'progress towards resolution' only appears to occur when the financial hobgoblins run free and terrorize all.

It's probably quite naive on my part, but I often wonder why the big five (Germany, France, UK, Spain, and Italy) can't just sit down together, develop a coherent (and lean) plan, run it through the democratic process, and just get it done. Yes, there have been nineteen official get-togethers, numerous referendums...yet here we all are, still skipping along the edge of financial armageddon.

Stone soup: the UK has some heavy duty financial expertise, Germany has it's east/west unification experience...and everybody has engineers who love to build things :wry:

Then again, who am I to say anything...my congress (the 112th in particular) still can't get it together either...:o...maybe it's all the lawyers and the decided lack of engineers in Washington? :D

davidbfpo

07-31-2012, 06:40 PM

Firn,

I will try answer your questions:
Why a country like the UK which can finance itself for basically nothing does not invest in such hard times is beyond me. It is obvious that the private sector has been fueled too much for too long and is, as basic macro predicts, enough unable to adjust itself smoothly. Those able to spend should spend - wisely for the own good. In this case the UK is more then Germany able to help others by helping itself.

The Labour government spent a large fortune on the public / state sector, adding IIRC 400k to the public payroll whilst in office and using private funding for a number of capital programmes e.g. new hospitals, called PFI (Public Finance Initiative).

The coalition for reasons that elude my level of understanding have embarked on Quantitative Easing (QE), printing electronic money which is then sold to the banks who then use the cheap cash to lend - 375billion UK Pounds to date. Even with the rate of interest being 0.5% there is little sign the banks are lending.

This may explain:http://www.bbc.co.uk/news/business-15198789

The coalition continues to press for reductions in public spending, for ideological and other reasons - especially avoiding pension payment liability. It does announce major capital projects, notably railways, all of which have long lead times and are unlikely to impact the current economy / employment rates.

Firn

08-01-2012, 06:28 PM

Firn,

I will try answer your questions:

The Labour government spent a large fortune on the public / state sector, adding IIRC 400k to the public payroll whilst in office and using private funding for a number of capital programmes e.g. new hospitals, called PFI (Public Finance Initiative).

The coalition for reasons that elude my level of understanding have embarked on Quantitative Easing (QE), printing electronic money which is then sold to the banks who then use the cheap cash to lend - 375billion UK Pounds to date. Even with the rate of interest being 0.5% there is little sign the banks are lending.

This may explain:http://www.bbc.co.uk/news/business-15198789

The coalition continues to press for reductions in public spending, for ideological and other reasons - especially avoiding pension payment liability. It does announce major capital projects, notably railways, all of which have long lead times and are unlikely to impact the current economy / employment rates.

This is a crux of the matter. There is a strong human tendency and an ingrained social/organizational imperative to do as others do around you, from following the herd in emergencies to investing into the stock market or into a country. It is just amazing how the Spanish provinces built white elephant after white elephant, be it airport or museum. As long something works and makes money people will likely buy into it, be it the private investor or the political party.

Some countries have managed to bring themselve into a very tight bind, like Italy with terrible policies, both public and private ones. The UK has had too much easy credit, possibly too much of a public sector boom with all the strings attached but it still has far more room to maneuver to a great deal thanks to that electronic printing press delivering virtual pound sterling.

It has relative high unemployment and should act on it. The big recent austerity policy is mostly about cutting into the flesh of the nation. The aim can be arguably correct but the means of getting there are terrible even in the longer term. Indeed the current crisis has been going on for an amazing amount of time with the economy going south again from a low level.

P.S: As most heavily taxed Italian I'm strongly in favoured in much more reduced Italian public sector because I know how that money gets sometimes spent even here in the more "European" north. And how Monti can call the current tax increases here and there and there again "spending review" (in neoitalian) beggars belief.

Surferbeetle

08-03-2012, 08:33 PM

Spain's Rajoy Hints Bailout a Possibility, By JONATHAN HOUSE, 3 Aug 2012,
WSJ, http://online.wsj.com/article/SB10000872396390443687504577567020462042862.html

Spanish Prime Minister Mariano Rajoy opened the door—slightly—to requesting support from the euro-zone bailout fund to help ease Spain's deepening financial crisis.

In recent days, however, Spanish officials had begun to concede in private that in the absence of a more active ECB, the government could be forced to ask for aid from the bailout fund.

Mr. Rajoy's government Friday also approved the outline of draft budget plans for 2013 and 2014 that it must submit to the European Union under new fiscal monitoring procedures. They contain more than €89 billion in spending cuts and tax increases to help the government meet its target of a budget deficit equal to 2.8% of gross domestic product in 2014, down from 8.9% in 2011.

Rajoy Will Consider Bond Buying Request to Protect Spain, By Angeline Benoit and Emma Ross-Thomas - Aug 3, 2012 11:17 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-08-03/rajoy-says-he-d-consider-bond-buying-request-to-protect-spain.html

Spain’s Prime Minister Mariano Rajoy said he would consider asking Europe’s bailout funds to buy Spanish debt if it were for the best for the country, as he called for a crisis meeting of the region’s finance chiefs.

“I will do what I always do, act in the best interest of Spaniards,” Rajoy said at a news conference in Madrid today, when asked whether he would consider making a request. He needs to see more details on what the European Central Bank is planning in terms of bond buying and non-conventional measures before taking any decision on seeking support, he said

Still, Rajoy, who declined to say whether he would apply for help at a joint press briefing with Italian Prime Mario Monti yesterday, said he needs more details before deciding whether to trigger support. The European Financial Stability Facility can buy bonds on the market if nations ask for it, and the European Stability Mechanism, the permanent successor aid fund that is awaiting final approval, will also be able to.

The Cabinet also approved a budget plan through 2014 to be submitted to the European Commission. The document details 102.1 billion euros of spending cuts and tax increases to reduce the nation’s budget gap, the third-largest in the euro zone, to 2.8 percent of GDP by 2014 from 8.9 percent last year.

Spanien will mehr als 100 Milliarden Euro einsparen, 03.08.2012, 18:54 Uhr, aktualisiert heute, 19:39 Uhr, Handelsblatt, http://www.handelsblatt.com/politik/international/neue-streichungen-spanien-will-mehr-als-100-milliarden-euro-einsparen/6961152.html

Das EU-Sorgenkind Spanien erhöht die Sparanstrengungen. Bis 2014 sollen knapp 40 Milliarden Euro mehr eingespart werden. Trotz aller Bescheidenheit: Ein Hilfegesuch an die EU will Madrid nicht ausschließen.

Die EU-Kommission hatte von Madrid die Vorlage der Haushaltspläne für 2013 und 2014 verlangt und Spanien im Gegenzug beim Abbau des Budgetdefizits ein Jahr mehr Zeit gegeben.

Die in Brüssel vorgelegten Pläne gehen davon aus, dass Spaniens Wirtschaft 2013 um 0,5 Prozent schrumpft und 2014 ein Wachstum von 1,2 Prozent erzielt. Madrid will die Neuverschuldung von 8,9 Prozent des Bruttoinlandsprodukts im Jahr 2011 bis 2014 auf 2,8 Prozent senken.

Rajoy asegura que no tiene tomada 'ninguna decisión' sobre el rescate, 3/8/2012, El Mundo, http://www.elmundo.es/elmundo/2012/08/03/espana/1343959517.html

Devuelve la pelota a Bruselas y exige conocer, antes de solicitarlo, las medidas "no convencionales" anunciadas el jueves por Draghi.

Surferbeetle

08-11-2012, 05:00 PM

European Central Bank, Monthly Bulletin, http://www.ecb.int/pub/mb/html/index.en.html/

Monthly Bulletin

With the Monthly Bulletin the ECB meets its legal requirement to publish reports on the activities of the ESCB at least every quarter (as per Article 15.1 of the Statute of the ESCB). The Bulletin is published one week after the monthly meeting in which the Governing Council of the ECB takes its monetary policy decision. It explains this decision and makes it more transparent by providing a detailed analysis of the current economic situation and risks to price stability.

Contents

The Editorial summarises the Governing Council's assessment of present data. To a large extent, the Editorial contains the same information as the Introductory Statement given at the press conference where the monetary policy decision is announced.

The part “Economic and Monetary Developments” includes information on:

The external environment of the euro area
Monetary and financial developments
Prices and costs
Output, demand and the labour market
ECB staff macroeconomic projections for the euro area (in the March and September issues)
Eurosystem staff macroeconomic projections for the euro area (in the June and December issues)
Fiscal developments (in the March, June, September and December issues)

Each Monthly Bulletin also includes articles (except for the March, June, September and December issues), euro area statistics and annexes. See article and boxes by topic.

Surferbeetle

08-12-2012, 05:13 PM

French Court Clears Adoption of European Fiscal Treaty, By DAVID JOLLY and JACK EWING, Published: August 10, 2012, NYT, http://www.nytimes.com/2012/08/11/business/global/french-court-clears-adoption-of-european-fiscal-treaty.html?src=recg

France’s highest court has ruled that the fiscal treaty European Union leaders agreed to earlier this year does not require an amendment to the French Constitution, clearing one more hurdle to adoption of the pact.

The decision leaves a German legal challenge next month as the next major obstacle to adopting the pact, which would bind euro currency union members to stricter fiscal and financial discipline in their future budgets.

French court hands Hollande victory with EU ruling, By Catherine Bremer and Daniel Flynn, Thu Aug 9, 2012 4:37pm EDT, Reuters, http://ca.reuters.com/article/topNews/idCABRE87816920120809?sp=true

France's Constitutional Council ruled on Thursday that the EU's budget responsibility pact did not require a change to the constitution, easing its path to ratification and removing a headache for Socialist President Francois Hollande.

The ruling allows Hollande's government, which had insisted it would not write a budgetary rule into the constitution, to press ahead with implementing the pact in September using a "super-law" which it can pass with its parliamentary majority.

A constitutional reform would have required a three-fifths majority of a special joint session of parliament, forcing Hollande into an embarrassing reliance on the conservative opposition and potentially delaying ratification until December.

It would have also entailed a lengthy debate on Europe which would have exposed bitter divisions in Socialist ranks, reviving painful memories of Hollande's failure in 2005 to unify the party in support of an EU Constitution, which was later rejected in a national referendum.

Many on the French left say the new pact allows Brussels to dictate national policy by allowing it to impose sanctions on countries that fail to respect a structural deficit ceiling of 0.5 percent of gross domestic product (GDP).

In its ruling, however, the Council said the treaty impinged no further on national sovereignty than existing EU budget rules, which impose deficit limits on euro zone member states.

"The Treaty of Stability, Coordination and Governance ... limits itself to repeating, and reinforcing, existing engagements," the ruling said. "There is no transfer of powers in terms of economic or budgetary policy."

The fiscal pact, signed by EU leaders in March, must be ratified by 12 countries before it can come into force in January, with the aim of calming investors concerned at heavy public debts.

Constitutional Council of the French Republic, http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/homepage.14.html

Cour De Cassation, France, http://www.eurofound.europa.eu/emire/FRANCE/SUPREMECOURT-FR.htm

It’s hotter in Karlsruhe than you think, Posted by Masa Serdarevic on Jul 12 17:30., FT Alphaville, http://ftalphaville.ft.com/blog/2012/07/12/1081281/its-hotter-in-karlsruhe-than-you-think/

Admittedly the words Karlsruhe and German and constitutional court lack any sex factor, but the relative lack of attention the case is getting seems a bit odd to us given what’s at stake. We’d expect the markets to be just a bit more het up about it.

So would Martin Lueck, an economist at UBS, who argues in his latest note that too many investors don’t understand the situation and are just assuming that the court will yield to the markets’/politicians’ pressure and let ratification of the ESM and fiscal compact pass:

Das ist ein schwerer Straftatbestand, NZZ, 8/12/2012, http://www.nzz.ch/aktuell/schweiz/spd-chef-wirft-schweizer-banken-organisierte-kriminalitaet-vor-1.17468607

Im Steuerstreit zwischen Deutschland und der Schweiz hat der Chef der deutschen SPD, Sigmar Gabriel, Schweizer Banken organisierte Kriminalität vorgeworfen. Den Kauf von Bankdaten verteidigte Gabriel in einer Sendung des Deutschlandfunks.

Gabriel wirft Schweizer Banken organisierte Kriminalität vor, 12.08.2012, FAZ, http://www.faz.net/aktuell/wirtschaft/steuerhinterziehung-gabriel-wirft-schweizer-banken-organisierte-kriminalitaet-vor-11853255.html

Im Streit das richtige Vorgehen gegen deutsche Steuerhinterzieher wirft SPD-Chef Sigmar Gabriel Schweizer Banken organisierte Kriminalität vor. Wer bandenmäßig Steuern hinterziehe, könne mit zehn Jahren Haft bestraft werden, sagte Gabriel am Sonntag im Deutschlandfunk. „Das ist ein schwerer Straftatbestand. Hier reden wir über organisierte Kriminalität in Schweizer Banken in Deutschland.“

Es ärgere ihn, dass es keine Schwerpunktstaatsanwaltschaft zur Bekämpfung solcher Vergehen gebe. Die Vereinigten Staaten hätten den Schweizer Banken schlicht und einfach mit Strafverfolgung gedroht. „Warum trauen wir uns das eigentlich nicht? Oder warum übergeben wir das nicht dem Generalbundesanwalt, damit er dagegen ermittelt?
Die werden Ruck-Zuck aufhören, da bin ich ganz sicher“, sagte der SPD-Chef.

Gabriel verteidigte so auch den Ankauf von CDs mit den Daten mutmaßlicher Steuerhinterzieher durch das Land Nordrhein-Westfalen. Das sei durch die Rechtsprechung gesichert.

Fuchs

08-12-2012, 07:41 PM

It's not important what Gabriel says. Next week he'll say something very different.
The guy has no compass whatsoever and never won a public election.

Surferbeetle

08-13-2012, 03:21 AM

He may also be off-message and or out of synch depending upon one's viewpoint...:wry:

SPD vor Strategiewechsel in der Euro-Debatte, Von Holger Schmale, 06.08.2012, Berliner Zeitung, http://www.berliner-zeitung.de/finanzkrise/eurokrise-spd-vor-strategiewechsel-in-der-euro-debatte,10808234,16809790.html

Die Euro-Staaten sollen gemeinsam fr ihre Schulden geradestehen, meint SPD-Chef Gabriel. Er will Grundgesetznderung und Volksabstimmung, um Haushaltsrechte des Bundestags auf die EU zu bertragen. Die Unionsfraktion lehnt eine solche Verfassungsdiskussion ab.

_________________________________________

Dark clouds loom over summer rally, By James Mackintosh, August 9, 2012 11:27 pm, Financial Times, www.ft.com

Summers here, and investors are dancing in the Street. The equity rally has seen US shares gain more than 10 per cent since their low at the start of June, US economic data has been better than expected and eurozone worries have receded.
The past five years have conditioned many to assume the rally cannot last, as economic gloom snuffs out hope time and again. Look back before the crisis and history is almost as negative on summer rallies.

Betting on the rally continuing once the autumn rains start shows a touching faith in politicians and policy makers.

Der Ausnahmezustand Europas, Von RAINER HANK, 12.08.2012, FAZ, http://www.faz.net/aktuell/wirtschaft/schuldenkrise-der-ausnahmezustand-europas-11852316.html

Europa droht zu zerbrechen. Die Eliten sagen, jetzt msse eine politische Union her. Doch das ist nicht mehr als eine Phantasie von Dichtern. Es ist an der Zeit, Europa vor den Rettungseuropern zu retten und Alternativen stark zu machen.

Rainer Hank, http://www.faz.net/redaktion/rainer-hank-11123665.html

wurde am 24. Januar 1953 in Stuttgart geboren. In Tbingen und Fribourg (Schweiz) hat er Literaturwissenschaft, Philosophie und Katholische Theologie studiert. Promotion 1983 ber die Literatur der Wiener Moderne. Es folgen fnf Jahre beim Cusanuswerk in Bonn, einem katholischen Begabtenfrderungswerk. Parallel dazu freie Mitarbeit und Hospitanzen unter anderem bei der Sddeutschen Zeitung und der Frankfurter Allgemeinen Zeitung. Im November 1988 Eintritt in die Wirtschaftsredaktion der F.A.Z. Dort hat er ber Gewerkschaften, Verbnde und Lohnpolitik berichtet; auerdem war er fr die wchentlich erscheinende Seite Beruf und Chance zustndig. Von Mrz bis August 1997 Visiting Scholar an der Business School des MIT und am Center for European Studies der Harvard University im Rahmen eines Sabbaticals. Whrend dieser Zeit entstand die Idee zu einem Buch ber den globalen Kapitalismus: Das Ende der Gleichheit (Frankfurt 2000). Von November 1999 bis August 2001 leitete er die Wirtschaftsredaktion des Tagesspiegels (Berlin). Der Reiz, eine neue Sonntagszeitung aufzubauen, fhrte ihn zurck nach Frankfurt: als Ressortleiter Wirtschaft sowie Geld & Mehr bei der Frankfurter Allgemeinen Sonntagszeitung. Mitglied unter anderem in der Jury des Ludwig-Erhard-Preises und im Kuratorium des Max-Planck-Instituts fr Gesellschaftsordnung in Kln.

Fuchs

08-13-2012, 10:29 AM

Firn

08-13-2012, 05:29 PM

The entire opposition's position about the fiscal crisis (pro Euro bonds etc) is a miracle to me. The government is fooling around and wasting money, and the opposition proposes to stop the fooling around and step the waste up by an order of magnitude.

The amazing thing is that they're on the other side of the government than is the majority of the population. It's not populism, it's not science-driven, it's not based on old party strategies, it's simply a miracle to me.

They behave as if they were in the EU parliament and their constituents weren't Germans, but South Europeans.

To be honest the SPD, Greens and Linke (well this one not so much) surprise me. Of course there are political games to be played but certainly even among their voters the great majority should be against their latest plans. Likely they think that somehow voters are still to be gained that way, but I have a hard time to believe in it.

The most likely explanation may be rather simple. They are so desperate to score some political points, to attack the government and to sharpen their political profile that they are doing something stupid to do something at all.

(The "Quarto Reich" headline by Berlusconis Giornale is, in my Italian mind at least, a clear attack on Monti, mixed with some dislike on how our Silvio was treated by the foreign, in this case German press. In this case Monti was painted to be a minion of Angela. Maybe she is planning an new Repubblica di Salo' :eek:)

In general I would greatly welcome a couple of billion to reduce our public debt. Dear Finns, Germans, Austrian, Dutch & Co please do support our republic in those hard time. We know from our gigantic internal Lira and Euro flow to the mezzogiorno that it can change nothing in the long term and even make it worse but offers are always welcome. :D

P.S: La Guardia di Finanza has registered an ~80% increase in tax evasion at the Italian-Swiss border (http://it.ibtimes.com/articles/34607/20120813/evasione-capitali-estero-svizzera-fuga.htm)

La Guardia di Finanza ha registrato un aumento del 78% rispetto all'estate 2011 di evasioni di capitale. Fino a luglio sono stati sequestrati alle frontiere oltre 41 milioni di euro, 88 kg di oro e 570 kg di argento. Gli stratagemmi per nascondere le banconote o i preziosi sono dei più fantasiosi, dalla biancheria intima alle fodere delle giacche. Un'imprenditrice cinese ha nascosto 100mila euro negli assorbenti ed un italiano cercava di portare 122mila euro in Etiopia infilati nel doppiofondo del trolley. A Ponte Chiasso un cinquantenne varesino, titolare di un negozio di alimentari in viaggio con la figlia, tentava di portare via 50 chili d'oro nel doppiofondo di uno dei sedili dell'auto. Il caso più eclatante è stato registrato a Chiasso sulla frontiera svizzera: l'uomo aveva nascosto nel doppiofondo del pavimento della macchina 100mila euro, dopo il sequestro si è ripresentato nuovamente alla frontiera con 26mila euro nascosti, anche questi sequestrati.

No wonder that the Swiss national bank has to print Franken like crazy to keep the exchange below the red line.

Fuchs

08-13-2012, 07:26 PM

To be honest the SPD, Greens and Linke (well this one not so much) surprise me. Of course there are political games to be played but certainly even among their voters the great majority should be against their latest plans. Likely they think that somehow voters are still to be gained that way, but I have a hard time to believe in it.

The most likely explanation may be rather simple. They are so desperate to score some political points, to attack the government and to sharpen their political profile that they are doing something stupid to do something at all.

Another interpretation would be that Gabriel probably wants to warm up Schrder's recipe for getting into power; cozy up with big business. I hope we won't learn whether he copies Schrder's approach to governing, too; backstab the lower class.

Surferbeetle

08-14-2012, 01:09 AM

Germany’s judgment day, By Quentin Peel, August 7, 2012 6:01 pm, Financial Times, www.ft.com

He [Christian Calliess of Berlin’s Free University] and other legal experts believe the court may use this opportunity to suggest a national referendum is held before further powers, such as budget sovereignty, are transferred to EU institutions.

Until now, the idea of such a referendum has been anathema to the political establishment. The fear has been that it would undermine parliamentary democracy, as the Nazis did in the 1930s. The same dark history shaped the creation of the constitutional court. “After the dictatorship of the Third Reich, the mothers and fathers of the Grundgesetz had to think about dealing with a situation where a majority might abuse fundamental human rights,” says Christine Hohmann-Dennhardt, a former member of the court, now on the board of German carmaker Daimler. “They decided that we needed an independent judicial authority which can have the last word to clarify such questions.”

Karlsruhe has a history of defending the rights of the individual – for example, to data protection or a minimum standard of living. “They give a voice to those parts of the population that don’t have an influence,” says Prof von Bogdandy. “It is largely successful. The court enjoys very high public reputation.”

About Italian National Institute of Statistics, http://www.istat.it/en/about-istat

The Italian National Institute of Statistics is a public research organisation. It has been present in Italy since 1926, and is the main producer of official statistics in the service of citizens and policy-makers. It operates in complete independence and continuous interaction with the academic and scientific communities.

Structure and competitiveness of industrial and services enterprises, Istat, http://www.istat.it/en/archive/5670

In 2008, enterprises in industrial and services sectors were 4,434,823. The persons employed were about 17.3 million people, of which 11.6 million employees, and the value added realized was around 714 billion euros. As regards the main economic indicators, the value added per employee was equal to 41.3 thousand euros, personnel costs per employee was equal to 32.9 thousand euros and the share of the profit on the value added was equal to 27.0 percent.

Swiss central bank keeps critics at bay, By James Shotter in Frankfurt, August 13, 2012 6:40 pm, Financial Times, www.ft.com

Last week, the central bank revealed that its foreign exchange reserves soared by more than 10 per cent in July to SFr406bn (€338bn) – up from SFr365bn the month before – as it again intervened heavily to keep the franc from breaching its target of SFr1.20 per euro.

Yet despite the SNB’s recent adventures, the news elicited barely a murmur from Switzerland’s political class.

The most immediate reason for the muted reaction is that the SNB is not currently making losses. Indeed, in the first half of this year it made profits of SFr6.5bn.

Swiss politicians are sensitive to their central bank’s profitability because Switzerland’s 26 cantons are its main shareholders. For the smaller cantons in particular, the SNB’s dividends have been an important source of funds.

The possibility of the SNB taking a loss on its mounting euro holdings, Ms Fetz suggests, is the lesser of two evils. “That is a risk you have to accept. The damage caused by not having a floor would be considerably higher.”

From the comments section on the above article...:wry:

Matthias - With all this money, the SNB could start its own little ESM. When the Europeans are not able to bail out Spain, why should the SNB not do it? A few month down the road and the SNB's reserves will hit a 1000 bn SFr. This would be enough to bail out Spain and Italy together. Certainly, Spain and Italy would be willing to discuss the interest rate with the Swiss when the SNB is buyng a 100% of their government bonds.

davidbfpo

08-14-2012, 07:31 AM

Steve,

What a brilliant prospect a non-EU national bank, the SNB, being in a position to bail out Italy and Spain! Using the Swiss Franc too.

The "Gnomes of Zurich" return:wry::http://en.wikipedia.org/wiki/Gnomes_of_Z%C3%BCrich

What conditions could be set by the SNB might be interesting.

Surferbeetle

08-15-2012, 03:33 AM

What conditions could be set by the SNB might be interesting.

Hey David,

Having both a plan A and a plan B are probably a good idea...:wry:

...speaking of which...:eek:

The Merkel memorandum, Aug 11th 2012 | from the print edition, The Economist, http://www.economist.com/node/21560252

ANGELA MERKEL, the German chancellor—and also, in effect, the euro area’s boss—has always insisted that she wants to preserve the euro area in its current form. But as the euro crisis intensifies and the potential bills for Germany mount, she would be imprudent not to be considering a Plan B. Drafted in utmost secrecy by a few trusted officials for the chancellor’s eyes only, this is what the memorandum outlining a contingency plan might say.

davidbfpo

08-15-2012, 07:54 AM

Convert the Euro to the Swiss France. Let the Swiss run the ECB, OK quite a Germanic influence still.

Firn

08-17-2012, 03:02 PM

Finland preparing Euro break-up (http://www.guardian.co.uk/business/2012/aug/17/eurozone-crisis-live-finland-preparing-euro-break-up)

It seems that the Finns see the survival of the Euro as a currency of the whole current Eurozone rather unlikely. The Finns are not among the "virtous Germanic" part of Eurozone, and have certainly nothing to do with the Swedish :D, but the share rather similar financial values as a public entity. [I have a couple of Finnish friends, what a great land for a naturalist, swimmer and hunter. I also adore the Sauna]

In any case so far one could make a lot of good money in the last months by good investment. I went in for the long term but as the short term went so well I sold part of the last investments in European stocks. One American one also became liquid. Overall I have to confess that I do like the stock market of the last five years. Big swings can mean big gains and while in general I could have done, as always, better but one has to be greedy only at the right time and I have problems to do so.

Said that one never knows what the future brings - I could be the stupid guy in only a matter of weeks. :o

jmm99

08-17-2012, 07:12 PM

Tuomioja tells British newspaper Finland is making contingency plans for euro break-up (http://www.hs.fi/english/article/Tuomioja+tells+British+newspaper+Finland+is+making +contingency+plans+for+euro+break-up/1329104632231):

Finland’s Minister for Foreign Affairs Erkki Tuomioja (SDP) has said in an interview with the British newspaper The Daily Telegraph that Finland is prepared for a possible breakup of the common European currency, the euro.

"We have to face openly the possibility of a euro-break up, It is not something that anybody - even the True Finns - is advocating in Finland, let alone the government. But we have to be prepared", the Foreign Minister said.

Finnish policy toward the euro has been under close international scrutiny.

Tuomioja said that Finnish officials have a plan ready in case the euro breaks up.

"This is what people are thinking about everywhere. But there is a consensus that a eurozone break-up would cost more in the short-run or medium-run than managing the crisis."

Tuomioja also said that a breakup of the euro would not mean the end of the European Union, and that it might ultimately make the EU function better.

Finland has made news recently over its severe policy toward the debt crisis. Finland is the only eurozone country to have demanded - and received - guarantees from Greece and Spain for its share of the bailout loans for those countries.

Meanwhile, Miapetra Kumpula-Natri (SDP), the chair of the Grand Committee of the Finnish Parliament, confirmed to the newspaper that the number of rescue packages is coming to an end.

"There is a feeling on the street that there has to be a limit. I can’t say whether it is 10 per cent of GDP, or what. It’s not written. But it is obvious that a small country can’t help big countries eternally", she says.

About its domestic politics - an op-ed, Finland will not voluntarily leave the euro (http://www.hs.fi/english/article/Finland+will+not+voluntarily+leave+the+euro/1329104616330).

Terveiset

Mikko

Firn

08-18-2012, 04:29 PM

As I have written before I don't think that the Euro will go away. So far it is far more likely that one, perhaps two smaller countries will leave the Eurozone. It is rather obvious that a responsible state does prepare for such eventualities.

BTW: I enjoyed the blog of "Why nations fail" (http://whynationsfail.com/) recently a lot and will likely buy the book soon. On Amazon two highly-rated reviews do address some of the issues I have encountered about their arguments, but the central idea is highly interesting. It has influenced my thinking about a country like Greece (or Suomi) quite strongly in the last days. In short so far not a personal Clauswitz or Ben Graham moment, but a great start.

Surferbeetle

08-19-2012, 04:04 PM

The systemic and nonsystemic variables of the risk equation for the Euro appear to add up to semi-favorable conditions to me at this point in time. Although post WWII summer equity rally's have historically not lasted the summer (~'78, '80, '86, '95), and the upcoming calendar is challenging (Aug 24 - Frau Dr. M & Mr Samaras Meeting and Greek Bond Payment due same week, Sept 6 - Monthly ECB Policy Meeting, Sept 12 - Karlsruhe Court Decision and Dutch Elections, Sept 14 Eurozone Finance Ministers Meeting, Oct 12 - significant Spanish Bond Payment due, etc, etc) I am sufficiently optimistic enough to still be in the game with small positions in individual stocks (to which i add to as they continually break new lows :rolleyes: ).

We will see what happens... :wry:

Euro-Zone wappnet sich fr Grexit, 18.08.2012, 17:38 Uhr, Handelsblatt, http://www.handelsblatt.com/politik/international/krisenplaene-euro-zone-wappnet-sich-fuer-grexit-seite-all/7017530-all.html

Auch Schuble wies die Euro-Skeptiker in die Schranken. "Wenn der Euro nicht zusammenbleibt, zahlen wir den hchsten Preis. Deswegen: Diejenigen, die so ein Haufen dummes Zeug reden, wissen nicht, wovon sie reden", sagte Schuble in Berlin.

Sovereign Debt Payment For Selected European Countries, By Wendy Soong - Jan 3, 2012 7:45 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-01-03/sovereign-debt-payment-for-selected-european-countries-table-.html

Eurozone shuttle diplomacy to pick up pace before critical month, By Andreas Rinke and Harry Papachristou, BERLIN/ATHENS | Thu Aug 16, 2012 1:43pm EDT, Reuters, http://www.reuters.com/article/2012/08/16/us-eurozone-diplomacy-idUSBRE87F0CA20120816

EUR/USD - Erholung mit Potential?, 17.08.2012 08:58, Finanzen.ch, http://www.finanzen.ch/nachrichten/devisen/EUR-USD---Erholung-mit-Potential-185946

Italiens Banken stark auf die EZB angewiesen, Freitag 17.8.2012, NZZ, http://www.nzz.ch/finanzen/uebersicht/boerse_und_maerkte/italiens-banken-stark-auf-die-ezb-angewiesen-1.17488824

Bankenprsident kritisiert die Sparkassen, 14.08.2012, 10:45 Uhr, Handelsblatt, http://www.handelsblatt.com/unternehmen/banken/andreas-schmitz-bankenpraesident-kritisiert-die-sparkassen/6994058.html

Unholy mess, Spain’s troubled savings banks edge towards their day of reckoning, May 27th 2010 | MADRID | from the print edition, The Economist, http://www.economist.com/node/16231412

Get ready for more Grexit speculation, Aug. 17, 2012, 5:38 a.m. EDT, By William L. Watts, MarketWatch, http://www.marketwatch.com/story/get-ready-for-more-grexit-speculation-2012-08-17

Dark clouds loom over summer rally, By James Mackintosh, August 9, 2012 11:27 pm, Financial Times, www.ft.com

Firn

08-20-2012, 01:25 PM

The Corriere della Sera gave good insight into on of the dark spots of the Italian economy, the very low % of employed. In fact only a bit over a third of the Italian population is - legally - employed. Even if we account for the "black" labour this is a very low level compared to other Eurozone countries. Germany for example has IIRC almost 1 in 2 employed, with only a slightly older population.

While the numbers of the unemployed generally captured the headlines this article, which is not available online, shows how much of the human potential of Italy has not been tapped. Especially the women are far less present in the labour market. (It is difficult to explain this due to the traditional wealth in children for which the mamma' had to care, as the fertility has been very low for many many years).

In short the relative low "unemployment" of Italy compared to a nation like Spain has to do with the specific circumstances of the country and the resulting black areas for the usual catchy statistics.

---

@Surferbeetle: I have recently sold quite a bit of stocks as the performance of many was just a bit too good, considering the current situation. It gives me enough liquidity to react to greater pessimism while the high % of stocks of my overall portfolio - not my portafoglio - should possibly continue to give high dividends and good long-term performance. Said that I have lost on paper almost 20% on the ETF on the European financial sector. Timing has been critical in this context, for example financial stock like Allianz have risen almost as much.

Surferbeetle

08-21-2012, 03:39 AM

Firn,

End of the day, the remaining brain-cell is toast...:wry:

The world of finance is always an interesting place. Continuing to dollar cost average into low cost index funds since one can only count on oneself for heavy lifting/retirement. ETF's are ok, but for me, individual stocks are truly where it's at for the 'small beer fun stuff'. The 1st quarter LTRO allowed me to surf a number of lows to highs and make my numbers (+7% cash out) for the entire year while post LTRO conditions have been a bit rough (-6% paper loss to date). Nonetheless, this has been a great year for more hands on learning regarding the business models, supply chains, value chains, networks, regulatory frameworks, business ratios, and micro & macro economics of the euro finance sector.

My investment & trading thesis for the remaining portion of this year is that Frau Dr. M and company will find a way to approach an acceptable pareto optimum regarding conditionality and the dicke Bertha. The path will not be painless. Let's also leave some room for skepticism however, with Jeremy Grantham's 2nd Qtr Letter being a good place to start...http://www.gmo.com/websitecontent/GMOQ2Letter.pdf

The economic environment seems to be stuck in a rather unpleasant perpetual loop. Greece is always about to default; the latest bailout is always about to save the day and yet never seems to; China is always about to collapse but instead teases us by inching down; and I swear the Financial Times is beginning to recycle its reports! In the U.S., the fiscal cliff looms along with debt limits and the usual election uncertainties. The dysfunctional U.S. Congress continues for the time being in its intractable ways. The stock market rises and falls and rises and falls again. It is getting difficult to find anything new to say at client meetings. I, for one, wish that the world would get on with whatever is coming next.

Haven't forgotten the priceless lessons of Iraq either...above ground, moving & breathing is always a win...;)

Surferbeetle

09-02-2012, 04:20 PM

Haldane calls for rethink of Basel III, By Brooke Masters, Chief Regulation Correspondent, August 31, 2012 5:10 pm, Financial Times, www.ft.com

Mr Haldane acknowledged that adopting his ideas “would require an about-turn from the regulatory community from the path followed for the better part of the past 50 years”, but he likened the situation to trying to catch a Frisbee. “To ask today’s regulators to save us from tomorrow’s crisis using yesterday’s toolbox is to ask a border collie to catch a Frisbee by first applying Newton’s law of gravity,” he said.

Dave Matthews Band - Mercy, http://www.youtube.com/watch?v=Kww33eLc6Cs

Surferbeetle

09-06-2012, 01:08 PM

Eurozone live: Draghi Day, September 6, 2012 7:51 am by Tom Burgis, Financial Times, www.ft.com

13.53 Draghi is batting off questions about what right he has to declare the euro “irreversible”. Now he’s asked about the “lira-isation” of the euro, a reference to what Draghi says is a “caricature” of a “southern cabal” running the show. The vote was near-unanimous, he reminds the questioner. He also insists that the bank is acting within its mandate — which forbids it directly to fund governments directly — because the bond purchases will be on the secondary market.

13.49 Draghi says there was one dissenting view on the board. He won’t say who that was. We couldn’t possiIT WAS THE GERMANSbly guess.

13.46 All the bond purchases will be sterilised, Draghi says. Each month, the ECB will publish its holdings by country.

The ECB’s previous bond-purchase programme, the SMP, is hereby terminated.

13.44 The programme will apply to bonds of maturity between one and three years. THERE WILL BE NO CAP FOR YIELDS.

The ECB will be treated the same way as any other bond buyer.

13.43 Now Draghi turns to the details of Outright Monetary Transactions (bond-buying to the likes of you and I).

Strict and effective conditionality attached to an EFSF/ESM programme. Either a full adjustment programme or a conditional credit line.

The involvement of the IMF shall be sought, in part to monitor the programme.

The ECB will consider buying bonds from a monetary policy perspective.

A CRUCIAL POINT If the government fails to comply with the bailout terms, the ECB will stop buying its bonds.

13.41 Good progress has been made, says Draghi, but need for reform remains across Europe. “On the fiscal front, it is crucial that governments take all measures to achieve their targets.”

Surferbeetle

09-06-2012, 06:45 PM

Draghi: Do Exactly As We Say, And We'll Hand Over The Money, by Jacob Goldstein, 10:16 am, September 6, 2012, NPR - Planet Money, http://www.npr.org/blogs/money/2012/09/06/160666299/draghi-do-exactly-as-we-say-and-well-hand-over-the-money#more

Are you a eurozone country? Are you having a hard time borrowing money at a reasonable rate? Mario Draghi has a deal for you.

First, you have to admit you have a problem. You have to ask for help from the European Union and the International Monetary Fund. Then you have to do whatever they say.

Mario Draghi, President of the ECB, Vitor Constancio, Vice-President of the ECB, Frankfurt am Main, 6 September 2012, http://www.ecb.int/press/pressconf/2012/html/is120906.en.html

It is against this background that the Governing Council today decided on the modalities for undertaking Outright Monetary Transactions (OMTs) in secondary markets for sovereign bonds in the euro area. As we said a month ago, we need to be in the position to safeguard the monetary policy transmission mechanism in all countries of the euro area. We aim to preserve the singleness of our monetary policy and to ensure the proper transmission of our policy stance to the real economy throughout the area. OMTs will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro. Hence, under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area. Let me repeat what I said last month: we act strictly within our mandate to maintain price stability over the medium term; we act independently in determining monetary policy; and the euro is irreversible.

Surferbeetle

09-09-2012, 05:47 PM

The Tragedy of the European Union and How to Resolve It, George Soros, SEPTEMBER 27, 2012, The New York Review of Books, http://www.nybooks.com/articles/archives/2012/sep/27/tragedy-european-union-and-how-resolve-it/?pagination=false

I have been a fervent supporter of the European Union as the embodiment of an open society—a voluntary association of equal states that surrendered part of their sovereignty for the common good. The euro crisis is now turning the European Union into something fundamentally different. The member countries are divided into two classes—creditors and debtors—with the creditors in charge, Germany foremost among them. Under current policies debtor countries pay substantial risk premiums for financing their government debt, and this is reflected in the cost of financing in general. This has pushed the debtor countries into depression and put them at a substantial competitive disadvantage that threatens to become permanent.

The policies pursued under German leadership will likely hold the euro together for an indefinite period, but not forever. The permanent division of the European Union into creditor and debtor countries with the creditors dictating terms is politically unacceptable for many Europeans. If and when the euro eventually breaks up it will destroy the common market and the European Union. Europe will be worse off than it was when the effort to unite it began, because the breakup will leave a legacy of mutual mistrust and hostility. The later it happens, the worse the ultimate outcome. That is such a dismal prospect that it is time to consider alternatives that would have been inconceivable until recently.

In my judgment the best course of action is to persuade Germany to choose between becoming a more benevolent hegemon, or leading nation, or leaving the euro. In other words, Germany must lead or leave.

When it was only an aspiration, the European Union was what psychologists call a “phantastic object,” a desirable goal that captured many people’s imagination, including mine. I regarded it as the embodiment of an open society. There were five large states and a number of small ones and they all subscribed to the principles of democracy, individual freedom, human rights, and the rule of law. No nation or nationality was dominant. Although the Brussels bureaucracy was often accused of a “democratic deficit,” elected parliaments had to give approval of the major steps.

The process of integration was spearheaded by a small group of farsighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.

There is a close parallel between the euro crisis and the international banking crisis of 1982. Then the IMF and the international banking authorities saved the international banking system by lending just enough money to the heavily indebted countries to enable them to avoid default but at the cost of pushing them into a lasting depression. Latin America suffered a lost decade.

Today Germany is playing the same role as the IMF did then. The details differ, but the effect is the same. The creditors are in effect shifting the whole burden of adjustment onto the debtor countries and avoiding their own responsibility for the imbalances. Interestingly, the terms “center,” or “core,” and “periphery” have crept into usage almost unnoticed, although it is obviously inappropriate to describe Italy and Spain as periphery countries. In effect, however, the introduction of the euro relegated some member states to the status of less developed countries without either the European authorities or the member countries realizing it. In retrospect, that is the root cause of the euro crisis.

Imperial power can bring great benefits but it must be earned by looking after those who live under its aegis. The United States emerged as the leader of the free world after the end of World War II. The Bretton Woods system made it the first among equals, but the United States was a benevolent hegemon that earned the lasting gratitude of Europe by engaging in the Marshall Plan. That is the historic opportunity that Germany is missing by holding the heavily indebted countries to their Schuld.

It is worth recalling that the reparations payments demanded of Germany after World War I were among the factors giving rise to National Socialism. And Germany had its own Schuld reduced on three separate occasions: the Dawes Plan in 1924, the Young Plan in 1929—too late to prevent the rise of Hitler—and the London Debt Agreement in 1953.

Today Germany does not have imperial ambitions. Paradoxically, the desire to avoid dominating Europe is part of the reason why Germany has failed to rise to the occasion and behave as a benevolent hegemon. The steps taken by the ECB on September 6 constitute the minimum that is necessary to save the euro but they will also take us a step closer to a two-tier Europe. The debtor countries will have to submit to European supervision but the creditor countries will not; and the divergence in economic performance will be reinforced. The prospect of a prolonged depression and a permanent division into debtor and creditor countries is so dismal that it cannot be tolerated. What are the alternatives?

1. Establishing a more or less level playing field between debtor and creditor countries, which would mean that they would be able to refinance their government debt on more or less equal terms.

2. Aiming at nominal growth of up to 5 percent so that Europe can grow its way out of its excessive debt burden. This will necessitate a higher level of inflation than the Bundesbank is likely to countenance. It may also require a treaty change and a change in the German constitution.

By contrast, if Germany were to exit and leave the common currency in the hands of the debtor countries, the euro would fall and the accumulated debt would depreciate in line with the currency. Practically all the currently intractable problems would dissolve. The debtor countries would regain competitiveness; their debt would diminish in real terms and, with the ECB in their control, the threat of default would evaporate. Without Germany, the euro area would have no difficulty in carrying out the U-turn for which it would otherwise need Chancellor Merkel’s consent.

What can bring Germany to decide whether to stay in the euro without destroying the European Union or to allow the debtor countries to solve their problems on their own by leaving the euro?

External pressure could do it. With François Hollande as the new president, France is the obvious candidate to advocate an alternative policy for Europe. By forming a common front with Italy and Spain, France could present an economically credible and politically appealing program that would save the common market and recapture the European Union as the idealistic vision that fired people’s imagination. The common front could then present Germany with the choice: lead or leave. The objective would not be to exclude Germany, but to radically change its policy stance.

Unfortunately, France is not in a strong position to form a united front with Italy and Spain in the face of determined opposition from Germany. Chancellor Merkel is not only a strong leader but also a skilled politician who knows how to keep adversaries divided. France is particularly vulnerable because it has done less than Italy or Spain to accomplish fiscal consolidation and structural reforms. The relatively low risk premium that French government bonds currently enjoy is due almost entirely to France’s close association with Germany. Asian central banks have been buying French bonds, especially since German Bunds have started selling at negative yields. Should France ally itself too closely with Italy and Spain, it would be judged by the same yardstick and the risk premium on its bonds may rise to similar levels.

The campaign to change German attitudes will therefore have to take a very different form from the intergovernmental negotiations that are currently deciding policy. European civil society, the business community, and the general public need to mobilize and become engaged. At present, the public in many eurozone countries is distressed, confused, and angry. This finds expression in xenophobia, anti-European attitudes, and extremist political movements. The latent pro-European sentiments, which currently have no outlet, need to be aroused in order to save the European Union. Such a movement would encounter a sympathetic response in Germany, where the large majority is still pro-European but under the spell of false fiscal and monetary doctrines.

Firn

09-10-2012, 05:58 PM

Surferbeetle

09-12-2012, 05:14 AM

Crisis fuels Catalan independence push, By David Gardner in London, September 11, 2012 5:21 pm, Financial Times, www.ft.com

Catalonia no longer fits within Spain and needs to explore the option of independence, according to a leading nationalist and former head of the Catalan regional government.

“It seems our understanding of our place within Spain has changed,” Mr Pujol says. He points to two main causes: first, a fiscal system whereby Catalonia, which has a relatively rich economy the size of Portugal’s, transfers up to 9 per cent of its gross domestic product to Madrid each year; second, the 2010 decision of Spain’s constitutional court to strike down reforms approved by the Catalan and Spanish parliaments that significantly enhanced home rule.

El clamor independentista colapsa Barcelona, Javier Oms | Víctor Mondelo | Germán González | Barcelona, Actualizado martes 11/09/2012 21:40 horas, El Mundo, http://www.elmundo.es/elmundo/2012/09/11/barcelona/1347377095.html

Guerra de cifras: dos millones de asistentes para los convocantes, 1,5 para los Mossos y 600.000 para la Policía Nacional y la Guardia Civil

La masa convocada reivindica bajo el lema 'Cataluña, nuevo Estado de Europa'

Los organizadores serán recibidos por Artur Mas en los próximos dos días

Cuatro encapuchados queman banderas de España, la Unión Europea y Francia

El independentismo catalán logra una histórica exhibición de fuerza, ÀNGELS PIÑOL Barcelona 11 SEP 2012 - 23:26 CET, El Pais, http://ccaa.elpais.com/ccaa/2012/09/11/catalunya/1347375808_419590.html

Barcelona ha vivido este martes una exhibición independentista sin precedentes, pacífica y sin un solo incidente. La manifestación de la Diada reunió a centenares de miles de personas procedentes de todo Cataluña. Fue una explosión secesionista, en la que participaron gentes de todas las edades y extracción social, que recorrieron el centro de Barcelona reivindicando la independencia. Con dos millones de asistentes, según los organizadores; 1,5 millones, según la Guardia Urbana, y unas 600.000 personas, según los cálculos de EL PAÍS, a las siete de la tarde, la manifestación rompió todas las previsiones y superó numéricamente a la de 1977, que reivindicó el Estatuto, y dejó pequeña la de julio de 2010, en contra del fallo del Tribunal Constitucional que recortó varios artículos de esa norma.

Convocada por un grupo independentista, la Assemblea Nacional de Catalana (ANC), bajo el lema Cataluña, nuevo estado de Europa, la marcha, transversal y que abarcó políticamente desde Convergència a los ecosocialistas de Iniciativa (ICV-EUiA), sumó socialmente muchas sensibilidades con un denominador común: la independencia es la solución para Cataluña. Ya antes de empezar, el Paseo de Gràcia se vio desbordado, incapaz de absorber la marea humana roja, amarilla y azul, ya con senyeres o estelades (bandera independentista), ya fueran banderas o capas, que se dirigía al punto de salida. Al grito de in-inde-indepèndencia, Barcelona en realidad vivió varias manifestaciones simultáneas con cortejos en las calles paralelas al paseo.

Una marea de manifestantes ha colapsado Barcelona bajo el lema 'Cataluña, Estado de Europa', 20MINUTOS.ES / AGENCIAS. 11.09.2012, http://www.20minutos.es/noticia/1585033/0/marcha-independista/barcelona/catalunya-estado/

National Day of Catalonia, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/National_Day_of_Catalonia

Jordi Pujol i Soley, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Jordi_Pujol_i_Soley

Mariano Rajoy, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Mariano_Rajoy

A Fistful Of Euros, Posted on August 12, 2012 by Edward Hugh, The Owl Of Minerva, http://fistfulofeuros.net/afoe/the-owl-of-minerva/

Just to round the commemorations off, in the August edition of their monthly bulletin the ECB finally let out that dirty little secret than every insider in the know has already discounted. The Bank have finally accepted that the much heralded Spanish labour reform isn’t going to work. At least not as planned. As the Financial Times put it, the Spanish labour market reform approved in February was “far-reaching and comprehensive” but came too late, the ECB implied, saying it “could have proved very beneficial” in avoiding job cuts if the measure had been passed some years ago.

_______________

Basque Country (greater region), From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Basque_Country_(greater_region)

________________

Scotland, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Scotland

________________

Bavaria, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Bavaria

________________

Firn,

Property prices have been going up, up, and up in Switzerland.... store of value, medium of exchange, property rights, enduring rule of law, hmmm, looks like many people are heading back to the old school basics...:wry:

SNB Seen Targeting Bank Capital to Curb Property Boom: Mortgages, By Simone Meier and Klaus Wille - Aug 13, 2012 4:47 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-08-12/snb-seen-targeting-bank-capital-to-curb-property-boom-mortgages.html

Thomas Jordan’s fight to protect the Swiss economy is set to widen beyond currency markets and too- big-to fail risks as the central bank chairman considers how to curb the biggest real-estate boom in two decades.

Ulenspiegel

09-12-2012, 09:01 AM

@Surferbeetle: Good that somebody keeps this key thread running. I have been busy recently and have not spent much time in the net.

Something which catched my attention in the last days has been the drop in the share of equity buyers of homes in Germany and Austria mustered to finance their (IIRC first houses). The former has come from a report in the Suedeutschen Zeitung, the latter from insider sources in the sector.

The inflation fear, low rates and a relative good economic environment (yes, indeed) and perhaps the recent price hike ( the usual paradox) could all play a role. Who knows the cause(s), but if true it is an interesting development which might effect other pieces of the European economy.

More research is of course required...

From a more northern German POV - my sister is bankster in the credit department of a bank in the Hannover region:

Since 2000 it has been a very rare event for her to provide a typical German credit financing, i.e. people have 25% own money and get 75% as credit. It was quite common during the last decade that customers only wanted around 30% credit, the rest was provided by other family members. So no real surprise for me that this developement continous at even lower level in the current situation.

Living in Austria, I know from friends that it has been quite common for years that Italians bought flats in some Austrian cities, esp. Salzburg. Again higher money influx simply led to an additional increase.

You can add, that the last two years many objects were bought by Austrian and German insurance companies, this lead to increased prices (>5% p.a.) in my home town Graz, that's a lot for Austria.

Common for Germany and Austria was that there was no real estate bubble, this may change in some cities but generally real estate is still considered worth the money by "professional" investors - I have a different opinion :-).

davidbfpo

09-12-2012, 12:35 PM

This BBC News report provides some context on the Catalan issue:http://www.bbc.co.uk/news/world-africa-19566838

Surferbeetle

09-12-2012, 02:19 PM

Ulenspiegel,

Comparing and contrasting typical German mortgage financing with US financing is pretty interesting, in particular with the not so distant NINJA (no in come, job, assets) mortgage history in the US. There seem to be lessons learned from this when one considers Basel III's strict capital requirements for banks...and the implementation fight and associated timetable is a story in and of itself.

David,

It looks like the negotiations regarding a greater say, or even the maximalist position of full autonomy, have been energized by the higher level EU machinations of late. It should go without saying, however, that using the mob to strengthen one's bargaining position is a dangerous route to take.

_________________

Antrge auf Erlass einer einstweiligen Anordnung zur Verhinderung der
Ratifikation von ESM-Vertrag und Fiskalpakt berwiegend erfolglos, Bundesverfassungsgericht - Pressestelle -

Pressemitteilung Nr. 67/2012 vom 12. September 2012
Urteil vom 12. September 2012

http://www.bundesverfassungsgericht.de/pressemitteilungen/bvg12-067.html

Das Bundesverfassungsgericht hat heute sein Urteil ber mehrere Antrge
auf Erlass einer einstweiligen Anordnung verkndet. Die Antrge sind vor
allem darauf gerichtet, dem Bundesprsidenten bis zur Entscheidung ber
die jeweilige Hauptsache zu untersagen, die am 29. Juni 2012 von
Bundestag und Bundesrat beschlossenen Gesetze auszufertigen und damit
die Voraussetzung fr die Ratifikation der mit ihnen gebilligten
vlkerrechtlichen Vertrge - des Vertrages zur Einrichtung des
Europischen Stabilittsmechanismus (ESM-Vertrag) und des Vertrages ber
Stabilitt, Koordinierung und Steuerung in der Wirtschafts- und
Whrungsunion (sog. Fiskalvertrag) - zu schaffen.

ber den Sachverhalt informiert die Pressemitteilung Nr. 47/2012 vom 2.
Juli 2012. Sie kann auf der Homepage des Bundesverfassungsgerichts
eingesehen werden.

Der Zweite Senat des Bundesverfassungsgerichts hat die Antrge mit der
Magabe abgelehnt, dass eine Ratifizierung des ESM-Vertrages nur
zulssig ist, wenn vlkerrechtlich sichergestellt wird, dass
1. durch die in Art. 8 Abs. 5 Satz 1 des ESM-Vertrages (ESMV) geregelte
Haftungsbeschrnkung smtliche Zahlungsverpflichtungen der
Bundesrepublik Deutschland aus diesem Vertrag der Hhe nach auf ihren
Anteil am genehmigten Stammkapital des ESM (190.024.800.000 Euro)
begrenzt sind und keine Vorschrift dieses Vertrages so ausgelegt werden
darf, dass fr die Bundesrepublik Deutschland ohne Zustimmung des
deutschen Vertreters in den Gremien des ESM hhere
Zahlungsverpflichtungen begrndet werden,
2. die Regelungen des ESM-Vertrages ber die Unverletzlichkeit der
Unterlagen des ESM (Art. 32 Abs. 5, Art. 35 Abs. 1 ESMV) und die
berufliche Schweigepflicht aller fr den ESM ttigen Personen (Art. 34
ESMV) einer umfassenden Unterrichtung des Bundestages und des
Bundesrates nicht entgegenstehen.

Die Bundesrepublik Deutschland muss zum Ausdruck bringen, dass sie an
den ESM-Vertrag insgesamt nicht gebunden sein will, falls sich die von
ihr geltend zu machenden Vorbehalte als unwirksam erweisen sollten.

Ulenspiegel

09-12-2012, 06:19 PM

I was told by friends who lived in the USA for many years that in the States it is considered a good thing if you have a credit history; in Austria and Germany it is much better if you do not have one: Consumer credit or maxing out your credit card means for a German banker that you are not able to save, result is you end in a high risc group and pay higher interst rates for your mortgage. :-)

Firn

09-12-2012, 06:44 PM

From a more northern German POV - my sister is bankster in the credit department of a bank in the Hannover region:

Since 2000 it has been a very rare event for her to provide a typical German credit financing, i.e. people have 25% own money and get 75% as credit. It was quite common during the last decade that customers only wanted around 30% credit, the rest was provided by other family members. So no real surprise for me that this developement continous at even lower level in the current situation.

Living in Austria, I know from friends that it has been quite common for years that Italians bought flats in some Austrian cities, esp. Salzburg. Again higher money influx simply led to an additional increase.

You can add, that the last two years many objects were bought by Austrian and German insurance companies, this lead to increased prices (>5% p.a.) in my home town Graz, that's a lot for Austria.

Common for Germany and Austria was that there was no real estate bubble, this may change in some cities but generally real estate is still considered worth the money by "professional" investors - I have a different opinion :-).

While I do strongly agree with the second part of your post I think I did not make my point clear about the equity ratio. I read a short notice in the Suedeutschen on which this recent (http://www.sueddeutsche.de/geld/kaufrausch-bei-immobilien-das-bisschen-risiko-1.1465337)
article seems to be based and it did fit my perception about a recent development in parts of Switzerland, Germany and Austria. A shallow googling seemed to strenghen this view. Basically there seems to be a run on "safe values" like houses in which an increasing amount of persons participate with little equity.

Some attractive areas have, has you have noted, indeed the problem that much non-local money flows into housing. Examples in Italy are the for example many villages in the Dolomites, creating a bad ratio between income and housing for the locals. The recent price declines seems strongly correlated with the redirection of the flow of legal or black money into similar objects in safer and more discrete locations. The infamous tax raid (http://www.telegraph.co.uk/finance/financialcrisis/8995142/Italian-ski-resort-lays-bare-tax-evasion.html) in Cortina d'Anpez is maybe a good symbol of the increasing focus on tax evasion and the strong tax increases in an already very heavily taxed country.

All in all it is not best of signs if something seems to become such a safe bet that considerable risk is taken by two sides to make it.

Ulenspiegel

09-13-2012, 05:09 AM

While I do strongly agree with the second part of your post I think I did not make my point clear about the equity ratio. I read a short notice in the Suedeutschen on which this recent (http://www.sueddeutsche.de/geld/kaufrausch-bei-immobilien-das-bisschen-risiko-1.1465337)
article seems to be based and it did fit my perception about a recent development in parts of Switzerland, Germany and Austria. A shallow googling seemed to strenghen this view. Basically there seems to be a run on "safe values" like houses in which an increasing amount of persons participate with little equity.

Some attractive areas have, has you have noted, indeed the problem that much non-local money flows into housing. Examples in Italy are the for example many villages in the Dolomites, creating a bad ratio between income and housing for the locals. The recent price declines seems strongly correlated with the redirection of the flow of legal or black money into similar objects in safer and more discrete locations. The infamous tax raid (http://www.telegraph.co.uk/finance/financialcrisis/8995142/Italian-ski-resort-lays-bare-tax-evasion.html) in Cortina d'Anpez is maybe a good symbol of the increasing focus on tax evasion and the strong tax increases in an already very heavily taxed country.

All in all it is not best of signs if something seems to become such a safe bet that considerable risk is taken by two sides to make it.

OK, there are different aspects:

1) Switzerland is in a completely different position than Germany and Austria, real estate there is even with Swiss income extremly expensive in the whole country. They play in a different league.

2) The citizens of some German cities like Munich, Stuttgart, Hamburg, Berlin experienced the last 5 years high annual increases of real estate prices without the same increase of their income, here the situation is described correctly by the Sddeutsche. But these cities are not the avarage. Here banks are tempted to reduce the requiremets for own money. How this plays out will be seen.
Minor issues: Berlin price level in absolute numbers was much lower than the Munich level and berlin has a quite different structure of its surrounding areas, IMHO it is a little bit comparing apple and oranges.

3) Most cities shrink or fight to keep the current number of citizens (e.g. Hannover), here you need as investor good knowledge and feeling which neighbourhoods will prosper, which will stagnate, which will die, or even more tricky, which towns and villages near relatively attractive cities will survive. These B- or C-cities/towns have a very low price level and promise if correctly selected very nice ROI. Therefore, my bet is that a lot of the investments will make a loss because real estate agents working not longer on their home turf do not have these information.

Fuchs

09-13-2012, 10:10 AM

The construction of houses in Germany varies a lot. The property to build a house on is about as expensive as the house in some regions, while it's almost fro free in others (and practically for free in certain regions where it's more typical to build a house on property that you got as a gift at your marriage and the like).

Decent old houses can be cheaper than a small car in some regions - especially in rural regions with shrinking population.

The construction of a new house varies even with equal quality a lot. Rural house construction often involves a lot of own work or work done by friends or relatives. The construction costs are in such cases not much higher than the material costs and in some regions even a car mechanic with an unemployed wife can build a family house before he turns 30.

Some cities (especially Frankfurt, Munich) have a well-deserved reputation for high cost of living in general and high cost of housing in particular. Wages for work in corporations in these areas tend to be clearly above average, while many public employees need to evade into cheaper surrounding towns and villages.

Germany does not tend to have bubbles in major markets. The only bubbles I remember right now were about exaggerations in new or revived sectors that experienced at least some degree of public subsidies or other incentives.

Houses are considered as an investment, but only so for securing the standard of life after retirement. They're durable enough to carry utility from *now* to 40 years in the future, while all other wealth during retirement depends on the economic output of that time (GDP in 40 years will pay for retirement money in 40 years). The demographic change means that this may become unsatisfactory.
We do usually not plan on selling houses we once owned unless they're inherited. We don't tend to buy or build a house when we expect to move to another job at a later time.

Firn

09-13-2012, 04:58 PM

Fuchs post pretty muchs mirrors the situation in Italy. In general, based on observation and rather solid facts like the saving rate and personal debt the Italians tend to behave in a similar way when it comes to enduring/durable goods. We just manage the res publica much worse.

A big difference is the amount an Italian spends on food - then again we have good reasons for it. First it costs more in then in German stores and second it is very difficult to find another Western country in which you get such an excellent ROI on "eating out". This naturally drives demand. :D

P.S: Spending on durable goods has dropped in Italy a great deal since the depression started. The car market which is on level last seen sixty years ago is just the most visible sign. All in all it is a great time to buy a car if you have the money and need one.

Surferbeetle

09-13-2012, 05:17 PM

Gentlemen,

The Last Harvest, from cornfield to new town, by Witold Rybczynski (NYT Review at http://www.nytimes.com/2007/07/29/books/review/Green-t.html ), is a pretty interesting window into real estate in the US.

A credit history is a big deal in the US where 'easy credit' is commonly used/culturally acceptable for things such as purchasing gas, computers, washing machines, cars, houses, property, and small businesses (Credit Bureaus by Wiki, http://en.wikipedia.org/wiki/Credit_reporting_agency#United_States

Household Life Cycles and Lifestyles in the United States, REX Y. DU and WAGNER A. KAMAKURA, Journal of Marketing Research Vol. XLIII (February 2006), 121–132, http://faculty.fuqua.duke.edu/~kamakura/My%20Reprints/Lifecycles%20and%20Lifestyles.pdf

____________

Gauck unterzeichnet ESM-Gesetz und Fiskalpakt, 13.09.2012, FAZ, http://www.faz.net/aktuell/wirtschaft/schuldenkrise-gauck-unterzeichnet-esm-gesetz-und-fiskalpakt-11889456.html

Einen Tag nach der Entscheidung des Bundesverfassungsgerichts hat Bundesprsident Joachim Gauck die Gesetze zum Euro-Rettungsschirm ESM und zum Fiskalpakt unterzeichnet. Rechtliche Folgen hat das zunchst allerdings nicht.

Coalitiemeter: welke coalities zijn mogelijk?, NRC Handelsblad, http://www.nrc.nl/apps/coalitiemeter/

Kies de partijen die je wel en niet terug wil zien in de nieuwe coalitie. Je ziet dan direct welke coalities op basis van de laatste peilingen een meerderheid kunnen vormen.

De coaltiemeter probeert coalities te maken met zo min mogelijk partijen die gezamelijk een meerderheid vormen, waarbij elke partij noodzakelijk is om die meerderheid te vormen.

Schaeuble Cautions Spain Against Aid Bid in Poke at France, By Rainer Buergin and Brian Parkin - Sep 13, 2012 10:03 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-09-13/schaeuble-cautions-spain-against-aid-request-in-poke-at-france.html

German Finance Minister Wolfgang Schaeuble discouraged Spain from seeking a full international bailout, saying another request for outside aid risked a fresh round of financial-market turmoil.

“I’m not in the camp that says ‘take the money,’” Schaeuble said in an interview in Berlin today when asked about French moves to press Spanish Prime Minister Mariano Rajoy’s government to ask for more aid. Spain “would be daft” to ask for a bailout on top of the 100 billion euros ($129 billion) for its banks if it didn’t need it.

Fuchs

09-13-2012, 08:01 PM

The car market which is on level last seen sixty years ago is just the most visible sign. All in all it is a great time to buy a car if you have the money and need one.

The automotive sector is a tricky one.
Cars are not being used up to their full life expectancy in Europe.

A well-designed (not intentionally degraded by developers) new car can last for decades. Mercedes Benz E-class Taxi cabs regularly drive 300,000 km in few years without killing an critical parts such as the engine or transmission terminally.
Corrosion has been under control for two decades; the stuff that corrodes to the point of requiring a spare part or to the point of making the chassis unsafe - that's corroding by design. Some developers (even at good brands) sabotage their own design to ensure there will be demand for new cars in the future.

Cars could be durable enough for 30 years of service to a family. This may happen if the cartel of degrading the corrosion-resistance will be broken.
The consequences on the macroeconomic scale and on lifestyle as well as on the automotive sector (after market and custom upgrades could become the new big thing) would be huge. Cars could become an investment for the retirement comparable to houses.

Firn

09-18-2012, 09:54 AM

I wrote already about the lack of Italian productivity growth. Now it has been picked up as page 1 topic by the Corriere della Sera (http://www.corriere.it/economia/12_settembre_17/produttivita-salari-imprese-marro_119056d8-0087-11e2-821a-b818e71d5e27.shtml)

Dalla produttivit ai salari
Rapporto sul declino italiano: Rapporto sul declino italiano

Nella classifica delle maggiori economie mondiali il sistema nazionale scivolato all'ultimo posto

ROMA - Eravamo i primi, siamo diventati gli ultimi. Negli anni Settanta l'Italia era al primo posto per crescita della produttivit nell'industria rispetto ai principali Paesi nostri concorrenti nel mondo. Negli anni Duemila chiudiamo la classifica. Nel decennio 1970-1979 l'output per ora lavorata (valore aggiunto al costo dei fattori) del settore manifatturiero era cresciuto in Italia in media del 6,5% l'anno. Meglio del Giappone (5,4%), dell'Olanda (5,2%), della Francia e della Germania (intorno al 4%) e molto meglio dei padroni del mondo, gli Stati Uniti (2,7%), e della culla della rivoluzione industriale, il Regno Unito (2,4%). Negli anni Ottanta gli inglesi erano per balzati al primo posto (sar stata la cura Thatcher?) con una crescita della produttivit del 4,4%, l'anno mentre l'Italia era scivolata in coda, dimezzando il ritmo precedente (dal 6,5% al 3,2%). Negli anni Novanta la leadership fu conquistata dagli Stati Uniti, grazie soprattutto alle innovazioni tecnologiche e informatiche (4,3% l'anno) e l'Italia rallent ancora (2,6%). Ma nel primo decennio del Duemila, cio dopo l'introduzione dell'euro, che la produttivit nel nostro Paese precipita a un misero 0,4% in media d'anno, contro l'1,8% della Germania, il 2,5% della Francia, il 2,8% dell'Olanda, il 3% del Regno Unito. E meglio di noi ha fatto anche la Spagna (1,5%). Bastano questi dati a illustrare la centralit del problema della produttivit in Italia.

Nothing new there. Same old story and now without the option to Lira our way out. Monti has been unable, mostly due to very strong resistence to reform the labour market. Something correlated:

This graphic (page 2) (http://wko.at/statistik/eu/europa-lohnstueckkosten.pdf) shows in the average yearly unit labour costs growth in the last decade. The gap between Germany and the other big EU countries (sorry Poland) is just shockingly large, especially if you discount the estimates of 2011 and 2012. (Greece for example would have +2.5 instead of +1.5 % per year).

davidbfpo

09-19-2012, 11:21 AM

A wide ranging commentary and I liked this passage for showing the complexities:
The international press has been quick to link the unprecedented pro-independence success of the rally in Barcelona and the surge in secessionist feeling in polls in Catalonia (support for independence seems to be consistently above the 50% threshold for the first time) to the dire economic situation in Spain. Analysts have been puzzled by the fact that this arrives at the same time that the regional authorities in Barcelona, facing the impossibility of the markets financing its soaring debt (the largest both in total and in per capita terms amongst Spanish regions) - have requested a bailout from the Spanish government. Catalan nationalists argue that Catalonia has consistently been transferring a disproportionate amount of its wealth to poorer Spanish regions – the current Catalan government estimates transfers amount to 8% of regional GDP – and complain about the irony that Catalonia may now be subject to additional conditionality in order to receive Madrid’s bailout. The absence of standard official statistics about interregional transfers (deemed too politically sensitive to publish by the Spanish Government in recent years) makes the debate one of faith and a matter of choice about which figures to believe: different economists and studies come to wildly diverging, even contradictory conclusions.

Link:http://www.opendemocracy.net/jordi-vaquer/separatism-in-times-of-crisis-in-spain-search-for-future

Firn

09-19-2012, 04:09 PM

In Italy there has been also a controversial debate about the federalismo and the role of the state and the regions in general which has been fueled by recent scandals like this (http://www.unionesarda.it/Articoli/Articolo/288403) and the staggering differences in the handling of the public good. It is strange that some regions like la Lombardia are able to work better with far less expenses per capita then others.

An element of this debate has been the complex confronation between the autonomous regions/provinces and other regions with the government trying to tax as much as it can and to safe quite a bit by cutting some expense by reducing for example the number of normal provinces. Now the autonomous regions are also not created alike and have various statuti and range from the in general virtuosi northern ones - Aosta, Trentino-Southtyrol, Friuli-Venezia Giulia - to the southern Sicily and Sardinia.

In generally in the first three have put their greater means and rights to good use, although the public sector of the Vall d'Aosta seems far to big while in the latter, especially Sicily this has not been the case. The current "spending review" has put alot of pressure especially on the wealthier ones to "do their part". This has caused of course anger especially when there has been little regard to hard-won rights at least based in one case on an international treaty. Not su much pacta sunt servanda for Monti in these times of expediency. A tendency which can be seen to a good degree in the whole Eurozone with the orginal Barbarians seemingly being by far more Latin in this sense then the so-called Latins.

Finishing with o tempora o mores might be a little much. So I will just add that due to the decline of the Lega Nord and the relative small size of those autonomous regions the impact on Italy as a whole should be smaller then in Spain.

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P.S: I have slightly reduced the strong investments in stocks due to the very strong gains in the last weeks. European stocks are IMHO still more under-then overvalued but short-term gains of 10-20% are nothing to be sneezed at especially if the economy is still so weak in many areas and the dividends have been mostly payed out. I'm thus both long on them while preparing myself to use another crisis phase to get in. If he latter is not possible I might look at decent bonds. On the other hand I did something which I usually don't do, buying while I'm selling, in this case an ETF on Chinese small caps. After a good deal of information I have very little trust indeed in the level of Chinese accounting or reporting etc but even with a good margin of safety built in they seem to be attractive for the long term, but who knows what the future brings.

P.P.S: For the Italian speakers out there (http://www.corriere.it/inchieste/reportime/interviste/regione-lazio-se-scandalo-non-fosse-solo-fiorito/d7ed807c-0220-11e2-9f2e-6124d1c3f844.shtml). Love also the comment, which sadly speaks the truth.

Villa abusiva? Ma come si fa: - a costruire una villa (NB non una tettoia per polli: una villa) abusivamente? - come si fa a costruirla di fronte al mare, dove tutti (tutti!) la possono vedere? - come si fa a non accorgersi di camion, gru, operai, allacciamenti alla conrrente ecc? - come si fa a costruirla in un parco? Ma, scusate: in che paese viviamo? Comune, Provincia, regione, Vigili...: nessuno controlla ????

Surferbeetle

09-20-2012, 04:25 AM

http://www.casareal.es/ES/Paginas/home.aspx

El Rey, a los independentistas: “Lo peor ahora sería perseguir quimeras”, MÁBEL GALAZ / CARLOS E. CUÉ Madrid 19 SEP 2012 - 00:50 CET, El Pais, http://politica.elpais.com/politica/2012/09/18/actualidad/1348001906_782001.html

Durante 34 años de democracia, y con la clarísima excepción del golpe de Estado del 23-F, donde su protagonismo fue absoluto, el Rey ha evitado entrar directamente, al menos en público, en los asuntos políticos más relevantes de España. Sin embargo, y en una situación especialmente compleja de crisis económica y política, el jefe del Estado decidió ayer dar un giro a esa línea de perfil bajo y entró de lleno en el asunto más relevante y delicado de la política española, el desafío independentista en Cataluña, con una declaración en la que todo era inédito: la claridad de los mensajes, el formato —un texto en la renovada página web de la Casa del Rey— y sobre todo, el contenido.

Don Juan Carlos, cuya política de comunicación ha dado un giro total desde la crisis de imagen que sufrió con su polémico viaje a Botsuana para cazar elefantes, lanzó un mensaje clarísimo, preparado en La Zarzuela, pero autorizado expresamente por Mariano Rajoy. Y ese texto, claramente político, iba dirigido muy directamente a los independentistas catalanes, que la semana pasada protagonizaron la gran manifestación de la Diada en Barcelona. “En estas circunstancias”, escribe el Rey, “lo peor que podemos hacer es dividir fuerzas, alentar disensiones, perseguir quimeras, ahondar heridas. No son estos tiempos buenos para escudriñar en las esencias ni para debatir si son galgos o podencos quienes amenazan nuestro modelo de convivencia. Son, por el contrario, los más adecuados para la acción decidida y conjunta de la sociedad en defensa del modelo democrático y social que entre todos hemos elegido”.

Ese mensaje sobre “perseguir quimeras”, una clara referencia al independentismo, y “discutir si son galgos o podencos”, fue precisamente lo más comentado ayer en los pasillos del Congreso y en general en la política española. La decisión de emitir un mensaje tan contundente causó un enorme impacto y muchas críticas, aunque la mayoría, salvo las de los nacionalistas, llegaban en privado. Mientras en el PP había una evidente satisfacción, ya que el mensaje era sobre la necesidad de pensar en la crisis económica y olvidarse de los debates secesionistas, el PSOE mantuvo formalmente su tradicional respeto al Rey, pero sin ocultar un malestar de fondo. Muchos diputados consideraban ayer que este mensaje puede ser contraproducente en Cataluña, donde el ambiente es de gran tensión política a la espera de lo que suceda mañana en la reunión en La Moncloa entre Rajoy, que sigue sin decir una palabra sobre el asunto desde la manifestación de Barcelona, y Artur Mas, el presidente de la Generalitat.

Spanish transition to democracy, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Spanish_transition_to_democracy

MONCLOA PACTS OF 1977, http://www.eurofound.europa.eu/emire/SPAIN/MONCLOAPACTSOF1977-ES.htm

Agreements reached in October 1977 between the Spanish Government and delegates of the most representative political parties to set the basic shape of economic and social policy during political transition. They established the framework of policy on pay, employment and social security during the early years of the democratic regime. They are seen as democratic Spain's first social contract or tripartite agreement.
_______________________

Euro financials score card:

Two wins, one loss for the August - September time frame....sold on the news of Draghi's OMT and just before Karlsruhe's ruling on the ESM. One more arrow in the quiver...probably should have sold on helicopter Ben's QE3 news last Friday, but will probably wait until this Friday...Japan's printing news has not made for much of a bounce :wry:

Firn

09-20-2012, 07:02 PM

It would be quite interesting to know more about the internal transfer mechanisms in Spain. I'm quite informed about those in Italy, Germany, the UK and the USA but lack even basic information about the Spanish system. In general the topic can be quite complex, especially for regions with a high degree of autonomy. More autonomy in general means that the region has to have more ressources (read money) at its disposal to fund those additional needs in autonomous sectors like education.

Found now a little (http://www.ucl.ac.uk/spp/publications/unit-publications/64.pdf), quite an interesting read.

Fuchs

09-20-2012, 07:27 PM

AFAIK the Spanish state keeps the exact figures of the transfers a secret itself in order to avoid discussions about the transfers.

Firn

09-21-2012, 06:36 AM

My youngest brother enjoyed his Erasmus year in Spain a great deal as Andalusia is beautiful even if very hot in the summer and surprisingly cold inside in wintertime due to a frequent lack of central heating. The rent was payed in black (at least one says so in Italian) and there was an amazing number of local people, especially young people living without regular job, most even without a "regular" black one. The number of high-quality musicians was very high indeed and greatly impressed him, who is quite a talented singer and musician himself. They generally also had more time to excercise then the guy finishing his engineering degree in Munich.

The local dialect is strong and he learned it rather quickly as he lived mostly among the locals. Surprisingly, although it really shouldn't be there were a couple of stereotypes about other Spanish regions and among them the arrogant and know-it-better Catalans. It is of course amusing to observe that the world is a village in this regard both also in Italy with the terroni ( those south Italians ) and polentoni ( I love a good polenta) and the Eurozone as a whole. :D

Lewis341

09-21-2012, 12:20 PM

It is estimated that Poland's total applications for Euro 2012 added up to more than 5 percent of its gross domestic products. Many Polish corporations are now investing just enough to keep enterprises going, but they are holding off on making big-ticket investments in substructure, development or employment.

Surferbeetle

09-22-2012, 01:33 AM

Una teora de la clase poltica espaola
, CSAR MOLINAS 10 SEP 2012 - 01:34 CET, El Pais, http://politica.elpais.com/politica/2012/09/08/actualidad/1347129185_745267.html

En este artculo propongo una teora de la clase poltica espaola para argumentar la necesidad imperiosa y urgente de cambiar nuestro sistema electoral para adoptar un sistema mayoritario. La teora se refiere al comportamiento de un colectivo y, por tanto, no admite interpretaciones en trminos de comportamientos individuales. Por qu una teora? Por dos razones. En primer lugar porque una teora, si es buena, permite conectar sucesos aparentemente inconexos y explicar sucesos aparentemente inexplicables. Es decir, dar sentido a cosas que antes no lo tenan. Y, en segundo lugar, porque de una buena teora pueden extraerse predicciones tiles sobre lo que ocurrir en el futuro. Empezando por lo primero, una buena teora de la clase poltica espaola debera explicar, por lo menos, los siguientes puntos:

Cmo es posible que, tras cinco aos de iniciada la crisis, ningn partido poltico tenga un diagnstico coherente de lo que le est pasando a Espaa?

Cmo es posible que ningn partido poltico tenga una estrategia o un plan a largo plazo creble para sacar a Espaa de la crisis? Cmo es posible que la clase poltica espaola parezca genticamente incapaz de planificar?

Cmo es posible que la clase poltica espaola sea incapaz de ser ejemplar? Cmo es posible que nadie-salvo el Rey y por motivos propios- haya pedido disculpas?

Cmo es posible que la estrategia de futuro ms obvia para Espaa -la mejora de la educacin, el fomento de la innovacin, el desarrollo y el emprendimiento y el apoyo a la investigacin- sea no ya ignorada, sino masacrada con recortes por los partidos polticos mayoritarios?

__________________

A European policy outlook: the crisis and beyond, LSE, http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1564

Speaker(s): Pierre Moscovici
Chair: Peter Sutherland

Recorded on 17 September 2012 in Old Theatre, Old Building.

Pierre Moscovici will address both the policy outlook in France and the ongoing crisis management developments at the European level. Pierre Moscovici was appointed Minister of the Economy and Finance on 16 May 2012, following the election of President Franois Hollande. He has been involved in European and international affairs as well as in national politics, in particular on fiscal issues. He was first a member of the European Parliament from 1994 to 1997, and became one of its vice-presidents from 2004 to 2007. In the meantime, he was elected to France's National Assembly in 1997 (and was later re-elected in 2007 and 2012), in the constituency of Doubs in eastern France, and was appointed Minister for European Affairs in the government of Lionel Jospin from 1997 to 2002, where he was specifically involved in finalizing the Amsterdam Treaty in 1997 and negotiating the Nice Treaty in 2000. He was also involved in negotiating the European Constitutional Treaty of 2004 and was a vigorous advocate of its adoption in France. Before holding elected office, he worked for the French Socialist Party, which he joined back in 1984 as an expert on fiscal issues. Pierre Moscovici joined the Audit Court (Cour des Comptes) after graduating from the Ecole Nationale dAdministration (ENA) in 1984.

__________________

Porsche, Daimler Indicate Europes Car Crisis Spreading
By Alex Webb, Dorothee Tschampa and Tommaso Ebhardt - Sep 21, 2012 5:44 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-09-20/porsche-daimler-indicate-europe-s-car-crisis-spreading.html

Daimler AG (DAI) and Porsche AG provided evidence that the worst European car market in 17 years has started to spread to the luxury brands, mirroring a broader recession that has spilled from southern Europe to Germany.

European car sales dropped 8.5 percent in August, the steepest decline since February, the Brussels-based ACEA industry association said on Sept. 18. The group forecasts that European deliveries will hit a 17-year low in 2012. German car registrations fell 4.7 percent in August, pushing the eight- month sales figure to a 0.6 percent decline.

The regions volume carmakers, hit hardest by the European markets downward spiral, are taking even tougher measures. Peugeot agreed yesterday to sell a majority stake in its trucking unit to raise cash. Fiats volume brands are eliminating 20 percent of management jobs in Europe, according to a person familiar with the matter.

davidbfpo

09-22-2012, 08:01 PM

An article from the FT, prior to the launch of a report next week by Counterpoint, a London-based European think tank and sub-titled:
Reluctant radicals’ make up the majority of Europe’s rightwing populist voters. But there are ways to win them back

Link:http://www.ft.com/cms/s/2/667b08a6-02b6-11e2-9e53-00144feabdc0.html#axzz27C8yOh3f

It opens with:
There is a story about Europe that says we are living in a rerun of the 1930s. According to this narrative, the populist right is rising again as crisis-hit Europeans look for scapegoats. Indeed, rightwing populist parties have polled more than or near one-fifth of the vote during the crisis in countries as tranquil as Finland and Switzerland. Already the populists are poisoning political debate, by pushing mainstream parties to take far-right paranoid, xenophobic views seriously. Now they aim to graduate to government.

But perhaps we worry too much. A fascinating new report by Counterpoint, the London-based research and advisory group, provides an unhysterical analysis of rightwing populism in Europe today. Merging recent data on voting in France, Finland and the Netherlands with previous surveys from around Europe, Counterpoint identifies who is voting for these parties and why. The report helps us see what strategies the populist right will use to grow – and what strategies we can use to counter them.

Fuchs

09-22-2012, 08:18 PM

The U.S. brands of right wing extremism are something that's likely more troublesome in the long term than whatever sugar high the European right wing(s) might get from the economic troubles.
Luckily, Americans have troubles crossing the English Channel language-wise.

Another long term problem with right wing ideology stuff might stem from Russia, Belarus and the Ukraine. Nationalism and jingoism appear to be part of what fills the void left by communism in those countries. This could turn ugly sooner or later (even more so in East Asia, where the Chinese, Koreans and Japanese have some outright ridiculous nationalistic ideas).

The only area in Europe where the economic crisis could give a decisive push to nationalism is in my opinion Catalonia.

Firn

09-26-2012, 09:47 AM

Catalonia warns EU that million-strong march cannot be ignored (http://www.guardian.co.uk/world/2012/sep/13/catalonia-million-march)

We had this discussion before and for the first time I have seen numbers for this wealth transfer:

Mas has threatened to call elections if that is done in Catalonia, believing it would provoke a wave of nationalist sentiment. Catalans pay between € 12bn and € 16bn more in taxes each year to Madrid than they receive back, with the excess going to poorer regions such as Andalusia and Extremadura.

For 7.2 millions this means roughly 2000 € per capita.

"I identify with the popular outcry," he said, adding that only his responsibilities as regional prime minister had prevented him from joining the demonstrators. "Catalonia needs a state," he added. "For years we thought it could be the Spanish state."

But just as northern Europe was getting fed up with the south, and vice versa, so Catalonia and the rest of Spain were now fed up with one another, Mas said.

He implied that one way for Rajoy to dampen the surge in separatist feeling would be to agree to a change in funding, allowing Spain's wealthiest region to hold on to more of the tax it generates.

Catalonia wants to be able to collect its own taxes and send a share to Madrid, rather than the other way around. That would make it different from most of Spain's other 16 regional government, but similar to the northern Basque country.

Mas will see Rajoy next week to discuss what he called an issue of "fiscal sovereignty". Popular outrage at Catalan money going elsewhere amid health and education cuts was fuelling the thirst for independence, he suggested.

Italy has very distinct regions with greatly differing languages and dialects but nothing like this heavy-weight.

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The Shiller P/E or P/E 10 is rather low for most European countries with some exceptions like Germany, where stock prices have been resisted and current PE is relative low due to strong earnings. The Dividend yield is high and for rougly 3 years now superior to the bond yields, for the first time in almost 50 years. The ROE is in general good despite some relative poor earnings. In this case the Eurozone crisis has been good for investors has it has enabled us to buy a seemingly good prices for quite some periods. While I'm firmly long with a roughly 65% in equity, nominally with good capital gains I have sold quite a bit in the recent weeks. Sadly yesterday I was not able to do so, but who knows where and when...

Considering that I'm a net saver and should remain so for a couple of years those low valuations are positive. Even more so is volative nature of the stock market which allows one to buy cheap and sell some high if one wants to. Certainly Mr. Market has been very helpful lately, giving in my opion sometimes a good margin of safety. I just hope that by generally sticking to my sweet spots and rules I did not comit too many blunders. Recounting the ones made in the last 6 months is already quite a bit painful :wry:

Instead of thinking of the current crisis why not enjoy some of the best qualities of good old Europe? Schubert, Trio op. 100 - Andante con moto (http://www.youtube.com/watch?v=e52IMaE-3As).

P.S: I can not resist to write that accroding to a study presented in the Corriere della Sera the Italian savers got slightly less the half of the overall yield of their investments. More then 50% went to "helpers" as Buffet calls them, in very costly fees. This is nothing but shocking and a good reminder why I have pushed hard to get the personal as low as possible. Low-cost index funds (ETFs etc) are part of this package. Sadly selling expensive products can be a good deal of the bank who enables the helpers to get enough money to help the bank to help the saver paying them in generally far too much for the performance they offer.

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Fuchs

09-26-2012, 11:52 AM

Catalans pay between € 12bn and € 16bn more in taxes each year to Madrid than they receive back, with the excess going to poorer regions such as Andalusia and Extremadura.

This does not fit together. Lots of central state expenses don't go to regions, such as military, border control etc.

Besides; all those figures that float around are unofficial, unconfirmed.

Firn

09-26-2012, 12:43 PM

This does not fit together. Lots of central state expenses don't go to regions, such as military, border control etc.

Besides; all those figures that float around are unofficial, unconfirmed.

Well spotted - add another one to those blunders. Thinking more does sometimes help. I also did not openly express doubt about the numbers which I should have.

davidbfpo

09-28-2012, 09:47 AM

An article on Portugal, a country that rarely appears in the UK press, which indicates:
The people have finally realised that the troika-imposed austerity is not working in Portugal.

As youth can sometimes be mobilised, this is significant:
unemployment is close to 16% of the population (youth unemployment is estimated by analysts to be as high as 40%.....There is a 'safety valve':
..the young and talented have decided to follow the advice of the Prime Minister and are now leaving the country in droves.

Link:http://www.opendemocracy.net/eunice-goes/portugal-and-eurozone-crisis-well-behaved-pupil-plays-truant

Firn

09-28-2012, 10:51 AM

Wie eine Waehrungsunion Italiens Sueden verarmen liess (http://www.faz.net/aktuell/wirtschaft/wirtschaftsgeschichte-wie-eine-waehrungsunion-italiens-sueden-verarmen-liess-11900081.html?selectedTab=comments&tabCounter=2&showMarginalSlot=1&commentsCount=3)

Erst mit einiger Versptung merkten die Zeitgenossen, wie sehr die Whrungsunion den wirtschaftlich schwcheren Regionen zu schaffen machte. Ihre Ausfuhren gingen um 16 Prozent zurck. Manufakturen mussten schlieen, im Binnenmarkt wuchs der Exportberschuss des reichen Nordens. Investitionen blieben aus, weil die wohlhabenden Schichten lieber die als sicher geltenden Staatsanleihen des neuen Whrungsraums kauften. Es half nichts, dass eine rigorose Sparpolitik die anfngliche Schuldenkrise bald berwand und sogar zu einem ausgeglichenen Haushalt fhrte: Die Art, wie diese Austerittspolitik ins Werk gesetzt wurde, vergrerte die Kluft weiter.

So war es, nachdem die Italiener vor 150 Jahren ihren Nationalstaat grndeten, aus so gegenstzlichen Teilen wie dem liberalen Piemont und dem feudalistischen Knigreich beider Sizilien. Bis heute vereint das Land die konomischen Extreme Europas innerhalb der eigenen Grenzen. Im Sden lag die Jugendarbeitslosigkeit schon vor der Krise bei 50 Prozent, in einigen Regionen des Nordens herrschte hingegen stets Vollbeschftigung. Die Frage ist, was sich aus diesem Europa im Kleinen fr das groe Ganze lernen lsst.

This actually very informative article does illuminate some of the Italian issues and their origins for German readers. Not that their are well-known to an even small number of Italians. The Banca d'Italia has a lot of quaderni, basically papers, on the storia economica d'Italia. They do a good job at explaining the historical economic development of this country.

Convergence among Italian Regions, 1861-2011 (http://www.bancaditalia.it/pubblicazioni/pubsto/quastoeco/qse-22/Quaderno_storia_economica_n_22.pdf)

Abstract

In 150 years, the trends in regional disparities in economic development within Italy have differed depending on whether they are gauged by longitude or by latitude. The disparities between western and eastern regions first widened and then closed; the North-South gap, by contrast, remains the main open problem in the national history of Italy.

This work focuses on the underlying causes of the turning points in regional disparities since national unification in 1861. The first came in the late nineteenth and early twentieth century, with the industrialization of the so-called industrial triangle. This was followed by the failed new turn during the interwar years: not only were the beginnings of convergence blocked but the North-South gap, until then still natural, inevitable, was transformed into a fracture of exceptional dimensions. The second turning point, in the twenty years after the World War, produced the first substantial, lasting convergence between southern and northern Italy, powered by rising productivity and structural change in the South. The last turning point was in the mid-1970s, when convergence was abruptly halted and a protracted period of immobility in the disparity began.

JEL Classification: N63, N93, R11, R12
Keywords: Italy, regional disparities

Authors: Giovanni Iuzzolino * , Guido Pellegrini** , Gianfranco Viesti***

I will comment on it when I have more time.

Fuchs

09-28-2012, 12:57 PM

I thought about writing an article for my blog about this kind of problem, but so far refrained for lack of connection to the usual blog topics.

European unity had to turn from a realist policy strategy to an ideology in order to succeed on the grand scale. The pro-Europe ideologues (including Kohl) looked at the commonality that a common currency provides and mistook it for unity.

A currency union does not unite; it divides. Existing imbalances are likely to increase with a common currency, and the utterly incompetent behaviour of naive investors and governments has amplified this effect.

Now we're in great trouble, for the ideology drove us into a wrong turn and walking back is not allowed to ideologues.

The challenge will be to break the ideology without breaking the real advantages of the degree of unity and cooperation so far achieved in Europe.

Surferbeetle

09-29-2012, 01:47 PM

Lot's of excellent links to read of late here on this thread :)

Been thinking about the importance of inculcating 'sustainable values' regarding privilege & responsibility while reading the Joseph Rowntree Foundation piece on Regional Government in France & Spain by Andy Smith and Dr Paul Heywood. The diffusion of power, while still maintaining a hand on the reins, is one of the themes that I see in the work...1789, 1905 & 1917, 1989, and the Arab Spring are arguably examples to keep in the back of one's mind while reading. Along those lines Dr. Charles Tripp's A History of Iraq, although strictly outside of our geographic area of concern but a trading partner nonetheless, is another very interesting and adroit analysis of power.

Just 20 some pages into the well written Banca D'Italia piece Convergence among Italian Regions 1861-2011 by Giovanni Iuzzolino, Guido Pellegrini, and Gianfranco Viesti, but it brought to mind David Blackbourn's The Conquest of Nature (Water, Landscape, and the Making of Modern Germany) and the FT Article about NRW (North Rhine Westphalia) Strengths and Location Help Cope with Change, By James Wilson on September 26th 2012....which leads to the Initiative Neue Soziale MarktWirtschaft website and a report on the Bundeslander

http://www.insm.de/en/

The initiative wants to renew the social market economy of Ludwig Erhard and adjust it to globalization, demographic change and the knowledge society. The INSM stands for a social system of freedom and responsibility.

http://www.bundeslaenderranking.de

Im Auftrag von Initiative Neue Soziale Marktwirtschaft (INSM) und WirtschaftsWoche haben Wissenschaftler alle 16 Bundeslnder untersucht: Wo stehen sie, was Arbeitsmarkt, Soziales, Wirtschaft und Wohlstand angeht? Rund 100 Einzelindikatoren gehen in diese Studie ein, die in diesem Jahr zum zehnten Mal vorliegt. Das Dynamik-Ranking bildet ab, wie sich die Bundeslnder in der Zeit von 2008 bis 2011 entwickelt haben Das Bestands-Ranking vergleicht den Ist-Zustand – also das absolute Niveau. Die INSM und die WirtschaftsWoche lassen diese Studie durchfhren, weil sie damit einen Beitrag zum fderalen Wettbewerb zwischen den Bundeslndern leisten wollen. Diese Webseite ermglicht es, auch Einzelindikatoren wie Arbeitslosenquote, Bruttoinlandsprodukt, Einwohnerentwicklung und Kitabetreuungsquote anschaulich gegenberzustellen. Den wissenschaftlichen Endbericht zu dieser Studie und Informationen fr die Presse finden Sie hier.

So...how does one operationalize all of this information (and soon to be knowledge) into success in the market? Here's one of many toolkits: FT Guide, Understanding Finance (A No-Nonsense Companion to Financial Tools and Techniques) 2nd Edition by Javier Estrada

Time to fire up another cup of coffee...:wry:

______________

This article, although well written, is not as enjoyable....perhaps a datapoint to consider for later in the day.

Eine unsichtbare Mauer teilt Marseille, International Samstag, 22. September 2012, NZZ, http://www.nzz.ch/aktuell/international/eine-unsichtbare-mauer-teilt-marseille-1.17634697

Von einem «Bandenkrieg» im Norden von Marseille war im Fernsehen die Rede. Der fast 70-jährige Taxifahrer, der sich «Monsieur Josi» nennt, lacht nicht auf die Frage, wo es denn zur «Front» gehe. Er schimpft über die Polizei, die nie dort sei, wo man sie brauche. Er bestätigt gern, dass es da ein paar «cités» (Hochhaussiedlungen mit Sozialwohnungen) gebe, wo er auch am Tag nicht gern und nachts «ganz sicher nicht» hinfahre. Er sei nicht der Einzige. Auch Ärzte, Sozialhelfer, die Feuerwehr und selbst die Polizei mieden diese Gegend. Merkwürdigerweise fehlen auf dem vom Fremdenverkehrsamt abgegebenen Stadtplan diese Quartiere, als wollte man ihre Existenz leugnen.

In einem Interview mit der Lokalzeitung «La Provence» hat die Senatorin darum den Einsatz der Armee angefordert und so Schlagzeilen gemacht. Die Militärs sollten die Dealer entwaffnen und den Zugang zu diesen «Supermärkten des Drogenhandels» blockieren. «Ohne Nachfrage kein Angebot», lautet Ghalis Logik zur Bekämpfung dieser Schattenwirtschaft. Zudem meint sie weiterhin, es wäre nur billig, den Kunden mit Sanktionen zu drohen.

«C'est compliqué»

«Soll ich dir etwa die zweite Panzerdivision schicken?», habe der französische Innenminister, Ghalis sozialistischer Parteikollege Manuel Valls, sie am Telefon spitz gefragt. Die Provokation sei ihr jedenfalls gelungen, und das sei natürlich auch der Zweck der Übung gewesen, gesteht sie im Nachhinein mit unverhohlener Genugtuung. Seit ihrem Aufschrei der Empörung über die eskalierende Gewalt wird die 44-jährige dunkelhaarige Frau mit ihrem feurigen Blick zu Fernseh-Talkshows eingeladen und interviewt.

Firn

10-01-2012, 11:05 AM

As I have written elsewhere I have greatly increased my time spent reading textbooks - just a bit like in the old uni days - reducing the time spent online quite a bit. There are wonderful ressources out there but it is much more difficult to retain focus and to get a high return on your invested time. A slightly more capital-intensive approach goes a long way to increase your productivity. So in the end what are 30 € spent on a good textbook? Now my student self would have disagreed about that, but the older one gets the greater is the value of time. Posts like this do of course take some time but in general I think it is good to have this kind of diverse stimulation.

The graphs of Armut und Reichtum (http://www.faz.net/aktuell/wirtschaft/armut-und-reichtum-geht-es-bei-uns-gerecht-zu-11908598.html) capture very important trends which have been of all the Western World most radical in the US. The great wealth and quality of living of the Western world is related with little doubt to long term inclusive economic and political institutions intertwined with technological ( in its widest economic sense) progress and free trade. Increasing economic inequality increases the potential risks for the society as a whole.

P.S: Wages of Destruction (http://www.amazon.com/Wages-Destruction-Making-Breaking-Economy/dp/0143113208/ref=sr_1_1?s=books&ie=UTF8&qid=1349087473&sr=1-1&keywords=wages+of+destruction) is a brilliant book about the German (war) economy which did help me to fit many strands of thought into a far more rich whole. There would be so much to say and write about this book but time is limited. However it does show just how important a free flow of ressources, capital and technology is for our modern economy.

In short the disparity of available ressources before and during the war in key areas was indeed shocking, with the British empire having better cards even in its darkest hours the most imagined. To does weaken to a great extent a good deal of the arguments of Why the allies won (http://www.amazon.com/Why-Allies-Won-Richard-Overy/dp/039331619X/ref=sr_1_1?s=books&ie=UTF8&qid=1349088617&sr=1-1&keywords=why+the+allies+won) while lending more weight to a couple. In the end "sheer weight of material strength" is not far off the mark as the key distinguishing factor.

(If you have grown up in a market economy such books are very helpful to keep the perspective. In this specific case it did greatly support my already strong belief for free, global markets, especially in certain sectors of the economy. In the European context, as Fuchs put it, it is important to conserve and even strenghten the good sides of the EU while trying hard to lessen the negative impact of a policy like the common currency.)

P.P.S: I dislike the graphs of that Quaderno, they should have really put a bit more effort into them. The job on the text itself has been far better. To some extent poor graphics are a wide spread problem in Italy.

Surferbeetle

10-04-2012, 03:04 AM

In light of the estimated €136.2 billion in EU exports to China and €292.5 billion in imports (EU Commission Trade with China, http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/china/ ) I appreciated the recent recommendation here on SWJ regarding Barry Naughton's textbook The Chinese Economy, Transitions & Growth. :wry:
__________________

Eigenes Budget für die Eurozone geplant, Von HENDRIK KAFSACK, BRÜSSEL, 03.10.2012, FAZ, http://www.faz.net/aktuell/wirtschaft/entwurf-fuer-eu-ratspapier-eigenes-budget-fuer-die-eurozone-geplant-11912554.html

Mitte Oktober treffen sich die EU-Staats- und Regierungschefs in Brüssel. Nach Informationen der F.A.Z. soll der Euroraum künftig mit einem eigenen Budget ausgestattet werden. Welches Volumen er haben und aus welchen Quellen er gespeist werden soll, ist unklar.

In der Bundesregierung dürfte das Papier trotz seiner weitreichenden Vorschläge weitgehend auf positive Resonanz stoßen. Die Schaffung eines eigenen Budgets für den Euroraum sei auf jeden Fall besser als die von Deutschland abgelehnte Vergemeinschaftung der Schulden der Eurostaaten durch sogenannte Eurobonds, hieß es in Diplomatenkreisen. Mit einem eigenen Budget könne man gezielt Anreize setzen - etwa durch die Finanzierung von Arbeitslosenprogrammen - und die Staaten so zu Reformen bewegen. Das sei mit den Mitteln des EU-Haushalts nicht möglich, weil diese in der Regel an keine Bedingungen geknüpft seien. Die EU soll zwar künftig Defizitsündern Strukturhilfen streichen können, wenn sie sich nicht an die Vorgaben der Kommission halten. Das ist aber nur als Ausnahmeregelung gedacht.

Bruxelles lance le débat sur la nécessité d'un outil budgétaire pour la zone euro, Par Anne Bauer | 03/10 | 20:54, Les Echos, http://www.lesechos.fr/economie-politique/monde/actu/0202305844894-bruxelles-lance-le-debat-sur-la-necessite-d-un-outil-budgetaire-pour-la-zone-euro-368796.php

Le président du Conseil européen Herman Van Rompuy, chargé de dessiner l'avenir de l'union économique et monétaire, veut interroger les capitales sur l'éventuel lancement d'un outil budgétaire dédié à la zone euro et destiné soit à amortir les chocs conjoncturels, soit à renforcer les réformes structurelles.

C'est pourquoi, faute d'avancée à moyen terme sur les euro-obligations, le Conseil Européen demande aux Etats d'étudier la possibilité de se doter d'un outil budgétaire, qui pourrait renforcer à la fois la solidarité financière entre les Etats membres mais aussi leur intégration économique. Paris et Berlin mènent des travaux exploratoires. Mais pas dans la même direction. Pour Paris, un tel budget pourrait servir à amortir les chocs conjoncturels, notamment sur le plan social. Le ministre de l'économie Pierre Moscovici avait ainsi évoqué l'éventuel lancement d'un fonds européen d'assurance chômage lors d'une rencontre à l'Institut Bruegel. Pour Berlin, un outil budgétaire commun devrait plutôt encourager les Etats, grâce à des incitations financières limitées dans le temps, à mettre en oeuvre des réformes structurelles difficiles afin d'accroître la compétitivité des pays les plus faibles de la zone euro. Ainsi les recommandations annuelles faites par la Commission Européenne dans le cadre de la nouvelle gouvernance économique pourrait être traduite en engagements contractuels.

Faut-il créer une capacité budgétaire pour accompagner la monnaie unique ? Pour quoi faire ? Et avec quels moyens ? Voilà les questions dont il faut débattre, explique la diplomatie bruxelloise. Du côté des moyens, aucune piste n'émerge encore. Dans un contexte de crise économique, il est difficile d'imaginer les Etats abonder un budget bis de l'eurozone à côté du budget de l'Union Européenne qui représente environ 1% du PIB des Vingt-sept Etats membres. Au minimum, peut-on imaginer que le Mécanisme européen de stabilité financière (MESF), outil créé en 2010 au début de la crise grecque pour permettre à la Commission Européenne de lever de l'argent grâce à sa propre signature, soit reconduit après 2013, année de son expiration. L'actuel MESF est plafonné à 60 milliards d'euros, qu'il peut lever grâce à la garantie du budget européen, et il a servi aux plans d'aides pour l'Irlande, le Portugal et la Grèce.

Fuchs

10-04-2012, 06:58 AM

@Firn:

Don't try to beat the market per se. It's too unlikely to be based on anything but chance. Most people fool themselves about their skill in investment.

I suggest to instead limit yourself to avoid stupidities (such as participating in a recognised bubble for anything but entertainment).

My experience told me that microeconomics -not the stuff taught in textbooks, but still the kind of thinking- is very useful for spotting losers in the market.

My classic example for this is a agricultural product processing company I once knew very well. It made no profit, and its owner lived off the reputation of having said company rather than of the company itself (he attracted research funds this way).
The small factory could not make profit because it was in a double loser sandwich: It had inferior market power in both its relations with suppliers (farmers who could easily grow something else, but the processing plant could only process one crop) and customers (who did use a synthetic perfect substitute and thus really didn't need his product at all).
He had only one shot at making profit; deceive both suppliers and customers about his break even, thus tricking them into better conditions. It was too late for that, though.
Ever since, I have found many other companies with a consistently poor performance that could easily be explained with the double loser sandwich explanation. Even start-ups, and rising stars with high "valuation" at the market (which inevitably folds, of course).

Other example:

Recently, I saw an advertisement by the local football club; ~"Passion pays good interest." It was for a five-year bond at a fixed interest rate.
The interest rate could be blacked, and I could still tell you this bond is a poor deal.
Reasoning: Either the management is good at financial matters and did set the interest rate "correctly" OR it is incompetent at it and not to be trusted with your money.
Furthermore, if said management did set the correct interest rat, it did so including the assumption that lots of cash owners have sympathy for the football club and are willing to buy bonds at a lower interest rate than otherwise.
As a conclusion, the management is either not to be trusted or the interest rate is too low for investment (= does not include a proper risk premium).
See? I did not even need to take the interest rate into account. It did not matter.
You can wade through 100+ page corporate reports and learn nothing of value from all its figures and graphics, or you can simply look at the company's market position and learn a lot about it.

Now feel free to assume whether I fool myself about my skill in investment. :D

Firn

10-04-2012, 02:03 PM

@Fuchs: Actually it is good to remind other people of the base rate and just how difficult it is to beat for a long time the market. Thinking, Fast and Slow (http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374275637/ref=sr_1_1?ie=UTF8&qid=1349357930&sr=8-1&keywords=thinking+fast+and+slow), which might the best book I have read in the last couple of years has some great chapters about Investing which fit nicely in his overall framework. It is worth to note that in he talks mostly about "helpers", as Buffet called them.

All in all the book reinforced my personal approach to the markets founded on Ben Graham and Warren Buffet. I do just a little stock picket for the lack of time but use mostly broad index fonds and try very hard to avoid serious erros and high fees. In Kahnemans sense I try to use the hard facts, like the screening tests developed by Graham as a base and anchor. This rigid and disciplined approach gets slightly modified by my personal thoughts.

Not perfect but the last seven years I did greatly outperfom the Eurozone market, with the Eurostoxx 50 as benchmark, into which I invested by far the greatest share. Recently I have payed a bit more attention to other markets.

So all in all I could fool myself a lot, however so far the facts are facts and as I seem to have science on my sight I hope there is casual link between my investing and my return. I agree in any case on bonds by football clubs.

Surferbeetle

10-06-2012, 06:21 PM

IMF Won’t Disburse Greek Loan If Debt Not Sustainable, By Sandrine Rastello on October 04, 2012, Bloomberg Businessweek, http://www.businessweek.com/news/2012-10-04/imf-won-t-disburse-greek-loan-if-debt-not-sustainable

The International Monetary Fund won’t disburse its share of the Greek bailout if the country’s debt is not deemed sustainable or if other creditors don’t pledge to fill a financing gap in the aid package, a fund spokesman said.

IMF Managing Director Christine Lagarde last week warned that the level of Greek debt would have “to be addressed,” pushing European policy makers to consider writing off some of the aid to the country. While the fund is sticking to a target of 120 percent of gross domestic product by 2020, the Greek government forecast this week that the general government debt will climb to 179.3 percent of GDP in 2013.

While Greek Prime Minister Antonis Samaras said yesterday the ECB should consider rolling over Greek debt, the ECB has shown no desire to contribute. ECB President Mario Draghi yesterday rejected the suggestion the central bank would participate in any further restructuring of Greek government bonds.

Samaras Says Greece Like Post-World War I Weimar Republic, By Alan Crawford - Oct 5, 2012 3:21 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-10-05/samaras-says-greece-like-post-world-war-i-weimar-republic.html

“Greek democracy stands before what is perhaps its greatest challenge,” Samaras said in an interview with German newspaper Handelsblatt published today, saying that Greeks’ living standards have plunged by more than a third in five years. The cohesion of Greek society is “endangered by rising unemployment, just as it was toward the end of the Weimar Republic in Germany.”

Just as the 1919-1933 Weimar years were marked by running battles between Communists and fascists, society at large in Greece today is threatened by extreme left-wing populists and “something that’s new to this country: the rise of an extreme right, you could almost say fascist, neo-Nazi party,” he said.

Griechischer Ex-Politiker nimmt sich das Leben, 04.10.2012, 21:46 Uhr, Handelsblatt, http://www.handelsblatt.com/politik/international/spekulation-uebe-motiv-griechischer-ex-politiker-nimmt-sich-das-leben/7216858.html

Die Medien stellten den Tod Tzannis' in einen Zusammenhang mit Geldwäschevorwürfen. Der Name des früheren Staatssekretärs war vor kurzem auf einer Liste von Politikern aufgetaucht, die in Geldwäscheaffären verwickelt sein sollen.

Im September hatten Medien Listen mit 36 Namen von Politikern veröffentlicht, die Steuern hinterzogen oder Geld gewaschen haben sollen. Die griechische Regierung forderte die Justiz des Landes auf, die Gerüchte über die angebliche Verwicklung von Politikern umgehend aufzuklären. Unter den Verdächtigen sind ehemalige Minister, zahlreiche Parlamentsabgeordnete und der Chef einer kleinen Partei.

Die Listen sollen aus dem Amt zur Bekämpfung von Finanzdelikten SDOE stammen und an die Presse durchgesickert sein. Die Behörde prüft zurzeit, ob diese Politiker tatsächlich Steuern hinterzogen oder sich illegal bereichert haben. Harte Fakten über diese Fälle wurden jedoch bislang nicht veröffentlicht.

Encore deux semaines de discussions entre la Grèce et la troïka, 06/10 | 18:15, Les Echos, http://www.lesechos.fr/economie-politique/monde/actu/reuters-00469178-encore-deux-semaines-de-discussions-entre-la-grece-et-la-troika-369741.php

Deux semaines de discussions seront encore probablement nécessaires pour parvenir à un accord entre la Grèce et la troïka de ses bailleurs de fonds internationaux sur de nouvelles mesures d'austérité, a déclaré samedi un responsable grec.

Merkel reist nach Athen, 05.10.2012, FAZ, http://www.faz.net/aktuell/wirtschaft/europas-schuldenkrise/griechenland/griechenland-krise-merkel-reist-nach-athen-11914701.html

Erstmals seit dem Ausbruch der Griechenland-Krise vor drei Jahren reist die Kanzlerin nach Athen. Sie will sich dort am Dienstag mit Griechenlands Ministerpräsident treffen.

Bassnectar - Pennywise Tribute, http://www.youtube.com/watch?v=GtrwN-Cxor8

Surferbeetle

10-06-2012, 07:51 PM

One Europe, Many Tribes, By Peter Coy on September 19, 2012, Businessweek, http://www.businessweek.com/articles/2012-09-19/one-europe-many-tribes#p1

Italy, unified in 1870, is newer than Nevada. Spain was split down the middle by a civil war as recently as the 1930s. And reunited Germany, dating back only to 1990, is younger than two of the Jonas Brothers. Just a reminder that, for all their claims to antiquity, many of the nations of Europe have been nations for only the briefest of times. For most of history they were rivalrous territories, kingdoms, duchies, principalities, and city-states. They were bound by language and culture—and riven by tribalism.

As Europe’s financial crisis drags on, the tribes have returned with a vengeance. It’s not just Greece vs. Germany. Today it’s Sicily vs. Lombardy, Berlin vs. Bavaria, Andalusia vs. Catalonia. Keep this in mind as optimists point to the successes of the campaign for “more Europe,” such as the European Central Bank’s agreement on Sept. 6 to support the bonds of hard-pressed countries that comply with deficit reduction agreements. Europe is boiling over with regional grievances. Money is the issue—who gives it and who gets it. The 1999 launch of the euro has forced an unwanted intimacy on Europeans in flagrant disregard for Robert Frost’s poetic dictum: “Good fences make good neighbors.” And the euro entices separatists to strike out on their own, figuring even small nations can survive if they share a currency. (Malta, a euro-zone nation, has fewer people than Dublin or Dresden.)

Insurance, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Insurance

Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.[1]

Risk management, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Risk_management

Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events[1] or to maximize the realization of opportunities.

ganulv

10-07-2012, 08:32 PM

Fuchs

10-07-2012, 11:13 PM

who is actually of the belief that the Greek debt is sustainable?

Countries have gone through more extreme challenges. The problem isn't so much the theoretical ability as it is that paying back the debt makes no sense.
I expected for years that the Greek government merely wants to buy time to prepare Greece for a mode of operation in which the Greeks have defaulted entirely and get no new credit.

It appears that they are serious about muddling through instead.
Their problem is probably the EU. They could default, but non-Greek courts could rule against them and that would automatically be effective in Greece as well. A 100% default would probably require Greece to drop a lot of European integration. Right now, it also requires them to offend the governments who helped them.
They dug deeper and deeper...

ganulv

10-08-2012, 01:47 AM

Countries have gone through more extreme challenges.
Most of the residents weren’t living off the fat the way post-Athens Games Greeks were, though. ‘Unrealistic expectations’ is just another way of saying ‘fantasies.’ :rolleyes:

Surferbeetle

10-08-2012, 04:03 PM

who is actually of the belief that the Greek debt is sustainable?

Short answer seems to be extend and pretend while waiting for individual leaders to rise who are able to overcome (gravity) failed institutions and an entrenched culture of mismanagement. There are some IMF Debt Sustainability Analysis reports that are circulating on the interwebs (21 Feb 2012 and 11 March 2012) with both baseline and less favorable scenario's showing debt in excess of 100% of GDP through 2020. They are sitting on some important geography, however, that should not be discounted when 'running the numbers'

The Greatest Man That Ever Lived - Weezer & Warren Miller, http://www.youtube.com/watch?v=zLvR5NiCPb0

That Greek debt sustainability analysis in full, Kate Mackenzie, Feb 21 08:49, FT Alphaville, http://ftalphaville.ft.com/2012/02/21/889521/that-greek-debt-sustainability-analysis-in-full/

Relentless austerity will only deepen Greek woes, By Wolfgang Mnchau, October 7, 2012 8:15 pm, Financial Times, www.ft.com

Samaras vows to fight Greek corruption, By Kerin Hope in Athens, 30 September 2012, Financial Times, www.ft.com

Debate Over Whereabouts of a List Highlight Greek Political Divide, By RACHEL DONADIO, Published: October 8, 2012, IHT/NYT, http://www.nytimes.com/2012/10/09/world/europe/greek-government-at-odds-over-list-of-names.html?ref=global-home

Port of Piraeus, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Port_of_Piraeus

Port of Thessaloniki, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Port_of_Thessaloniki

Leviathan gas field, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Leviathan_gas_field

Surferbeetle

10-08-2012, 11:03 PM

Fresh electrons from Tokyo via the IMF

World Economic Outlook (WEO), Coping with High Debt and Sluggish Growth, October 2012, http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf

A number of assumptions have been adopted for the projections presented in the World Economic Outlook. It has been assumed that real effective exchange rates remained constant at their average levels during July 30–August 27, 2012, except for the currencies participating in the European exchange rate mechanism II (ERM II), which are assumed to have remained constant in nominal terms relative to the euro; that established policies of national authorities will be maintained (for specific assumptions about fiscal and monetary policies for selected economies, see Box A1 in the Statistical Appendix); that the average price of oil will be $106.18 a barrel in 2012 and $105.10 a barrel in 2013 and will remain unchanged in real terms over the medium term; that the six-month London interbank offered rate (LIBOR) on U.S. dollar deposits will average 0.7 percent in 2012 and 0.6 percent in 2013; that the three-month euro deposit rate will average 0.6 percent in 2012 and 0.2 percent in 2013; and that the six-month Japanese yen deposit rate will yield on average 0.4 percent in 2012 and 0.3 percent in 2013. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections. The estimates and projections are based on statistical information available through mid-September 2012.

The forces at work are, for the most part, familiar.

Those forces pulling growth down in advanced economies are fiscal consolidation and a still-weak financial system. In most countries, fiscal consolidation is proceeding according to plan. While this consolidation is needed, there is no question that it is weighing on demand, and the evidence increasingly suggests that, in the current environment, the fiscal multipliers are large. The financial system is still not functioning efficiently. In many countries, banks are still weak, and their positions are made worse by low growth. As a result, many borrowers still face tight borrowing conditions.

The main force pulling growth up is accommodative monetary policy. Central banks continue not only to maintain very low policy rates, but also to experiment with programs aimed at decreasing rates in particular markets, at helping particular categories of borrowers, or at helping financial intermediation in general.

Turning to policy action, the main focus continues to be the euro area. Here, there has been a clear change in attitudes, and a new architecture is being put in place. The lessons of the past few years are now clear. Euro area countries can be hit by strong, country-specific, adverse shocks. Weak banks can considerably amplify the adverse effects of such shocks. And, if it looks like the sovereign itself might be in trouble, sovereign-bank interactions can further worsen the outcome.

Therefore a new architecture must aim at reducing the amplitude of the shocks in the first place— at putting in place a system of transfers to soften the effects of the shocks. That architecture must aim at moving the supervision, the resolution, and the recapitalization processes for banks to the euro area level. It must decrease the probability of default by sovereigns, and were default nevertheless to occur, it must decrease the effects on creditors and on the inancial system. It is good to see these issues being seriously explored and to see some of these mechanisms being slowly put together.

In the short term, however, more immediate measures are needed. Spain and Italy must follow through with adjustment plans that reestablish competitiveness and fiscal balance and maintain growth. To do so, they must be able to recapital- ize their banks without adding to their sovereign debt. And they must be able to borrow at reason- able rates. Most of these pieces are falling into place, and if the complex puzzle can be rapidly completed, one can reasonably hope that the worst might be behind us.

Surferbeetle

10-10-2012, 03:32 PM

Britain Rethinks Its Opposition to a Two-Tier Europe, By STEPHEN CASTLE, Published: October 8, 2012, NYT, http://www.nytimes.com/2012/10/09/business/global/uk-edges-closer-to-idea-of-an-eu-with-2-tiers.html?pagewanted=1&src=recg

Despite its long ambivalence toward European integration and its refusal to adopt the euro, Britain has usually demanded a seat at Europe’s top table. And the country has resisted moves to relegate it to an outer, more detached tier as a status not befitting a global power.

But with Britain struggling to emerge from recession and Mr. Cameron under domestic political pressure to distance his country from Europe’s financial problems, he is now willing to let Britain take a back seat in the European Union.

Under plans now being discussed in Brussels, the 17 European Union nations that use the euro could have their own budget, allowing them to make big transfers of cash to help ease the type of economic pain now being felt in Greece and Spain. They might even have their own separate parliament, to make the system more accountable.

Talks on the next European Union budget are expected to culminate in November when European leaders will try to agree on a spending ceiling for the 2014-2020 period.

The European Commission, the bloc’s executive branch, has proposed a figure of up to 1.03 trillion euros, or $1.34 trillion, for all 27 nations. That compares with a ceiling of 975 billion euros for the current seven-year period. The proposed figure, though, is almost certain to be negotiated downward. With the Continent engaged in country-by-country cuts in national budgets, Britain has led calls for curbs.

Germany sees political integration as the quid pro quo for supporting weaker euro zone nations like Spain. France, since the inception of the single currency, has tried to build up separate euro zone structures, partly because, when a large country like Britain is not present, French influence is greater.

No one is sure how a euro zone-specific budget would operate. It might be financed at least in part by adopting a tax on stock trades and other financial transactions. France and Germany support such a tax. Britain, where London’s global financial hub is a big part of the national economy, opposes the idea of a transaction tax.

Britain also thinks the two-tier idea could save it money. As one of the biggest net contributors to the bloc’s budget — £7.4 billion, or $11.9 billion, last year, according to the British treasury — Britain has long complained that it does not get its money’s worth from participating in the European Union. The country has long chafed, for example, at the fact that it receives far less in farm subsidies from the bloc than France does.

To compensate for the imbalance, Britain receives a rebate on its contribution. But previous budget talks have bogged down over British demands for a big reduction in farm spending — and counterdemands from France that London surrender its rebate.

Britain hopes that, under a two-tier budget approach, the euro zone would assume much of the economic regeneration work undertaken by the current European Union budget, making life cheaper for the “outs.”

Firn

10-11-2012, 10:36 AM

I took a look at the World Economic Outlook (WEO) - October 2012 (http://www.imf.org/external/pubs/ft/weo/2012/02/index.htm) thanks to the Economists view (http://economistsview.typepad.com/).

Antonio Fatas and Ilian Mihov on the Global Economy
(http://fatasmihov.blogspot.co.at/2012/10/underestimating-fiscal-policy.html) have a good blog entry about a facet of the report:

Underestimating Fiscal Policy Multipliers

The October edition of the IMF World Economic Outlook is out with very strong warnings about risks to growth (full report can be found at the IMF web site). In Chapter 1 there is a nice analysis about whether in our most recent growth forecasts we have recently underestimated fiscal policy multipliers. Quoting from that chapter:

"With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated."

And the answer is yes and here is my reading of what has happened. About eleven years ago there was a series of academic papers that estimated fiscal policy multipliers. The conclusion of the earlier papers is that multipliers were somewhere in the range 1-1.5. In other words, a 1% increase in government spending raised GDP by somewhere between 1% and 1.5%. This was the conclusion I reached together with my co-author back in 2001 (paper is available at my web site). This was also the conclusion of the paper written by Oliver Blanchard and Roberto Perotti written around the same time and available here.

...

This is what the IMF suggests now in their analysis, which, by the way, is also self critical. They look at their recent forecasts for global growth and they suggest that their model was implicitly using fiscal policy multipliers around 0.5 when measuring the impact of fiscal consolidation. Given that their GDP growth forecast has been overestimating growth, the IMF now wonders whether multipliers are higher than 0.5. The analysis in the current World Economic Outlook suggests that multipliers might be within the range 0.9 to 1.7. A range which happens to be very almost identical to the one produced by the early papers and confirmed by the most recent academic literature. It is also not far from what most economic models would predict given current economic conditions.

Note the vast implications of the vast differences between 0.5 and a range of 0.9 to 1.7, a multiplicator range of roughly 2x to 3x of what they used in their models. Shocking and to think that we already had the models with a more realistic factor for such circumstances, not least in my uni textbook makes it so much harder to stomach. That it was written by Gregory Mankiw (http://en.wikipedia.org/wiki/N._Gregory_Mankiw), current advisor of Romney! makes the issue even more troubling.

So in this case, just like in most other ones, in the long run Keynes was right ;)

Surferbeetle

10-13-2012, 06:13 PM

Firn,

This past week has been most interesting, appreciate your comments on the high level debate regarding the advice of Keynes and Hayek (unfortunately not Salma :wry:) and indirectly, Kant. Congratulations are in order regarding the Nobel Peace Prize for the EU, the fruits of democracy peace theory in action it would seem.

Dusted off my Macroeconomics by N. Gregory Mankiw (6th edition) and reviewed the chapter on the Mundell - Fleming Model and the two equations used to describe a 'small open economy with perfect capital mobility':

Y = C(Y-T) + I(r*) + G + NX(e) aka the IS portion of the IS-LM Model

M/P=L(r*, Y) aka the LM portion of the IS-LM Model

This helped to refresh my understanding regarding how the variable G (Government Spending) impacts the variable Y (Aggregate Income).

IMF Economists Olivier Blanchard and Daniel Leigh seem to started a bit of a firestorm with their observations regarding the observed ranges of fiscal multipliers versus what theory suggests. We will see how this shakes out...

...in the meantime I am attempting to use the IMF report to find mispriced/misvalued sectors (and equities within them) of the global economy. ;)

By the way, as a committed political independent, is it just me or do both US candidates seem to be heavily committed to keynesian stimulus measures? (ARRA vs DoD)
_________________________

John Maynard Keynes, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/John_Maynard_Keynes

Salma Hayek, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Salma_Hayek

Nobel Committee Gives Peace Prize to European Union, By ALAN COWELL and NICHOLAS KULISH, Published: October 12, 2012, NYT, http://www.nytimes.com/2012/10/13/world/nobel-peace-prize.html?pagewanted=1

Democratic peace theory, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Democratic_peace_theory

Mundell–Fleming model, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Mundell–Fleming_model

IS/LM model, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/IS/LM_model

Fiscal multiplier, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Fiscal_multiplier

Government Spending Equation, From Wikipedia the free encyclopedia
http://en.wikipedia.org/wiki/Fiscal_multiplier#Standard_Government_Spending_Equ ation

Olivier Blanchard, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Olivier_Blanchard

Daniel Leigh, IMF Bio, http://www.imf.org/external/np/cv/AuthorCV.aspx?AuthID=154

World Economic outlook october 2012, IMF, Box 1.1, Page 47 of the pdf, http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf,

With many economies in fiscal consolidation mode, a debate has been raging about the size of fiscal multipliers. The smaller the multipliers, the less costly the fiscal consolidation. At the same time, activity has disappointed in a number of economies undertaking fiscal consolidation. So a natural question is whether the negative short-term effects of fiscal cutbacks have been larger than expected because fiscal multipliers were underestimated.

This box sheds light on these issues using international evidence. The main finding, based on data for 28 economies, is that the multipliers used in generat- ing growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7.

Robustness of IMF data scrutinised, By Chris Giles in London, Last updated: October 12, 2012 11:00 pm, Financial Times, www.ft.com

Even though Olivier Blanchard, the fund’s chief economist, was careful not to draw strong policy conclusions from it, others seized on the IMF numbers as proof that deficit reduction efforts by governments were misguided.

An exercise by the Financial Times to replicate and evaluate the IMF’s work, however, showed that the results suggesting very large multipliers – the relationship between deficit reduction efforts and growth – do not easily stand up to a different choice of countries or time period.

The size of the multiplier was once a long-forgotten relic of Keynesian economics, deemed irrelevant in modern economic analysis. But as the economic crisis has ground into its fifth year, it is central to thinking about deficit reduction.

Lagarde calls for caution on austerity, By Claire Jones in Tokyo, Last updated: October 11, 2012 2:15 pm, Financial Times, www.ft.com

It’s (austerity) Multiplier Failure, Kate Mackenzie, Oct 09 09:42, FT Alphaville, http://ftalphaville.ft.com/2012/10/09/1199151/its-austerity-multiplier-failure/

The IMF game changer, Izabella Kaminska, Oct 11 12:19, FT Alphaville, http://ftalphaville.ft.com/2012/10/11/1205021/the-imf-game-changer/

The fact of the matter is that the IMF has played bad cop to the global economy for generations now, enforcing austerity, conditionality and accountability wherever it goes. And, for the most part, it’s the emerging world that’s suffered most.

Recanting on some of these closely held beliefs, especially now that the bitter medicine is predominantly being applied to the developed world, is awkward to say the least. Some might even say it’s as close to an admission of past wrongs as you will ever get.

American Recovery and Reinvestment Act of 2009, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009

Defence, Arms and the men, There is a clear distinction between the candidates on military spending: more versus less, Oct 6th 2012 | from the print edition, The Economist, http://www.economist.com/node/21563956

Taxes, spending and the deficit, Trillion-dollar questions, With the deficit at over $1 trillion for a fourth year running, taxes and government spending are critical to the campaign, Oct 6th 2012 | from the print edition, The Economist, http://www.economist.com/node/21563952

______________

The Black Keys - Gold On The Ceiling [Official Video], http://www.youtube.com/watch?v=6yCIDkFI7ew

Firn

10-18-2012, 05:37 AM

@Surferbeetle: I think it helps indeed to get back to the roots or the fundamental models of the trade. I know that in 2008 I made the big mistake to try to think just myself without giving the conventional a hard enough look. In consequence I was one of the guys fearing inflation far too much - even if the liquidity trap matched the situation almost perfectly.

I have currently litle time for investment research so I kept my portafoglio steady, that is apart from living and saving.

----

But enough of Macro, considering our recent Nobel price winners:

A Nobel Prize for Work that Matters in Our Everyday Lives

A few comments on yesterday's Nobel Prize in Economics (no link -- still stuck in editing at MoneyWatch link now active):

A Nobel Prize for Work that Matters in Our Everyday Lives: (MarketWatch) The Nobel Prize in Economics was awarded to Alvin Roth and Lloyd Shapley for their work on matching markets and mechanism design. What exactly do those terms mean, and why is their work important to people outside of economics?

In the textbook case when markets are perfectly competitive and prices are free to vary, the price-system produces an outcome that cannot be improved upon. But when substantial market failures are present, or when prices are restricted, missing, or otherwise prevented from responding to changes in market conditions, markets can break down.

Mark Thoma on his economists view (http://economistsview.typepad.com/) goes on:

Macroeconomic theory has come under considerable criticism lately, much of it deserved, and economics more generally has been tainted by the performance of macroeconomists and their theories prior to and during the crisis. Some aspects of the criticism apply to both macro and micro, e.g. the validity of the assumption that agents are rational, but for the most part this has not been fair to microeconomists.

As this award shows, microeconomists have made many useful contributions to the world, and they have also had success in other real world applications such as auction theory. Hopefully this award will help those outside the profession understand that the world of economics is more than macro, and highlight the important contributions from the microeconomics side of the profession that matter in our everyday lives.

I happily confess that nothing clicked at all when I heard of Lloyd Shapley, but it is hard to keep up with all the great humans* which form that giant giant on which shoulder we can stand to get a fine sight. Of course we still have to do the looking ourselfs.

*not just intellectuals, but humankind. It was a long way out of Africa and towards our current level of development and prosperity. Of course some moved more the others.

Fuchs

10-18-2012, 11:14 AM

Note the vast implications of the vast differences between 0.5 and a range of 0.9 to 1.7, a multiplicator range of roughly 2x to 3x of what they used in their models.

You need a multiplicator of about 1.7 to 2.5 to make it budget neutral in the medium term (dependinbg on the gov revenue system). Short-term deficit fanatics will not be satisfied with a range of 0.9 to 1.7 (and said range does not apply to all cases).

The real problem aren't economists or the wrong use of economic models or even mere wrong variable values from econometrics (or lack thereof).

The problem is that governments are too easily influenced by fashions/lobbyists and not really competent in macro or even only micro. They appoint people with little more competence, too.

The problem isn't that macro cannot predict the timing of a crisis outbreak.

The problem is that banks and other lenders or investors are about as competent in their jobs as a dice. We should force 70% of their workforce into unemployment now, with a higher share of management and traders.
Those people earn millions for being correct (lucky) in a mere 52% of their decisions.
Their "talent" and "skills" are style, not substance. All they need to do to get rich is to acquire customers. They're basically all in a self-marketing job, not in banking, investment or trading.

This incompetence leads to a horrible resource allocation (not unknown to governments either), the creation of financial crisis in the first place and the weakening of the real (manufacturing) economy.

I've personally seen credit withheld for great projects and credit given to the pretty blonde with no brain...

ganulv

10-18-2012, 01:05 PM

Their "talent" and "skills" are style, not substance. All they need to do to get rich is to acquire customers. They're basically all in a self-marketing job, not in banking, investment or trading.
A couple of friends of mine who have taught courses in U.S.-based business schools tell me that as compared to the non-professional school student body the business school students dress better, are only very rarely tardy to class, and invariably turn in their assignments formatted to the letter. They also say that questions posed are more mechanical than substantive and that it is the rare well-formatted assignment that displays real engagement with the material. Improving one’s impression management (http://en.wikipedia.org/wiki/Impression_management) skills seems to be the why of business school in the U.S.

Firn

10-21-2012, 06:22 PM

To be honest when I was young I was a bit Warren Buffet. That is in assuming that clever people try and make the rational choice for their group and entity. Obviously I never heard of the "institutional imperative":

My most surprising discovery: the overwhelming importance in
business of an unseen force that we might call "the institutional
imperative." In business school, I was given no hint of the
imperative's existence and I did not intuitively understand it
when I entered the business world. I thought then that decent,
intelligent, and experienced managers would automatically make
rational business decisions. But I learned over time that isn't
so. Instead, rationality frequently wilts when the institutional
imperative comes into play.

For example: (1) As if governed by Newton's First Law of
Motion, an institution will resist any change in its current
direction; (2) Just as work expands to fill available time,
corporate projects or acquisitions will materialize to soak up
available funds; (3) Any business craving of the leader, however
foolish, will be quickly supported by detailed rate-of-return and
strategic studies prepared by his troops; and (4) The behavior of
peer companies, whether they are expanding, acquiring, setting
executive compensation or whatever, will be mindlessly imitated.

Institutional dynamics, not venality or stupidity, set
businesses on these courses, which are too often misguided. After
making some expensive mistakes because I ignored the power of the
imperative, I have tried to organize and manage Berkshire in ways
that minimize its influence. Furthermore, Charlie and I have
attempted to concentrate our investments in companies that appear
alert to the problem.

Chairman's Letter 1989 (http://www.berkshirehathaway.com/letters/1989.html)

[Actually it is also quite relevant for many other topics of the SWJ/C]

In general as a consumer I love efficient markets as I investor I love them if they allow me to invest efficiently into a business which is sheltered from too strong a competition...

BTW: There is a nice docu "Broke" by ESPN about American sportstars going broke which greatly impressed me. The scary part is that it all makes so much sense if you have decent emphaty - and it is all so wrong.

ESPN Broke (http://www.youtube.com/watch?v=aJq2bEX7ILw)

Firn

10-22-2012, 10:25 AM

Obvioulsy the game theory and the cui bono nature of rationality are also factors beside the institutional imperative. Already Jesus had some interesting stories about the owner-agent problem.

Anyway a quick look at FAZ:

The British industry drives in reverse gear (http://www.faz.net/aktuell/wirtschaft/wandel-zur-dienstleistungswirtschaft-britische-industrie-faehrt-im-rueckwaertsgang-11933625.html)

http://www.faz.net/polopoly_fs/1.1933353!/image/2863832677.jpg_gen/derivatives/default/2863832677.jpg

Starke Industrie in Deutschland

Ganz anders das Bild in Deutschland: Seit 1997 hat die Industrie den Anteil am Bruttoinlandsprodukt auf fast 23 Prozent ausgebaut und nach einem Rckgang in der Finanzkrise in den vergangenen Jahren wieder gesteigert. Italien kommt dagegen auf 16 Prozent, Spanien auf 13 Prozent, Frankreich liegt wie Grobritannien leicht oberhalb von 10 Prozent.

Durch seine starke Industrie sei Deutschland besonders gut durch die Krise gekommen, findet das Institut der deutschen Wirtschaft (IW) in Kln. Das liege vor allem am Export. Zudem sind die Standortbedingungen fr die Industrie hierzulande als gut bis sehr gut zu beurteilen, sagte Karl Lichtblau vom IW Kln der Frankfurter Allgemeinen Sonntagszeitung

While it is difficult to know exactly why things became how they are now the forces of free trade and the ever growing economic integration of Europe and the world do certainly play a role. The research in the last decades on the economic geography have shed quite a bit of light on it's effect and have also explained the processes behind economic clusters. As the theory predicted the increasing concentration outcomes like sock city (http://news.bbc.co.uk/2/hi/business/4287398.stm) and many, many others can be seen as fine prediction.

So in a sense the industrial cluster of Germany has more and more become the industrial heartland of Europe with a relative close integration with mostly southern and eastern neighbours and regions. I would love to see Europes regions mapped with those criterions. So to some extent the initial advantages of Germany were leveraged while in other traditional industrial powers the spiral went into the other direction. The different paths taken by Italy and Germany are especially interesting.

P.S: An older article about 13 reasons for Germanys strenght (http://www.faz.net/aktuell/wirtschaft/unternehmen/erfolgsgeheimnisse-deutschlands-staerke-hat-13-gruende-11925735.html)...

P.P.S: To some extent it is also no surprise why we have certain topic clusters here in the SWC - with more active French and Italian posters in the thread we would have more posts and discussion about the specific economies.

----

Without much comment an article about a topic already discussed here:

http://www.faz.net/polopoly_fs/1.1924685!/image/380350002.jpg_gen/derivatives/default/380350002.jpg

Fuchs

10-22-2012, 10:46 AM

Concerning the German housing data; keep in mind

(1) rents are regulated and cannot grow quickly, so it would make sense to look at whether rents grow too slowly rather than houses rising too quickly in price.

(2) always be careful about graphs of this kind, with indexing at a specific date

(3) house property may rise in value due to restricted ground for construction - especially in those cities. City councils know about demographics and do not develop many new areas for settlement any more. A rising price as reflection of a scarcity is fine and not a bubble.

(4) the interest rate data is about requested loans, not granted ones

(5) housing in cities such as Munich, Frankfurt and Berlin is not only very different to housing in towns nearby, but also very atypical for German housing in general.

(6) Income levels in business are higher in Frankfurt and Munich than elsewhere, in order to compensate for higher cost of living there.

(7) a short-term look back only to the beginning of the crisis is a dubious choice. I'd rather ask for data reaching back to '90.

Surferbeetle

10-22-2012, 05:54 PM

The difficulties of assembling and steering an effective organization/bureaucracy during turbulent times...:wry:

Can the EU satisfactorily and sustainably address today's issues of concern for it's own citizens via an integrated financial framework, an integrated budgetary framework, an integrated economic policy framework, democratic legitimacy and accountability? What is it's current sphere of influence as compared to the hopes and dreams of 'the elite'? Is there a significant deficit of democracy? What about privatization and the application of market forces?

Some of today's reading...

TOWARDS A GENUINE ECONOMIC AND MONETARY UNION Report by President of the European Council, Herman Van Rompuy, Brussels, 26 June 2012, http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/131201.pdf

The REAL Eurozone Crisis Is About Much More Than Debt, Business Insider, http://www.businessinsider.com/europes-next-big-crisis-democracy-2012-10?op=1#ixzz2A3AgZ2Jf

Welcome to Berlin, Europe’s new capital, By Gideon Rachman, October 22, 2012 4:48 pm, Financial Times, www.ft.com

Berlin does not feel like an imperial city. The new government buildings – the chancellor’s office, the Bundestag and the foreign ministry – have all been designed with plenty of glass and natural light, to emphasise transparency and democracy. The finance ministry is, admittedly, housed in the old headquarters of the Luftwaffe. But most of the grandest architecture – Unter den Linden and the Brandenburg gate – is a legacy of the Prussian kings. Modern Berlin presents a more welcoming face, and has become a magnet for tourists and teenagers.

Yet while the German capital has deliberately eschewed the trappings of imperial power, the fact is that Berlin is increasingly the de facto capital of the EU. Of course the EU’s main institutions – the commission and the council – are still based in Brussels. But the key decisions are increasingly made in Berlin.

High fiscal multipliers undermine austerity programmes, October 21, 2012 3:25 pm by Gavyn Davies, Financial Times, www.ft.com

Much therefore hinges on whether Blanchard and Leigh are right. Their methodology is certainly not watertight. Cross-sectional country studies are notoriously unreliable. As demonstrated by Chris Giles in the FT, if we exclude Greece and Germany from the 28 countries in their study, then their result largely melts away. It is also sensitive to the time period chosen, and does not appear to work for other similar periods. It is surely asking a lot to change the entire course of global economic policy on the basis of a result as flimsy as that.

Having said that about this particular study, there are other, stronger, reasons for believing that fiscal multipliers are higher than many governments have been assuming. In the 1950s and 1960s, when Keynesianism was at its height, the multiplier was generally assumed to be around 2. Then in the 1990s and 2000s, these estimates gradually dropped, leaving the consensus range around 0.5-0.7 by 2009.

European Bank For Reconstruction And Development 2011 Annual Report, http://www.ebrd.com/pages/research/publications/flagships/annual.shtml

The Annual Report 2011 shows how the EBRD continued to provide strong, sustained support across sectors from central Europe to central Asia, as well as Russia and Turkey, during turbulent times. At the same time as supporting its existing countries of operations in 2011, the EBRD began to lay foundations for future investment in the southern and eastern Mediterranean (SEMED) region and to assist those countries affected by uprisings to make the transition to open, democratic market economies.

European Bank For Reconstruction And Development Search at Bloomberg, http://topics.bloomberg.com/european-bank-for-reconstruction-and-development/

Putin Balks at Pension Threats as Aging Russians Hold Trump Card, by Henry Meyer - Oct 21, 2012 4:01 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-10-21/putin-balks-at-pension-threats-as-aging-russians-hold-trump-card.html

Sultankina -- and the legion of Russians who grew up with the cradle-to-grave state care of the Soviet Union -- are holding Putin, 60, hostage to his election promise to keep the retirement age unchanged six months after he returned to Russia’s presidency.

Pension spending will rise to 14 percent of gross domestic product by 2030 from 9 percent, Standard & Poor’s said. There is an “urgent need” for measures to curb the rise in retirement costs, according to VTB Capital. Government debt may rise to 70 percent of GDP by 2030 from about 10 percent this year, if the pension deficit is financed through borrowing, it said.

Firn

10-22-2012, 06:59 PM

Back for a quick view at very important topic of the Keynsian multiplier.

First of all I should say that one really has to beware of the law of small numbers and sheer complexity of the issue. Our world gives you just a certain amount of countries, even fewer with good enough and accessible data and even our timeframe is sadly restriced by nature. Economist are said to have a deep envy for physicists with their elegant math and relative experimental ease but this is the way the cards were dealt. Good old Carl might have told us quite a bit about a foggy game of cards full of friction. :D

From the same blog (http://blogs.ft.com/gavyndavies/#axzz2A3J2xWc8)

...

The opposite is also true. Now that interest rates are stuck at the zero lower bound, central banks cannot reduce policy rates when fiscal policy is tightened, and the multiplier is correspondingly increased.

Kudos to the Keynesians for predicting this in advance, but in many ways this is a fairly standard result from dozens of econometric simulations and it should not really have come as a total surprise to policy makers.

So how high should we assume the multiplier is today? [2] That will always be subject to great uncertainy. A very important paper earlier this year by Summers and DeLong, analysed in this earlier blog, argued that the multiplier should be assumed to be a minimum of 1.0 under present circumstances. It explains very clearly why the multiplier should be much higher than normal when the economy is stuck in a recession with interest rates at the zero lower bound. [3] Another noteworthy empirical paper, by Auerbach and Gorodnichenko, says that the multiplier during recessions might be around 1.5-2, while in expansions it drops to zero

No-one really knows for sure. However, what does not seem plausible is that the multiplier, in the current recession, is as low as governments assumed when they embarked on their austerity programmes in 2010. And that will make austerity much harder to sustain.

Now economy is a science and a successful prediction is a bit of the holy grail. Einstein got his nobel, strangely enough his only one, mostly for this paper (http://www.zbp.univie.ac.at/dokumente/einstein1.pdf) containing a key prediction which was later found out to be true.

http://upload.wikimedia.org/wikipedia/commons/thumb/f/f5/Photoelectric_effect.svg/170px-Photoelectric_effect.svg.png

So I'm a bit shocked by one observation in this blog which almost makes the following sound like it is no big deal:

Kudos to the Keynesians for predicting this in advance, but in many ways this is a fairly standard result from dozens of econometric simulations and it should not really have come as a total surprise to policy makers.

Wasn't and isn't that our key problem? That standard economists using standard theory with standard models predicted that under certain circumstances there is a strong negative multiplier attached to austerity and that still policy makers acter later as if it was a total surprise?

Firn

10-22-2012, 07:03 PM

@Fuchs

Points 2), 3) and 7) are especially important and are usually the exact questions I usually ask.

Fuchs

10-22-2012, 07:50 PM

That standard economists using standard theory with standard models predicted that under certain circumstances there is a strong negative multiplier attached to austerity and that still policy makers acter later as if it was a total surprise?

There are more problems, incompetent politicians are just a standard problem that persists.

I myself was not an advocate of stimulus, but then again as a German that's a sensible position even as of now - for Germany. We export and import so much that our stimulus would largely be exported, too. We depend on foreign demand because our relatively huge manufacturing is not oriented at covering our demand, but at world-wide demand for certain goods (steel, chemicals, cars, machinery mostly - far in excess of our own demand for these).
Our own stimulus (~cash for clunkers, but earlier than the U.S. program by several months) was a mere gift to the industry, and again not even well-aimed (most cars disposed of this way were replaced by small cars, which play a minor role in German automotive production).

I did (in 2009 (http://defense-and-freedom.blogspot.de/2008/12/military-procurement-in-20092010.html)) point at the possibility to get a long-term debt-neutral stimulus, though.
The idea had quite a career (http://defense-and-freedom.blogspot.de/2009/02/defense-stimulus-topic-and-this-blog.html) in the months thereafter (in variations), albeit no doubt totally independent of my text.

This '09 opinion of mine addresses one concern that applies to Keynesian counter-cyclical spending: Politicians cannot be trusted to pay down debt in good times (any more - this was realistic only until the 70's afaik). So Keynesianism cannot really work on the macro level. On top of that, people are dumb. A stimulus working wonders in a crisis would no doubt lead many to believe it's good economic policy in general and to demand one even during weak per capita growth.
Remember, people are dumb enough to buy into Laffer curve, trickle down economics, the "huge trade surplus = good" nonsense, for leaning more capital-based pension schemes in a country with an already large trade surplus etc etc. Human stupidity is reliable.

So even a multiplier like 2 does not prove in itself that a huge stimulus is a good idea.
Then again, the argument that government would hardly squander the money so hard that it wouldn't pay off despite the really small interest rate for inflation-indexed U.S. bonds holds water.

Krugman -the loud proponent of stimulus- is a short-term-only economist. He is a true Keynesian in that he doesn't care about the long term. What he wants is to set the U.S. economy back on track ASAP, sans the bubble.
Too bad that this track has still walls ahead, and picking up steam on this route will only lead to the next crash.

The U.S. needs to get back to its natural GDP per capita trajectory, but in a sustainable way. And I don't mean green stuff or energy.
I mean savings and investment. There is no way how the U.S. economy can justify and sustain the material standard of life in the U.S. without a vastly higher level of capital investment (both private and public) enabling a vastly higher manufacturing output per capita.
This in turn means a higher savings rate is a must, for this higher level of investment will not be possibly enabled by even much higher trade balance deficits (=net capital import).

Right now the U.S. is living off its fat, foreign generosity - and forgets to sustain itself. The financial market crisis was but a symptom of the inherently ####ed up allocation of resources in the U.S..
The financial sector was able to siphon a lot of resources for itself and proceeded to waste them with its inherent incompetence.

The real problem looming in the background was that the resource allocation was ####ed up. Income distribution sucks, capital investment sucks, savings rate is ridiculous.

Bad news; neither candidate has a clue, nor do their parties and most likely even their advisors have no real sensitivity for the issue.

Finally some more EU context; the UK did the same, ever since Reagan/Thatcher, but much more so since Blair.

Surferbeetle

10-22-2012, 10:25 PM

Reducing things to a binary choice, i.e. economics is or is not science, is perhaps a form of fast versus slow thinking? :wry: :)

Ya'll already know this, but for my own edification I'll restate it: Science and philosophy are interlinked; science is about formulating and testing hypotheses while philosophy is the study of problems relating to mind/existence/reality/values. Both rely on systematic approaches to characterization of the subject at hand.

With respect to the science component of economics we have come further than from where we started but we have some distance yet to travel, I think, before we can conclusively hang our hat on the predictions resulting from many of our models and theories...Keynesian or Hayek-ian.

Let's run a quick compare/contrast between physics and economics and see what we can see from this particular armchair...

Newtonian physics models commonly encountered systems (human scale) in states of equilibrium and in motion via the study of statics (http://en.wikipedia.org/wiki/Statics) (sum of all forces x,y,z equal zero) and the study dynamics (http://en.wikipedia.org/wiki/Dynamics_(mechanics)) (sum of all forces x,y,z equal mass x acceleration), respectively. Quantum mechanics/physics (http://en.wikipedia.org/wiki/Quantum_mechanics) is focused on atomic scale phenomena.

As I understand economics, commonly encountered systems are modeled at equilibrium via microeconomics (http://en.wikipedia.org/wiki/Microeconomics) and macroeconomics (http://en.wikipedia.org/wiki/Macroeconomics). This is not to say the associated math is any simpler than the math associated with physics as my Springer-Verlag series on financial engineering (stochastic calculus for finance I & II, stochastic differential equations, and monte carlo methods in financial engineering) attests :eek:.

Both physics (applied) and economics attempt to describe the how to of conservation/efficient allocation of energy/resources. In general, large groups of folks tend to get 'touchy' when there is a discussion regarding prioritization and allocation of resources, but hopefully us science types can stick to science side of things and teach each other more than we know individually? ;)

Fuchs

10-23-2012, 11:05 AM

Modelling isn't the whole of economics. Many insights exist only quantitatively, or have normative character.

The quantitative models deserve criticism for their inability to create breaks over the timeline (such as a financial crisis), but it's doubtful whether they were ever meant to simulate such things.

The Keynesians of today still argue a lot with ultra-simple models such as IS-LM which already offer almost all insights without any quantitative input (such as the angles or curves of the lines).

Economics so far are good enough at pointing out that something is not sustainable and in which direction the change is gonna happen sometime *wink*equilibrium models, thank you*/wink*. There will probably never be an economic model that predicts the timing of the crash.

Much blame has to be applied to economists in practice, some to people who have inflated expectations of what economic science has on offer and only a little bit of blame is actually deserved by the economic models.

One of the tricky things in economics is that you can get 36 of 37 influence factors right and still be 180° wrong in your conclusions. Economists who get ambitious predictions right were lucky to err on influences that did influence the outcome much into the other direction. Apparently nobody can get everything right these days with so many influence factors at work, dozens of models relevant to a specific question.
Just look at Mankiw; whenever his conclusion sounds a lot like right wing positions, he omitted at least one, more often about half a dozen influence factors.

Firn

10-23-2012, 05:28 PM

Well it is certainly an interesting discussion with quite a livid mix. Personally I see Quantum physics pretty much as the base of our knowledge and the fundamentals of our world. Apart from other issues it deals with the smallest parts/elements/? we know, Higgs&Co. A science like chemistry takes over some of the matter in a different way and it does so because it makes scientific and practical sense. Just like you don't have to worry about Heisenberg if you want to hit a ball chemistry operates at certain levels of abstractions and does most of the time don't have to worry about other not so relevant things. Biology and other physical sciences work in a similar way mostly in a field with only the necessary level detail. In the end it is just a smart way to operate as long as there is enough interaction and everybody obeys the laws of scientific research. Actually this sounds almost like an old German principle of war to make our mess complete :D

From the Wiki I can see that there are quite a bit of different maps on the issues, in this case organized in different and certainly more sensible way.

http://upload.wikimedia.org/wikipedia/commons/thumb/0/04/Partial_ordering_of_the_sciences_Balaban_Klein_Sci entometrics2006_615-637.svg/450px-Partial_ordering_of_the_sciences_Balaban_Klein_Sci entometrics2006_615-637.svg.png

Anyway it is not a surprise that we have both a Micro and a Macro field in economy with quite a bit of effort to integrate both fields, mostly by putting Macro on a firm Micro basis.

What surprised me, to be honest, was the fact that how good really simple, well-known macro models worked out in our current crisis. It is so obvious that we have to think METT-TC, taking the circumstances into considerations that I really should not need to write it. But if Kahnemann and personal experience have showed me anything then it is all to often so that sometimes our intuition moves too fast in complex situations and we take too much intellectual liberty, trying to free us to some degree from the dreadful chains of science. *

On a sidenote, Fuchs, what can we do if the people which always seem to lead us are "dumb"? Leaving apart my observation that in this case there is not much hope anyway there remains a key question: Should we be fearful to do the right thing now only because there might be a good chance that people take the wrong lesson from it?

*see the first paragraph

Fuchs

10-23-2012, 05:46 PM

On a sidenote, Fuchs, what can we do if the people which always seem to lead us are "dumb"?

It would be nice if they got some smart competition, for starters.

Current republics use a wrong path to power: Those who are in power are so not for their expected utility in this position, but because they won power struggles by gaining allies, pushing back opponents and getting the timing of their actions right.
The election that gives them executive or legislative powers in the end is merely a confirmation.
Such a scheme leads to top politicians with great skill in political infighting and little skill that's of actual use to their constituency.

The German constitution mandates that all parties are democratic inside, that is power flows upwards. The practice is the opposite; the elites decide and the pawns nod. It's not by pure chance that the newest party, Piraten, is quite radical about basis democracy (for example, their party conventions are online conferences where every member has a vote). A speaker of theirs has also criticised the Berlin parliament well for its nodding, and proposed to delete the passage which empowers the cabinet to propose laws from the state constitution. His complaint was that bureaucrats write the laws, and parliament merely nods.
The reactions from the other parties were dismissive and provoking early on and became increasingly silent during the speech.
So forcing real bottom-up power flows could at least push from power-mongering elites towards more populism 8maybe good, maybe bad - it depends).

Another possibility would be to force more specialisation (http://defense-and-freedom.blogspot.de/2010/03/lets-improve-our-democracy-work-in_22.html)on politicians in order to encourage at least specialised competence. A newspaper chief editor (of one of our top 30 newspapers) once bluntly stated to me that all journalists are universal dilettantes. I suppose most politicians are the same.

In the end, we cannot expect better performance if the principal doesn't supervise and discipline the agent (http://en.wikipedia.org/wiki/Principal_agent) more thoroughly.

Surferbeetle

10-24-2012, 03:30 AM

Isn't it interesting that the 'law' of one price (http://en.wikipedia.org/wiki/Law_of_one_price) does not apply to EU interest rates (http://www.ecb.int/stats/money/long/html/index.en.html) (north only, south only, EU-10, EU-17, EU-27 etc)?

Economics, although very cool, is not yet at a point/distance in it's evolution equivalent to that of the field of chemistry or physics. For example chemistry concepts such as stoichiometry (http://en.wikipedia.org/wiki/Stoichiometry), equilibrium constants (http://en.wikipedia.org/wiki/Equilibrium_constant), reaction quotients (http://en.wikipedia.org/wiki/Reaction_quotient), and the Gibbs Free Energy Equation (http://en.wikipedia.org/wiki/Gibbs_free_energy) are able to describe and predict 'reality' more consistently than economic concepts can. Similarly physics concepts such as gravitation (http://en.wikipedia.org/wiki/Gravitation) (both the newtonian and the einstein-ian/relativity approximations), electromagnetism (http://en.wikipedia.org/wiki/Electromagnetism), strong (http://en.wikipedia.org/wiki/Strong_interaction) and weak nuclear forces (http://en.wikipedia.org/wiki/Weak_interaction) are able to describe and predict 'reality' more consistently than economic concepts can. Humanity is fortunate that we are hardwired to continually strive and explore the 'boundaries', and so I believe that the field of economics will continue to move forward and improve it's descriptions and predictions.

As to the centrality of models, is not everything but a representation/shadow of reality/truth?

Perhaps Spaten Optimator (thank you economics and globalization), Bertrand Russell on the 'reality' of a kitchen table (http://www.ditext.com/russell/rus1.html), and Kipling get us closer to seeing truth...:wry:

Rudyard Kipling, If

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,
Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a Man, my son!

Firn

10-24-2012, 07:57 PM

This trial (http://www.bbc.co.uk/news/world-europe-20025626) is a bit of a summary of the problem Italy has with rules. Usually, often wrongly and somtimes rightly myriads of rules are sidestepped and soften in daily use and not too rigidly enforced. On other occasions they are taken as a judical weapon. Even a honest guy can have a hard time to avoid any error when dealing with our terribly complicated laws and if there is a combination of interest and power it can have dire consequences.

In this case I get the feeling that some had to be the scapegoat and it is certainly not the first time it happened. The result are often surprisingly harsh punishment, especially compared to the usual stuff.

Surferbeetle

10-26-2012, 03:08 PM

This trial (http://www.bbc.co.uk/news/world-europe-20025626) is a bit of a summary of the problem Italy has with rules.

"...eppur si muove."

It's 10 P.M. In Frankfurt. Do You Know Where Your Gold Is?, by Lam Thuy Vo, October 25, 2012 3:24 PM, http://www.npr.org/blogs/money/2012/10/25/163618547/its-10-p-m-in-frankfurt-do-you-know-where-your-gold-is

Just this week, Germany's federal court told the Bundesbank to prove that the country's massive gold reserve actually exists.

This isn't as random as it seems; more than half of Germany's gold reserves are held at the New York Fed, and hasn't been inspected by the Germans for decades. This dates back to the '50s and '60s, when foreign governments could still exchange dollars for gold, and often parked their gold reserves in New York.

So over the next three years, 150 tons of German gold will be shipped back to Germany for inspection.

Berlusconi Gets 4-Year Sentence for Tax Evasion, By THE ASSOCIATED PRESS, Published: October 26, 2012, http://www.nytimes.com/2012/10/27/world/europe/berlusconi-convicted-and-sentenced-in-tax-fraud.html?hp&_r=0

An Italian court on Friday convicted former Prime Minister Silvio Berlusconi of tax fraud and sentenced him to four years in prison.

In Italy, cases must pass two levels of appeal before the verdicts are final. Mr. Berlusconi was expected to appeal.

Firn

10-28-2012, 06:51 PM

"...eppur si muove."

Indeed, at last (http://www.guardian.co.uk/world/2012/oct/26/silvio-berlusconi-sentenced-four-years) but sadly him going to jail will be the least likely outcome...

An uncle of mine, who was the head of a university institute of criminal law had and still has a rich treasure of stories about peculiar law matters. Sometimes fact is stranger then fiction although in Berlusconi case the outcome seems to be just too predictable.

Surferbeetle

11-05-2012, 02:13 PM

Fitch raises Turkey to investment grade, by Daniel Dombey in Istanbul, November 5, 2012 12:57 pm, Financial Times, www.ft.com

Monday’s decision to upgrade the country’s long-term foreign debt to BBB- from BB+ is in effect a vote of confidence in Turkish officials’ efforts to rebalance the economy away from the breakneck growth of recent years and towards a more export-driven rather than domestic-led demand model.

In a nod to the political tensions facing Turkey over the fighting in its neighbour Syria – with which Ankara has frequently exchanged cross-border fire in recent weeks – Fitch said it was assuming the country would not be drawn into a “full-scale military conflict”, an event that could lead to a downgrade.

It also assumed that Turkey would not be suspended from its membership in the inter-governmental Financial Action Task Force in an ongoing dispute over Ankara’s failure to pass and implement terrorist financing legislation – or that if the country was suspended, that it would “not precipitate countermeasures that materially adversely affect the capacity of Turkish entities to access international financing”.

Firn

11-05-2012, 05:44 PM

As usually there is much ado about rather random short-term movement (http://www.finanzen.net/video/Unsicherheit_vor_US_Wahlen_drueckt_die_Kurse-Video_7625) of the stock markets. In this case the US elections are to be blamed for the poor performance of the European stocks.

At least we have a scapegoat lined up if things get not better, either way things turn out. :D

Surferbeetle

11-06-2012, 02:19 PM

@Firn

Fair...some of us have been blaming you folks. :wry:

The volatility of late has been helpful for those of us surfing small short-term trades however, and the 18th National Congress on the 8th of November looks to be interesting as well.

China's Communist Party faces change, BY: BILL SMITH From: AAP November 06, 2012 7:45PM, The Australian, http://www.theaustralian.com.au/news/breaking-news/chinas-communist-party-faces-change/story-fn3dxix6-1226511747473

The party will use the highly orchestrated event to persuade the nation's 1.3 billion people that it can provide another 10 years of economic growth and social stability while curbing corruption and nepotism.

It must repair the damage to its public image from the scandal surrounding deposed regional leader Bo Xilai, once tipped for a top leadership post, and overcome a broad lack of trust and the public perception that all party officials are corrupt.

Its task became harder after the New York Times reported that the extended family of Premier Wen Jiabao, who was once seen by optimists as China's best hope for political reform, had amassed assets worth $US2.7 billion ($A2.62 billion).

James MacKintosh over at the FT mentions some US election trading & investing strategies in his 30 October 2012 article, US political stereotypes and investing. www.ft.com

I have made a small concentrated bet on what I think the outcome of the intersection of the US Election and Chinese National Congress will lead to for one section of the global economy. I used my reading, the IMF's most recent report, tangible book value (and the associated delta), balance sheet, 52 week high/low stats, as well as intersection points of the simple moving average and share price over the last year...oh yeah I also scattered some chicken bones and wore a voodoo top hat on while doing so...my b school teachers would not be amused :wry:

We will see...

Dayuhan

11-06-2012, 10:38 PM

http://www.reuters.com/article/2012/11/06/column-markets-saft-idUSL1E8M5BLF20121106

Europe needs a weak euro

...Data released last week shows euro zone manufacturing shrinking for the 16th month in a row, but the real horror show last week was in an ECB survey of bank loan officers. Compared to the second quarter, loan conditions were 15 percent tighter in July-August, with banks charging more, demanding more collateral and being especially tough on riskier loans...

Fuchs

11-06-2012, 10:58 PM

That's BS.
A quick check for whether a country (or currency area) might have a too strong currency is the trade balance.
A substantial surplus would answer back "No".

http://www.tradingeconomics.com/charts/euro-area-balance-of-trade.png?s=xttbez
http://www.tradingeconomics.com/euro-area/balance-of-trade
(retrieved today)

Economics : Reuters
1 : 0

Firn

11-07-2012, 07:15 PM

@Surferbeetle: :D

Personally I find it always amusing when I read in the papers why the stock market has fallen or risen. In any case I blame the US for todays fall of European equity. :wry:

@Fuchs: Indeed the balance of trade as a whole is like it is. Still there are some areas/nations which would benefit from a weaker Euro and yes of course are there strings pulling downwards attached to this policy.

For example I don't like to suffer too much of a hit in purchasing power. From what I have heard, in short from more or less reliable stories, people in North Italy/Central Europe are slowly getting back or want to get back into equities.
If you look what you get from your local bank and from dividens from solid companies it is difficult to to find too many arguments against it, despite all current problems...

Til (europeiske?) ungdommen (http://www.youtube.com/watch?v=gKZa6hNFouw&feature=related) which is fortunatly not 'Kringsatt av fiender'.

Surferbeetle

11-10-2012, 04:18 PM

Good to see that the healing continues and that Sissel is part of that process.

Norway Proposes to Raise $17 Billion in 2013 Long-Term Loans, By Josiane Kremer - Nov 9, 2012 5:35 AM MT, Bloomberg News, http://www.bloomberg.com/news/2012-11-09/norway-proposes-to-raise-17-billion-in-long-term-loans-in-2013.html

The increased bond sales “should be positive for the Norwegian krone,” Knudsen said. “We often hear that investors are telling us the market is too small, so everything that works in the opposite direction should be well received.”

The krone was little changed at 7.3006 against the euro by 12:22 p.m. in Oslo after reaching a two-month high earlier today. The currency, which has offered refuge to investors fleeing Europe’s debt woes, hit a nine-year high versus the euro in August. It fell 0.3 percent versus the dollar at 5.7388.

Statoil recently (this past spring/summer) sold it's Gas/Fuel Station business to Couche-Tard of Canada for around 2.8 billion USD. This seems to be offset by Johan Sverdup (North Sea), Skugard (Barents Sea), Havis (Barents Sea), Peregrino South (Brazil), and Zafarini (Tanzania) and perhaps funding some work in the Marcellus Shale deposit in the US along with some future work in China?

Along those lines (segueing to natural gas turbines and more) I note that Peter Löscher has presented and will soon implement an approximately 6 billion + USD restructuring plan at Siemens...it appears that China has been a fierce competitor in solar and so it's time to get back to basics. Although the volatility in the share price has been useful for some, as compared to that of GE for instance, it's always interesting to watch the engineering giants from just a pure business/adaptation/evolution/struggle/innovation vantage point as well. :wry:

Surferbeetle

11-13-2012, 02:41 PM

Global natural gas prices vary considerably, SEPTEMBER 30, 2011, EIA, http://www.eia.gov/todayinenergy/detail.cfm?id=3310

http://www.eia.gov/todayinenergy/detail.cfm?id=3310 Graph of Natural Gas Spot Price (USD/mmbtu) for US-Henry Hub, UK- National Balancing Point, and Japanese average LNG import price

Eon warns on conventional power, By Pilita Clark in London, November 13, 2012 10:28 am, FT, www.ft.com

Eon, Germany’s biggest utility by sales, is reviewing its earnings forecasts for 2013 after warning that gas-fired power stations have become “barely profitable to operate” because of weak economic conditions and a surge in renewable energy.

World Energy Outlook 2012, EIA, http://iea.org/publications/freepublications/publication/English.pdf

A new global energy landscape is emerging

The global energy map is changing, with potentially far-reaching consequences for energy markets and trade. It is being redrawn by the resurgence in oil and gas production in the United States and could be further reshaped by a retreat from nuclear power in some countries, continued rapid growth in the use of wind and solar technologies and by the global spread of unconventional gas production. Perspectives for international oil markets hinge on Iraq’s success in revitalising its oil sector. If new policy initiatives are broadened and implemented in a concerted effort to improve global energy efficiency, this could likewise be a game-changer. On the basis of global scenarios and multiple case studies, this World Energy Outlook assesses how these new developments might affect global energy and climate trends over the coming decades. It examines their impact on the critical challenges facing the energy system: to meet the world’s ever-growing energy needs, led by rising incomes and populations in emerging economies; to provide energy access to the world’s poorest; and to bring the world towards meeting its climate change objectives.

Taking all new developments and policies into account, the world is still failing to put the global energy system onto a more sustainable path. Global energy demand grows by more than one-third over the period to 2035 in the New Policies Scenario (our central scenario), with China, India and the Middle East accounting for 60% of the increase. Energy demand barely rises in OECD countries, although there is a pronounced shift away from oil, coal (and, in some countries, nuclear) towards natural gas and renewables. Despite the growth in low- carbon sources of energy, fossil fuels remain dominant in the global energy mix, supported by subsidies that amounted to $523 billion in 2011, up almost 30% on 2010 and six times more than subsidies to renewables. The cost of fossil-fuel subsidies has been driven up by higher oil prices; they remain most prevalent in the Middle East and North Africa, where momentum towards their reform appears to have been lost. Emissions in the New Policies Scenario correspond to a long-term average global temperature increase of 3.6 °C.

The tide turns for US energy flows

Energy developments in the United States are profound and their effect will be felt well beyond North America – and the energy sector. The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity – with less expensive gas and electricity prices giving industry a competitive edge – and steadily changing the role of North America in global energy trade. By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s) and starts to see the impact of new fuel-efficiency measures in transport. The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030. This accelerates the switch in direction of international oil trade towards Asia, putting a focus on the security of the strategic routes that bring Middle East oil to Asian markets. The United States, which currently imports around 20% of its total energy needs, becomes all but self-sufficient in net terms – a dramatic reversal of the trend seen in most other energy- importing countries.

Firn

11-13-2012, 10:32 PM

Ulenspiegel

11-14-2012, 09:43 AM

I do own EON stock, bought this year, and I just read of the mighty fall of it today. Over -10% is nothing too usual for a days work. I will have to give it a closer read to draw my conclusions. So far I tend to buy as I don't think that much has changed since I have done my in-depth analysis. Thanks for the link.

"Eon, Germany’s biggest utility by sales, is reviewing its earnings forecasts for 2013 after warning that gas-fired power stations have become “barely profitable to operate” because of weak economic conditions and a surge in renewable energy. "

The interesting question for me still is, why does EON and the other three of the "Mighty Four" (G4) do not have a larger share of renewable energy (=profit); amost 30% of the electricity net production comes from reneables, the G4 have only a share <7%. Could it be that EON is a nice example of faulty strategy, of a organisation that was used to a simple business model and then became lazy?

Fuchs

11-14-2012, 09:54 AM

Firn

11-14-2012, 11:37 AM

Look at how renewable energies are being subsided; a fixed prices system.

Small providers can deliver renewable energy electricity into one of the big four's nets and get a high, fixed price for it.

The big providers can't do this with their own net, as they would pay themselves. In the end, renewable energy electricity in their own area would have the actual price, and they love their old nuclear powerplants with all their thoroughly hidden and externalised costs sooo much.

Moreover, it doesn't make sense to go to another big provider's area and infuse renewable energy electricity there. They could take revenge and do the same in your area, and there you're effectively back at the original case of selling to yourself.

What they have is for PR and for having competence cores about the stuff.

It is certainly interesting how the variable incentives for renewable energy influence the market behavior. This is of course the E.ON CEO speaking, but it seems the alignment of the incentives is a problem as well as the insufficient integration of the national and European grids.

Die Zeit has an interview with Johannes Teyssen (http://www.zeit.de/2012/26/Interview-Teyssen/seite-3). DIE ZEIT, 21.6.2012 Nr. 26

ZEIT: Dass einzelne Stadtteile vom Netz abgeklemmt werden knnten, klingt beunruhigend.

Teyssen: Es gibt in Europa genug Strom, auch in Deutschland. Trotzdem werden wir in den nchsten Jahren regionale, aber beherrschbare Engpsse erleben. Natrlich werden wir Stromleitungen und neue Kraftwerke bauen mssen. Technisch ist all das organisierbar. Die Frage wird sein, ob wir unsere Energiesysteme effizient und bezahlbar umbauen. Heute knnen Sie zum Beispiel einen Windpark bauen, wo es gar kein Netz gibt, und bekommen den Strom auch dann bezahlt, wenn er gar nicht eingespeist werden kann.

ZEIT: Welche Rolle spielt dabei der Emissionshandel?

Teyssen: Der ist leider vllig verkommen.

ZEIT: Warum?

Teyssen: Weil eine Tonne CO₂ im Emissionshandelssystem nur noch rund sechs Euro kostet, also viel zu wenig fr einen Investitionsanreiz. Gleichzeitig zahlen wir in anderen Systemen, beispielsweise bei der Frderung erneuerbarer Energien, mehrere Hundert Euro pro Tonne vermiedenes CO₂. Das ist absurd.

About the overall energy mix of E.ON which is of course does not operate only in Germany.

ZEIT: Reden wir ber die erneuerbaren Energien. Deren Wachstum ist fr ein Unternehmen wie E.on, das immer noch mehr als 80 Prozent seines Stroms aus konventionellen Energien erzeugt, ein richtiges rgernis, oder?

Teyssen: Nein. Wir haben 3.000 Megawatt Wasserkraftstrom und inzwischen sogar noch mehr installierte Leistung bei den Windkraftanlagen, nmlich nahezu 4.000 Megawatt. Wir sind einer der Weltmarktfhrer bei den erneuerbaren Energien.

ZEIT: Aber nicht in Deutschland. 198 Megawatt Windkraft haben Sie in Deutschland, diese Leistung entspricht rund einem Prozent der Leistung aller deutschen E.on-Kraftwerke.

Teyssen: Wir bauen vor Amrum fr rund eine Milliarde Euro einen der grten Offshore-Windparks in der deutschen Nordsee. Abgesehen davon: Wo ist das Problem? Ist es fr den Klimaschutz wirklich wichtig, ob ein Windpark in dnischen, britischen, schwedischen oder deutschen Hoheitsgewssern gebaut wird? Weltmarktfhrer wird man in der Welt, nicht in Deutschland.

Their market share in Germany will fall, which is of course one of the reasons they are investing in other geographical areas as well as trying to get a stronger foothold in the renewable sector.

ZEIT: Die Energiewende findet aber in Deutschland statt.

Teyssen: Aber Deutschland kann die Welt nicht retten. Nicht umsonst beschreibt das Energieprogramm der Bundesregierung, wie sich in Deutschland ein klimavertrgliches Energiesystem im europischen Kontext entwickeln lsst. Ohne die Solidaritt und die Einbindung in Europa geht es nicht. Wer bei der Energiewende national denkt, denkt zu klein. Deshalb bleibe ich dabei: Es ist richtig, dass wir als E.on dort in erneuerbare Energien investieren, wo wir die schnellsten Lernerfahrungen machen knnen. Und das geht bei der Windenergie etwa in den USA. Die Erfahrung, die wir da machen, bringen wir nach Deutschland zurck.

ZEIT: Dazu zwingen Sie die Umstnde. Weil Kernkraft und Kohle laut offiziellem Kurs keine groe Zukunft mehr haben, muss E.on grner werden oder kleiner.

Teyssen: Beides. Ich bin ich davon berzeugt, dass unser Marktanteil in Deutschland zwingend und nachhaltig sinken wird. Es ist nicht mglich, dass wir in einer strker dezentralisierten Energiewelt den gleichen Marktanteil halten, etwas weniger als 15 Prozent in der Stromerzeugung. Aber unabhngig vom Marktanteil, muss E.on sich zu einem Konzern weiterentwickeln, der noch strker als bisher auf dezentrale und erneuerbare Energien aufbaut.

No surprise that he is against the forced intake at a fixed price of every watt of renewable power and there are good arguments on his side. Said that this principle was the key to quickly unlocked the market for green energy. From a owners point of view and a fan of technological progress I hope that the increasing competivness of the renewable sector will lead to a decrease of the fixed price and that E.ON is able to increase it's earnings per share.

ZEIT: Im Prinzip haben Sie nichts gegen das EEG, auch nicht gegen den Einspeisevorrang?

Teyssen: Den unbedingten Einspeisevorrang, den rate ich dringend zu berdenken. Fr die letzte Stunde Photovoltaik am sonnigsten Tag des Jahres msste sonst das Netz fr viel Geld und gegen groe Widerstnde ausgebaut werden. Wahnsinn. Vom Markt her sind Sonne und Wind sowieso vorne, denn sie verursachen ja keine Brennstoffkosten.

ZEIT: Sind die Deutschen eigentlich reif fr die Energiewende?

Teyssen: Ja, klar. Wer soll es schaffen, wenn nicht wir?

P.S: I did buy a considerable amount of E.ON stock today as I think the value is still good and that price was certainly attractive.

Ulenspiegel

11-14-2012, 01:15 PM

Surferbeetle

11-14-2012, 01:47 PM

P.S: I did buy a considerable amount of E.ON stock today as I think the value is still good and that price was certainly attractive.

It's tough to go against the grain, buy when everybody is scared, but that is also a time when I do best. Good luck. :)

I do have some questions for you, if you are up for it. I'll outline my process and would appreciate any tips that you are willing to share? :confused:

Data gathering seems to be just about as important as analysis for making profitable decisions. Free is always good and so I regularly use sites such as Marketwatch (http://www.marketwatch.com/investing/stock/EOAN?countrycode=XE ), Finanzen.ch (http://www.finanzen.ch/aktien/E.ON-Aktie ), Yahoo Finance ( http://finance.yahoo.com/q?s=EONGY&ql=1 ), Google Finance ( http://www.google.com/finance?q=eongy&ei=MZijUMi7DsHXqAGnjAE ), Seeking Alpha ( http://seekingalpha.com/symbol/eongy.pk ) and of course the company website (http://www.eon.com/en/investors.html ). Paid and unpaid newspaper subscriptions help with the macro background and trade newspapers and magazines help to further zoom in. Next, I am aware of and sometimes use, paid providers such as the Economist Intelligence Unit and Moody's Investors Service to further zero in on important nuances. In my mind a Bloomberg terminal would be the pinnacle of data gathering capability, but I have never used one (renting is pricey) so perhaps I am being captured by the hype.

As to EON analysis, I have not done any homework but, I have read that ~35 percent of Euro energy comes from renewables and this figure is set to rise significantly over the next couple of decades. Geopolitics are very tough, and I suspect this is part of what is driving this significant effort towards self supplying energy via renewables. Fortunately debt is cheap at this time and EON appears to be able to sustain it's 35 billion Euro debt (or so) and I note that it has ~150 billion Euro in assets. Tangible book value per share is 7.76 Euro today, today's price at the moment is 14.27 Euro, the 52 week low is 14.05 Euro, around 14.3 million shares have changed hands today, and approximately 75,000 employees generated ~140 billion Euros in revenue last year. I have not compared these numbers with the typical utility in German or outside of Germany (such as EDF in France). Out of 38 analysts covering the stock, 13 say buy (I usually ignore these recommendations).

What can I do better?

Firn

11-14-2012, 05:24 PM

It's tough to go against the grain, buy when everybody is scared, but that is also a time when I do best. Good luck. :)

Good luck always helps, I hink we will see if it was a wise decision in a couple of years.

I do have some questions for you, if you are up for it. I'll outline my process and would appreciate any tips that you are willing to share? :confused:

Data gathering seems to be just about as important as analysis for making profitable decisions. Free is always good and so I regularly use sites such as Marketwatch (http://www.marketwatch.com/investing/stock/EOAN?countrycode=XE ), Finanzen.ch (http://www.finanzen.ch/aktien/E.ON-Aktie ), Yahoo Finance ( http://finance.yahoo.com/q?s=EONGY&ql=1 ), Google Finance ( http://www.google.com/finance?q=eongy&ei=MZijUMi7DsHXqAGnjAE ), Seeking Alpha ( http://seekingalpha.com/symbol/eongy.pk ) and of course the company website (http://www.eon.com/en/investors.html ). Paid and unpaid newspaper subscriptions help with the macro background and trade newspapers and magazines help to further zoom in. Next, I am aware of and sometimes use, paid providers such as the Economist Intelligence Unit and Moody's Investors Service to further zero in on important nuances. In my mind a Bloomberg terminal would be the pinnacle of data gathering capability, but I have never used one (renting is pricey) so perhaps I am being captured by the hype.

What can I do better?

Well of course I'm in no position to know that. In general I follow the framework set up by Graham and Buffet and try to stick to it, which is surprisingly hard. Grahams filters work pretty well to sort get stocks which deserve a closer look, but he is arguably a bit too restrictive on book value.

You are also using pretty much the same ressources as I do, I have completely given up to listen to 'insider' information. Apart from the facts and the experience there is now a little nice story of a friend of mind. He became one of Americas 1% or less and sold a year or two ago part of the stock of the company in which he worked at less then 1/3 of the price I got only a month or so ago. He had of course far far more of it and invested considerable time in getting the decision right (he no longer works regulary) and despite all the odds favoring him luck and a layed back-approach worked this time better.

Krugman (http://krugman.blogs.nytimes.com/2012/10/30/scoop-dupes/) had recently an entry on the issue in general. Kahnemann argues in a similar way. Obviously the discussion is about certain complex topics with a lot of uncertainty. In other areas expert knowledge and insider knowhow are golden.

P.S: The German Wiki does have a decent overview of the history of E.ON. Needless to say that the Jahresabschluss (http://www.eon.com/content/dam/eon-com/de/downloads/e/E.ON_2011_Jahresabschluss_de_.pdf) is full of info. Maybe we could start a bit more detailed European discussion about it. In general I would say that Europe-wide the utilities are trading for low prices. The big question is of course if the those prices are low enough under their long-term value to give you a good margin of security.

P.P.S: Eurokrise ebnet VW den Weg zur Herrschaft (http://www.wallstreetjournal.de/article/SB10001424127887324556304578118681951625120.html?m od=wsjde_finanzen_tickers&mod=wsjde_finanzen_tickers)

VW als "sicherer Hafen" in der Krise

"Volkswagen ist ein sicherer Hafen geworden", sagt VW-Finanzvorstand Hans-Dieter Pötsch."

Und es ist nicht nur VW. Die Münchener Siemens AG refinanzierte sich im August am Anleihemarkt so günstig wie nie zuvor. Die Rendite, die Siemens bieten musste, lag sogar unter dem, was gleichzeitig für französische Staatsanleihen mit „AAA"-Rating am Markt bezahlt wurde.

Im Durchschnitt mussten deutsche Unternehmen wie BASF, Linde oder die VW-Nutzfahrzeugtochter MAN zuletzt am Anleihemarkt einen Aufschlag von 1,9 Prozentpunkten auf einen Referenzzinssatz zahlen, der sich an den EZB-Leitzinsen orientiert, zeigen Daten von Dealogic. Bei italienischen Firmen betrug die Prämie 4,2 Prozentpunkte, bei spanischen 4,65.

The 'Kupon' you get on bonds of solid German enterprises is really low indeed. Offers deemed decent to good are snatched up quickly by the big boys. That over 2% more are a problem for Italian companies in competition with German ones is no surprise.

Surferbeetle

11-14-2012, 08:36 PM

Maybe we could start a bit more detailed European discussion about it. In general I would say that Europe-wide the utilities are trading for low prices. The big question is of course if the those prices are low enough under their long-term value to give you a good margin of security.

Good post, thanks for the links, and I am willing to discuss further. Will have to do some additional reading and thinking and will get back to you in a week or so.

In the meantime, here is a story that I am mulling over:

U.S. Rethinks Security As Mideast Oil Imports Drop, by Tom Gjelten, Nov 14, 2012, NPR, http://www.npr.org/2012/11/13/165052133/u-s-rethinks-security-as-mideast-oil-imports-drop?ft=1&f=1001

The sharply reduced dependence on Persian Gulf oil is raising questions about whether the Carter Doctrine should still apply.

If protecting the Persian Gulf oil supply doesn't matter so much anymore, would that justify some U.S. disengagement from the Middle East?

Persian Gulf oil will remain important, and somebody will need to secure those Gulf shipping lanes. China, poised to become the No. 1 buyer of Gulf oil, is now benefiting from the huge U.S. security presence in the region. Perhaps the United States could turn over security responsibilities in the Persian Gulf to China.

"Strategically, that's not something we really want to do," says Herberg. "But in an oil sense they are now the prime beneficiary of this. [They are a] free rider on these free sea lanes the U.S. keeps open. So how do you manage that conflict?"

"It's insane that we have the 5th Fleet of the U.S. Navy tied up there to protect oil that ends up in China and Europe," T. Boone Pickens, the energy tycoon, was quoted as saying recently in Parade magazine.

Fuchs

11-14-2012, 08:44 PM

I'm always amazed that people think public info would be good for investing.
Whatever info is public IS PUBLIC. How is this supposed to offer an advantage over the others?

Surferbeetle

11-14-2012, 09:06 PM

@Fuchs

One doesn't have to cheat in order to win. :wry:

There is gobs of public info out there and it is my sense that not all of that info gets to the market instantaneously nor efficiently (flying in the face of some of the tenants of the efficient market hypothesis :eek: ).

Firn has rightly recommended Benjamin Graham (http://en.wikipedia.org/wiki/Benjamin_Graham)'s book the Intelligent Investor as worth a read. I second his recommendation...Mr. Market sometimes drops by with some craaazzzyyy pricing on stocks...enough value that one can later sell those same stocks and cover one's beer and pretzels expenses for the year. :D

Fuchs

11-14-2012, 09:18 PM

Surferbeetle, the people who buy or sell shares (and stuff) define the market price, not the ones who hold it.
The people who buy or sell can also be expected to have recently paid attention to news more than the holders.

I understand others people who read financial news or listen to them on TV believe they have info, but this info is basically already priced in. Whatever unsystematic distortion happens between info and conclusion tends to affect both you and all the others (buyers, sellers) on average. The market price is already aggregated including the info you get from reading or watching public info.
To believe that you get an advantage from such sources is about the same as to believe that you can process the info better than the one you're trading with. There's little reason to believe this to be systematically true.

Professionals who spend 60 hrs/week with consuming, discussing and digesting publicly and non-publicly available information on a narrow segment of the market get rich if they're correct more than 51% of the time. It's in my opinion delusional to believe you can beat your trading partner this way.

Or in another way: It's like believing that you can make profit in the betting market for sports because you are watching sports matches.

Focus on avoiding systemic risks and on keeping fees small instead and enjoy life by not looking at your shares' development or useless financial "news" more than monthly or quarterly.
A more thorough analysis makes only sense if you've got enough capital to diversify AND justify the expenses of a thorough analysis of a specific company, preferably a Ltd.

Surferbeetle

11-14-2012, 09:49 PM

Fuchs,

Appreciate the concern and words of wisdom.

Savings/investing work is limited to low cost index funds only, and I am more on the cash side of late due to my concerns with our geopolitical situation. For fun, relaxation, and intellectual exercise I have about ten stocks which I follow and trade in from time to time. My limit is 'beer & pretzels' money only... if it all goes bad I can walk away without a glance back at what I placed on the table. E.ON is not one of these stocks since I have little or no knowledge regarding Euro utilities. ;)

Agree with you regarding the value of much of what passes for for 'news'.

Regarding the efficient market hypothesis, what you state tracks with what I was taught in school and what I read in many of my various text & reference books. I am a bit of a heretic on this topic however as theory does not always appear to track with what I experience in the field. Let's just say that asymmetry exists....:wry:

Fuchs

11-14-2012, 09:52 PM

Asymmetry or not; the problem is you have no systemic reason why you should find yourself on the good end of asymmetry, rather than on the bad end.

Surferbeetle

11-14-2012, 10:29 PM

The world is a very big place, and we don't necessarily understand what we think we know. Along those lines:

What's the better way to invest—little by little, or all at once?, October 09, 2012, Vanguard, https://personal.vanguard.com/us/insights/article/dollar-cost-averaging-102012

A Vanguard research paper issued in July 2012 found that the lump-sum approach has historically outperformed the dollar-cost method in the United States, United Kingdom, and Australia. But a close look at the study's underlying assumptions reinforces the idea that there are compelling arguments for both investing methods.

Firn

11-19-2012, 08:36 PM

It is always nice to see some contra given. Anyway I will post the latest three trades, at least the price for which I got hopefully more value. Note that this concerns the small part of the portfolio wich is directly invested in equities. The far bigger equity part is in index funds, mostly of the (physical) ETF type.

E.ON: ~15
HP: ~10
Xerox: ~5

Buying fees are roughly 0.5%, portfolio fees 0.1%. Prices in €. Trades happened in the last two weeks. Obviously the sample is (too) small but it will be easier to manage.

We will see how things go in a couple of years. Hopefully we will not have forgotten this thread, but maybe this might be a good thing as good news doesn't create as many posts. :D

P.S: I just noted the almost perfect price scale of 5-10-15. Funny.

Surferbeetle

12-06-2012, 01:10 AM

LNG Transport Ship Ob River (Dynagas LTD - Greece)

http://msnbcmedia.msn.com/j/MSNBC/Components/Photo/_new/pb-121127-lng-ob-river-arctic-jsa-3.photoblog900.jpg

Gas tanker Ob River attempts first winter Arctic crossing, By Matt McGrath, 25 November 2012 Last updated at 19:35 ET, BBC News, http://www.bbc.co.uk/news/science-environment-20454757

A large tanker carrying liquified natural gas (LNG) is set to become the first ship of its type to sail across the Arctic.

Built in 2007 with a strengthened hull, the Ob River can carry up to 150,000 cubic metres of gas. The tanker was loaded with LNG at Hammerfest in the north of Norway on 7 November and set sail across the Barents Sea. It has been accompanied by a Russian nuclear-powered icebreaker for much of its voyage.

"Nineteen thousand ships went through the Suez canal last year; around 40 went through the northern sea route. There's a huge difference."

Firn

12-06-2012, 09:14 PM

The defeat of the Euro bond vigilantes? (http://fatasmihov.blogspot.co.at/2012/12/the-defeat-of-euro-bond-vigilantes.html)

In Europe the evolution of interest rates for governments bonds has been very different with several countries seeing very high levels and in some cases no access to funding. The fear was due to probability of default and potentially an exit from the Euro area, not so much inflation. But after a volatile period and following the statement of Mario Draghi supporting the Euro (no action yet) and the more recent agreement for funding for Greece and Spain, interest rates are coming back to levels which are not far from the historical average during the Euro period (and significantly lower than what these countries faced before joining the Euro).

With Monti in trouble (http://www.corriere.it/politica/12_dicembre_06/passera-berlusconi_0d3b1312-3f7e-11e2-823e-1add3ba819e8.shtml) the situation is better the quite a few feared. Anyway it is very difficult indeed to forecast something in Italian politics. I would hardly be surprised by the most surprising events.

---

Looked again at those 3 stocks:

Xerox 5.38 up from roughly 5
HP 10.77 up from roughly 10 - bough another third under 9.5
E.ON 14.04 down from roughly 15 - invested over a third today at +- that.

GDF Suez lost over 10% (http://www.bloomberg.com/news/2012-12-05/gdf-suez-cuts-earnings-forecasts-on-european-economic-slowdown.html) today and highlights some general problems of the European utility market but also some specific French ones. In this case the French government is a major shareholder and limits the price GDF (and other companies) can ask for it's gas. GDF is fighting a legal battle
(http://www.finanzen.net/nachricht/aktien/Gasvorsorger-GDF-zieht-gegen-Deckelung-von-Gaspreisen-vor-Gericht-2158561)

PARIS (dpa-AFX) - Frankreichs grter Gasversorger GDF Suez will die von der Regierung verfgte Deckelung der Gaspreise im vierten Quartal gerichtlich kippen lassen. Einen entsprechenden Antrag habe das Unternehmen bereits vor dem hchsten franzsischen Gericht eingereicht, sagte ein GDF-Sprecher am Freitag. Der ehemalige Monopolist beschwert sich in diesem Jahr damit bereits zum dritten Mal und folgt damit dem Vorgehen von Konkurrenten. Die franzsischen Gasversorger wollen die Begrenzung von Preiserhhungen anfechten, um Tarife verlangen zu knnen, die ihre Kosten decken.

GDF Suez, an dem der franzsische Staat mit 35 Prozent beteiligt ist, hatte im Oktober zwar die Erlaubnis erhalten, seine Preise um zwei Prozent zu anzuheben. Beantragt hatte der Versorger aber eine doppelt so starke Erhhung. GDF argumentiert, dass nur so die gestiegenen Bezugspreise gedeckt werden knnten. Die Gasversorger waren bereits gegen die Vorgngerregierung vor Gericht gezogen, um die Umlegung der Importpreise auf die Kunden durchzusetzen. Damals hatte das Gericht im Sinn der Klger entschieden./jke/stw/he

After having watch the stock for quite some time I invested in it today, at roughly 15. Certainly we have seen quite a bit of volatility this year and the 10% + drops in a single day of E.ON and GDF are amazing for such huge and long-standing companies. We will see in a couple of years, I actually was mostly interested in buying some more. Of course with the general development of the market the balance sheet lof this year looks quite bright.

Firn

12-10-2012, 05:15 PM

There was certainly trouble and Monti chose to act on his own by going to Napolitano....

Anyway the manovri di palazzo and with the parties have long started. The center-left candidate (http://www.corriere.it/politica/12_dicembre_10/bersani-monti-meglio-fuori_639df00c-42c7-11e2-af33-9cafd633849d.shtml) wants for good or not so noble reasons no "political" Monti, who could return as a leader of the center or center-right. He should conserve himself as technical choice for times of need.

Piazza Affari (http://www.corriere.it/economia/12_dicembre_10/btp-bund-spread_45e1f8c4-429a-11e2-af33-9cafd633849d.shtml) was hard hit, the spread has also grown. While I have to give the the report (http://www.corriere.it/economia/12_dicembre_07/ceto-medio-redditi-come-1993_54fca39e-404d-11e2-abcd-38132480d58e.shtml) a closer look everybody knows that Italy is no country for young women, even less so then for young men.

Surferbeetle

12-11-2012, 03:26 AM

Some have suggested parallels between today's situation and Wagner's story of Lohengrin, Elsa of Brabant, and Telramund during the seasonal opening at La Scala.

La Scala under fire for choosing Wagner before Verdi in battle of the birthdays, Tom Kington in Rome, The Guardian, Tuesday 4 December 2012 15.00 EST, http://www.guardian.co.uk/world/2012/dec/04/la-scala-wagner-verdi-battle

Monti quits political theatre for opera, By Guy Dinmore in Rome, December 7, 2012 6:01 pm, Financial Times, www.ft.com

U.S. Stocks Rise With Metals on China; Italy Bond Plunge, By Stephen Kirkland & Rita Nazareth - Dec 10, 2012 2:37 PM MT, Bloomberg News, http://www.bloomberg.com/news/2012-12-10/asian-stocks-oil-advance-on-u-s-china-data-as-euro-weakens.html

The NYT has an interesting take on a country analysis (economics, politics, history, and more) of Italy at: http://topics.nytimes.com/top/news/international/countriesandterritories/italy/index.html
_______________________

Profitably traded in and out of a French Bank with southern exposure earlier in the year, might go back in depending on how much/credible fear results from the current political uncertainty. :eek:

Currently doing ok with a US construction/mining/diesel power equipment company (volatility is useful), wish I had picked up more just before the US election. ;)
______________

The World In 2030: Asia Rises, The West Declines, by TOM GJELTEN, December 10, 2012, NPR, http://www.npr.org/2012/12/10/166895624/the-world-in-2030-asia-rises-the-west-declines

By the year 2030, for the first time in history, a majority of the world's population will be out of poverty. Middle classes will be the most important social and economic sector. Asia will enjoy the global power status it last had in the Middle Ages, while the 350-year rise of the West will be largely reversed. Global leadership may be shared, and the world is likely to be democratizing.

But the planet may also be racked by wars over food and water, with the environment threatened by climate change. Individuals, equipped with new lethal and disruptive technologies, will be capable of causing widespread harm. Global economic crises could well be recurring.

It all depends on how events develop over the next decade, according to a new report, Global Trends 2030 [PDF (http://media.npr.org/documents/2012/dec/dnireport.pdf)], prepared by the National Intelligence Council, comprising the 17 U.S. government intelligence agencies.

Global political leadership, however, is likely to be diffused, with no single country or alliance playing a dominant role.

"A growing number of diverse state and nonstate actors, as well as subnational actors, such as cities, will play important governance roles," the report says. "The increasing number of players needed to solve major transnational challenges — and their discordant values — will complicate decisionmaking."
_____________________

Earlimart - 10 Years, Youtube, http://www.youtube.com/watch?v=bRO8seMD-gU

Firn

12-11-2012, 06:40 PM

According to our dear enlightened former PM Berlusconi Monti and his german-centric are to be blamed for bad state of the Italian economy. While I do not agree with some of the policies of Frau Merkel or Mr. Cameron or more then a couple of other politicians by far the biggest share of our current troubles is home-made. And the guy with the biggest influence in the last 20 years was mostly busy with bunga-bunga, delayed actions against the law as well as breaking it and personal business affairs.

Another big slice is the unhappy impact of supply-side globalisation in traditional Italian sectors with vastly increased competition. The increase in demand resulting in more export was not able to compensate the loss. In this case Germany got dealt the better cards with specific sectors booming due to heavy international demand.

The Scala bit is really just a storm in the tea cup but Mr.Balotelli scoring in the Summer was certainly not :D

---

I have now to clean up the portfolio to give the state as little tax money as possible. It was stupid to leave it for so late as the markets have generally gone up, should have sold some stock with negative return already during the Summer. This way I could have balanced the book with less friction.

Firn

12-12-2012, 07:57 PM

The economist's view (http://economistsview.typepad.com/) zoomed in on an interesting issue in this case with a post of Tim Taylor.

'Cautionary Details on U.S. Manufacturing Productivity'

Awhile back I asked Tim Taylor if it would be okay to reprint a post occasionally in full or in part, and he quickly and graciously said I could. As he notes, this is an important addendum to the standard story on manufacturing, productivity, and employment. The bottom line is that "the condition of U.S. manufacturing looks more ominous than the standard story" would have us believe:

Said McKinsey report (http://www.mckinsey.com/insights/mgi/research/productivity_competitiveness_and_growth/the_future_of_manufacturing) states:

"A rich pipeline of innovations promises to create additional demand and drive further productivity gains across manufacturing industries and geographies. New technologies are increasing the importance of information, resource efficiency, and scale variations in manufacturing. These innovations include new materials such as carbon fiber components and nanotechnology, advanced robotics and 3-D printing, and new information technologies that can generate new forms of intelligence, such as big data and the use of data-gathering sensors in production machinery and in logistics (the so-called Internet of Things). ...

Important advances are also taking place in development, process, and production technologies. It is increasingly possible to model the performance of a prototype that exists only as a CAD drawing. Additive manufacturing techniques, such as 3-D printing, are making prototyping easier and opening up exciting new options to produce intricate products such as aerospace components and even replacement human organs. Robots are gaining new capabilities at lower costs and are increasingly able to handle intricate work. The cost of automation relative to labor has fallen by 40 to 50 percent in advanced economies since 1990."

http://4.bp.blogspot.com/-9AsiPbToI1c/ULjO4SSx74I/AAAAAAAACLU/p8GtJJKM-eY/s400/mckinsey+5.jpg

Krugman (http://krugman.blogs.nytimes.com/2012/12/11/human-versus-physical-capital/) discusses the role of the human versus the physical capital.

http://graphics8.nytimes.com/images/2012/12/11/opinion/121112krugman1/121112krugman1-blog480.jpg

http://graphics8.nytimes.com/images/2012/12/11/opinion/121112krugman2/121112krugman2-blog480.jpg

So the story has totally shifted; if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.

I enjoyed his earlier 'wonkish' post (http://krugman.blogs.nytimes.com/2012/12/10/technology-and-wages-the-analytics-wonkish/) about the role of technology. Indeed not all technology is created equal in their effects on the marginal product of labor.

So it’s wrong to assume, as many people on the right seem to, that gains from technology always trickle down to workers; not necessarily. It’s also wrong to assume, as some (but not all) on the left sometimes seem to — e.g., William Greider — that rapid productivity growth is necessarily jobs- or wage-destroying. It all depends.

What’s happening right now is that we are seeing a significant shift of income away from labor at the same time that we’re seeing new technologies that look, on a cursory overview, as if they’re capital-biased. So we could be looking at my technology B story above.

There are, however, other possibilities — including the possibility that the fact that we don’t actually have perfect competition is playing a big role here.

So that’s the story so far. And it’s important stuff.

I think it would be worthwhile to look more at this stuff also in the European context. Personally I think it is a highly interesting topic. Overall I thought that great built-up in capital in the last 60 years cpuled with the marginal product of capital (http://www.youtube.com/watch?v=ayiV7mH2_Qg) and the demographic trends would result in a generally more worker-biased shift. The simplified cited model of the role of technology might be part of the answer.

Fuchs

12-12-2012, 10:54 PM

( http://4.bp.blogspot.com/-9AsiPbToI1c/ULjO4SSx74I/AAAAAAAACLU/p8GtJJKM-eY/s400/mckinsey+5.jpg )

I'm always amused when I see such stats showing the U.S. so far ahead in national income. It's ridiculous, but the PPP method doesn't reveal it.

Two men paying no VAT for washing each others' hand pay each other a gazillion dollars for washing hands once and do so as part of business expenses - and do so on Nauru.
Boom! Nauru (http://en.wikipedia.org/wiki/Nauru) is now the biggest economy in the world!

Such services-inflated GDP stats are a joke, but I guess the time hasn't come to make this visible to the mainstream.
I prefer to look at the physical economy and the services trade balance instead (http://defense-and-freedom.blogspot.de/2009/02/extent-of-economical-problem-because.html).

________

About Krugman; it's astonishing, but he misses the wood while walking past trees. (Yeah, I totally forgot how the saying works in English.)

I suppose the decisive influence factor at work is simply power asymmetry. He's totally in a dead end with his look at who owns the capital. This decides who gets the capital income, not how much of the income becomes allocated to the capital owners. He probably needs more sleep or something.

Power asymmetry; this is largely picked up from a professor of mine, Prof. Homburg, years ago (not my invention, if this helps its credibility :D ):
Imagine the labour market. A corporation seeks a worker for a job, workers apply, one gets the job. This is a monopoly situation, with monopoly power and even worse; the corporation can squeeze a rent out of the worker by only offering a small wage. There are plenty other workers, after all.

Now the workers form a labour union AND there's little unemployment. The labour unions adds bargaining power to the workers and this leads to a shift of income to labour.

Now good policy would be to push -with whatever policies- for power symmetry. This way the labour union cannot take a power rent from the capital owners (and occasionally crash some companies) and the corporations cannot exploit the workers either. Furthermore, good policy is to regulate conflicts in a way which means the nearly symmetric powers can agree on new wage levels without many harmful strike days.

Power asymmetry is a form of market failure for which mainstream recognition isn't well-developed yet either, though.

OK, what happened instead ?
(1) Unemployment because of poor adaptation to changing circumstances and because the employer lobby actually likes unemployment while labour unions don't get hurt by it much in the short term (and are often distracted by trying to avoid creative destruction): ~40 year old problem.
(2) A largely successful 30-year campaign of the U.S. right wing to break labour unions, step by step, sector by sector, state by state.

So now the U.S. has an economy with an unemployment rate which capital elites actually like if not promote (see how the public discussion is dominated by the budget, not by jobs?), with almost powerless labour unions, with a race to the bottom by states in regard to worker benefits and worker power.

Isn't it obvious that this leaves a trace on the capital / labour income balance (especially if you look at executive compensations as a third share, not mixed up with worker's pay)?

Related:
The effect of Germany's Agenda 2010, which basically forced the poorest 20% into accepting ridiculously low pay and much-lowered security*:

http://www.scribd.com/doc/116046526/Agenda-2010

It transferred about 7% of national income from labour income to capital income in a mere two years. This shift had no parallel since the 50's, and the reached level of capital income share wasn't seen for decades either.
(Our social democrats don't deserve their name any more; part of the reason why their left half parted ways and joined the former communists or greens or abstained from politics or voting.)

*: Such as courier drivers who used to have a normal job with 40 hour week and good job security now being forced into pseudo-entrepreneurship with 1-man businesses needing to take a loan for an own truck, work 50-60 hours/week, have huge insecurity and in the end no money left for retirement savings or only proper insurances.

Firn

12-13-2012, 06:03 PM

( http://4.bp.blogspot.com/-9AsiPbToI1c/ULjO4SSx74I/AAAAAAAACLU/p8GtJJKM-eY/s400/mckinsey+5.jpg )

I'm always amused when I see such stats showing the U.S. so far ahead in national income. It's ridiculous, but the PPP method doesn't reveal it.

Two men paying no VAT for washing each others' hand pay each other a gazillion dollars for washing hands once and do so as part of business expenses - and do so on Nauru.
Boom! Nauru (http://en.wikipedia.org/wiki/Nauru) is now the biggest economy in the world!

Such services-inflated GDP stats are a joke, but I guess the time hasn't come to make this visible to the mainstream.
I prefer to look at the physical economy and the services trade balance instead (http://defense-and-freedom.blogspot.de/2009/02/extent-of-economical-problem-because.html).

I do not agree, at least not fully but I will have to tackle that another time.

________

About Krugman; it's astonishing, but he misses the wood while walking past trees. (Yeah, I totally forgot how the saying works in English.)

I suppose the decisive influence factor at work is simply power asymmetry. He's totally in a dead end with his look at who owns the capital. This decides who gets the capital income, not how much of the income becomes allocated to the capital owners. He probably needs more sleep or something.

What the man wrote earlier:

But there’s another possible resolution: monopoly power. Barry Lynn and Philip Longman have argued that we’re seeing a rapid rise in market concentration and market power. The thing about market power is that it could simultaneously raise the average rents to capital and reduce the return on investment as perceived by corporations, which would now take into account the negative effects of capacity growth on their markups. So a rising-monopoly-power story would be one way to resolve the seeming paradox of rapidly rising profits and low real interest rates.

He is just a good economist, looking at the evidence and then around what might explain it and can be tested against:

As they say, this calls for more research; but the starting point is to realize that there’s something happening here, what it is ain’t exactly clear, but it’s potentially really important.

Last but not least:

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.

Anyway I agree that power asymmetry should be a bigger topic in general. Why nations fail did really put the link between politics and economics on the 'agenda 2012'. We have of course many models of markets up to monopolies but the political impact on the framework of the economy has been not given much attention in the last twenty years. In the US and Europe the reforms and policies of the last thirty years have certainly not weakened (large) capital relative to labour...

Fuchs

12-13-2012, 07:07 PM

I noticed his monopoly power point, but it's a subset of power asymmetries, and not the same I meant. He doesn't appear to mean the labour market with his remark.

Firn

12-13-2012, 10:55 PM

I noticed his monopoly power point, but it's a subset of power asymmetries, and not the same I meant. He doesn't appear to mean the labour market with his remark.

I felt he did. In any case the important point is the supposed trend and what might cause it. As usually I'm rather guarded and like it when there seems to be a strong effort to look at the scientific 'problem' from different angles without jumping too quickly to a conclusion. One can too easily fool oneself. :D

Surferbeetle

12-29-2012, 01:13 AM

Is US economic growth over? Faltering innovation confronts the six headwinds, CEPR Insight # 63, Robert J Gordon, Northwestern University and CEPR, http://www.cepr.org/pubs/PolicyInsights/PolicyInsight63.pdf

The prospects for future long-run US economic growth were already dismal in 2007 but were little noticed in the continuing euphoria over the invention of the internet and the related 1. developments in information technology and communications (ICT). This Policy Paper pulls back from the past five years of financial crisis to pose a question with implications that will persist for decades even if the current international economic disorder is eventually resolved.

Robert J. Gordon, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Robert_J._Gordon

In an economy not so far, far away, By Izabella Kaminska, December 27, 2012 8:00 pm, Financial Times, www.ft.com

Imagine a time when all undesirable work is done by automated systems or robots. What would it mean? Would there be a financial crisis? What would happen to labour and capital?

These are some of the deeper questions economists are asking when not preoccupied by short-term worries about the fiscal cliff, a Chinese slowdown or the eurozone.

Innovation Crisis or Financial Crisis? Kenneth Rogoff, Project Syndicate, http://www.project-syndicate.org/commentary/technological-stagnation-and-advanced-countries--slow-growth-by-kenneth-rogoff

Is Growth Over? Paul Krugman, NYT Blog, http://krugman.blogs.nytimes.com/2012/12/26/is-growth-over/

Gordon argues, rightly in my view, that we’ve really had three industrial revolutions so far, each based on a different cluster of technologies:

The analysis in my paper links periods of slow and rapid growth to the timing of the three industrial revolutions:

IR #1 (steam, railroads) from 1750 to 1830;
IR #2 (electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum) from 1870 to 1900; and
IR #3 (computers, the web, mobile phones) from 1960 to present.

Gordon then argues that IR#2 was by far the most dramatic, which again seems right. Think of the America shown in Lincoln, which is a society shaped by industrial revolution 1 but not yet transformed by IR #2. It was a society in which you could travel much further and faster than ever before — but when you got to your destination, it was still a horse-drawn society in which most people still lived on farms and cities were cruder and dirtier than we can easily imagine. By the 1920s, however, urban America was already recognizably a modern society.

What Gordon then does is suggest that IR #3 has already mostly run its course, that all our mobile devices and all that are new and fun but not that fundamental. It’s good to have someone questioning the tech euphoria; but I’ve been looking into technology issues a lot lately, and I’m pretty sure he’s wrong, that the IT revolution has only begun to have its impact.

A decisive year for ‘deglobalisation’, Howard Davies, December 23, 2012, Financial Times, www.ft.com

The quarter-century leading up to the financial crisis saw a remarkable leap in globalisation. In particular, cross-border financial flows grew rapidly. Western investors piled into China and the other Brics. The new phenomenon of south-north flows emerged, as sovereign wealth funds from Asia and the Middle East acquired developed economy assets on a massive scale. But the fastest growth was in cross-border bank lending, much of it intermediated in London. Citibank’s ambition was to be seen on street corners from Manhattan to Manama; HSBC proudly told us, every time we got off a plane, that it was “the world’s local bank”.

Since the crisis that last trend has gone into reverse: cross-border lending has fallen sharply and the ambitions of major American and European banks have been scaled back. HSBC has withdrawn from a number of countries; Citibank and Barclay’s have other preoccupations. The continental European banks are struggling to strengthen their capital bases, and emerging market assets have been realised to bolster the parents’ balance sheets.

So are we entering a new age of financial deglobalisation? If so, should we care?

Globalization, From Wikipedia, the free encyclopedia,http://en.wikipedia.org/wiki/Globalization

In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge.[7]

Fuchs

12-29-2012, 09:44 PM

I’ve been looking into technology issues a lot lately, and I’m pretty sure he’s wrong, that the IT revolution has only begun to have its impact.

Sometimes he doesn't sound like a macroeconomist.

There's a model about how inflation-corrected growth happens.
The four ingredients on the macro (aggregate) level are
(1) labour
(2) capital
(3) natural resources (exploitation thereof)
(4) technology

whereas "technology" (technological progress) is the "leftover" that explains away all the growth (or shrinking) that happens after the other factors were appraised.

Technological progress is a pointless model variable for very detailed or short-term analysis, but it makes a lot of sense when you talk about decades.

I wonder why he didn't prefer to stick to technological progress instead of diving into micro here. This macro variable tells a story of a declining rate of growth, for technological progress shrinks by 0.1 to 0.2 percent points per decade. At this pace, we would run out of technological progress in about three to six generations.

Surferbeetle

12-30-2012, 02:15 AM

Sometimes he doesn't sound like a macroeconomist.

To my eyes, he is a Nobelist and public intellectual who has been able to use technology to engage and educate civil society in a long overdue discussion regarding economic policy (which of course impacts us all). Now if only our elected officials would follow his lead - do their job, take the time to try and understand what is going on and actually formulate & operationalize functional policy that meets the needs of the majority of their democratic constituency. :wry:

I am going to dig into this a bit, for my own edification mainly as I am assuming much of what follows is familiar to you.

In his macroeconomic work, as I understand it, he is characterized as new-keynesian...part of a school that attempts to bridge the gap between macroeconomics and microeconomics by also examining imperfect competition (to include monopolies and oligopolies traditionally examined by microeconomists) and wage & price stickiness (using advanced models such as DSGEs - Smet-Wouters in the case of the ECB) in addition to the traditional macroeconomic concerns of national income, output, consumption, unemployment, inflation, savings, investment, international trade, international finance, etc.

Home / Nobel Prizes / Prize in Economic Sciences / Paul Krugman - Prize Lecture: The Increasing Returns Revolution in Trade and Geography, http://www.nobelprize.org/nobel_prizes/economics/laureates/2008/krugman-lecture.html

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008, Paul Krugman, “for his analysis of trade patterns and location of economic activity”, http://www.nobelprize.org/nobel_prizes/nobelguide_eco.pdf

The Conscience of a Liberal, http://krugman.blogs.nytimes.com

Paul Krugman, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Paul_Krugman

Macroeconomics, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Macroeconomics

Microeconomics, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Microeconomics

New Keynesian economics, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/New_Keynesian_economics

Microfoundations, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Microfoundations

Dynamic stochastic general equilibrium, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Dynamic_stochastic_general_equilibrium

ECB, Smets-Wouters (2003) Model, http://www.ecb.int/home/html/researcher_swm.en.html

General equilibrium theory, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/General_equilibrium

There's a model about how inflation-corrected growth happens.
The four ingredients on the macro (aggregate) level are
(1) labour
(2) capital
(3) natural resources (exploitation thereof)
(4) technology

I am assuming that you are referring to the Nobelist Dr. Robert Solow and his Solow–Swan growth model (intellectual progeny of the Harrod–Domar model)?

whereas "technology" (technological progress) is the "leftover" that explains away all the growth (or shrinking) that happens after the other factors were appraised.

Technological progress is a pointless model variable for very detailed or short-term analysis, but it makes a lot of sense when you talk about decades.

I wonder why he didn't prefer to stick to technological progress instead of diving into micro here. This macro variable tells a story of a declining rate of growth, for technological progress shrinks by 0.1 to 0.2 percent points per decade. At this pace, we would run out of technological progress in about three to six generations.

The links to Dr. Krugman, and others, which I provided upthread and in this post are part of a discussion regarding factors impacting growth sparked by Dr. Gordon's recent paper. Dr. Gordon, broadly, seems to be reprising Rev Thomas Robert Malthus' argument regarding limits to growth. Dr. Krugman, Dr. Rogoff, and others find his argument interesting, but, dispute his conclusions.

By definition exogenous inputs, such as 'technology' (industrial revolutions as opposed to x-inefficiency or technical efficiency - output produced with given inputs), are difficult to predict.

My read is that Dr. Krugman is referring to technology in the sense of an unpredictable exogenous input as opposed to the more narrow macroeconomic definition examined by Dr. Solow.

So...do you see a pull back in globalization as part of the explanation of the current global malaise? Overreach by the oligarchy? :eek:

The Quiet Coup, By Dr Simon Johnson (Former IMF Chief Economist), May 2009, The Atlantic, http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/

Fuchs

12-30-2012, 02:42 AM

You seem to have misunderstood something.
The technological progress I mentioned is vastly more general, not more narrowly defined than 'better machines'.

The introduction of timestamps to reduce absentee rates would contribute to it, for example. Also legislative changes affecting productivity. Nice weather in a given year. Even higher world market prices for crops contribute to it (minus their effect on domestic inflation).

It's so general that so many factors are placed in this leftover aggregate that it's useless in the short term.

Nevertheless, it's great for long-term analysis.
It makes sense to calculate the rate of this technological progress of the 60's, 70's, 80's, 90's and 00's. This is the terrain of Kondratieff's long waves and seems to be exactly the same terrain as the stuff I replied to.

To use the technological progress variable I referred to may appear to be an excessive aggregation, but the topic is about technological progress caused over decades and in more than even only the entire Western world. You need a huge aggregation to match this. You cannot investigate the productivity effects of individual tools or technologies in many years and in many countries in parallel. There aren't enough man-years available for such an approach.
Look at the technological progress variable (relatively easy to get) for the G7 countries instead.

Surferbeetle

12-30-2012, 04:27 AM

You seem to have misunderstood something.

Ok

Let's look

The technological progress I mentioned is vastly more general, not more narrowly defined than 'better machines'.

I suggest that we have a continuum of definition here ranging from industrial revolutions/exogenous inputs to better machines/technological progress. I think that we might be at different places along that continuum with our respective definitions.

The introduction of timestamps to reduce absentee rates would contribute to it, for example.

I see this example as a 'better machine', i.e. management controls

Also legislative changes affecting productivity.

'Better machine', i.e. policy controls.

Nice weather in a given year.

Unpredictable exogenous input - 'act of god'

Even higher world market prices for crops contribute to it (minus their effect on domestic inflation).

Mixture....'act of god' plus 'better machine' - farming techniques

It's so general that so many factors are placed in this leftover aggregate that it's useless in the short term.

Going to my point that exogenous inputs are unpredictable and thus difficult to model.

Nevertheless, it's great for long-term analysis.
It makes sense to calculate the rate of this technological progress of the 60's, 70's, 80's, 90's and 00's. This is the terrain of Kondratieff's long waves and seems to be exactly the same terrain as the stuff I replied to.

I would classify this as being able to be modeled, and, thus defined as 'better machine'

To use the technological progress variable I referred to may appear to be an excessive aggregation, but the topic is about technological progress caused over decades and in more than even only the entire Western world. You need a huge aggregation to match this. You cannot investigate the productivity effects of individual tools or technologies in many years and in many countries in parallel. There aren't enough man-years available for such an approach.

Look at the technological progress variable (relatively easy to get) for the G7 countries instead.

Although I am not currently aware of any papers, I wonder how long until 'big data'/cheap computing power/huge databases will sufficiently expand modeling frontiers in order to help tighten the definitions used when discussing this topic...components of economic growth...exogenous inputs vs technological progress.

I would offer Thomas Savery's work (invention of the steam engine) as an exogenous input/industrial revolution and James Watt's work as an example of a technological progress/better machine. Similarly for electricity Ben Franklin (arguable considering the recent rediscovery of the Baghdad Battery) for the exogenous input and Nikola Tesla and Thomas Edison for technological progress. Finally Alan Turing's work for the exogenous input and Steve Jobs for the technological progress description with respect to computing.

When thinking about this topic I contrast the often qualitative answers provided by economics with the quantitative answers provided by science & engineering. Although exogenous inputs are an example of a nonlinear stochastic process, IMO economics still has a ways to travel yet before it can provide satisfactory answers to the questions we pose.

Surferbeetle

12-31-2012, 02:24 AM

Are there significant western governance failures in designing, gaining acceptance, and implementing changes to the social contract? Would this lead to measurable (peer reviewed) social instability? A global estimate of 60 year olds has risen from 200 million in 1950, to 760 million in 2009, and is projected to hit 2 billion people by 2050. Youth unemployment & underemployment - if nothing else - detracts from the ability to care for the 60+ demographic by reducing the amount of time to gain & hone skills and fund, via taxation, a portion of the costs the 60+ cohort has not saved for (or subjected to pension shortfalls). It would seem to follow that taxation rates would need to at least meet a transparent cost breakout of items of social value that a democratic society has agreed to fund (rule of law, education, infrastructure, vulnerable demographic cohorts, security, etc). Are there examples of western governance directly engaging the population at large in a substantive discussion regarding these topics? Switzerland perhaps?

WEF Global Risks Report, 2012, http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2012.pdf

Restoring Fiscal Equilibrium in the United States, by William R. Cline, Peterson Institute for International Economics, June 2012, http://www.petersoninstitute.org/publications/interstitial.cfm?ResearchID=2144

How the [US] Tax Burden Has Changed [1980-2010], NYT Graphic, 29 Nov 2012, http://www.nytimes.com/interactive/2012/11/30/us/tax-burden.html

Fuchs

12-31-2012, 02:57 AM

(...), a portion of the costs the 60+ cohort has not saved for (or subjected to pension shortfalls).

It makes little to no sense to speak of savings of elderly when looking at demographic problems. My country had this fallacy in its public discourse about the topic a decade ago as well (and sticks with it), but it's still a fallacy in most contexts it's being used in.

Look, the quote is talking about the global population, so there's a perfectly closed economy (as quite safe assumption even for 2050, 2070 etc).
The elderly may have savings or not, but that's merely an indicator for allocation issues. What would they do with their savings? They would buy the period's economic output (or output that's not much older).

It makes thus little sense to discuss savings in the context of demographic change; it's much more reasonable to speak about natural GDP growth paths, capital stock, depreciation rates (share of very durable goods in capital stock) etc.
______________

My view on demographic change etc is the view of someone who has read too much about history:
Forget about the supposed problem. Humans adapt easily to changes, and especially so to slow changes. The problem almost solves itself because it's so creeping.
We might be able to consume more per capita if a larger share was working. Not going to happen. Instead, we won't get used to this 'more' consumption and thus won't really miss it more than we would miss 'even more' consumption if we had 'more'. We won't be satisfied anyway.

When thinking about this topic I contrast the often qualitative answers provided by economics with the quantitative answers provided by science & engineering. Although exogenous inputs are an example of a nonlinear stochastic process, IMO economics still has a ways to travel yet before it can provide satisfactory answers to the questions we pose.

Maybe the problem is with the questions.
Very, very, very much can be answered with economic theories older than I am. Most often economic science can say "this would be stupid because ..." and there's no real need to calculate how stupid it would be.

The problem is in my opinion more that people cannot make good use of existing economic theories. It's perfect routine for politicians to ignore economic science advice and listen to charlatans instead.

Surferbeetle

01-04-2013, 02:29 AM

Fuchs,

Appreciate the discussion on growth & development. 2013 is shaping up to be a very interesting year in that the struggle over (scarce?) resources by various factions becomes ever more visible. Apparently, Malthus may be alive and well.

Europe: Burnt and abandoned, by James Fontanella-Khan, January 2, 2013 6:44 pm, Financial Times, www.ft.com

Between 2007 and 2011, annual investment in the 27 countries of the EU dropped by more than €350bn, vastly outpacing falls in other economic indicators, according to a study published last month by McKinsey, the US consultancy. The decline was 20 times the fall in private consumption, for example, and four times the decline in the overall economy.

That lost investment means companies in Europe will not generate €543bn in revenues they would otherwise have churned out between 2009 and 2020, the study estimated.

Obama Fights Republicans on Debt as Investors Seek Growth, By Mike Dorning - Jan 3, 2013 6:19 PM MT, Bloomberg News, http://www.bloomberg.com/news/2013-01-03/obama-fights-republicans-on-debt-as-investors-seek-growth.html

Fresh from a budget fight so raw that the Republican speaker of the U.S. House cursed the Democratic leader of the Senate outside the Oval Office, President Barack Obama and Congress are heading for an even bigger confrontation over raising the nation’s debt limit.

U.S. Treasury bond investors -- who most directly bear the risk of a government default -- aren’t alarmed. In a sign of the disconnect between Washington and Wall Street, investors remain confident the two sides will compromise rather than inflict what Obama called “catastrophic” consequences. Yields on long-term U.S. debt are near record lows.

“Heretofore, they’ve been playing with a cherry bomb in economic terms,” said Steve Bell, a former Republican Senate budget aide. “When they start playing with the debt ceiling in February, they are starting to play with C-4,” he said, referring to the powerful plastic explosive material.

The decline of western dominance, by Samuel Britton, January 3, 2013 5:31 pm, Financial Times, www.ft.com

Indeed, what has to be explained is not the west’s looming relative decline but its temporary pre-eminence. Of a world population approaching 7bn, the US and western Europe together account for a mere 770m. Their gross domestic product per head – a very approximate guide to living standards – is three times the world average. Such discrepancies can hardly be expected to last in an increasingly globalised planet. In 1500, just after Christopher Columbus’s voyages of discovery, China and India were both estimated to have had a total GDP considerably higher than western Europe’s and GDP per head only slightly lower. Earlier still, in about 1000, living standards were fairly uniform – and low – throughout the world but the estimates show China slightly in the lead.

Many commentators see the reverse flow out of developing countries as unnatural, by which they mean immoral. There are clearly special factors at work such as state management of the Chinese economy and the large surpluses of oil producers. But these do not look like going into reverse at all soon, and we had all better learn to live with the new direction of capital flows, which is apparently known in academic literature as the Lucas Paradox.

The intriguing question is what the emerging nations will do with their accumulating surpluses. There are already many signs that they have had their fill on holdings of dollars and other western currencies that earn low or even negative real interest rates. The next stage is both portfolio investment and direct investment in areas such as Africa, but also in America and Europe. For the moment, they can be assured of a welcome but what will happen as their stake grows?

There are almost bound to be tensions. Zillions of words have already been written about the declining real power of western governments. Even more will need to be written as they become responsible for ever smaller proportions of their own economies. The main sufferers are not likely to be ordinary citizens, but the hitherto governing and business classes.

Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation, Laura Alfaro, Sebnem Kalemli,-Ozcan Harvard Business School, University of Houston, and NBER, Vadym Volosovych, University of Houston, November 2005, http://www.people.hbs.edu/lalfaro/lucas.pdf

We examine the empirical role of different explanations for the lack of flows of capital from rich to poor countries—the “Lucas Paradox.” The theoretical explanations include differences in fun- damentals across countries and capital market imperfections. We show that during 1970−2000 low institutional quality is the leading explanation. For example, improving Peru’s institutional quality to Australia’s level, implies a quadrupling of foreign investment. Recent studies em- phasize the role of institutions for achieving higher levels of income, but remain silent on the specific mechanisms. Our results indicate that foreign investment might be a channel through which institutions affect long-run development.

Firn

01-04-2013, 07:23 AM

Sorry for not doing much discussing recently, I had to enjoy my holidays. ;)

Economic history makes for an interesting read. One has to keep in mind that the data is very very limited for most of our history and often biased for a certain bono. The growth we witnessed in Europe and in the US in the last hundred years was indeed a great ride. Last year I bought a neat volume on European Econhistory and read a little bit about our local area. It reminds one once again that the massively increased yields/productivity gains in agriculture are the basis of our current living standards.

----

To be honest it is also a bit amused to read things like Europe: Burnt and abandoned when you too had a great ride in the stock markets. I did of course not match the DAX, as I had invested more broadly and bonds were a drag but it was a fine year indeed. While some companies did cut the dividends, sometimes completely, the earnings are still strong compared to the price in many instances. A very high ratio of 75% in stocks payed off also in asset growth while I personally invested more with an eye on dividends*. Of course one should not be fooled by success so I have to think if I have to adjust something. Sadly I could not balance away a high percentage of the capital gains by selling stocks at a loss so I will have to do an additional contribution on the budget front. :wry:

*For the reasons posted a couple a times in this thread I did not buy a single fresh bond in the last two years. Dividends of good companies have been beating them handily for a couple of years now. This can and will of course change!

Surferbeetle

01-04-2013, 04:38 PM

Firn,

No worries on time, the conversation is good and moves at it's own pace.

Thought this article was interesting and it seems to speak to our global adventures in a variety of fields :wry::

Learning to Create the Perfect Cup of Coffee, By MATT RICHTEL, Published: December 31, 2012, NYT, http://www.nytimes.com/2013/01/02/dining/learning-to-create-the-perfect-cup-of-coffee.html?pagewanted=1&ref=general&src=me

The essence of good espresso, of good coffee in general, revolves around three numbers: the amount of quality dry coffee used, the amount of time water flows through it and the amount of coffee that comes out the other end. When the ratio is right, the process extracts the best flavor. If it is wrong, the good flavor never surfaces or is watered down. A mistake in seconds or grams, I am coming to learn, is the difference between something wonderful and awful.

Mr. Baca explains that you have to experiment to find just the right balance of these three elements for each coffee machine and coffee grind, and then replicate them. He has tested the machinery at Sightglass and determined that we want to use 17 grams of high-end coffee and run water for 25 seconds to yield about 30 grams of coffee.

---------

Economic history makes for an interesting read. One has to keep in mind that the data is very very limited for most of our history and often biased for a certain bono. The growth we witnessed in Europe and in the US in the last hundred years was indeed a great ride. Last year I bought a neat volume on European Econhistory and read a little bit about our local area. It reminds one once again that the massively increased yields/productivity gains in agriculture are the basis of our current living standards.

I would agree. As we have discussed, Jeremy Grantham has been providing some thoughtful 'realtime' analysis on this and continues to do so. Along these lines, I received a copy of James J. O'Donnell's 'The Ruin of the Roman Empire' for the holidays. I find it to be very well written with some excellent insights into economics, governance, war, and the human condition in general. Who is your European Econo-history author?

To be honest it is also a bit amused to read things like Europe: Burnt and abandoned when you too had a great ride in the stock markets. I did of course not match the DAX, as I had invested more broadly and bonds were a drag but it was a fine year indeed. While some companies did cut the dividends, sometimes completely, the earnings are still strong compared to the price in many instances. A very high ratio of 75% in stocks payed off also in asset growth while I personally invested more with an eye on dividends*. Of course one should not be fooled by success so I have to think if I have to adjust something. Sadly I could not balance away a high percentage of the capital gains by selling stocks at a loss so I will have to do an additional contribution on the budget front. :wry:

*For the reasons posted a couple a times in this thread I did not buy a single fresh bond in the last two years. Dividends of good companies have been beating them handily for a couple of years now. This can and will of course change!

Newspaper article titles can be, shall we say, 'eye-catching'. The article itself was meat & potatoes analysis to me, but I also keep in the back of my mind the 'micro' (with macro implications) - UK in or out of the EU question that is playing out in the UK media, as well as the macro East & West economic convergence theme being examined.

Equities are fun and familiar, yet it's always good to gain additional perspective. Sheldon Natenberg's book Option Volatility and Pricing has been/continues to be a very thoughtful/exceptional look at things. Derivatives are an exotic & theoretical tool for me at this point, even after a number of years of thinking about them. Bonds are an even further bridge. I still rely on bond index funds for diversification. Any suggestions regarding bond books? Perhaps I will have to look at the FT Guides for bonds...I have some on finance, risk modeling, options, and forex and find them all to be insightful and helpful for my equities focus. School is always good...but i find that i still gotta keep exercising my brain cell in order to survive out here in the retail trading & investing world. Successfully running money out in the professional world has to be another order of magnitude leap...

Going back to the coffee analogy, overall I think much of life is about quality, timing, and a bit of luck. 08' - '12 has been very educational and I made a profit for that time period, primarily on quality Euro stocks. I hope to continue to do so. :wry:

Firn

01-05-2013, 02:04 AM

Equities are fun and familiar, yet it's always good to gain additional perspective. Sheldon Natenberg's book Option Volatility and Pricing has been/continues to be a very thoughtful/exceptional look at things. Derivatives are an exotic & theoretical tool for me at this point, even after a number of years of thinking about them. Bonds are an even further bridge. I still rely on bond index funds for diversification. Any suggestions regarding bond books? Perhaps I will have to look at the FT Guides for bonds...I have some on finance, risk modeling, options, and forex and find them all to be insightful and helpful for my equities focus. School is always good...but i find that i still gotta keep exercising my brain cell in order to survive out here in the retail trading & investing world. Successfully running money out in the professional world has to be another order of magnitude leap...

Going back to the coffee analogy, overall I think much of life is about quality, timing, and a bit of luck. 08' - '12 has been very educational and I made a profit for that time period, primarily on quality Euro stocks. I hope to continue to do so. :wry:

"Live is about Quality, timing and a bit of luck". I think Kahneman got it right when he stated that success = talent + luck and great success = a little more talent + a lot of luck. One of my profs teaching sociology opened once his lecture by stating that he was glad to see such a bunch of winners of evolution. (Had to write a paper about the selfish gene ;)) And indeed we are just the last in a long line of organisms who arguably had overall a little more talent and a massive lot of luck. If you are an American or a Westernish European all the luckier.

The situation for many in Europe is indeed worse then in the last decade and the Italian South lost just last year, IIRC over 100.000, mostly young. I hope they will have a better future here in the North or elsewhere. It might be heartless but this mobility is needed to make the idea of of a Eurozone (or Italian state) work.

I hope you too will continue to do well and enjoy the mental fun. My maternal grandfather was mentally sharp till his death by swimming his ten km a week and by following the markets. There are worse vices for your brain cells. :p

In a strange way this song (http://www.youtube.com/watch?v=T3k8H_9SjoM) pretty fitted in his case. The name of course especially. This song (http://www.youtube.com/watch?v=wFUTHcjiZGo) does so only partly, luckily. For those who were not so lucky I will raise the last beer.

Surferbeetle

01-09-2013, 07:59 PM

Lost illusions on Europe, Editorial, January 9, 2013 7:13 pm, Financial Times, www.ft.com

Britain needs to adopt a hard-headed approach founded on the national interest – and hold a referendum

The UK’s troubled relationship is a matter of culture, geography and history. Britain is a post-imperial power with an affinity to other English-speaking countries, especially the US. Mutual incomprehension between the UK and Europe comes down to a basic difference in outlook: while the UK sees membership of the club in economic terms, France and Germany, the co-founders, see the European Union as a political project forged from the ashes of the second world war.

This newspaper has always argued in favour of Britain’s membership of the EU, and we continue to believe it is central to the national interest. Our reasons go beyond a purely economic calculation of cost and benefit. They have to do with Britain’s place in the world. Membership gives the UK influence over the biggest global market. It helps to keep the US relationship special. It amplifies the UK’s sway in a world where economic power is shifting eastwards.

The benefits stretch across national frontiers. Thanks to the single market, the British can live, work, travel and study freely across Europe. Enlargement of the EU southwards and eastwards has consolidated democracy in Spain, Portugal and Greece and created a zone of peace and prosperity in former communist central and eastern Europe. Nonetheless, today’s EU is vastly different from the one the UK joined in 1973, or indeed the one Britons voted to stay in when they were last given a chance to express their views in a referendum in 1975.

davidbfpo

01-09-2013, 11:16 PM

Surferbeetle,

The last sentence from the FT article provides the context for my comments:
Nonetheless, today’s EU is vastly different from the one the UK joined in 1973, or indeed the one Britons voted to stay in when they were last given a chance to express their views in a referendum in 1975.

In 1975 I happily voted to remain a member of the European Economic Community (EEC). Somehow the European political elite converted this idea to a single market, with an explosion in bureaucracy and rules - which of course needed a state-like structure, with a parliament, court and more. This structure then became a federal Europe, the European Union (EU).

The EU being democratic oddly forgot to give everyone a chance to vote in national referenda on this decision. Those few national electorates that had the chance to decide and voted 'no' had to hold a second vote to get it right! IIRC Denmark and Ireland.

The European political elite have failed to persuade most voters IMO that the EU - which is a federal state - is necessary, even preferable. Along came the recession plus further weakening public belief in politicians.

In the UK the Conservatives in opposition promised a referenda, but once in coalition with the very pro-EU Lib-Dems David Cameron forgot.

Now I regret voting 'Yes' in 1975, if asked today I would vote 'No'.

Surferbeetle

01-10-2013, 05:33 AM

The European political elite have failed to persuade most voters IMO that the EU - which is a federal state - is necessary, even preferable. Along came the recession plus further weakening public belief in politicians.

David,

Appreciate your insights and point that 'the brussels political elite' have failed to convince many that the EU as structured or as proposed can/will provide the highest and most authoritative good for the polis. Here across the pond we also have questions regarding 'the washington political elite' and their (apparent lack) of ability to concentrate on providing the highest and most authoritative good for the polis.

Ran a quick google search and found that France, Ireland, and the Netherlands all have had significant questions regarding the EU Constitution. As you have noted previously, Nigel Farage seems to be one of the stronger/more effective communicators on this topic of late. I am not sure about Taoiseach Kenney's latest. Nonetheless it's reassuring to see that civil discourse and the democratic process (as flawed and messy as it is) are the preferred method to examine and address concerns.

Meanwhile, back at the armchair, I have pulled out my quadrangle graph paper & pen and started drafting up likely trading & investing scenarios involving Brixit and the latest US debt ceiling debacle... :eek:

Although you are likely more familiar with the topics at hand than am I, here are a few of this evening's search links that I found to be of interest:

Plato, Aristotle, and the Purpose of Politics, Dr Kevin M. Cherry, University of Richmond, http://www.cambridge.org/aus/catalogue/catalogue.asp?isbn=9781107021679&ss=exc

French European Constitution referendum, 2005, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/French_European_Constitution_referendum,_2005

Irish European Constitution referendum, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Irish_European_Constitution_referendum

Dutch European Constitution referendum, 2005, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Dutch_European_Constitution_referendum,_2005

Nigel Farage, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Nigel_Farage

Enda Kenny: “Brixit” would be “disaster”, By Pierre Lemoine in Dublin | Wednesday 09 January 2013, Europolitics, http://www.europolitics.info/europolitics/enda-kenny-brixit-would-be-disaster-art346907-46.html

Goodbye Europe, The Economist, Dec 8th 2012, http://www.economist.com/news/leaders/21567940-british-exit-european-union-looks-increasingly-possible-it-would-be-reckless

Britain needs to lead in a strong, reformed EU, From Mr Roland Rudd, Sir Richard Branson and others, January 8, 2013 10:01 pm, Letter to the FT, www.ft.com

Banks Win 4-Year Delay as Basel Liquidity Rule Loosened, By Jim Brunsden, Giles Broom & Ben Moshinsky - Jan 7, 2013 9:23 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-01-06/banks-win-watered-down-liquidity-rule-after-basel-group-deal.html

Japan’s Abe Urges 2% Inflation as Shirakawa Attends Meeting, By Andy Sharp & Keiko Ujikane - Jan 9, 2013 7:09 PM MT, Bloomberg News, http://www.bloomberg.com/news/2013-01-09/boj-to-work-more-closely-with-abe-at-regular-policy-meetings.html

If the tide goes out, investors beware, By James Mackintosh, January 9, 2013 8:35 pm, Financial Times, www.ft.com

Fuchs

01-10-2013, 04:09 PM

This may interest you

http://delong.typepad.com/sdj/2013/01/rough-transcript-stimulus-or-stymied-the-macroeconomics-of-recessions.html

Firn

01-11-2013, 08:23 PM

Interesting. Thanks for the links.

Surferbeetle

01-13-2013, 06:50 PM

Energiewende, spare economic capacity, what the heck is FRED, linkages between soft & economic power, Japan, trillion dollar coins, France's economy...

Der zweifelhafte Erfolg der deutschen Stromexporte, Matthias Benz, Berlin, 13.1.2013, NZZ, http://www.nzz.ch/aktuell/wirtschaft/wirtschaftsnachrichten/der-zweifelhafte-erfolg-der-deutschen-stromexporte-1.17937315

Deutschland hat im vergangenen Jahr so viel Strom ins Ausland geleitet wie nie zuvor. Dies geht aus einer neuen Schtzung des Bundesverbandes der Energie- und Wasserwirtschaft (BDEW) hervor. Demnach exportierte Deutschland 2012 Strom im Umfang von 23 Mrd. kWh. Im Vorjahr war dieser Wert auf 6 Mrd. kWh gesunken. Als Hauptgrund fr das Exportwachstum wird der starke Ausbau der erneuerbaren Energien, vor allem von Windkraft- und Solaranlagen, angefhrt.

Der Chef des deutschen Energiekonzerns E.On, Johannes Teyssen, betont etwa schon seit lngerem, dass man in Polen und Tschechien die Stabilitt des Netzes gefhrdet sehe, wenn die deutschen Windkraftwerke im Norden zu viel Strom lieferten. Beide Lnder wollen deshalb ihre Netze mit sogenannten Phasenschiebern zeitweise abschotten. Dies luft freilich der Idee eines integrierten europischen Binnenmarkts fr Strom entgegen.

How much spare capacity does the world have left?, January 13, 2013 5:12 pm by Gavyn Davies, Financial Times, http://blogs.ft.com/gavyndavies/2013/01/13/how-much-spare-capacity-does-the-world-have-left/

What does all this imply for the future? In the short term, it suggests that any rise in nominal demand, stemming from expansionary policy or a recovery in private spending, is much more likely to be reflected in rising real output than in higher inflation. Demand management policy can be expansionary.

However, in the longer term, it does not support the view that the developed economies can easily return to their pre-2008 trendlines for GDP through demand expansion alone. Perhaps they can never get there, or perhaps there is a speed limit which cannot be safely exceeded [2]. In either case, supply constraints would not be as remote as the use of linear trendlines would imply.

Federal Reserve Economic Data, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Federal_Reserve_Economic_Data

British tin ears leave EU deaf to demands, By Tony Barber in London, January 13, 2013 4:46 pm, Financial Times, www.ft.com

On January 22 Angela Merkel and Franois Hollande, the German chancellor and French president, will lead celebrations marking the 50th anniversary of the Elyse treaty of postwar Franco-German reconciliation. Only tin diplomatic ears, or minds closed by arrogance, can explain why British policy makers fail to care that Paris and Berlin might be offended if David Cameron, the UK prime minister, were to choose this almost sacred date for his long-awaited speech on Europe.

Notes on Japanese Numbers (Boring), Paul Krugman, January 13, 2013, 11:28 am, NYT Blog, http://krugman.blogs.nytimes.com/2013/01/13/notes-on-japanese-numbers-boring/

In a way, recent developments can be seen as a demonstration of a point I’ve tried to make about bond vigilantes: even if they show up, they won’t drive interest rates up, they’ll drive the dollar down, which is a good thing. In Japan’s case, you can think of what’s happening as a growing belief on the part of investors that Japan will end up inflating away part of its debt. This has led to a currency drop; it has *not* led to an interest rate spike:

Debt Limit Showdown Spurs Debate On Trillion-Dollar Coin, By Ian Katz - Jan 8, 2013 11:33 AM MT, http://www.bloomberg.com/news/2013-01-08/debt-limit-showdown-spurs-debate-on-trillion-dollar-coin.html

The proposal for the Treasury Department to mint a platinum coin worth $1 trillion and deposit it at the Federal Reserve to give the U.S. enough money to pay its debts...

The Treasury will run out of funds to pay its bills between Feb. 15 and March 1, the Washington-based Bipartisan Policy Center said in a report yesterday.

IMF Concerned With the Pace of France’s Economic Reform, By: Domenico Lombardi, January 8, 2013, Brookings, http://www.brookings.edu/research/opinions/2013/01/08-french-economy-lombardi

While the IMF had hoped for a “competitiveness shock” reform package, Paris has responded with selective and incremental measures to be put in place gradually. On the whole, the Hollande presidency has yet to put forward a convincing reform agenda. And yet, experience teaches us that the first months of government are the most fruitful in terms of reform.

Bloomberg Risk Brief, 01.11.13, http://www.bloombergbriefs.com/files/RiskP1_011113.pdf

The 10 largest U.S. money-market funds’ holdings of French bank securities overtook their British counterparts for the first time in at least 16 months on growing confidence in the euro region and cheap U.K. state funding that lessened the need to issue short-term debt.

The funds’ French bank holdings increased by $9.6 billion to $42.8 billion in December, while British banks were cut by $11.2 billion to $29.4 billion, according to a survey of the funds’ bank holdings by Bloomberg Brief: Risk Newsletter. The bank with the largest increase was Natixis SA, the investment-banking unit of Groupe BPCE, France’s second- largest lender by branches.

Firn

01-13-2013, 09:11 PM

Surferbeetle

01-13-2013, 09:23 PM

Firn,

I owe you a thought out reply regarding the energiewende.... perhaps there are some worthwhile comparisons with the economics of hydropower rich countries?

In the meantime, here is a link to an extraordinary article by Herr. Dr. Schauble in the FAZ:

Institutioneller Wandel und Europische Einigung, Wofgang Schaulble, 11.01.2013, FAZ, http://www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/rede-von-wolfgang-schaeuble-institutioneller-wandel-und-europaeische-einigung-12021794.html

Um weitere Integrationsschritte in Europa zu schaffen, werden wir auf pragmatische - also suboptimale, aber derzeit erreichbare - Schritte in Richtung weiterer Integration und damit auch auf Flexibilitt angewiesen bleiben. Das ist in der realen Welt besser als Stillstand und hufig auch Wegbereiter fr knftige systemgerechtere Lsungen

Gotta go do some chores....no rest for the wicked. :wry:

Fuchs

01-13-2013, 09:29 PM

EON and RWE suffer because they're fossilized.

Energy storage with potential energy stores is very limited for geographic reasons and inefficient anyway.
The real promise lies AFAIK in electrified individual traffic.

Ten million electric cars by 2020 could soak up electric power at night and since the family cars are idle almost all the time they could be plugged into electrical grid and serve as millions of batteries. An electrical grid which can make use of millions of batteries as buffers could be a substantial improvement. The ability to absorb electrical energy at a low price (when there's a lot of wind in the north and sun in the south) and possibly even give it back at a high price (in competition with natural gas powerplants which usually run only at peak demand times) would be attractive to owners.

OK, this was but an example of the kind of non-traditional thinking about energy that fossilised corporations are capable of using for PR and presentations, but not capable of actually exploiting economically.
They're even bad at properly setting up the largest wind power investment projects, the offshore wind parks.

We have asimilar fossilised corporation problem in the automotive sector. German car makers (the big OEM brands) pretend to be innovative, but the French ones have been more innovative since the 1930's.
The real capability to develop novelties other than in internal combustion powerpacks has moved to the tier one suppliers anyway, and the OEMs are too timid in making use of their innovations, pressing for ever lower costs instead (FU Lopez!).

The result is the rise of companies such as Fisker, Tesla.
The Tier Ones could build an electric car easily (they completed functional conventional concept cars at ease), but fear that such a move up the value added chain will incur a boycott by the OEMs. It's basically a rarely described form of market failure.

Surferbeetle

01-14-2013, 12:39 AM

Ten million electric cars by 2020 could soak up electric power at night and since the family cars are idle almost all the time they could be plugged into electrical grid and serve as millions of batteries. An electrical grid which can make use of millions of batteries as buffers could be a substantial improvement. The ability to absorb electrical energy at a low price (when there's a lot of wind in the north and sun in the south) and possibly even give it back at a high price (in competition with natural gas powerplants which usually run only at peak demand times) would be attractive to owners

Israel's Shai Aggassi* is someone to watch on this topic. He has been covered in HBR from time to time and it appears that his incremental rollout of a network of battery changing stations is moving forward:

Better Place, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Better_Place

Better Place is a venture-backed international company. It is formally based in Palo Alto, California, but the bulk of its planning and operations has been steered from Israel, where both its founder Shai Agassi and its chief investors reside. Better Place develops and sells battery-charging and battery-switching services for electric vehicles. Israel is also the location of the company's first large-scale commercial pilot for battery-switching services, launched to the public in early 2012.

Renault Fluence Z.E., From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Renault_Fluence_Z.E.

Energy CEO Shai Agassi on recognizing a “sliding-doors” moment, A Conversation with Shai Agassi by Josette Akresh-Gonzales, May 2009, HBR, http://hbr.org/2009/05/energy-ceo-shai-agassi-on-recognizing-a-sliding-doors-moment/ar/1

Speeding Ahead to a Better Place, by Elie Ofek, Alison Berkley Wagonfeld, Harvard Business School , Publication date: Jan 19, 2012, http://hbr.org/product/speeding-ahead-to-a-better-place/an/512056-PDF-ENG

Better Place Plans Electric-Car IPO Within 2 Years, Agassi Says, By Gwen Ackerman & Jonathan Ferziger - Jan 25, 2012 7:34 AM MT, http://www.bloomberg.com/news/2012-01-25/better-place-plans-electric-car-ipo-within-2-years-agassi-says.html

Better Place LLC, a U.S. startup developing charging stations for electric vehicles that started putting cars on the road this week, expects to go public in the next two years, Chief Executive Officer Shai Agassi said.

“We’re probably not going to go for another private round between now and the initial public offering,” Agassi, 43, who founded the business, said yesterday at Better Place’s test track and showroom north of Tel Aviv. “We have enough capital to go all the way until then.”

Startup to Capture Lithium from Geothermal Plants, FRIDAY, NOVEMBER 18, 2011, Science, http://science-wired.blogspot.com/2011/11/startup-to-capture-lithium-from.html

As portable electronics get more popular and the market for electric vehicles takes off, demand for lithium—a critical element in rechargeable lithium-ion batteries—could soar. Yet just two countries, Chile and Australia, dominate global lithium production.

The Lithium Rush, By Antonio Regalado on December 21, 2009, Technology Review, http://www.technologyreview.com/photoessay/416772/the-lithium-rush/

In the Bolivian Andes lies a vast salt flat that may shape the future of transportation.

----

*Hmm it seems Shai Agassi is no longer the CEO or on the board of Better Place...

http://www.betterplace.com/Our-Story

Firn

01-16-2013, 03:24 PM

The big question is when the economies of scale and networks will kick in with a vengeance on the side fo this revolution. Time seems certainly on it's side, it being not question of if, but when.

Notthetreasuryview (http://notthetreasuryview.blogspot.co.at/2013/01/european-labour-markets-five-key.html) discusses the 'excellent' catalogue Employment and Social Developments in Europe 2012 (08/01/2013) (http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7315).

I have so far not read a single line of it, but may give the abstract, the introduction and may a chapter or so a quick view as the time is limited but the pages are many. :o

Surferbeetle

01-21-2013, 09:15 PM

...strategic macro through the prism at Brookings (Hat tip to Ned McDonnell III who shared a link:
http://www.brookings.edu/research/interactives/2013/big-bets-black-swans ):

Eurozoned Out, By: Justin Vasse and Thomas Wright, January 17, 2013, Brookings, http://www.brookings.edu/research/papers/2013/01/eurozoned-out

The Eurocrisis has been ongoing for three years and the European Union is beginning to get its act together to build a sustainable monetary union. But, the euro is not out of the woods yet. Real dangers remain. The underlying causes of the crisis have not been addressed. The politics are pulling in a different direction from that required for a solution. Populations on the periphery are suffering from austerity measures and see no end in sight. Those in the so-called core (Germany, Northern Europe) feel exploited. The Eurozone is building new structures but they may not be sufficient to protect it against a future major crisis.

As long as an optimal solution remains elusive, the risks of failure will remain. If failure occurs, it could be devastating to the U.S. economy, surpassing the crisis of 2008. Some estimates project that the collapse of the euro would cause an immediate 10 percent loss of GDP for the global economy, with unemployment in the European Union reaching 20 percent and spiraling inflation on the EUs periphery. The United States and European Union are the two largest economies in the world and they are inextricably linked with each other through trade, foreign direct investment (FDI), and financial markets. For instance, 50 percent of U.S. FDI abroad goes to the European Union while 62 percent of FDI into the United States originates in the European Union. The rest of the world would also be adversely affected, particularly the Middle East and China, the worlds second largest national economy, both of which require robust growth to maintain domestic political stability.

A secondary but related danger is that the construction of a new Eurozone could lead to the fracturing of the European Union through a British withdrawal. The United Kingdom is extremely concerned that further integration in the Eurozone will damage its interests as an E.U. member. Public opinion also favors a renegotiation of the United Kingdoms terms of membership even though such a renegotiation would be strewn with difficulty and would likely fail. In this scenario, the Eurocrisis would remove Americas most reliable European ally from the EU and lead to a weakening of Europes capacity to act as a coherent unit in world affairs.

Free Trade Game Changer, By: Mireya Sols and Justin Vasse, January 17, 2013, http://www.brookings.edu/research/papers/2013/01/free-trade-game-changer

Pursuing and signing free trade agreements (FTAs) with both the Asia-Pacific region and Europe during your second administration will yield considerable economic and political benefits. World trade is expected to have stalled at a mere 2.5 percent growth in 2012, down from 13.8 percent in 2010. Protectionism is on the rise everywhere, especially in the form of non-tariff barriers. The Doha Round is essentially dead. At the same time, the United States and Europe need to stimulate their economies without resorting to fiscal spending. Furthermore, the United States needs to establish a broader and deeper economic presence in Asia, the worlds most dynamic economic region. Achieving both a Trans-Pacific Partnership (TPP) and a Trans-Atlantic Free Trade Agreement (TAFTA) is the most realistic way to reclaim U.S. economic leadership and make progress towards your promised goal of doubling U.S. exports. Moreover, signing both the TPP and TAFTA would have deep strategic implications. Both deals would reaffirm liberal norms and a leading U.S. role in setting the global rules of the road. The TPP would help define the standard for economic integration in Asia, without necessarily antagonizing China. TAFTA would give American and European businesses an edge in setting industrial standards for tomorrows global economy.

...and, arguably, tactical macro:

Are we seeing the great rotation from bonds to stocks?, January 20, 2013 5:07 pm by Gavyn Davies, Financial Times, http://blogs.ft.com/gavyndavies/2013/01/20/are-we-seeing-the-great-rotation-from-bonds-to-stocks/

The past few weeks have seen a surge of inflows into US equity mutual funds, following many years in which investors have preferred allocating money to bonds rather than stocks. The week ended 9 January saw the fourth largest weekly cash flow into equity mutual funds since 1992, and large investment companies like BlackRock have spoken of a sea change in the opinion of small investors towards equities. Some analysts see this as the start of a great rotation from bonds into stocks, thus reversing the pattern of the last decade.

Others, however, point out that cash inflows from small investors tend to be contrarian indicators, since they are often driven by recent market behaviour, rather than by fundamental valuation, which is what actually determines market returns in the long run.

My conclusions from all this? Recent investor flows into equities, and improving sentiment, are driven mainly by price momentum, which works over short horizons, but says nothing about a longer term rotation from bonds to stocks. In judging medium term returns, we have nothing better to rely upon than fundamental valuation, which also fits better with the theory of finance. At present, valuation indicates that US stocks (though not European stocks) are fairly expensive compared to their own history, while bonds are extremely expensive. Based on valuation, US stocks should therefore out-perform bonds in the medium term, but overall real returns on both assets in the US may be fairly low.

Surferbeetle

01-23-2013, 05:08 PM

David Cameron's EU speech - full text, Guardian.co.uk, Wednesday 23 January 2013 03.45 EST, http://www.guardian.co.uk/politics/2013/jan/23/david-cameron-eu-speech-referendum

Seventy years ago, Europe was being torn apart by its second catastrophic conflict in a generation. A war which saw the streets of European cities strewn with rubble. The skies of London lit by flames night after night. And millions dead across the world in the battle for peace and liberty.

As we remember their sacrifice, so we should also remember how the shift in Europe from war to sustained peace came about. It did not happen like a change in the weather. It happened because of determined work over generations. A commitment to friendship and a resolve never to revisit that dark past – a commitment epitomised by the Elysee treaty signed 50 years ago this week.

What Churchill described as the twin marauders of war and tyranny have been almost entirely banished from our continent. Today, hundreds of millions dwell in freedom, from the Baltic to the Adriatic, from the Western Approaches to the Aegean.

And while we must never take this for granted, the first purpose of the European Union – to secure peace – has been achieved and we should pay tribute to all those in the EU, alongside Nato, who made that happen.

But today the main, overriding purpose of the European Union is different: not to win peace, but to secure prosperity.

As Chancellor Merkel has said, if Europe today accounts for just over 7% of the world's population, produces around 25% of global GDP and has to finance 50% of global social spending, then it's obvious that it will have to work very hard to maintain its prosperity and way of life.

Third, there is a growing frustration that the EU is seen as something that is done to people rather than acting on their behalf. And this is being intensified by the very solutions required to resolve the economic problems.

And my point is this. More of the same will not secure a long-term future for the eurozone. More of the same will not see the European Union keeping pace with the new powerhouse economies. More of the same will not bring the European Union any closer to its citizens. More of the same will just produce more of the same: less competitiveness, less growth, fewer jobs.

And that will make our countries weaker not stronger.

That is why we need fundamental, far-reaching change.

We believe in a flexible union of free member states who share treaties and institutions and pursue together the ideal of co-operation. To represent and promote the values of European civilisation in the world. To advance our shared interests by using our collective power to open markets. And to build a strong economic base across the whole of Europe.

And we believe in our nations working together to protect the security and diversity of our energy supplies. To tackle climate change and global poverty. To work together against terrorism and organised crime. And to continue to welcome new countries into the EU.

For an EU without Britain, without one of Europe's strongest powers, a country which in many ways invented the single market, and which brings real heft to Europe's influence on the world stage, which plays by the rules and which is a force for liberal economic reform would be a very different kind of European Union.

And when the referendum comes let me say now that if we can negotiate such an arrangement, I will campaign for it with all my heart and soul.

Surferbeetle

01-24-2013, 11:14 PM

A government rescue of the world's oldest bank may substantially impact the Italian political sphere...

Paschi Pressed to Disclose Derivative Losses as Vote Looms, By Sonia Sirletti & Elisa Martinuzzi - Jan 23, 2013 10:06 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-01-22/monte-paschi-pressed-to-disclose-derivative-losses-as-vote-looms.html

Former Monte Paschi Chairman Giuseppe Mussari resigned yesterday as head of the Italian Banking Association lobby group. The world’s oldest lender is under pressure to disclose the full extent of its use of derivatives after saying in November that it needed an additional 500 million euros of government money to bolster capital because of the contracts. Shareholders meet this week to approve two capital raisings required by the Treasury for the lender to get that aid.

“We will ask for full transparency,” Guido Antolini, a member of Associazione di Piccoli Azionisti Azione Banca Monte dei Paschi di Siena, an association of the lender’s individual investors, said in a telephone interview. “We will want to know what was inherited from previous executives and the actions that the bank is taking to repair the damage.”

Wirbel um Derivate bei Monte dei Paschi, Wirtschaftsnachrichten Gestern, 22:21 (23.01.2013), NZZ, http://www.nzz.ch/aktuell/wirtschaft/wirtschaftsnachrichten/wirbel-um-derivate-bei-monte-dei-paschi-1.17958485

Der Wirbel um Mussari, der vorerst widerrechtliche Handlungen kategorisch bestritt, und vor allem auch die Unsicherheit bezüglich der finanziellen Folgen des Skandals führten am Mittwoch vorübergehend zu einem schweren Einbruch des MPS-Aktienkurses von bis zu 11%. Das älteste Geldhaus der Welt, das seit letztem Sommer vom früheren Unicredit-Chef Alessandro Profumo präsidiert wird, hatte Ende vergangenen November bereits mitgeteilt, dass es wegen in Vorjahren eingefädelter Derivatetransaktionen vorsorglich 3,9 Mrd. € statt der bis dahin geplanten 3,5 Mrd. € Staatshilfe in Form sogenannter Monti-Bonds beanspruchen werde.

Firn

01-25-2013, 07:26 PM

The count against the miner (http://www.economist.com/blogs/easternapproaches/2013/01/czech-elections), better known as Schwarzenberg against Zeman will have at least one certain outcome: a big eurosceptic will no longer be the president of the Czech Republic.

A runoff on January 25th and 26th will decide the winner. While Mr Zeman largely met expectations from pre-election polling, Mr Schwarzenberg more than doubled his anticipated share in what was the first direct presidential election in the history of the country. Some 61.3 % of voters cast ballots after a constitutional change earlier this year did away with a formerly convoluted parliamentary process that was rife with backroom dealing. The head of state has limited powers, but is influential in driving public opinion and appoints members of the Constitutional Court, among other tasks.

Voting patterns were sharply divided geographically and socio-economically, with the left-leaning populist Mr Zeman dominating the eastern part of the country, Moravia, as well as the economically distressed North Bohemian region. Mr Schwarzenberg, an irreverent conservative, held sway in a central swath of the country, trending towards urban and wealthy, as well as from ballots cast by Czech citizens living abroad.

A hot discussion about the (in)famous Benes decrees (http://en.wikipedia.org/wiki/Bene%C5%A1_decrees) did fire up additionally the last days of the election.

From an economic point of view the developed central and western parts of the Republic are well intergrated into the European (think German) economy.

---

The Sole 24 ore (http://www.ilsole24ore.com/art/notizie/2013-01-25/resa-conti-assemblea-063509.shtml?video&uuid=Ab5wpvNH&mccorr=Abwc7dNH) has focused on the MPS affair. It is of course sad and a bit unsettling to hear talk about la sicurezza dei depositi again and see informations pages for savers (http://www.ilsole24ore.com/art/finanza-e-mercati/2013-01-24/tutto-devono-sapere-risparmiatori-221111.shtml?uuid=AbtsqtNH). It is interesting to note that much of the basic stuff has been among the most read on that site.

Surferbeetle

01-28-2013, 12:07 AM

Appreciate the Czech links, from there it was a short walk to the Chalga videos on youtube...that damn globalization. :wry:

TAFTA is back, approximately 50% of global trade may be impacted if the negotiators can pull it off. The time table for implementation of Basel III has been relaxed, the LTRO is being paid off (kinda ;) ), there is talk of a Great Rotation from bonds to stocks, interest rates are indeed fluctuating, currency wars are a topic of discussion...hmmm...we are at technical boundaries (52 week highs are regularly being broken) and fundamental valuation boundaries on the stocks that I follow...the phrase 'the market can remain irrational longer than one can remain solvent comes to mind.' I have taken to buying ETFs early in the week and bailing out by the end of the week...:eek:

Transatlantic Free Trade Area, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Transatlantic_Free_Trade_Area

From ideas to implementation, Remarks by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, at the 8th High Level Meeting organised by the Basel Committee on Banking Supervision and the Financial Stability Institute and hosted by the South African Reserve Bank, Cape Town, 24 January 2013, http://www.bis.org/review/r130124a.pdf?frames=0

Of course, there are plenty of other big ideas being floated on how the banking industry should be restructured in the aftermath of the crisis, particularly those related to varying models of structural separation (eg the ideas of Volker, Vickers and Liikanen). But for those that fall within the mandate of the Basel Committee, we believe that the ideas produced by Basel Committee thinking – translated into the Basel III reforms, and subsequently endorsed by the G20 and Financial Stability Board – provide a substantial foundation on which the banking system can be rebuilt to be much more robust and resilient in the future.

ECB Website, Open market operations, http://www.ecb.int/mopo/implement/omo/html/index.en.html#com

ECB Says Banks to Repay More Than Forecast of 3-Year Loan, By Stefan Riecher - Jan 25, 2013 5:56 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-01-25/ecb-says-banks-to-make-137-billion-euro-loan-repayment-next-week.html

Some 278 financial institutions will return 137.2 billion euros ($184.4 billion) on Jan. 30, the first opportunity for early repayment of the initial three-year loan, the Frankfurt- based ECB said in a statement today. That compares with the median forecast of 84 billion euros in a Bloomberg News survey of economists. The ECB’s first loan totalled 489 billion euros and banks can continue to make early repayments in coming weeks.

The ECB still allows banks to borrow as much money as they want against eligible collateral for periods of one week, one month and three months. Some economists say this reduces the importance of the three-year loans being repaid.

Government Bond Yields, Bloomberg, http://www.bloomberg.com/markets/rates-bonds/

China’s Yi Warns on Currency Wars as Yuan Close to ‘Equilibrium’, By Jeff Black & Zoe Schneeweis - Jan 27, 2013 11:00 AM MT, Bloomberg News, http://www.bloomberg.com/news/2013-01-26/china-s-yi-warns-on-currency-wars-as-yuan-in-equilibrium-.html

Japanese Economy Minister Akira Amari said in Davos that his nation aims to defeat deflation rather than weaken the yen, after Prime Minister Shinzo Abe’s push for laxer monetary policy sparked a slide in the currency. His comments on Jan. 26 followed a week in which German and Canadian policy makers joined a worldwide chorus highlighting a recent plunge in the yen as a worry.

“A currency war, a series of ###-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong who previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.”

Reasons to feel bullish as political clouds fade, January 25, 2013 8:29 pm, John Authers, Financial Times, www.ft.com

What could possibly go wrong? Stock markets have had a great start to the year. The talk about a “Great Rotation” from bonds into stocks, and of a new Bull Market in equities, is deafening.

As the US fund manager John Hussman points out, the following combination currently holds: the S&P is more than 8 per cent above its average of the preceding 52 weeks, more than 50 per cent above its four-year low, and trades well above its historic average cyclically adjusted earnings multiple; while treasury yields have risen over the past six months, and investor bullishness far outweighs bearishness. This combination has been seen nine times in the past four decades, and in all but one a correction ensued.

Firn

01-29-2013, 08:59 PM

Thanks for the links and the comments.

Sounds like the cannons have fallen silent for now, the markets certainly had a great run and thankfully the Italian (and Spanish) state doesn't have to pay so much to get money on the financial markets. There is more then just talk about huge flows from (IMHO very expensive) bonds into stocks. And exactly this worries me more then just a bit. :wry:

As I have written before I had over the whole last year 75% in stocks for the simple reasons that I thought the value was lower then the price by some margin of security and that decent bonds were overpriced. Now the gains look nice but I almost feel like there are no really good options around to invest money I take out of stocks.

What is to be done?, asked Lenin, although I wouldn't like his answer :o

Fuchs

01-29-2013, 11:14 PM

What is to be done?

I was always under the impression that people who actively manage their savings are in large part doing so for fun.

The crowdsourced credit/investment thing should be quite a playground to such people.

Firn

01-30-2013, 05:14 PM

I was always under the impression that people who actively manage their savings are in large part doing so for fun.

The crowdsourced credit/investment thing should be quite a playground to such people.

With fun might express it better.

As a generally pragmatic/ignorant person I stay away from crowdsourcing, it seems to me to be too much effort for too little capital with too little return for the risk.

The mainstream (http://www.wallstreetjournal.de/article/SB10001424127887323375204578269742689031034.html) has now run some articles about the prince oft bonds, something of which I have written for quite some time.

Surferbeetle

01-31-2013, 07:08 AM

Firn

01-31-2013, 10:39 PM

What is to be done? :wry:

Fishing, surfing, and exploring out away from the urban world reveals natural law, 'red in tooth and claw'. Our 'friend' the lawyer/philosopher/revolutionary was tough enough to track and ride the shark but nonetheless blind to it's true nature. The attempts to shackle and cage it were very unhealthy for all involved...China/The Great Leap(s) Forward, Yugoslavia, Czechoslovakia, Iraq, and of course the USSR...the oppressive architecture, the lack of opportunity, the repugnant police state/Mukhābarāt, and the marrow deep fear of the citizenry made for a toxic and bitter experience. All are noteworthy examples of what happens when the State loses it's way.

Indeed. The very human qualities which allowed us to become billions on this beautiful planet can cut both ways - and all too powerfully.

WSJ.de...nice catch, was not aware of it until now. The Anleihemarkt Zetibombe is interested in us even if we are not interested in it. So, are Jens Weidmann and Dylan Grice modern day Cassandras? Can Ben Bernanke, Janet Yellen, Mark Carney, Stanley Fisher, and others guide the policy makers out of the wilderness?

For fun and with fun. ;)

Indeed, we are part of a big whole, as much as we many sometimes not like it. In this case the actions, which actually I support for the most part, have created a dilemma for many savers, be at the individual or pension fund level. Pragmatism founded on science should (hopefully) act on the policy side, we poor just react or ignore accordingly.

And it does make sometimes fun.

Alt J, An Awesome Wave, Intro, youtube, http://www.youtube.com/watch?v=EAC9Ecf1Xgc

Nice link, liked (http://www.youtube.com/watch?v=JvTVuMzQXTM) this Alt J song as well.

BTW: An older article (http://www.wallstreetjournal.de/article/SB10000872396390443477104577552352933063514.html) about crowdsourcing which hits the nail pretty much on its head. I think it is always, always important to keep the basics well-ordered in mind. The problem is often acting accordingly, just like the guy in my quote found out.

Surferbeetle

02-05-2013, 03:59 AM

There has been some political turbulence in Spain and Italy of late. This turbulence may have translated into interest rate increases in 10 year government bonds today, with a one day 23 and 14 basis point move (23/10,000 and 14/10,000) respectively. This results in annual yields of 5.44% and 4.47%, again respectively, and can be compared to yields of 0.76% in Switzerland and 10.92% in Greece. Preparatory work continues on European and Asian Free Trade Agreements however, so I am keeping the faith.

Meanwhile, on this side of the pond/back at the ranch, ISM and January BLS Non Farm Payroll numbers have been of interest as has the DOJ lawsuit against the S&P.

Bloomberg 10 year Government Bond Yields, http://www.bloomberg.com/markets/rates-bonds/

Spanish Leader Pledges Transparency Amid Corruption Inquiry, By RAPHAEL MINDER, Published: February 2, 2013, NYT, http://www.nytimes.com/2013/02/03/world/europe/spanish-leader-pledges-transparency-amid-corruption-inquiry.html?ref=europe&_r=0

Italian Banks Fall as Politics Spreads Uncertainty: Milan Mover, By Sonia Sirletti & Francesca Cinelli - Feb 4, 2013 4:55 AM MT, Bloomberg News http://www.bloomberg.com/news/2013-02-04/italian-banks-fall-as-politics-spreads-uncertainty-milan-mover.html

Basis point, From Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Basis_point

Obama puts trade at heart of agenda, By Richard McGregor in Washington, February 4, 2013 5:56 pm, Financial Times, www.ft.com

Institute for Supply Management, http://www.ism.ws/ismreport/mfgrob.cfm

Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.nr0.htm

Reports: U.S. Plans To Sue S&P Over Mortgage Bonds Ratings, by EYDER PERALTA, February 04, 2013 2:40 PM, NPR http://www.npr.org/blogs/thetwo-way/2013/02/04/171081615/reports-u-s-plans-to-sue-s-p-over-mortgage-bonds-ratings

Firn

02-12-2013, 05:45 PM

A couple of links:

Dude where is my cheap oil? (http://www.econbrowser.com/archives/2013/02/dude_wheres_my.html)

It's obvious from the above price charts that it makes no economic sense to add gallons of ethane or propane to gallons of crude oil to try to summarize global oil supply. But growth of natural gas liquids has been a key factor in the reported increases in "world oil supply" over the last few years and is also a key component of recent optimistic assessments of future oil production by Leonardo Maugeri and the IEA.

There is no question that the boom in production of natural gas liquids is providing a great benefit to industrial users of ethylene. But if you're waiting for it to lower the price you pay for gasoline at the pump, you may have to wait a while longer.

I enjoyed this nice short blog entry. So far it doesn't make much sense to see ethane or propane as good enough substitutes. They should become such goods if we see enough cars running on them with the proper network aka pump support.

---

From Krugmans blog (http://krugman.blogs.nytimes.com/) I posted an important argument about a topic which has made headline thanks to story in which more is at stake then an Apple and an Ei(nhorn). [Sorry for the bad pun which only a few will understand :D]

In short it is what to do with all that cash on the balance sheet of sometimes highly profitable companies? My personal take is (unsurprisingly) heavily influenced by Buffet and Graham. If the company is not able to find something with a high enough ROI it should check first if it is sensible to buy back stock if the price is higher then it's value. (Highly efficient and no taxman involved). If it isn't it should start to pay out more dividends.

The macro view:

Still Say’s Law After All These Years

When John Maynard Keynes wrote The General Theory, three generations ago, he structured his argument as a refutation of what he called “classical economics”, and in particular of Say’s Law, the proposition that income must be spent and hence that there can never be an overall deficiency of demand. Ever since, historians of thought have argued about whether this was a fair characterization of what the classical economists, or at any rate his own intellectual opponents, really believed.

Not being an intellectual historian myself, I won’t venture an opinion on that subject. What I will say, however, is that Say’s Law (Say’s false law? Say’s fallacy?) is something that opponents of Keynesian economics consistently invoke to this day, falling into exactly the same fallacies Keynes identified back in 1936.

In the past I’ve caught Brian Riedl and John Cochrane doing it; now Peter Dorman finds Tyler Cowen in their company.

Cowen can’t see why corporate hoarding is a problem. Like Riedl and Cochrane, he concedes that there might be some problem if corporations literally piled up stacks of green paper; but he argues that it’s completely different if they put the money in a bank, which will lend it out, or use it to buy securities, which can be used to finance someone else’s spending.

But of course there isn’t any difference. If you put money in a bank, the bank might just accumulate excess reserves. If you buy securities from someone else, the seller might put the cash in his mattress, or put it in a bank that just adds it to its reserves, etc., etc.. The point is that buying goods and services is one thing, adding directly to aggregate demand; buying assets isn’t at all the same thing, especially when we’re at the zero lower bound.

What’s depressing about all this is that Say’s Law is a primitive fallacy – so primitive that Keynes has been accused of attacking a straw man. Yet this primitive fallacy, decisively refuted three quarters of a century ago, continues to play a central role in distorting economic discussion and crippling our policy response to depression.

In simple terms 1€ spent on an investment means 1€ of increased demand while 1€ spent on an asset means that only a part of that dollar creates demand - especially if the rates are so low due to the liquidity trap.

Firn

02-12-2013, 06:28 PM

Sorry about the double post, I think it helps to the reader more then overly long posts.

Wiki has a decent write-up about the Dividendum (http://en.wikipedia.org/wiki/Dividend)

Dividends are not created of course equal.

The Deutsche Telekom AG (http://www.finanzen.at/bilanz_guv/Deutsche_Telekom) is an interesting case. It does not divide the earnings of the company but the earnings + the capital. If a company earns over the last 7 years something like 0,5 per share but pays out a bit more then 0,7 something is usually very wrong. At least for the investor and 8,5€ per share certainly don't look cheap from this angle alone. ( At a low enough share price a disinvesting business could be quite attractive)

The France Telecom (http://www.finanzen.at/bilanz_guv/France_T%C3%A9l%C3%A9com) looks different. Over the last 7 years it has paid out 1,3€ per share while earning roughly 1,7 €. That is a high proportion and might be a bit too much as the shareholder might have had a higher return from higher amount of retained capital*. Quite recently FT has decided to cut the dividend to 0,8€ for 2012 and 2013. Earnings have suffered a bit but they should be higher then 1,2 IIRC for 2012. At a price of ~ 8€ the dividend yield is very high, at least before the dreaded taxes. It is certainly remarkable that in a world without taxes a shareholder with 1 share could have bought another one 7 years later just with the dividends. (No inflation and investment taken into account) Of course in this case he might be not too happy as he invested into this first share somewhat over 20€. :D

The first stock is not worth a second look, as time is precious, but the second one might be well worth the time even with those wicked French socialists² in power.

*A business typically needs to invest more then the depreciation takes just to keep it's current position to it's competitors.

²They leave you just 60% of your dividend while the dear US takes less the 30% away...

Fuchs

02-12-2013, 07:04 PM

In simple terms 1€ spent on an investment means 1€ of increased demand while 1€ spent on an asset means that only a part of that dollar creates demand - especially if the rates are so low due to the liquidity trap.

He's still wrong to put the blame on the corporation instead of on the bank.

Meanwhile if he's irritated by the reserves held by banks - part of them are obligatory, and the Fed is free to pump more money into the system if those reserves are a problem.

Money held back slows down the rate of circulation which according to a quite established theory (not necessarily the theory Krugman likes) means less inflation. So this "less inflation" can be seen as a problem as Krugman does or as an opportunity to do something that usually drives inflation, such as the Fed giving the U.S. a gift in shape of buying some debt obligations at ridiculous conditions.

He's very, very arbitrary in blaming liquidity-hoarding corporations.

Firn

02-12-2013, 07:20 PM

He's still wrong to put the blame on the corporation instead of on the bank.

Meanwhile if he's irritated by the reserves held by banks - part of them are obligatory, and the Fed is free to pump more money into the system if those reserves are a problem.

Money held back slows down the rate of circulation which according to a quite established theory (not necessarily the theory Krugman likes) means less inflation. So this "less inflation" can be seen as a problem as Krugman does or as an opportunity to do something that usually drives inflation, such as the Fed giving the U.S. a gift in shape of buying some debt obligations at ridiculous conditions.

He's very, very arbitrary in blaming liquidity-hoarding corporations.

I think he is perfectly right for the very reasons he wrote. The lack of direct investment of an (greatly) increased share of the national income is no good for the aggregate demand. It is 'just' one part of a bad economic spiral but still not a good one for the whole economy.

BTW dividends would of course tend to go to people which will reinvest most of the captial, buying assets instead of consuming. At least Uncle Sam would get more revenue and this by hardly taxing the poor.

Firn

02-13-2013, 08:04 PM

Just a nice old link (http://www.cnbc.com/id/25058426) about a bet between Buffet and Protg Partners LLC.

Here's the bet, which Loomis says hasn't been reported before but has been in existence since the beginning of this year:

"Protg has placed its bet on five funds of hedge funds - specifically, the averaged returns that those vehicles deliver net of all fees, costs, and expenses. On the other side, Buffett ... has bet that the returns from a low-cost S&P 500 index fund sold by Vanguard will beat the results delivered by the five funds that Protg has selected."

Both Buffett and Protg (the firm, not the funds) have contributed $320,000 to buy a zero-coupon Treasury bond that will cash out at $1 million when the wager concludes in 2018.

Still a long way to go but it is interesting tor read (http://www.cnbc.com/id/100405142) about the score at roughly half-time:

The strategy with the best return at the end of 2017, including the costs associated with the funds, will be the winner, with a guaranteed $1 million going to either Buffett's designated charity (Girls Inc of Omaha) or Seides' (Absolute Returns for Kids.)

Fortune's Carol Loomis reports today that Buffett's chosen fund is up 8.69 percent, easily ahead of the hedge funds picked by Protege with their 0.13 percent average increase.It's vindication, at least so far, of Buffett's long-held argument that over a number of years, the "experts" aren't able to outperform the overall stock market. It's the basis of his belief the fees "helpers" charge investors usually aren't justified.

It might be this (https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT) one - behold the power of good dividends. Keep in mind that 2008 was a terrible year for the S&P, losing almost practically half of it's value. One could not have picked a worse time in the last 5 years to buy the index fund but that might have just added spice to the wager ... :D

Firn

02-14-2013, 05:40 PM

Bad economic data for Germany, Italy & Co (http://www.guardian.co.uk/business/2013/feb/14/eurozone-crisis-live-recession-germany). Italy was hit hard (http://www.corriere.it/economia/13_febbraio_14/pil-italia-in-calo-ne-2012_fbd18a8c-7693-11e2-bad5-bab3677cbfcd.shtml) by the recession, the harsh and unbalanced austerity certainly playing a part in that. Maybe even worse the man responsible for a great part of our current economic woes, the man which played a whoring* sunking while Italy burned and put us all into a financial bind seems to profit from the recent developments.

I will be responsible in my district for the voting next weekend, let us hope that the duty won't be too hard. :wry:

*a rather factual description of what happened time and time again.

---

Why is France Telecom (http://finance.yahoo.com/q/ks?s=FTE+Key+Statistics) not worth more? Of course nobody knows for sure, but a quick glance on the key statstics gives us some potential idea.

1) 'Management Effectiveness' is quite dismal. Keep in mind that on average the results were considerably better in the years past. Still not good.

Return on Assets (ttm): 5.44%
Return on Equity (ttm): 12.30%

The capital employed by FT brings (very) little return. The return on equity is a bit better but only thanks to high leverage. The high goodwill is of interest as it is amount of intangible assets on the balance sheet (http://finance.yahoo.com/q/bs?s=FTE+Balance+Sheet&annual). A lot of question marks on those lines. If it is 'good' economic goodwill it would drive up the return on the tangible assets but it is impossible to tell before looking up the statements in detail.

2) Profitability doesn't looked too good. Recently FT has become under heavy pressure by competitors in the home market.

Profit Margin (ttm): 8.28%
Operating Margin (ttm):

3) The balance sheet shows the considerable leverage and a great deal of goodwill and intangible assets compared to the tangible ones and equity. Lots of questions here, especially if the goodwill is indeed good or if it is a no-will. The long-term debt is high, how long-term is it and how high the interest?

So the stock looks 'cheap' at first and comes with a might dividend even if multiplied by 0.6 but as usual one has to do first the homework.

Fuchs

02-14-2013, 05:58 PM

Firn

02-15-2013, 12:15 PM

GDP figures have a certain margin of error, especially early ones.
-0.6% is nothing really noteworthy as an early GDP change figure, since the technological rate of progress has moved towards 1.5 % over decades and you need to subtract the demographic influence from this in order to get the natural GDP growth path figure.

Many people have not adjusted their growth expectations to 'GDP per working age capita' yet.

I agree about the point, however to a good amount that working age capita GDP sustains every single capita in a country. I will leave it there as we already discussed it and the traps laying around the concept of the GDP are many. Makes me think of Winston and his view on democracy or Buffets take on the GAAP.

As one of the biggest and most important countries in Europe prepares to vote in just a week I think it is just to shift the focus in this direction.

Monti (http://www.corriere.it/politica/13_febbraio_15/monti-tangentopoli_1aaac7a2-7743-11e2-a4c3-479aedd6327d.shtml) points the finger at the PdL, the party of our ridicolous sunking.

L'Italia - ha aggiunto Monti - e' un paese importante, un paese del G8, e' certo puo' anche cadere nel ridicolo come e' accaduto per l'atteggiamento ridicolo tenuto da qualcuno in passato.

According to Monit Bersani (center-left) offered him the role as president ( the Quirinale is the current home of Napolitano) on the condidtion that the would stay out of the elections.

Se ci sara' un governo Bersani lei entrerebbe nella compagine?, gli chiedono: Dipende se nel programma ci sono le riforme che noi vogliamo e per le quali io ho compiuto l'insensatezza di rinunciare a posizioni che mi venivano prospettate. Il Quirinale? E non solo, perche' ci tengo a fare queste riforme.

The swiss NZZ (http://www.nzz.ch/aktuell/international/papst-schadet-berlusconi-1.18002776) reported how 'Benedetto uomo' (the blessed man) and his shock retire as Bishop of Rome, as well as Sanremo might heavily influence Berlusconis campaign which is only based on emotions and glibberish.*

Italiens Parlamentswahlen finden zwar erst am 24. und 25. Februar statt, doch hörte der Wahlkampf laut dem sarkastischen Kommentar von Luigi Crespi, einem führenden Demoskopen, bereits am 11. Februar um 11 Uhr 46 auf. Crespi wies damit überspitzt darauf hin, dass der von Papst Benedikt XVI. am Montag angekündigte historische Amtsverzicht die Medienberichterstattung über die Wahlen marginalisiert hat.

Monti will also be at the center of the news this weekend when the pope invites him into the Vatican, allowing him to act as a catholic statesman.

Und mit Konsternation hatte er am Mittwoch zu registrieren, dass Papst Benedikt am kommenden Samstag den scheidenden Regierungschef Monti, der das politische Zentrum im Wahlkampf anführt, zum Abschied empfangen wird.

*my view.

Firn

02-18-2013, 07:26 AM

Yesterday evening I took a closer look at some financial statements, with some interesting results. ENEL for example did indeed trade a some point in recent times under the cash per share.

Mostly I looked at the results of stocks I own. Overall it was quite nice, but as written before such bull runs are always a bit two-edged if you have a hard time to find other good investements outside of stocks...

It is always nice to see some contra given. Anyway I will post the latest three trades, at least the price for which I got hopefully more value. Note that this concerns the small part of the portfolio wich is directly invested in equities. The far bigger equity part is in index funds, mostly of the (physical) ETF type.

E.ON: ~15
HP: ~10
Xerox: ~5

Buying fees are roughly 0.5%, portfolio fees 0.1%. Prices in €. Trades happened in the last two weeks. Obviously the sample is (too) small but it will be easier to manage.

We will see how things go in a couple of years. Hopefully we will not have forgotten this thread, but maybe this might be a good thing as good news doesn't create as many posts. :D

P.S: I just noted the almost perfect price scale of 5-10-15. Funny.

E.ON went down from ~15 to ~13€, a brilliant investment in a strong market :)
H.P did not too badly from ~ 10 to 12,8€ not too shabby.
Xerox gain some from 5 to 6€

So if one invested 30 € in each stock one has now (with fees but without dividends) roughly 100€ compared to 90€ you had a quarter ago. Not too bad especially if we consider that the € roughly gained 10% on the $. An U.S American could have got a nice return with those three combined.

Firn

02-22-2013, 12:10 PM

Tomorrow we will have the last big meeting before for the elections (http://it.wikipedia.org/wiki/Elezioni_politiche_italiane_del_2013#cite_note-23). Let us hope that this sacred duty goes well, especially for the country. It is always a bit of a hassle to get everything right but our district team is good.

Personally I hope we get a clear result with a moderate and pragmatic coalition. History has shown that this is highly unlikely and a look on the lists (from Wiki) shows a big part of the problem:

Per il rinnovo della Camera dei Deputati e del Senato della Repubblica risultano candidate le seguenti liste o coalizioni di liste:[92][93]

Coalizioni di liste

Coalizione avente come leader Pier Luigi Bersani, denominata Italia. Bene Comune e composta da: Partito Democratico,[n 1] Sinistra Ecologia Libertà,[n 2] Centro Democratico,[n 3] Partito Socialista Italiano,[n 4] Moderati,[n 5] Il Megafono - Lista Crocetta,[n 6] Südtiroler Volkspartei,[n 7] Verdi Grüne Vërc,[n 8][94] Autonomie Liberté Démocratie.[n 9][95]

Coalizione avente come leader Silvio Berlusconi, composta da: Il Popolo della Libertà,[n 10], Lega Nord,[n 11] Fratelli d'Italia,[n 12] La Destra,[n 13] Moderati Italiani in Rivoluzione,[n 14] Grande Sud,[n 15] Movimento per le Autonomie,[n 16] Intesa Popolare,[n 17] Partito Pensionati,[n 18] Liberi per una Italia Equa,[n 19] Basta Tasse,[n 20] Cantiere Popolare.[n 21]

Coalizione avente come leader Mario Monti, denominata Con Monti per l'Italia[n 22] e composta da: Scelta Civica,[n 23] Unione di Centro,[n 24] Futuro e Libertà per l'Italia,[n 25] Movimento Associativo Italiani all'Estero.[n 26][96]

Coalizione avente come leader Ottavio Pasqualucci, composta da: No alla Chiusura degli Ospedali,[n 27] Dimezziamo lo Stipendio ai Politici,[n 28] Viva l'Italia.[n 29]

Yes sometimes reading those names one doesn't know if one should laugh or shed tears. Below we have neo-facists, rurals, autonomists, democrats, atheists, seperatists, feminists, ?, neo-fascists, ?, seperatists, seperatists and so forth. Luckily they will play just a small role apart form the MoVimento 5 Stelle.

CasaPound Italia,[n 30] avente come leader Simone Di Stefano
Civiltà Rurale Sviluppo,[n 31] avente come leader Enzo Bosio
Comunità Lucana,[n 32] avente come leader Michele Somma
Costruire Democrazia,[n 33] avente come leader Massimo Romano
Democrazia Atea,[n 34] avente come leader Carla Corsetti
Die Freiheitlichen,[n 35] avente come leader Ulli Mair
Donne per l'Italia,[n 36] avente come leader Maria Cristina Sandrin
Fare per Fermare il Declino,[n 37] avente come leader Oscar Giannino
Fiamma Tricolore,[n 38] avente come leader Luca Romagnoli
Forza Nuova,[n 39] avente come leader Roberto Fiore
Indipendenza per la Sardegna,[n 40] avente come leader Pietro Murru
Indipendenza Veneta,[n 41] avente come leader Lodovico Pizzati
Insieme per gli Italiani[n 42]
Io Amo l'Italia,[n 43] avente come leader Magdi Cristiano Allam
I Pirati,[n 44] avente come leader Marco Marsili
Italiani per la Libertà[n 45]
La Base,[n 46] avente come leader Efisio Arbau
L'Alto Adige nel Cuore[n 47]
Liberali per l'Italia - PLI,[n 48] avente come leader Renata Jannuzzi
Liga Veneta Repubblica,[n 49] avente come leader Fabrizio Comencini
Lista Amnistia, Giustizia e Libertà,[n 50] avente come leader Marco Pannella
MoVimento 5 Stelle,[n 51] avente come leader Beppe Grillo
Movimento Eudonna,[n 52] avente come leader Giovanna Sorbelli
Movimento Naturalista Italiano,[n 53] avente come leader Gabriele Nappi
Movimento Politico Pensiero Azione,[n 54] avente come leader Antonio Piarulli
Movimento Progetto Italia - MID,[n 55] avente come leader Marina Petrini
Movimento Staminali d'Italia,[n 56] avente come leader Erika Graci
Movimentu Europeu Rinaschida Sarda,[n 57] avente come leader Salvatore Meloni
Nation Val d'Outa[n 58]
Partito Comunista - Sinistra Popolare[n 59]
Partito Comunista dei Lavoratori,[n 60] avente come leader Marco Ferrando
Partito Comunista Italiano Marxista-Leninista,[n 61] avente come leader Domenico Savio
Partito del Sud - Meridionalisti Unitari,[n 62] avente come leader Andrea Balia
Partito di Alternativa Comunista,[n 63] avente come leader Adriano Lotito
Partito di Azione per lo Sviluppo,[n 64] avente come leader Alfonso Luigi Marra
Partito per Tutti - Partei für Alle[n 65]
Partito Repubblicano Italiano,[n 66] avente come leader Franco Torchia
Partito Sardo d'Azione,[n 67] avente come leader Giovanni Angelo Colli
Popolari Uniti,[n 68] avente come leader Antonio Potenza
Progetto Nazionale,[n 69] avente come leader Piero Puschiavo
Rialzati Abruzzo - Abruzzo Futuro,[n 70] avente come leader Carlo Masci
Rifondazione Missina Italiana,[n 71] avente come leader Raffaele Bruno
Riformisti Italiani,[n 72] avente come leader Stefania Craxi
Rivoluzione Civile,[n 73] avente come leader Antonio Ingroia
Tutti Insieme per l'Italia,[n 74] avente come leader Antonio Corsi
Unione Italiani Sudamerica[n 75]
Unione Padana,[n 76] avente come leader Giulio Arrighini
Unione Popolare,[n 77] avente come leader Maria Di Prato
Unione Sudamericana Emigrati Italiani[n 78]
Union Valdôtaine Progressiste[n 79]
Vallée d'Aoste[n 80]
Veneto Stato,[n 81] avente come leader Antonio Guadagnini
Voto di Protesta - Diritto alla Dignità,[n 82] avente come leader Giuseppe Cirillo

Firn

02-25-2013, 08:44 PM

Really, what should one say. Even if the moderate center-left coalition wins the camera the senate looks absolutely ungovernable.

I mean Berlusconi winning the senato, Grillo in many regions over 30%. What has this country become?

It would be all quite funny if it wouldn't be almost true.

Ah che bello scappa' (http://www.youtube.com/watch?v=Om0GzigXEG4)...

Firn

02-26-2013, 08:21 PM

I tried to collect my wits after the 'risultato ingovernabile':

1) La madre degli imbecilli e' sempre incinta, the mother of the idiots is always pregnant. The success of the Berlusconi&company is hard to stomach, as many voters gave him their vote and trust already two times and should have seen what he has done with it twice. He came within 0,4% of winning the camera and was only narrowly beaten in the senato. Disgraceful.

2) Grillo and his movement hit indeed like a tsunami and has changed the political game, as with such a strong third force he has broken up the logic of the last twenty years. Until the triumph of the M5S, which became from 0% the strongest political party a relative majority in the popular vote resulted also in an absolute majority in the senato. Even with that advantage the smaller parties within a coalition could blow up governments as we have seen so often. It is rather shocking to note against the backdrop of our chronically unstable coalitions that we have now arguably the most gridlocked senato of the last twenty years....

So, what next? I see three paths:

1) The center-left, possibly with the center with or without Monti try to form a minority government. In this case the support of at least some Grillini will be key. In Sicily there was some moderate action and support by members of the M5S and Grilli and some of his movement did state that they were willing to vote for laws case by case.

Even a relative short duration would allow us to get a new president, which in turn could dissolve the chambers. Our current one can not do so if I understood the situation correctly as he is very close to end his term.

2) A great coalition with the right. Very difficult to imagine that, we have quite leftist members in the center-left coalition and quite rightist on the right plus persons like Silvio in the midst of all. The chances that nothing works are high. The M5S might profit from it's predictable failure. This might lead to path 3 with even better cards for Grillo.

3) New elections. The old parties possibly fear rightly a Grillo landslide if we have new elections. If you look at the numbers he is not that short from getting the majority in the camera and the senato. Still it is hard to see how we can avoid them and who knows what the result will be?

Not bad either (http://www.youtube.com/watch?v=I1llmIXHYFs). BTW the pencils Italy used to vote are at least 'engineered in Germany' by Faber-Castell. And they also gave this great songwriter (http://www.youtube.com/watch?v=1XNcV2OSRho) his nickname...

Firn

02-27-2013, 08:13 PM

I'm a bit sorry that I center the thread on Italy, but I do think it is one of the most important topics. La Repubblica (http://www.repubblica.it/) does of course report the words of dear Peer, who called Peppe and Silvioclowns (http://www.guardian.co.uk/business/2013/feb/27/eurozone-crisis-italy-elections-bond-auction). I just hope he won't send us the cavalry, supported by blogging industry captains who sponsor his campaign! :D

Of course he is in this rare case pretty much spot on, but he was of course dead wrong to say it in public, especially while our president stays for three long days in Germany...

Far more important are the manovre di palazzo, the political maneuvers going on. And the words used by some is far more foul (http://www.repubblica.it/speciali/politica/elezioni2013/2013/02/27/news/grillo_bersani_morto_che_parla-53538083/?ref=HREA-1) then 'clowns':

Dove ancora campeggia il post dal titolo: "Bersani, morto che parla". E dove Grillo sembra chiudere in maniera netta a qualsiasi forma di collaborazione organica con il Pd definendo Bersani stalker politico" che "da giorni sta importunando il M5S con proposte indecenti invece di dimettersi".

"Ha passato gli ultimi mesi a formulare giudizi squisitamente politici - si legge nel pezzo, in cui Grillo elenca tutti gli attacchi (a dir la verit pi che mai ricambiati) ricevuti in campagna elettorale dal segretario democratico: dal "autocrate da strapazzo" al "ci porta al disastro". "Ora questo smacchiatore fallito - si legge ancora - ha l'arroganza di chiedere il nostro sostegno (...) Il M5S non dar alcun voto di fiducia al Pd (n ad altri). Voter in aula le leggi che rispecchiano il suo programma chiunque sia a proporle. Se Bersani vorr proporre l'abolizione dei contributi pubblici ai partiti sin dalle ultime elezioni lo voteremo di slancio (il M5S ha rinunciato ai 100 milioni di euro che gli spettano), se metter in calendario il reddito di cittadinanza lo voteremo con passione".

Grillo also stated yesterday (http://www.youtube.com/watch?v=nvLQWUoX-7o) that Berlusconi bought 'most of his votes'. Still it is Italians insulting Italians, dear Peer...

I have a hard time to see any coalition between the three relevant political forces which seem to hate each other with quite some passion. Still path 1) which I outlined above seems to be the most likely but we will see with little doubt new election before 2015, even before. I hope that we get the election of the new presidente della Repubblica done as soon as possible.

davidbfpo

03-11-2013, 06:12 PM

Europe has spent hundreds of billions of euros rescuing its banks but may have lost an entire generation of young people in the process, the president of the European Parliament said.

Since the region's debt crisis erupted in Greece in late 2009, the European Union has created complex rescue mechanisms to prop up distressed countries and their shaky banking sectors, setting aside a total of 700 billion euros.

But little has been done to tackle the devastating social impact of the crisis, with more than 26 million people unemployed across the EU, including one in every two young people in Greece, Spain and parts of Italy and Portugal.

Link:http://www.reuters.com/article/2013/03/11/us-eu-parliament-crisis-idUSBRE92A08W20130311?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943

A Reuters article citing at length the German Social Democrat who sits as President of the European Parliament, without doubt he is trying to make a mark as an EU summit approaches later this week. If there is one EU institution that is irrelevant in policy-making and democratic accountability it is this parliament - a very comfortable place to to sit and pontificate.

Firn

03-11-2013, 08:14 PM

Link:http://www.reuters.com/article/2013/03/11/us-eu-parliament-crisis-idUSBRE92A08W20130311?feedType=RSS&feedName=businessNews&utm_source=dlvr.it&utm_medium=twitter&dlvrit=56943

A Reuters article citing at length the German Social Democrat who sits as President of the European Parliament, without doubt he is trying to make a mark as an EU summit approaches later this week. If there is one EU institution that is irrelevant in policy-making and democratic accountability it is this parliament - a very comfortable place to to sit and pontificate.

The European Parliament certainly go merkelanized to some degree in the last years but it is quite relevant and busy in many areas if you go a little deeper. No wonder that those pesky Americans (http://www.europe-v-facebook.org/EN/en.html), not alone of course, offer help in shaping those key laws. I also voted for an guy there, if I'm not mistaken.

While I share certainly not all ideas of the center-left faction in the European parliament he is pretty much spot on. So much potential, so much productivity vasted by a mostly cyclical problem made worse by the wrong policies.

In any case that Austrian student showed excellent initiative and with others he brought attention some serious issues.

Firn

03-18-2013, 10:11 PM

Quite a day in Europe and a rather rough one mostly for the people of Cyprus and a fair amount of Russian&Co. Who would have imagined that such a little island not even reaching 0,5% of EU's GDP could have cause such troubles. I bet that more money was 'burned' in stocks today then was necessary to keep the gray&bad banks of the Cybrian banking sector running. But wait, if memory serves right, there was a similar colder island (http://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_financial_crisis), with very similar problems some years ago. Another green island, part of the EU, had also a massive financial sector (http://en.wikipedia.org/wiki/2008%E2%80%932013_Irish_banking_crisi) which was blowing up.

The Icelandic raiders refused to give anything back to those who willingly lend to get a higher return on their money while the Irish burdened with some help the heavy load. In Cyprus we have seen a mix proposed, although far less bloody then in Iceland. Once again people brought partly black money there to wash it white while earning a handy return, far above the European norm. Still it was stupid and immoral to hit those who have little, especially after up to 100.000 were guaranteed a day before.

While the EU and the ECB handled the issue badly I'm honestly disgusted by the way the powers in Cyprus treated their people. From a variety of sources it emerges that key player of the ruling coalition wanted to have the burden shifted more 'equally'. To take less from the rich and tax evaders they wanted to take a good deal from the poor. Not only did they try to protect the former but also their personal wealth. I would be not surprised at all if there were lots of last-minute transfers from the politcal caste and the well-connected. Disgraceful.

davidbfpo

03-19-2013, 07:05 AM

It was odd to listen to a German politician being interviewed on the BBC radio yesterday about Cyprus. Best bit was when he mentioned all the work to guarantee EU-wide bank deposits up to 'X' level and along comes Cyprus - which has ruined any public faith in secure banking.

What is more interesting is the exposure of Russian deposits and the potential for questions about "dirty" money and money laundering. Whatever the pretence of much anti-money laundering regulation, it is clear that for (some) governments "dirty" money is a source of income, albeit at a price sometimes.

Firn

03-19-2013, 06:17 PM

From the left-leaning liberal Zeit (http://www.zeit.de/wirtschaft/2013-03/zypern-chaos-entscheidung-bruessel)

Nach Angaben aus Teilnehmerkreisen hatten EZB-Ratsmitglied Jrg Asmussen und die Euro-Gruppenchef Jeroen Dijsselbloem genau einen solchen Plan ausgearbeitet, der Kleinanleger verschonte. Als der Vorschlag dem zyprischen Prsidenten Nikos Anastasiades vorgestellt worden sei, habe dieser jedoch kategorisch abgelehnt. Um das ntige Geld zusammen zu bekommen, htten die Vermgen ber 100.000 Euro mit einer Zwangsabgabe von deutlich mehr als zehn Prozent belastet werden mssen. Das habe Anastasiades abgelehnt.

Danach soll es im Brsseler Sitzungssaal hoch her gegangen sein. Schuble, Dijsselbloem und Vertreter von EU, EZB und IWF unterbrachen die Sitzung mehrmals, um sich die Zyprer im Einzelgesprch vorzunehmen. Samstagfrh habe der Niederlnder Dijsselbloem dann vorgeschlagen, dass die Einlagen ber 100.000 Euro mit 12,5 Prozent belastet werden.

Daraufhin strmte Zyperns Prsident Anastasiades laut Teilnehmern wutentbrannt aus dem Saal. Er kehrte erst zurck, nachdem ihm ranghohe Unterhndler unmissverstndlich klargemacht hatten, wenn er nicht an den Verhandlungstisch zurckkehre, wren der Staatsbankrott und die Schlieung der Banken unabwendbar. Schlielich stimmte er der Abgabenregelung zu, bestand aber auf eine Hchstgrenze von 9,9 Prozent fr die Vermgen ber 100.000 Euro. Damit war klar, dass alle anderen Guthaben belastet wrden und zwar mit 6,75 Prozent.

This fits pretty much what I had in my mind yesterday. Of course we have to treat every information with care but it fits pretty nicely. One has also to keep in mind Cyprus hard and in hindsight harmful stance on it's banking system and dirty money against European institutions. It is highly likely that many could not stomach the fact that the rich tax evaders would get away while the European taxpayer would have to foot the bill. After Cyprus was told and told again that it had to act on those issues.

Mr. Anastasiades&Co would have know what the game was about and maybe tried to save some face - by coming up with a more 'even' burden for all. It is quite telling how quickly and easily the journalists seem have to got many details. Looks like many are not quite happy how things were depicted earlier...

It is just disgraceful that poorer and less financially sophisticated citziens of Cyprus seem have to pay a considerable amount. It is not like they moved their money to the banks of their island to get a higher return but they just put it into the institution around the corner...

Firn

03-19-2013, 08:10 PM

The Telegraph (http://www.telegraph.co.uk/finance/debt-crisis-live/9939296/Cyprus-bailout-live.html) live-blogs the events following the Guardian model.

18.23 Apparently they voted with a show of hands.

18.16 So they voted after all. And surprise surprise, the bank levy bill has been defeated. There were 36 votes against, and 19 abstentions. One MP didn't even show up. Cyprus's parliament has 56 seats.

So they said no. Very bad news indeed, especially for the man on the street, may he or may he not carry a shield crying murder. The banks should not open anytime soon.

I appreciate that things are hectic and if many twitter and talk there must be some pretty idiotic stuff among it:

Germany might be telling the world not to blame it for Cyprus' bailout plan, but one analyst told CNBC that Russia could avenge the loss of billions of dollars it has invested and deposited on the island by cutting Germany's energy supply.
...

:p

On the other hand it is different if you hear something like that:

15.05 Former governor of the Cypriot central bank, Anthanasios Orphanides has launched an powerful rebuke towards Cyprus's European creditors, branding their actions tantamount to blackmail. Speaking to Bloomberg TV, he said:

Decisions like this, much like the decision to haircut Greek debt in October 2011, actually benefit some countries. For example as we’ve seen from markets yesterday a decision like this reduces the financing costs for the German government so the German government can now borrow at negative rates as a result while it inflicts pain on other countries. Not everybody is equal under the law the way European governments are behaving these days.

Such talk is quite dangerous and during the last years I would have been quite glad if some would have said not a single word. He was the fromer top guy of the CCB when the bank secto got out of control and dirty money was pouring in. It happened on his watch and just like terrible governments at home brought us into a mess with few good alternative the Cypriotic leader did shovel their island their own hole. They made themselves dependent on help and goodwill of others which they squandered by doing nada of what they had asked them.

Let us see the offical stance of France:

"The rates could be different and could protect deposits under 100,000 euros, we are waiting for that and we are ready for that," French Finance Minister Pierre Moscovici told CNBC on Tuesday.

"There was a huge problem in Cyprus, nobody can deny that - with a banking sector which was absolutely enormous, with some advantages which were huge too and a lack of transparency- we had to address that, that's what we're doing,"

In short so far: Do what you want but you have to collect enough money to pay your part of the bailout.

Firn

03-21-2013, 10:23 AM

Big news (http://www.ecb.int/press/pr/date/2013/html/pr130321.en.html) indeed from the ECB, seems that my take on the situation was not that far off..

PRESS RELEASE

21 March 2013 - Governing Council decision on Emergency Liquidity Assistance requested by the Central Bank of Cyprus

The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013.

Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.

In short. Get a deal done with the EU/IMF or your whole banking sector goes bust.

...

--

I had yesterday time to look at some annual reports and stock movements, and look at the performace of what I bought in the last year. Seethe original post (http://council.smallwarsjournal.com/showpost.php?p=142459&postcount=396)

E.ON went down from ~15 to ~13€, a brilliant investment in a strong market
H.P did not too badly from ~ 10 to 12,8€ not too shabby.
Xerox gain some from 5 to 6€

So if one invested 30 € in each stock one has now (with fees but without dividends) roughly 100€ compared to 90€ you had a quarter ago. Not too bad especially if we consider that the € roughly gained 10% on the $. An U.S American could have got a nice return with those three combined.

E.ON from 15 down to ~ 13,5€ - so far so good ;)
HP from 10 to ~ 17,5 € - 75% are quite a decent return in a couple of months
Xerox from 5 to ~ 6,75 - somewhat over 30% gain in the same timeframe

So the orignal 90 have become 120 € in less then half a year. Not so bad. I never understood in good times and bad ones why stocks have to be per se riskier then cash in bank. It all depends on the value you get and the price you pay. It is surprising to what lengths some persons go to get a slightly higher return on bonds and cash while shunning equity out of prinicple because of the volatility...

P.S: Today I sold my considerable investment in HP and Xerox. I invested additional capital in E.ON very recently. The government can be happy as it earned roughly 25% of the return. No taxes were evaded.

Firn

03-21-2013, 01:46 PM

Krugman (http://krugman.blogs.nytimes.com/) seems to have a rather similar take on part how the levy was shaped up. But he does a neat summary of what seems to be 'The Sum of All FUBAR':

Cyprus: The Sum of All FUBAR

At this point the Cyprus situation is pretty clear — and clarity does not bring reassurance. In fact, it looks as if Cyprus has managed to combine in one place everything that has gone wrong elsewhere.

1. Runaway banking. Cyprus has a huge banking system — assets around 8 times GDP — based on a business model of attracting offshore money with high rates and good opportunities for tax avoidance/evasion.

I’ve done some asking around, and cleared up something that was puzzling me. Officially, only about 40 percent of the deposits in Cypriot banks are from nonresidents, which would imply resident deposits of almost 500 percent of GDP, which is crazy. But the answer is that I do not think that word “resident” means what you think it means. Some of the money is from wealthy expats living in Cyprus; much of it is from rich people who have resident status without, you know, actually living there. So we should think of Cypriot deposits as mainly coming from non-Cypriots, attracted by that business model.

And the business model only works until there’s a big loss somewhere; since Cypriot banks were investing in Greece and in their own domestic real estate bubble, doom was inevitable. Which brings me to:

2. Big domestic real estate bubble, Spain or Ireland-sized. Not yet fully deflated, which means lots more losses to come. And the combination of the real estate bubble and the income from dodgy banking also led to:

3. Massive overvaluation, with Cypriot prices and costs having risen much more than in the rest of the euro area. In 2008 the current account deficit was more than 15 percent of GDP!

What can be done? First off, Cypriot banks cannot honor their debts, which unfortunately overwhelmingly take the form of deposits. So a default on deposits is inevitable.

As I now understand it, the initial screwup was a joint error of the Europeans and the Cypriots. Europe didn’t want an explicit bank resolution, which would among other things have given clear seniority to small insured deposits; instead, it wanted this essentially fictitious tax scheme. Meanwhile, the Cypriot government still has the illusion that its banking model can survive, and wanted to limit the hit to the big overseas depositors. Hence the debacle of the small-deposit tax.

In the end this probably comes, in some version, to what it should have been from the start — a big haircut on deposits over 100,000.

But even then the situation is by no means under control. There’s still a real estate bubble to implode, there’s still a huge problem of competitiveness (made worse because one major export industry, banking, has just gone to meet its maker), and the bailout will leave Cyprus with Greek-level sovereign debt.

So then what? As a number of people have pointed out, Cyprus is arguably better positioned than Iceland to do an Iceland, because devaluing a reintroduced Cypriot currency could bring in a lot of tourism. But will the Cypriots — who haven’t even reconciled themselves to the end of their round-tripping business — be willing to go there?

Truly awesome stuff

Number 1: The sheer amount of 'foreign' resident accounts has only partly been covered by the media. The 40% number does of course greatly underestimated the foreign, partly dirty money parked in Cyprus.

Number 2: I did not follow the housing sector there but it is quite likely that a huge financial boom, with huge inflows and lots of new residents in search of a nice house with a proper washing machine did greatly inflate the prices. I will take his word on that.

Number 3: The perfect fusion, the labor was getting payed better and better, everybody was buying and happy, things were going well almost too well to be good and now it seems they were.

Cyprus must act or it might wake up next week with just the beaches remaining*.

The excellent Guardian coverage (http://www.guardian.co.uk/business/2013/mar/21/eurozone-crisis-cyprus-bailout-plan-b) shows the all too understandable reactions, ATM by ATM.

https://pbs.twimg.com/media/BF4XlJECcAAdSL-.jpg:large

*'In Cyprus they have only a financial sector and beaches, now that the financial sector is heading for closure nothing but the beaches will remain'
The Swedish Finance Minister, Mr. Borg.

davidbfpo

03-21-2013, 01:56 PM

That is a classic and from a Swede too.

Seems to me Cyprus fell for easy money assuming there was no risk, just wealth. Didn't Iceland do the same, but with a very different, popular response when disaster struck?

Firn

03-21-2013, 02:08 PM

Well Iceland had even a higher deposit/GDP leverage then Cyprus today thanks to the marauding Viking banks. In this case white money poured in from the EU, attracted by the great rates and low costs. A brilliant deal.

When the bubble burst it was obvious that the small population could refund foreign lenders and acted accordingly. The Icelanders blamed their government and their banks and did what had to be done. The Cypriots seem to blame mostly the EU/ECB/IMF/Germany for not helping more and seem to want to keep the grossly inflated banking system and the dirty (Russian) money stream with which it grew.*

*Little Cyprus was last year responsible for roughly 1/4 of all 'foreign' investment into Russia...

Fellow members should take note that the lender of the last resort must actually be capable to lend to keep the money in his banks safe. Ideally should also be able to print his own money.

Firn

03-21-2013, 06:02 PM

This mirrors my impressions:

11.09 Reuters has seen the notes made during an emergency conference call of eurozone finance ministers revealing the level of panic being felt over Cyprus.
One official described emotions as running "very high" admitting this made it difficult to come up rational solutions, and referred to "open talk in regards of Cyprus leaving the eurozone".

The call, among deputy finance ministers or senior treasury officials, as well as officials from the ECB and European Commission, was shunned by the Cypriot representatives, a move seen as ominous by their counterparts. The French representative is recorded as saying:

'The Cypriot parliament is obviously too emotional and will not decide on anything, if Cyprus does not even feel that they can attend the call it is a big problem for us.'

The emotions are indeed running high, after the jubilation of the heroic 'no' there is now the expected disperation in the streets. Many really didn't saw it coming, didn't they? And most can hardly be blamed for that even if a look at the Cypriot balance sheet, labour costs, housing bubble and bank rates should have made one shudder. But a bubble is a bubble for the very reason that it is a bubble.

17.07 More on the protests happening outside the Cypriot parliament this evening, where anxious bank workers have gathered. Joe Lynam of the BBC tweets:

BBC_Joe_Lynam Joe Lynam BBC Biz

The road outside #Cyprus parliament is now closed because soon to be jobless Laiki bank workers were attacking politicians

Shocking scenes and so sad.

lemasabachthani lemasabachthani
*CYPRUS POPULAR BANK HAS FEW HOURS OF LIQUIDITY LEFT: OFFICIAL

The social media certainly helps to spread the panic around. When will we see banks open again? And how should the economy work without liquidity?

17.34 Reuters reports that Cyprus' Popular (or 'Laiki') Bank has announced restrictions on cash machine withdrawals of €260 per customer daily.

Obviously the banks are faced with an unprecedented demand for cash at the ATMs with everybody desperate to get as much cash as possible as more and more shopkeepers are only accepting that. We are seeing a classic bankrun by modern means all over Cyprus. Every day that passes liquidity will get horded as much as possible and drained from the banks and the economy. With no international bank lending to practically dead Cypriotic banks and the ECB not willing to infuse liquidity without a plan the whole banking system + the economy will go down very quickly.

Why did the Cypriotic politicians do nothing, why were they so stupid and proud to say no?

alexralph Alex Ralph
At Laiki Bank branch in Mayfair. Little activity. One Russian accented gentleman on mobile talking about bank split and asking for lawyer.

...

Firn

03-21-2013, 06:23 PM

The last years have certainly been highly interesting for everybody who studied economy, with texbook cases all too often played out in the real world.

'Open talk' of Cyprus leaving euro (http://www.telegraph.co.uk/news/worldnews/europe/cyprus/9945446/Open-talk-of-Cyprus-leaving-euro-as-British-savings-are-put-at-risk.html)

Unless the island signs off on a radical debt-cutting programme, the ECB will on Monday withdraw "emergency liquidity assistance" leading to the immediate collapse of the two largest Cypriot banks and a financial crash in Cyprus.
It has also emerged that talks over Cyprus leaving the EU's single currency took place on Wednesday night between senior finance officials who have drawn up plans for capital controls to prevent a meltdown of the eurozone's financial system.

In minutes seen by Reuters of a telephone conference that Cyprus refused to take part in, one senior ministry official described emotions as running "very high" and "open talk in regards of (Cyprus) leaving the euro zone".
The officials, heads and deputy heads of the eurozoneﾒs finance ministries discussed draconian capital controls to "ring-fence" the rest of the eurozone from the impact of Cyprus leaving the euro and to ensure there was no contagion.

Fears were raised of large outflows of capital once Cypriot banks reopen on Tuesday with ﾓtechnical preparations" being made to try to limit capital flight.

Capital controls are still in place in Iceland, with business owners having to get the nod from the MoF to get € to pay for the goods.

The chairman of the ﾓeuro working group, Thomas Wieser, an Austrian, warned: "The economy is going to tank in Cyprus no matter what. Restrictions on capital will probably be imposed."

Cypriot banks are totally reliant on the ECB for funding and have taken over €9.1 billion in an emergency programme to ensure cash does not run out.

The damage has been now done. The Cypriotic politicians refused a deal which sounds now very good indeed. Sometimes you must know when to fold them. Obviously we will now have:

1) Even lower limits at ATM

2) Banks staying closed longer

3) An economy like a dead fish

4) Panic, protests and shock

5) Very strict capital controls

Blast from the past (http://www.youtube.com/watch?v=qu2uJWSZkck), but the US was thankfully no Cyprus.

Firn

03-21-2013, 10:38 PM

Back home and I took a quick look around.

The BBC video (http://www.bbc.co.uk/news/world-europe-21885301) does support my fears and make it much more graphic.

The economy seems to have come to halt. Our market economies, just like our bodies need a realiable circulation of liquidity so that goods can be exchanged easily and quickly. In the last years the ever greater increase of electronic transfers has meant that a surprising small amount of cash, real paper or coins (lets keep it simple) are needed.

In Cyprus capital controls are effectively in place and suddendly everybody hords it creating a huge spike in demand for cash which sucks the economy and the banks dry.

1) I wonder how the online banking is handled. Maybe they have been slower to clamp down on that.

2) I heard that just deposits aka cash were meant to take a haircut, not portfolios. That can hardly be true as this would greatly lessen the impact on the bigger guys. But with the way the politicians have fought for the rich it just might be.

3) Few saw that coming. One side imagined that they would get a way lightly while the other side imagined a 'rational' reaction.

Firn

03-22-2013, 12:29 PM

Die Zeit (http://www.zeit.de/wirtschaft/2013-03/zypern-rettungsplan-merkel-euro-ezb)

Merkel seems to be less then amused on how Cyprus handled the crisis. No plan, no communication, no realism. She is said to have stated that the Cypriotic model of business has come to an end.

'Geschftsmodell am Ende'

Darber hinaus wurde die deutsche Regierungschefin grundstzlich. Zypern, so soll sie laut Teilnehmern gedroht haben, drfte die Geduld der Euro-Partner im Ringen um ein Rettungspaket nicht ausreizen. Es knne nicht sein, dass Nikosia die Grenzen der Troika testen wolle. Merkel klagte, dass Zypern seit Tagen nicht mit EU, EZB und IWF kommuniziert habe. Im brigen sei der kleinen Mittelmeerinsel noch nicht klar, dass ihr bisheriges Geschftsmodell am Ende sei. "Wir werden weiterhin darauf hinweisen, was auf dem Spiel steht."

In my humble opinion the business model is now indeed dead. Which person doesn't want to get his money out sooner rather then later. Even the draconian capital controls will not stop some drain, even if they are absolutely necessary despite crippeling the economy.

10.38 Yiannis Mouzakis, who blogs as The Prodigal Geek, has seen the full banking bill (in Greek) and gives a summary of what the wide-reaching capital controls would entail.

Restrictions in daily withdrawals

Ban on premature termination of time savings deposits

Compulsory renewal of all time savings deposits upon maturity

Conversion of current accounts to time deposits

Ban or restrictions on non cash transactions

Restrictions on use of debit, credit or prepaid debit cards

Ban or restriction on cashing in cheques

Restrictions on domestic interbank transfers or transfers within the same bank

Restrictions on the interactions/transactions of the public with credit institutions

Restrictions on movements of capital, payments, transfers

Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety

Pretty much the full program. This means of course also a big stress on the Russian economy as Cyprus is a key stepping stone for many Russian deals on their round-about trips. I can see little chance for that working again for quite some time.

Cyprus Market Cyprus Market ‏@russian_market 1h

Russians chatter about 47.5% tax. It's like 1917 revolution in Russia @TradeDesk_Steve: Talk of a deposit haircut above 100k of 30-40%

Russian market puts his flashlight on the mood in the wealthier Russian circles, those who have private or company money in Cyprus.

11.36 Foreign correspondent Richard Spencer explains the implications of the official government statement (emphasis ours):

The key thing is that party leaders are consulted so presumably the president thinks the bank legislation will go through - this is itself a major cave-in to Germany, which demanded acceptance both that Cypriots (and Russian) depositors cough up part of the bail-out money and also that Cyprus abandon its banking model.

We will see if that happens, lots of rumours around...

11.52 Our man in Brussels Bruno Waterfield sends a snap update of the situation. It looks like the bank levy is back on the table.

Looks like deal is emerging as:

Laiki break up

Deposit levy on all above 100k -more than 9.9pc

Capital controls -very tough for all banks and deposits

Generic bank resolution laws if other banks in Cyprus get into further trouble

So back to plan A just as the Eurogroup/ECB/IMF proposed a couple of days earlier. The one on which the Cypriotic PM is reported to have stormed out? Plus very though capital controls plus a breaking up of one of the two biggest banks? In which the costumers above 100.000 € may lose up to 40%?

It would have been all too easy and humble to say yes, we messed up, now the trust is gone and a vast amount of damage has been done.

The Telegraph (http://www.youtube.com/watch?feature=player_embedded&v=Y4sf6PTV9tE#!) gets it this time pretty well

That is in line with view of other more cool-headed analysts who have also described the overwhelming repudication of the first bailout package as a classic example of MPs pandering to populist sentiment.

Indeed. Told you so, even if it is easier to keep the head cool if you are not part of the game. Of course we do not know how things end and with crisis management this bad...

Firn

03-22-2013, 02:07 PM

13.27 More analysis from think tank Open Europe, who wonder whether the latest plan will doubly penalise large depositors.

Thinking about the plan in more detail, it occurred to us that this may amount to trying to burn the larger depositors twice. The plan essentially is to move all the bad assets to a bad bank, along with the large uninsured depositors (€100,000+). These assets would then be wound down or sold off at a large discount with the depositors footing the bill (and taking losses of 20pc - 40pc). This, along with the merging of Bank of Cyprus and the good bank, is how the recapitalisation costs will be reduced by €2.3bn.

So, the large depositors will take significant losses here and yet may still face a large deposit tax as well? That seems to be pushing the boundaries to us, although it is not impossible. Cyprus would not recover as destination for foreign investment for some time. One way to structure this could be for the tax only to be applied to depositors above €500,000 (as we suggest below) and the bad bank to apply to all uninsured deposits. Obviously, the bad bank scheme so far only applies to Laiki bank, but as the second largest Cypriot bank it is still likely to account for a large amount of big deposits.

Still this could see larger depositors taking up to 50pc hits in some cases. We can't imagine Moscow would take that one lying down, especially given comments earlier in the week..

Didn't Medvedev didn't look yesterday on his iPad during the PC and stated that there would be not bank levy? He must not be too happy, we will see.

Firn

03-22-2013, 03:00 PM

Krugman on the choice of the dancing partner. The Icelandic raiders plundered softer targets. BTW he is positive about the Icelandization. The Cypriots might have found themselves under a truly massive pile of debt without that move and European solidarity. Yes, they should arguably say thanks many times to the European taxpayer for helping them with many, many €. And that after having made them in general pay more by helping others to evade quite a few of those taxes. Of course we will hear none of that.

Cyprus Update

Well, it looks as if the Icelandization of Cyprus — at least in the sense of making offshore depositors take a big hit — is happening faster and more decisively than I feared. Great summary by Paul Murphy at FT Alphaville, ending thusly:

Big depositors in Cypriot banks stand to lose circa 40 per cent of their money here, which has drawn plenty of fury and veiled threats from Russia.

But what exactly can the Russians do about this? Sell euros? Tear up double taxation agreements? Murder Cypriot bankers? Medvedev and co could not have played a worse hand during this crisis — and it’s not immediately clear why.

Cyprus now has a binary choice: become a gimp state for Russian gangsta finance, or turn fully towards Europe, close down much of its shady banking sector and rebuild its economy on something more sustainable.

The choice is obvious.

Still, if I were a Cypriot official I might seek a bit of extra security for my family …

Indeed, with friends like that...

Firn

03-28-2013, 08:04 PM

Cyprus did not witness a bank run, which is not that surprising given the draconian captial controls and to a lesser degree the publicity stunt of airlifting 5 B € in cash into country under heavy security. If you and (most) others have no chance to get even a decent amount of your cash out of the banks then there is little incentive to run to your bank. You have been doomed either way.

---

Bersani can not form a government alone. Berlusconi offers his greasy hand but Bersani says (rightly) no. Bersani offers his to Grillo but Grillo says **** off to all. The result? No government in sight. Elections seem sadly be the most likely answer unless we get another technical one.

---

Capital claims a record share (http://www.epi.org/publication/economy-built-profits-not-prosperity/) of the net income. This trend is obviously, at least in the short run, good for those who own large amounts of equity.

It is difficult to see demand in the advanced economies keeping up, as it is mostly driven by our broad middle classes. Other success economic success stories like China or Brazil certainly increased their demand for many US/European goods and services. Still we have to consider just how big the demand share of the West is compared to the rest of the globe.

Firn

04-17-2013, 08:05 PM

Quite a bit of Italians seemed to be worried about the status of Austria's 'Bankgeheimniss', according to some friends working in Austrian banks. 'You know the off-shore and tax stuff*'... :D

Over the last year I also read a lot about big catches on the Italian border with Switzerland. Certainly the tax pressure has been racheted a lot from an already terribly high level for our middle class. Housing has increasingly been seen as another source of tax revenue, targeting the biggest and dearest asset of the Italians. Older ones will also remember the last haircut on their deposits...

So I can understand why people would want to invest and deposit in 'safe' and rather 'silent' neighbouring states. The incentives are certainly stacked against the honest folk.

*Austria does tax the capital gain of foreign EU capital at around 35% IIRC and sends the money to the respective state but without telling them the name of the owner.

Firn

04-25-2013, 08:14 PM

Evidence and Economic Policy (http://krugman.blogs.nytimes.com/)

Henry Blodget says that the economic debate is over; the austerians have lost and whatshisname has won. And it’s definitely true that in sheer intellectual terms, this is looking like an epic rout. The main economic studies that supposedly justified the austerian position have imploded; inflation has stayed low; the bond vigilantes have failed to make an appearance; the actual economic effects of austerity have tracked almost exactly what Keynesians predicted.

But will any of this make a difference? The story of the past three years, after all, is not that Alesina and Ardagna used a bad measure of fiscal policy, or that Reinhart and Rogoff mishandled their data. It is that important people’s will to believe trumped the already ample evidence that austerity would be a terrible mistake; A-A and R-R were just riders on the wave.

The cynic in me therefore says that after a brief period of regrouping, the VSPs will be right back at it — they’ll find new studies to put on pedestals, new economists to tell them what they want to hear, and those who got it right will continue to be considered unsound and unserious.

But maybe I’m wrong; maybe truth will prevail. Here’s hoping

Roughly five years ago I expected high inflation after the waves of liquidity injected by increasingly easing central banks. As it didn't happen I read a bit around and mostly Krugman pointed me to that basic modern macro we learned back in college as undergrads. To me it made intellectually perfect sense after looking at the evidence and intrinsic logic I found and I did also adjust increasingly my personal investing to those rational conclusions.

Keynes was indeed a great mind and applied his intellect also very successfull as an investor. No wonder that he is by far the most quoted economist by Buffett. ;)

----

Sadly austerity is indeed taking it's bitter toll. Spain had a might housing bubble and far too much building in general but while the private sector (and some regions) was deep in debt the central government had actually little. Still they cut, cut, cut and cut exactly during a time when the private demand totally collapsed and helped contracting the economy.

http://ep01.epimg.net/elpais/imagenes/2013/04/25/media/1366878313_750528_1366906107_noticia_normal.png

Spain has now over 6 million unemployed (http://economia.elpais.com/economia/2013/04/25/actualidad/1366872244_350515.html), over a quarter of the populations and that despite a shrinking population.

http://ep00.epimg.net/sociedad/imagenes/2013/04/22/actualidad/1366660472_170308_1366665528_sumario_grande.png

Shockingly they are insisting and cutting deeper and deeper into the flesh of the economy. Public employment drastically (http://economia.elpais.com/economia/2013/04/25/actualidad/1366879871_694663.html) austeridaded.

Dear Merkel (http://www.faz.net/aktuell/wirtschaft/europas-schuldenkrise/vor-ezb-zinsentscheid-merkel-fuer-deutschland-muessten-zinsen-hoeher-sein-12161702.html), I agree with the part that the southern countries need the ECB to help to inject more liquidity and more credit into those economies. Good to hear that however I disagree that Germany would need a higher 'Leitzins'. In isolation maybe but we live in interconnected Europe and globalized world. A slightly higher inflation in Germany is important for the whole Eurozone and will thus help Germany indirectly far more than a tighter one. Developing economies like China and Brazil are also subject to rapidly increasing labour cost and the German advantage will just be somewhat lessened.

The Bank of England is certainly doing it's part (http://www.bankofengland.co.uk/publications/pages/news/2012/067.aspx) in trying to help the British economy suffering under terrible economic policies of Mr. Cameron&Co. The ECB must act very strongly and used it's mandate and the monetary policy to it's fullest.

Firn

05-03-2013, 01:31 PM

Work is done for this week and I wanted to reflect a bit about taxes, speculations and investing. Last week it became public that Uli Hoeness (http://www.faz.net/aktuell/finanzen/fonds-mehr/boersensucht-zehntausende-zocken-wie-hoeness-12170156.html), president of the FC Bayern did not pay taxes on a 'zocker', 'gambling' portfolio deposited on a bank account in Switzerland. I'm a fan of two international clubs, Bayern and Inter and I have always admired Hoeness for his work for Bayern. He certainly is a highly intelligent, very hard working business man with a heart for social issues but it shows once again that such persons can also make big mistakes. If he really fell under the spell of gambling & speculating a Swiss account was certainly suited to seperate that from the 'sane' business accounts.

In Deutschland handeln zehntausende Anleger exzessiv an der Brse. Genaue Zahlen gibt es nicht, nach jngsten Angaben existieren jedoch rund 67.000 CFD-Konten. CFD steht fr Contracts for Difference. Diese Differenzkontrakte sind eigens dafr geschaffen, mit hohen Hebeln den Geldeinsatz binnen kurzer Zeit zu vervielfachen. Ebenso schnell kann der Einsatz jedoch verloren gehen. Je nach Kontengestaltung muss der Anleger dann sogar Kapital nachschieen.

Ob Uli Hoene auf seinem Schweizer Konto mit CFDs gezockt hat, ist unklar. Im Gesprch mit der Wochenzeitung Zeit sprach der Prsident des FC Bayern Mnchen jedoch davon, seit etlichen Jahren an der Brse aktiv zu sein und davon in den Jahren 2002 bis 2006 an der Brse richtig gezockt zu haben - teilweise auf Basis eines Kredits in Millionenhhe durch seinen Freund und Adidas-Vorstandsvorsitzenden Robert Louis-Dreyfus.

Er habe selbst bei Fuballspielen seinen Brsenpager mit aktuellen Kursen dabeigehabt. Ich habe Tag und Nacht mit der Bank telefoniert, die haben ja alle so Nightdesks, wegen der Zeitverschiebungen, sagt Hoene. Die Sicherheiten der Bank mssen ja 24 Stunden gelten, wenn es aber in Asien nachts extreme Bewegungen gibt, wirst du trotzdem rausgeschossen. Die Bank sagt dir, du musst einen sogenannten Stopp einbauen, das heit, wenn die Sicherheit unterschritten wird, fliegst du automatisch raus.

Smart guys or guys who think they are smart guys are arguably especially in danger of becoming gamblers. I guess they see it as an intellectual challenge a bit like poker with high stakes. That a guy with so many big tasks at hand like Hoeness seemingly fell for it is sadly not so surprising. As Ben Graham wrote that is stunningly common that smart & successfull business men throw away all their sound principles once they step into the terrain of Wall Street. He personally always stated that the best approach to investment was the most business-minded. Maybe for some it is some sort of outlet.

Unter dem Strich schneiden die aktiven Handelsteilnehmer daher meist sogar deutlich schlechter ab als der Marktdurchschnitt - wie Hoene offenbar auch. Der berwiegende Teil der aktiven Anleger erleidet beim Trading Verluste, sagt Alexander Surminski, Geschftsfhrer von Ayondo, einer Plattform, auf der erfolgreiche Anleger imitiert werden knnen. Nur wenige Trader, die eine jahrelange Erfahrung vorweisen knnen, erzielen eine Marktberrendite. Studien sprchen von nur 1 Prozent der exzessiv handelnden Anleger. Nach unseren eigenen Erfahrungswerten machen 85 Prozent der Trader auf Dauer Verluste.

That 85% of all those active traders suffer losses over time sounds high but it is not too unlikely. Every movement causes friction in the form of fees and most of the monetary energy gets tranfered this way into the hot pockets of the financial industry. This should hurt them especially as the last 10 years have been brilliant for a long-term investor.

Die berragende Mehrheit der an der Brse aktiven Deutschen whlt indes eine weitaus konservativere Herangehensweise. Von den 4,2 Millionen Aktienbesitzern gelten mehr als 4 Millionen als langfristig orientiert und damit auf die Dauer erfolgreich. In den vergangenen zehn Jahren hat ein breit gestreutes Depot mit deutschen Aktien im Durchschnitt eine jhrliche Rendite von 10 Prozent erbracht, in zwanzig Jahren von gut 8 Prozent und in dreiig Jahren von knapp 10 Prozent. Ob ein in Deutschland wohnender Anleger seine Brsengeschfte in Deutschland ttigt oder wie Hoene in der Schweiz, ist aus steuerlicher Sicht irrelevant. Spekulationsgewinne mssen nach deutschem Recht versteuert werden.

Keep in mind that the German DAX outperformed pretty much every other Euroepan index so the numbers look especially good. Still even with broad investments in Euroepan stocks one could get excellent returns in the long run.

The high volatility of European stocks has been actually a huge advantage for the business-minded investor and for those who wanted to reduce their tax bill. Today the state sent me back a significant amount of money because temporary downswings last year in three stocks allowed me to sell low and buy low again. Those losses on stocks (minus the fees!), which have been risen a good deal in the last months did reduce the taxable gains. Keep in mind that dividends and yields flow into the same pot, so a steep fall of recently acquired stock of a good company can be a gift, enabling you to cut taxes and buy additional stock at a cheaper price.*

Strangely the yield you get on money alone does not flow into that pot, which means that most can not profit from such moves. It is also a solution which is IMHO sensible from an accounting point of view but is as a whole quite narrowly focused on the not so poor. In this case the state got less money and the capital was not consumed but will be reinvested. So it is one of the cases in which a tax break set little incentives for additional demand. For the economy as a whole it would have made much more sense if that money had enabled consumption and increased demand.

*Of course you would have to pay even more tax if you sell that stock later at a relative higher price. But I tend to keep a good business in my portfolio unless it becomes clearly highly overvalued. and nobody knows if that is going to happen anytime soon.

P.S: I pretty much never talk about money even with friends, maybe this is typical for the region I come from. So possibly this is the reason why I like to discuss such issues on an international board with a strong focus on policy. The last time I looked at the 'discussions' on an specialized Italian board I was rather taken aback by the amount of gambling. It seems that the more you throw around things like CDS, trigger, call and stuff the cooler & smarter your are.

P.P.S: I wrote a couple of months ago that I never saw a more dominant squad in an European final which ended up losing the cup then Bayern, which absolutely dominated Chelsea, getting many huge chances and conceding pretty much nothing. I think it was about Kahneman and the element of luck. Bayern has recently shown just how strong it has become over the last years by the right strategy and tactical answers. Of coruse this doesn't mean that they will win against Dortmund in the big final.

Firn

05-03-2013, 02:33 PM

After having taken a quick look at the financial data of the last week this article (http://www.guardian.co.uk/technology/2013/may/01/apple-tax-debt-move) fits the topic rather well. I have to disclose that I have bought a considerable amount of Apple stock a bit over 400 $ as the fundamentals made it look much undervalued. (RoE, margins on operations, Graham P/E, Owners Earnings & P/E, RowA all seemed good or great). The future certainly looked brighter then imagined by many. A greater $ share of the portfolio also made sense from a diversification and hedging point of view. Still I'm long on Europe.

I hoped before the shareholder meeting that Apple would drastically increase their buybacks for those very reasons and they did announce pretty much that. Doing it with bonds, the capital of others, with such a low yield for such long periods is brilliant from the two angles called equity and taxes. Sadly the stock price went up so quickly, now those buy backs will cost more. At 400 $ the EPS would have went up over 30% for the shareholder even if the earnings had stayed (inflation-adjusted) flat... :rolleyes:

A similar sad story is the VW stock which I bought after the big fall to 140 €. (I was stupid enough not to buy it under 50 € a couple of years ago). I have some money due within a month and wanted to invest a lot more into VW as it is IMHO was undervalued and made sense to diversify the portfolio risk. (VW is big worldwide in pretty much every sector of the industry with increasingly huge economies of scale and massive financial advantages compared to practical every non-German European carmaker.) Now the stock went up despite a fall in demand in the European markets and is likely that I won't get it that margin of safety soon.

Firn

05-06-2013, 08:11 PM

This weekend we had the big shareholder meeting of Berkshire in Omaha.* Looking at the GAAP earnings of the last quarters, which underestimate by a fair amount the owner earnings I should really kick myself for not buying a couple of A shares a couple of years ago. I can just hope that we will see soon once again one of those rare big sell-offs, but that is rather unlikely.

Bonds (http://video.cnbc.com/gallery/?video=3000166408) certainly look like a 'terrible' investment, as the are obviously incredibly expensive compared to historical standards. I have written about that before. He will also not buy any of those expensive Apple iBonds. I bought a considerable amount of Apple shares around roughly 400$ recently and I think it is a great company which did finally make a big step into the right direction of capital allocation. (At least they did not throw all that money at bad purchases, not any company - HP - can say that). The fact that they can get so much foreign capital so cheaply to buy back stock at attractive prices is exactly the reason why I want to be on the equity side of that company.

With inflation that low liquidity is not that costly compared to 'safe' bonds. Of course you should avoid states like Cyprus and keep it under those 100.000 €. Stocks hit all-time heights recently and it was a good ride for those with a lot of equity in stocks. It is just very hard to sell most of it as it is very hard to find a better investment for the long-term. As Warren rightly says it is absolutely natural to see new heights from time to time, as business growth + retained earnings will push the prices in the long run higher and higher.

*EON did also have one in Essen, but it was a rather different affair.

Firn

05-07-2013, 12:07 PM

A quick look at the European economy.

1) There has been some mobility of the factor labour in the sense that Germany had a net migration growth of 369.000 (http://www.faz.net/aktuell/politik/inland/statistisches-bundesamt-zuwanderung-aus-suedeuropa-stark-gestiegen-12175314.html), the highest in almost 20 years. It would be interesting to compare the average age of those coming into Germany and going away. A good deal of Italians went all'estero.

Obviously from a economic, European perspective this is a good thing within a bad situation and quite overdue. Labour is in demand in Germany, capital is easily accessible there and labour is in great supply in countries like Spain where capital is rather restricted. National austerity is the whip and German boom the honey.

2) Rapid current-account rebalancing in the southern Eurozone (http://www.voxeu.org/article/rapid-current-account-rebalancing-southern-eurozone) is also generally good news even if it is done under unnecessary and plain stupid austerity pain.

http://www.voxeu.org/sites/default/files/image/FromApr2012/auer%20fig2%203%20may.png

Conclusion

A key requirement for the Eurozone to achieve long-term success is that corrective forces are at work which limit external imbalances.6 This column documents that Greece, Italy, Portugal, and Spain are close to achieving a balanced current account.

These patterns indicate that one of the key requirement for the end of the European debt crisis is on its way. In as such, there is no evidence that the institutional setup of the European Monetary Union will lead to ever-increasing imbalances akin to the ones in the Bretton-Woods system. In fact, the speed of current-account rebalancing in these four nations is actually faster than the typical rate of adjustment found after other episodes of large current-account imbalances.

This rebalancing also has to be seen in the light of the current discussion on the origins and implications of the large Target2 imbalances within the Eurozone. In a panel analysis, I analyse the role that the provision of central-bank liquidity (visible in Target2 balances) played in smoothing the ‘sudden stop’ and the partial reversion of private capital flows that had financed current-account imbalances before the onset of the financial crisis in 2007.

Given that current-account imbalances are rapidly diminishing, Target2 balances will be reduced once private capital flows* return to the southern Eurozone. Given the current signs that private investors are rediscovering these troubled financial markets (see Atkins and Watkins 2013), this may happen in the not-too-distant future.

I bought recently Telecom Italia and ENEL stock as I thought them to be grossly undervalued, especially the latter. The times are harsh with little investment in Italy. I hope that Italy will become quickly more competitive, every month that goes on like that does inflict terrible damage on the economy and the people, especially the youth.

In any case life will mostly go on. The sun will go still up over Napoli so let us listen to atarantella (http://www.youtube.com/watch?v=trCrFGUdHNw)

Fuchs

05-07-2013, 05:19 PM

Firn

05-07-2013, 06:43 PM

A couple ten thousand of those migrants are actually university students. Universities are almost free in Germany (about 500 €/year all inclusive) and there hasn't only been a rise of German university students*, but also of foreign ones.

*: Abitur (highest school degree) shortened from 13 to 12 years, producing a double class, no more conscription or alternative compulsory social service, efforts to improve especially the education of Germans 'with migration background' and the unsatisfactory labour market with poor pay expectations for non-academics have contributed tot his rise.

Can you back that up quickly?

Not that I don't think it is likely, as my brother studied in Munich 'Elektrotechnik'. Keep in mind that there are many Germans who study abroad. So once again the net difference would be interesting. In any case university is a steal in central Europe compared. I also don't think the quality is bad...

Personally I think that by far the biggest share of the net surplus is searching desperately for work...

Fuchs

05-07-2013, 07:15 PM

2011 there was more than a quarter million foreign students in Germany for the first time.
https://www.daad.de/portrait/presse/pressemitteilungen/2012/21295.de.html
More in 2012, no doubt.
I know a university of applied sciences for engineering and IT that's operating at 200% of designed capacity in terms of students enrolled becuase of huge growth in past three years.

davidbfpo

05-07-2013, 08:19 PM

One of the consequences of the English government requiring universities to raise tuition fees, starting this academic year, to 9k UK Pounds per annum (or US$14k), funded by student loans (by a specific agency, not the banks) was a 6% drop in admissions. Few want to consider the impact of emigration after graduation, so avoiding repayment of the loan. What better why to encourage emigration of the "best & brightest"?

Firn

05-08-2013, 07:51 PM

In a depression the implicit opportunity costs of studying at a university should be considerably lower then during a booming economy, especially if you are fresh out of school. Thus such a drop is quite interesting even if the explicit cost did rise and credit got possibly tighter.

A quick look at the age structure (http://en.wikipedia.org/wiki/Demography_of_the_United_Kingdom) of the UK reveals that the group from 15-19 is quite a bit smaller then the 20-24 one. It is quite a rough yardstick, but the trend is relatively well supported by one agegroup up and down. So maybe it is mostly just a 'natural' trend, one would need to dig a little bit deeper.

Interesting to see a rise in the 0-4 group. The effects of the large immigration in the last 6-7 years and the bad economy for young people? On of my sisters got the kids earlier because a certain job program at the local hospital took a bit longer then expected to get approved. Quite a few capable & educated people lost to the UK, Switzerland and Germany, congratulations.

@Thanks Fuchs: Interesting to see so many Chinese. My brother said they were rather reclusive compared to the other guys and that some cooperating companies quietly told the uni that next time they would rather have a student from a different country working with them. Stories about copied data and so forth. It is of course difficult to get an objective overview on that.

Firn

05-10-2013, 01:55 PM

Let's get real about the stock market (http://economistsview.typepad.com/economistsview/2013/05/lets-get-real-about-the-stock-market.html) puts all the recent records in perspective. For non-economists the 'real' is a play on the important adjustment for inflation.

http://2.bp.blogspot.com/-v2dPxyUHoos/UYnHZBJU9PI/AAAAAAAAAcA/_6DxPUhl_EI/s400/Stock.png

He also uses the Graham/Shiller P/E to put the price in context of the (past) long-term earnings. It is one of relative few metrics I value for a few reasons I have outlined in the past. For obious reasons he will tend in the long run to hover above the current P/E...

http://4.bp.blogspot.com/-nfYH4LPXhSQ/UYnINAsAGvI/AAAAAAAAAcM/3faeObBqV8U/s400/PE+Stock.png

Buffett pretty much said the same thing last week underlining especially the part about the retained earnings. So should you invest now in stocks? Just like pretty much everbody else I have no idea. I will continue to sell bonds and have not bought a new one in the last 3 years or so. Too much risk IMHO as someday you will have higher yields and thus in the long run bond prices will come down. Hopefully we won't all be dead...

I enjoyed this post about why old hedge fund managers hate Ben Bernanke (http://www.businessinsider.com/why-old-hedge-fund-managers-hate-bernanke-2013-5). Luckily I did change my views on inflation within a liquidity trap, after having faced the facts. I would be quite a bit poorer today and have much less faith in ordinary macro textbooks...

Hedge funds are doing badly in this rising-tide-lifts-all-boats market, and they feel that they would be outperforming if the Fed just let things collapse, and they could swoop in when prices "clear."

The inflation and hyperinflation fantasies are another important aspect here. A lot of these guys cut their teeth during the 80s, when inflation was the enemy, and Volcker was a hero for fighting it. Thus being anti-inflation is kind of a nostalgia trip for them. Also in general, the older people are, the more worried they are about inflation. Also the older people are, the more they are inclined to invest in bonds and risk-free assets, so low rates aren't fun.

Firn

05-14-2013, 09:11 PM

Time travel in Euroland (http://fatasmihov.blogspot.co.at/2013/05/time-travel-in-euroland.html)

Unfortunately, this is not news by now, but the president of the Euro group, Jeroen Dijsselbloem in an interview with CNBC yesterday dismissed the role that fiscal policy and monetary policy can have to address the economic crisis (emphasis is mine):

"Monetary policy can really not help us out of the crisis. It can take away the pressure, it can accommodate new growth, but what we really need in all countries is structural reforms in the first place. I'd just like to stress the point that in the policy mix of fiscal policy, monetary policy and structural reforms — I'd like the order to be exactly the other way around. Structural reforms in the first place, fiscal policy and viable targets in the mid-term for all regions in second place — and monetary policy can only accommodate domestic economic problems in the short-term."

The bloggers respond:

It is not exactly clear what to make out of his statement but it seems that long-term solutions should come first before we implement those that will help us in the short term. It is surprising that even today there is such a great confusion about long-term versus cyclical problems.

This confusion comes from a basic belief that some hold that there is nothing inherently different in the dynamics of an economy when one looks at the short run and the long run. This is part of a never-ending academic debate but when it comes to policy makers and politicians it seems to be more a matter of beliefs.

What it is not always understood is that we are dealing with two separate problems and therefore we need two different set of tools or solutions to deal with them.

I fully agree with their point of view. Right now the ECB is in life-saving mode and tries to keep the patient afloat. The governments should act quickly and pump into him the needed medicaments and other proper treatments including expensive surgery. There is now little sense to force him to undergo and even light training to get into good shape and to shed some weight. The latter is an excellent approach for the long term but in the short run it might lead to an exitus.

Of course some political actors seem to fear that good fiscal treatment will ease the way for dolce vita and not harsh austerity, with an adios to structural reforms.

Firn

05-29-2013, 11:38 AM

Why oh why are we so poor ... (http://blogs.faz.net/fazit/2013/05/28/warum-sind-wir-blos-so-arm-1896/)

Oder sind die Deutschen reicher als gedacht, weil sie so eine grozgige Rente bekommen, wie Angela Merkel behauptete? ltere Untersuchungen zeigen, dass die Rentensysteme von Italien oder Spanien mindestens genauso grozgig sind wie die deutschen. Und: Wenn die Deutschen sich auf ihre Rente verlieen, dann wrden sie weniger sparen. Tatschlich aber spart kaum jemand mehr als die Deutschen. Von ihrem hohen Einkommen legen sie seit Jahren jedes Jahr mehr als ein Zehntel zurck.

Doch aus den Daten von De Bonis und seinen Kollegen ergibt sich eine andere Antwort auf die Frage, wo das Geld der Deutschen bleibt. Ihre Linien zeichnen ein Bild von einer Nation, die spart wie verrckt, aber ihr Geld vollkommen falsch anlegt. Aus lauter Angst um das kostbare Ersparte stecken die Deutschen ihr Geld in Anlageformen, die als sicher gelten aber auf Dauer viel zu wenig Geld bringen.

I think there is quite some truth in that. It is especially strange since the German economy offers a great deal of great businesses which are active all over the world. So even a simple ETF on the DAX offers a fine globalized and diversified investment opportunity.

Da ist zum Beispiel das allseits beliebte Tagesgeldkonto: Fast die Hlfte des deutschen Finanzvermgens liegt in Einlagenkonten. Dort geht selten etwas verloren, aber die Rendite ist mickrig. Das eine Prozent, das Direktbanken im Moment zahlen, gleicht nicht mal die Inflation aus.

Instead of owning a part of the business you lend your money away very cheaply.

Auch die Liebe der Deutschen zu ihrer Lebensversicherung findet sich in der Studie wieder: Versicherungsansprche machen in Deutschland ein Drittel des Finanzvermgens aus. Auch die sind aber eher schlecht verzinst.

Der Lohn des Ganzen: Die Deutschen sind zusammen mit den Franzosen und den Japanern die Einzigen, die im Jahr 2011 schon wieder ihre Verluste aus der New-Economy-Krise ausgeglichen hatten. Aber sie hatten eben schon vor der New Economy kaum Vermgen. In den Lndern, in denen die Menschen mehr Geld in Aktien und Immobilien investieren, waren zwar die Verluste grer aber das Gesamtvermgen war trotzdem deutlich hher, weil die Menschen vorher mehr verdient hatten.

De Bonis und seine Kollegen zeigen: Die Deutschen sparen zwar viel. Aber was den Zins angeht, gehren sie seit den spten neunziger Jahren fast jedes Jahr zu den Schlusslichtern. Das macht die ganze groe Ersparnis zunichte. Und die Deutschen arm.

That is actually rather tragic. The positive impact on the capital costs for German business is certainly small compared to the loss in long-term wealth. Capital allocation matters greatly indeed.

Lanxess is one of the relative few big German stocks which looks really attractive. I actually enjoy reading annual reports, knowing well how companies tend do dress their windows but usually you always find out interesting stuff. I will have to dig deeper, time permitting.

Firn

05-30-2013, 08:33 PM

The wrong advisers - where are the economists? (http://www.zeit.de/2013/23/europa-wirtschaftskrise-oekonomen)

One of the most interesting articles I have read this year. It is about the lack of economists within the circle of power of the German government.

Wahrscheinlich, weil niemand genau zugehrt hat. Die Regierung tue gut daran, den Empfehlungen der konomen mit "kritischer Distanz" zu begegnen, sagte Merkel. Und berhaupt gebe es hufig "unterschiedliche Begutachtungen des gleichen realen Sachverhalts".

Die Wahrheit ist: Nie zuvor war der Graben zwischen Politik und konomie tiefer. Prominente Wirtschaftsprofessoren haben sich zusammengeschlossen, um mit der neu gegrndeten "Alternative fr Deutschland" die etablieren Parteien herauszufordern. Und in den Fhrungsetagen der wichtigen Ministerien gibt es praktisch keine konomen mehr.

Was sagt es ber die Politik aus, wenn das Land in einer der grten Wirtschaftskrisen aller Zeiten ohne Wirtschaftsexperten regiert wird? Und was sagt es ber die konomie aus, wenn es den Deutschen doch zugleich so gut geht wie lange nicht mehr?

It is actually quite amazing. Now I'm used from Italy that the various avvocati dominate (http://iusletter.com/avvocati-primi-in-parlamento/) parliament&Co but I was really surprised just how marginal economists are currently within the political elite of Germany.

Possibly this is indeed one of the reasons why Germany acts like it does. It always felt to me that there the current government has a big fear of getting played for a fool by other countries. To fight the moral hazard and the bad breaking of rules, strict treaties get written with many hefty strings attached. In short you get the money but only with that sine qua non and if you do not fullfill this contract you have to suffer this and that punishment. It is all fully understandable from a lawyers point of view and to a good amount necessary even from a purely technical point of view but it is not always good economic sense. And that one seems to lack greatly.

Die Politik dagegen ist in einer Zeit, in der weitreichende Entscheidungen getroffen werden mssen, mehr denn je auf Orientierung angewiesen. Und die knnen die Wirtschaftswissenschaftler immer weniger bieten. Schuble erzhlt gerne, dass amerikanische konomen rieten, weniger zu sparen, whrend deutsche Experten ihm das Gegenteil nahelegten.

Also geben in der Regierung Juristen den Ton an. Das prgt die deutsche Sicht auf die Krise. Fr Merkels Berater steckt Europa in der Klemme, weil bestehende Vertrge nicht eingehalten wurden. Und so tfteln sie an immer neuen Vertrgen, die schwerer zu umgehen sein sollen. Der Fiskalpakt fr die Begrenzung der Staatsschulden ist bereits verabschiedet, derzeit wird ein Abkommen fr Strukturreformen ausgearbeitet. Dahinter steht der Glaube, dass sich die Welt mit Rechtsakten ordnen lsst und die Wirtschaft floriert, wenn die Guten belohnt und die Bsen bestraft werden.

Fr die meisten konomen hingegen ist die Krise allen Meinungsverschiedenheiten zum Trotz nicht das Ergebnis individuellen Fehlverhaltens, sondern systemischer Natur. Sie sei darauf zurckzufhren, dass durch die Einfhrung der gemeinsamen Whrung zu viel Kapital vom Norden in den Sden Europas geleitet wurde. Wer die Guten sind und wer die Bsen die Haushalte im Sden, die das billige Geld ausgegeben haben oder die Sparer aus dem Norden, die es ihnen zur Verfgung stellten , ist dann nicht mehr so klar.

At last:

http://www.faz.net/polopoly_fs/1.2202090!/image/677717204.jpg_gen/derivatives/default/677717204.jpg

Good and bad times indeed. ;) for some private wealth + :rolleyes: for the state of many countries and many people.

At the last end:

These 31 charts will destroy your faith in humanity (http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/24/these-31-charts-will-destroy-your-faith-in-humanity/), I used to argue with some of them.

Firn

06-13-2013, 11:36 AM

Quite a setback on the equity markets, with Asia leading the way in reaction to the European crisis and the monetary race to the bottom which however might or might not end despite good economic reasons but strong political pressure which is caused by raging inflation which is at historic lows for a couple of years.... :D

To keep it simple. The U.S economy looks quite bad for labour, far better for shareholders or the 'rich' but overall vastly superior to many European ones in which austerity whips dying horses closer to the happy hunting grounds. Japan has done rather well thanks to brave Abenomics which obviously wants higher inflation expectations and takes gladly a weaker yen. China is still growing strong, even if 'just' under 8% and in India and Brazil and quite a few other developing countries the consumers are consuming more and more. The world economy should grow over 2% and that despite the drag of recession big Europe.

All in all bonds still look deadly, money is a sure loss in purchasing power and I got housing pretty well covered. So stocks it is and it will remain this way for quite some time. The dividends after tax are beating the inflation pretty handily. Today I invested into a MSCI China ETF and Lanxess. I'm pretty sure that both will give me good returns over 5 years.

The Chinese are slowly tackling the problems on their equity markets, hopefully the big heads of the party understand the need to solve those problems. Right now so much money flows into housing that and additional basin would be highly welcomed. Overall I have considerable faith into the average Chinese guy trying to do well.

Firn

06-13-2013, 10:06 PM

Italian 10Y bond yields, see the European Mark effect kick in:

http://www.tradingeconomics.com/charts/italy-government-bond-yield.png?s=gbtpgr10&d1=19910101&d2=20131231&type=candlestick

Germany obviously kept it's own currency. 10 more years are covered in the graph.

http://www.tradingeconomics.com/charts/germany-government-bond-yield.png?s=gdbr10&d1=19800101&d2=20131231

As did the UK:

http://www.tradingeconomics.com/charts/united-kingdom-government-bond-yield.png?s=gukg10&d1=19800101&d2=20131231

Last but not least, the big boy of capitalism:

http://www.tradingeconomics.com/charts/united-states-government-bond-yield.png?s=usgg10yr&d1=19120101&d2=20131231

Despite printing and printing and printing and all the funny names the yields are incredibly low. A nod to good old Keynes. If the money starts indeed to flow away from bonds, I'm waiting for it as a new fellow shareholder in equities.

davidbfpo

07-25-2013, 05:37 PM

A Greek-American economist's Q&A:
...discusses the disastrous outcomes of the policies enforced on Greece by its international lenders, and the IMF’s admission that it made serious errors in its assessment of the impact of austerity on the Greek economy and society.

Link:http://www.opendemocracy.net/openeconomy/dimitri-b-papadimitriou-cjpolychroniou/greek-catastrophe-and-possible-way-out

Advocating an EU-funded Marshall-type recovery programme is IMHO lacking realism, let alone how Germany would react.

Firn

07-26-2013, 04:36 PM

A Greek-American economist's Q&A:

Link:http://www.opendemocracy.net/openeconomy/dimitri-b-papadimitriou-cjpolychroniou/greek-catastrophe-and-possible-way-out

Advocating an EU-funded Marshall-type recovery programme is IMHO lacking realism, let alone how Germany would react.

Nothing new, the European core does still preach austerity, even for the own population and it is highly unlikely to see much additional help flowing into a desolate country with a terrible political caste. The core could do a lot more to raise the own costs compared to South and profit of the incredibly low yields in the bond markets to invest into the own country. Lately there have been some highly critical articles about the infrastructure of Germany, so why does the governments not lend for basically free and do something about it?

Italy or Spain are, despite all their specific problems, no Greece, with all due respect to the Hellenic state. Still the austerity does inflict amazing amounts of pain and will drive the public debt higher and higher. Rather obvious, considering the erosion of the tax base.

Firn

09-19-2013, 08:32 PM

The German DAX hit today a record high, a good run indeed for most shareholder. The funny thing is how predictable sometimes the long term is while the short term can be extremely confusing. Obviously the record is not a real record as it is not real, not inflation-adjusted.

All in all not much changed, but equity became a bit more risky, bonds a bit less deadly. Clearly it is still safer to stay long-term in the former with liquidity getting more attractive.

The Fed did the right thing, I guess to support an economy in which the job market is still bad.

Firn

10-15-2013, 09:02 PM

Well the DAX hit a new record today and it all feels a bit strange. One week ago I started to disinvest and I continued it so that I could reduce my stock % which has been almost 95%. The reasons have been mentioned in the last years in this thread, bonds have been terrible and selling them over the last two years has proven to be an excellent decision.

Stocks have become far less cheap over the last two years and I had recently had a hard time to find really attractive as I glanced over a couple of candidates I filter with good old Grahams help. In addition to that we have seen that a couple of fringe players were able to imperil the credit of the USA, something I found rather unbelievable some years ago. It is quite a sad story, at least the FED got a chief able to soften the political blow somewhat. It is no good sign that one has to put his faith into the central bankers to work monetary miracles to limit the danger too many politicians are doing to their own people....

P.S: The Nobel for Fama, Hansen and Shiller has caused a bit of stir.

Personally I think that Fama deserves credit for forcefully creating a pure ideal which has much truth in it. Shilller put with great success great effort into showing that financial markets 'only' tend to be efficient to differing degrees depending on various circumstances. Personally I'm an avid reader of Shiller which still offers neat new insights while Fama mostly lives from his fama of earlier days. A very deserved one, I might add.

P.P.S: In SWC terms both togheter do a repeat of Clausewitzs mighty first chapter of Vom Kriege. ;)

Firn

10-16-2013, 12:25 PM

Mark Thoma gives a -obviously - better example (http://economistsview.typepad.com/economistsview/2013/10/are-rationality-and-the-efficient-markets-hypothesis-useful.html) about the recent prizes:

Are Rationality and the Efficient Markets Hypothesis Useful?

Just a quick note on the efficient markets hypothesis, rationality, and all that. I view these as important contributions not because they are accurate descriptions of the world (though they may come close in some cases), but rather because they give us an important benchmark to measure departures from an ideal world. It's somewhat like studying the effects of gravity in an idealized system with no wind, etc. -- in a vacuum -- as a first step. If people say, yes, but it's always windy here, then we can account for those effects (though if we are dropping 100 pound weighs from 10 feet accounting for wind may not matter much, but if we are dropping something light from a much higher distance then we would need to incorporate these forces). Same for the efficient markets hypothesis and rationality. If people say, if effect, but it's always windy here -- those models miss important behavioral effects, e.g., -- then the models need to be amended appropriately (though, like dropping heavy weights short distances in the wind, some markets may act close enough to idealized conditions to allow these models to be used). We have not done enough to amend models to account for departures from the ideal, but that doesn't mean the ideal models aren't useful benchmarks.

Anyway, just a quick thought...

Firn

10-22-2013, 07:26 PM

From petty talk about stocks to one of the important developments in Italy after the war, in the South the deaths outnumber the births. In the Mezzogiornos often tormented history this happened only twice in peacetime: 1867 after the Italian unity and in the grip of the Spanish fever.

Desertificazione del Sud: I morti superano i nati - Cos solo dopo l?Unit e durante la Spagnola.

C' da rimanere impietriti a guardare in quali condizioni versa il Sud. Il lavoro una chimera, la povert aumenta vertiginosamente, i giovani scappano, il divario con il resto del Paese diventa abisso. Per non parlare del macigno della criminalit. L'ultimo rapporto del centro studi sull' economia meridionale Svimez ci consegna uno scenario angosciante, nel quale avanza soltanto una cosa: la desertificazione. Industriale, economica, ambientale. Perfino umana: nel 2012 il numero dei morti ha superato quello dei nati vivi. Nella storia del Mezzogiorno d'Italia era accaduto soltanto due volte: nel 1867, pochi anni dopo l'unit, e nel 1918, anno dell'epidemia di spagnola. Un dato che segnala le proporzioni di un dramma destinato ad assumere proporzioni enormi, considerando che anche la fecondit femminile ha subito una preoccupante battuta d'arresto. Non si fanno pi figli: 1,35 per ogni donna al Sud, 1,43 al Centro-Nord. Il rapporto Svimez ci dice che il ritmo dell'emigrazione ormai costante. L'anno scorso sono scappati dalle Regioni meridionali in 112 mila. Negli ultimi vent'anni hanno definitivamente lasciato il Sud 2 milioni 700 mila persone. Fuggono i giovani, che sono il 70 per cento di chi emigra, fuggono le donne, che sono il 50 per cento, fuggono i laureati, che sono il 25 per cento.

Interestingly the 'esodo' was not higher then the mean during the last 20 years, however the lower birth rates have taken their toll and there is just a smaller pool of people which tend to emigrate. Most of them are between 20 and 40 with a peak around 30. While in the past the Mezzogiorno could replace it's migration losses with it's fertility, however times have changed greatly and in the last decade the Southern population has just remained stable with a big grey shift. In highly likely indeed that it will shrink a very considerable amount in the next decades.

The macroeconomic data coming from this report is bad for Italy as a whole but downright depressing when looking at the South. It does not make for happy reading.

Here (http://lnx.svimez.info/images/RAPPORTO/materiali2013/rapporto_2013_sintesi_stampa.pdf) you can read the Italian summary, there is no English version.

P.S: I just wanted to add something to avoid getting misunderstood. It is good that people with pretty low chances to get a half-away decent job are mobile and go to find work where there is more. I wrote about that a couple of times in this thread and in addition still think that public spending has a considerably higher multiplier in the North. Sadly the exodus is a reaction to the terrible state of the South, Italian depression or not, which only has become (much) worse in the last five years.

Firn

02-11-2014, 11:34 AM

This thread has certainly gone quiet without the imput of other guys. Maybe most are just too tired about the economic mess in which large parts of Europe are still in. :D

The swiss Masseneinwanderungsinitiative (http://www.nzz.ch/aktuell/schweiz/je-weniger-auslaender-desto-hoeher-die-zustimmung-1.18240391#) has caused quite some reactions within and across Europe. It was very close indeed, caught many big players in the industry and politics by surprise and will cause the Switzerland very considerable issues. The EU and neighbours are certainly not amused and even if the will of 50,x of the voters will get respected it will have consequences.

The relative liberal and economy-focused NZZ has analyzed the voting patterns, the reaction and the possible consequences. Needless to say that there are quite a few paradoxes:

Die Skepsis der Bevlkerung gegenber der Zuwanderung ist nicht dort am grssten, wo sie am strksten sprbar ist. Kantone mit einem Auslnderanteil, der unter dem nationalen Schnitt liegt, haben nmlich der Masseneinwanderungsinitiative der SVP zugestimmt. Aus diesem Muster fallen nur die Kantone Tessin und Schaffhausen, die trotz berdurchschnittlicher Auslnderquote im Ja-Lager sind. Vor allem im Tessin ist der durch die Grenzgnger aus Italien ausgelste Druck gross. Der Ausreisser auf der anderen Seite ist der Kanton Jura, der die Initiative bei vergleichsweise wenigen Auslndern ablehnt.

Eine hnlich paradoxe Situation zeigt sich beim vieldiskutierten Dichtestress. Dieser msste in grossen Stdten und in Regionen mit hohen Wachstumsraten (Bevlkerung, Bruttoinlandprodukt) am strksten wahrnehmbar sein. Doch eine von der Firma Microgis aufbereitete Grafik zeigt eindrcklich, wie vorab in der Deutschschweiz die Ablehnung der Initiative mit dem Grad der Urbanisierung steigt. Je mehr Menschen auf engem Raum leben, desto geringer fiel also die Zustimmung aus. Ausnahmen bilden auch hier die Kantone Tessin und Schaffhausen. Erstaunlich auch, dass die Diskussionen in der Westschweiz und vor allem im Arc lmanique ber knappen Wohnraum und hohe Immobilienpreise nicht in eine hhere Zustimmung zur Initiative mndeten.

So in general the Kantone with a higher share share of EU-citiziens, higher density and higher economic growth have say 'No' to the initiative.

P.S: It is always interesting to quickly check what you have written some months ago. In terms of stocks every single one that I bought and mentioned here in the last year has considerably outperformed the market. ENEL and Telecom Italia were simply so cheap compared to the value that sooner or later they had to rise, roughly 40% and 50% compared to the roughly 15% of the Eurostoxx 50. Apple and VW gained roughly 30% compared to the E50's ~15% in their timeframe. The last two actually lost a considerable amount in the last month. In Apples case I bought new stock at around 510$ because the fundamentals are still good enough IMHO and the financial guys did the right thing and bought back stock big time. See my orginal reasoning a year ago.

I hoped before the shareholder meeting that Apple would drastically increase their buybacks for those very reasons and they did announce pretty much that. Doing it with bonds, the capital of others, with such a low yield for such long periods is brilliant from the two angles called equity and taxes. Sadly the stock price went up so quickly, now those buy backs will cost more. At 400 $ the EPS would have went up over 30% for the shareholder even if the earnings had stayed (inflation-adjusted) flat...

P.P.S: I now went back further and it is good to see that in the the short term I was completely wrong about the two big Telecom companies of Germany and France. Orange looked much more attractive but gained only a bit over 10% (the dividend yield was of course a lot higher then the E50 average) while Deutsche did almost make 50%. I did sell a third of my Orange stock at ~25% months ago to lower the overall ratio of shares. I actually threw out the little DT I had over a year ago, and personally I would even more eagerly sell it now. While overall Orange earned for me a bit more then the E50, one has to consider that as a underperformer. So it is not 4/4 but for 4/5 which outperformed the Eurostoxx50 benchmark.

Firn

02-11-2014, 09:21 PM

With an earlier SVP initative and success it is rather likely that Switzerland would have still 0 medals instead of 2 golden ones. It is certainly no small irony that two much praised Swiss champs are also fully kids of immigrants, one of Italian heritage and another of Russian.

Dario Cologna (http://de.wikipedia.org/wiki/Dario_Cologna) has grown up right across the border from Italian parents, Italian as a father language and German as mother language and played youth football in Italy. As a son of his home valley he also speaks Romansh (http://en.wikipedia.org/wiki/Romansh_language). Quite a big loss for our team.

Adriano, Langenthal: Hoi Dario, was hast Du eigentlich für eine Abstammung? Bist Du halb Italiener?

Dario Cologna: Die Mutter ist Südtirolerin und auch mein Vater ist in Italien aufgewachsen. Für mich hat sich die Frage nie gestellt, für Italien zu starten. Ich bin in der Schweiz geboren und aufgewachsen.

BTW one of the Swiss things I love is that a national German-language paper brings a Romansh question without translation. Unthinkable in Italy.

Hasch tü realis cha nu deran sper la loipa e sbrajian sco nars e dera quai per tai motivant? Chars salds Flavio

Dario Cologna: Hoi Flavio, grazia fich! cun quai cha jau vea n pa avantag nhaja schon bada cha blers fans dasper la loipe a fanar e quai ha dar natralmaing amo daplü forza :-)

Iouri Podladtchikov (http://de.wikipedia.org/wiki/Iouri_Podladtchikov) is the other example how Switzerland profited from human capital from abroad. A son of a highly educated Russian couple which left a poor Russia in turmoil he won now gold for Switzerland.

Aber eigentlich kann er Kontrolle durch andere nicht ertragen, nur durch sich. Iouri, sagen seine Eltern Yuri Podladtchikov und Valentina Podladtchikova, ein Professor für Geophysik und eine Mathematikerin, sei ein Kontrollfreak. Einer, von dem sie hätten lernen mssen, dass er sich nicht dreinreden lasse, jeder Hauch von Einflussnahme ist kontraproduktiv, selbst wenn es um den Kauf eines Autos geht. Wenn aber wir ein Auto kaufen wollen, so die Mama, ist er der Erste, der auf uns einzuwirken versucht.

Interestingly he himself did point out why Switzerland in general could reap so much profit from its large wealth and great institutions in combination with much of the best European immigrants or commuters. The Swiss organization is just far more professional. In 2007, with 18 years he took the Swiss instead of the Russian citizienship.

Podladtchikovs Vater, ein Professor für Geophysik, wanderte im Jahr 1992 samt seiner Familie aus Russland nach Westeuropa aus. Nach Stationen in Schweden und den Niederlanden ließen sich die Podladtchikovs 1996 in der Schweiz nieder. Bis zum Sommer 2007 blieb Iouri Podladtchikov russischer Staatsbrger und nahm für Russland an Wettkmpfen teil, dann wurde er Schweizer Staatsbrger. Ob seiner guten Leistungen in dem darauffolgenden Winter erhielt der Snowboarder nach eigenen Angaben ein Angebot des russischen Verbandes, wieder für diesen zu starten. Diese Offerte wies er jedoch zurck, mit der Begründung, im Schweizer Verband sei alles viel professioneller. Neben dem Snowboard fährt Podladtchikov wie auch andere Athleten der Disziplin gerne Skateboard.[7]

P.S: The forum software really butchers Romansh, Italian, Spanish and German, almost as much as I do with English...

Found also a neat, powerful picture about the Swiss 'Nati' without the genes from other countries:

http://www.sport1.de/media/_redaktion2012/sportarten_2/fuball20132014/sonstiges_89/Schweiz_5x4_Diashow.jpg

Ob Granit Xhaka, Xherdan Shaqiri, Gökhan Inler, Tranquillo Barnetta oder Diego Benaglio - alle diese Schweizer Nationalspieler stammen aus Familien, die einst in die Schweiz einwanderten.

Firn

02-13-2014, 07:37 PM

There is little economic in it, sadly once again we had an all too Italian and all too disgusting act of internal party politics toppling our PM. The sounds of Renzis knives getting sharpened have been heard for some time and now the 'young' major of Florence, which never stood in a national election will become our new PM. (http://www.corriere.it/politica/14_febbraio_13/saluto-ministri-poi-salita-quirinale-letta-si-prepara-commiato-fatto-possibile-605a8ffc-94cb-11e3-af50-9dc536a34228.shtml) The 'vignetta' tells us a lot:

http://www.corriere.it/methode_image/2014/02/13/Cultura/Foto%20Cultura%20-%20Trattate/giann-k2jB-U43010449692355q7C-410x450@Corriere-Web-Sezioni.jpg

Never say never. Renzi speaking:

'Never political games like in the first republic'
'Never against Letta'
'Never without the popular vote'
'Never with the center-right'
'Oh, the moment has already arrived?' (Surprise) 'I would have never said (expected) that'

Who can I vote for such a man and a party which has played a very similar game now so often in the recent past. Only in 2013 in the PD this happened:

On March 22, President Giorgio Napolitano asked Bersani to form a new government.[9] On March 27, Bersani failed to strike a deal for forming a new Italian government with the grassroots Five-Star Movement (M5S) which holds the balance of power after February's inconclusive elections.[10] On April 19, Bersani announced he would be stepping down from his post as Democratic Party leader after Romano Prodi failed to secure a parliamentary majority in the presidential election.[11]

Renzi had already his hand in the shameful manner Prodi was deserted right at the election by a great part of his own party.

http://images2.corriereobjects.it/methode_image/2014/02/13/Politica/Foto%20Politica%20-%20Trattate/667dccd125a2d4be01cb45b9b67fbbef-002-ki9H-U43010449474940n2H-398x174@Corriere-Web-Sezioni.jpg?v=20140213072553

Now I saw his last tweet, he will say what he has to say tomorrow, in streaming, 'with an open face'. No hint of irony of course. :rolleyes:

The Italian governments since WWII (http://www.governo.it/Governo/Governi/governi.html), as everybody can see there is not a single one which ruled the full 'normal' legislatura. In fact only Berlusconi II -III comes close.

Firn

02-14-2014, 11:35 AM

I will only comment on Italian politics after the dust from the infighting has settle, at least for the time being. It is just a too disgusting spectacle right now.

The NZZ (http://www.nzz.ch/aktuell/schweiz/leitsaetze-der-eu-im-bilateralen-drama-1.18243036) explains in simple and frank terms the logic of the EU actions. A long time ago I had European law as a course and althought I have forgotten most the basic principles are still present. I even have the Codex somewhere. ;)

In short there are no surprises in the way the EU acts, apart perhaps from the speed. One has to keep three concepts in mind:

1) The national sovereignty of Switzerland with it's strong comittment to direct democracy.

2) The inter/supranational nature of the EU with it's intricate systems of treaties. In simplistic terms the EU is entitled in certain areas by it's member states to act instead.

3) The specific nature of the treaties between the two entities. The 'Freizuegigkeit' was a part of a bundle 'Bilateralen I' which has to be accepted as a whole by both sides.

The Swiss government finds himself against it's will in a very difficult situation in which it fights, in Swiss parlance, with far shorter pikes.

Firn

02-18-2014, 03:22 PM

Hopefully the good qualities of the EU will prevail over Italian fiscal madness:

Interrogazioni Ppe-euroscettici, viola trattati Ue libera circolazione capitali - Due distinte interrogazioni parlamentari sono state presentate alla Commissione europea per il prelievo del 20% sui bonifici dall'estero imposto dal primo febbraio dalla Agenzia delle Entrate. Nei testi si ipotizza la violazione dell'art.63 del Trattato sul funzionamento della Ue, che vieta le restrizioni dei pagamenti tra gli stati membri. A presentare le interrogazioni, due eurodeputati ex leghisti: Tino Rossi (Forza Italia/Ppe) e Claudio Morganti (Io Cambio/Eld, il gruppo euroscettico).

Per i consumatori un abuso, per evitarlo serve autocertificazione - I consumatori gi nei giorni scorsi avevano definito "l'ennesimo abuso di potere" la ritenuta del 20% che le banche sono obbligate a trattenere su tutti i bonifici esteri che arrivano sui conti correnti italiani, rappresenta. Adusbef e Federconsumatori hanno ricordato in una nota che dal primo febbraio 2014 sui bonifici dall'estero a persone fisiche italiane la banca deve applicare automaticamente una ritenuta del 20% perch le somme accreditate si considerano reddito imponibile, salvo prova contraria del contribuente. Spetta al beneficiario del bonifico, infatti, dimostrare che le somme non hanno natura di compenso "reddituale"

Basically if you or somebody else transfers money from a non-Italian account to an Italian the dear state will take 20% from you, unless you get to considerable lenghts to show that it was properly earned money. To burden of proof is on the citizien and it looks like a pain to get that proof through our bureaucracy. If you work currently abroad, as a considerable amount of high-qualified Italians do and you want to pay something for your property, family and so forth you face considerable costs. Even if you earned it honestly and even if it that will get accepted by our slow-movers you face uncertainty and loss of time.

For Italians working relative close to Italy it becomes ironically now more attractive to take your money in cash accross the frontier without declaring anything. Under 10000 per capita you are fine and the chances to get controlled at all are very slim. This is important as with the complicate and plentiful Italian laws, slow bureaucracy and crawling courts you really want to avoid any possible hassle. Sadly that in turn makes it more likely that it gets used to pay something black. Brilliant.

So I really hope the EU steps in to stop this idiocy which IMHO violates EU law.