EUCOM Economic Analysis - Part I

[AdamG]

Reading music

BUCHAREST, Romania — Romania’s prime minister warned Monday that violent protests that left 59 injured over the weekend could jeopardize the country’s stability and chances for economic growth.

Some of the around 1,000 protesters clashed with police in downtown Bucharest Sunday, after four days of demonstrations against the government’s austerity measures turned violent. Police used tear gas and flares to repel demonstrators hurling stones and firebombs.

http://www.washingtonpost.com/world/...d=pm_world_pop

[Surferbeetle]

Adam (and Slapout),

Like your ideas....here is some reading music (whiskey in the jar by Lars Ulrich and the boys - the theme song for our bankster friends and any sympathizers ) to enjoy with your black and tan

World Bank Projects Global Slowdown, with Developing Countries Impacted, Press Release No:2012/236/DEC, Beijing, January 18, 2012, World Bank

Developing countries should prepare for further downside risks, as Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, says the World Bank in the newly-released Global Economic Prospects (GEP) 2012.

The Bank has lowered its growth forecast for 2012 to 5.4 percent for developing countries and 1.4 percent for high-income countries (-0.3 percent for the Euro Area), down from its June estimates of 6.2 and 2.7 percent (1.8 percent for the Euro Area), respectively. Global growth is now projected at 2.5 and 3.1[1] percent for 2012 and 2013, respectively.

Slower growth is already visible in weakening global trade and commodity prices. Global exports of goods and services expanded an estimated 6.6 percent in 2011 (down from 12.4 percent in 2010), and are projected to rise by only 4.7 percent in 2012. Meanwhile, global prices of energy, metals and minerals, and agricultural products are down 10, 25 and 19 percent respectively since peaks in early 2011. Declining commodity prices have contributed to an easing of headline inflation in most developing countries. Although international food prices eased in recent months, down 14 percent from their peak in February 2011, food security for the poorest, including in the Horn of Africa, remains a central concern.

“Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.

Developing countries have less fiscal and monetary space for remedial measures than they did in 2008/09. As a result, their ability to respond may be constrained if international finance dries up and global conditions deteriorate sharply.

To prepare for that possibility, Hans Timmer, Director of Development Prospects at the World Bank, said: “Developing countries should pre-finance budget deficits, prioritize spending on social safety nets and infrastructure, and stress-test domestic banks.”

[Surferbeetle]

Reading music by Bon Scott and the crew as they explain to us why it's a long way to the top back in '76 on Australian Bandstand.

"No Deal" - Greek Bondholders Do Not Think Agreement Can Be Reached Before "Crunch Date", by Tyler Durden, on 01/18/2012 17:48 -0500, at ZeroHedge

Because as the supposed restructurng expert should know, once you have a disparate group of ad hoc creditors, which is precisely what we have in the Greek circus now, there is nothing even remotely close to a sure deal, especially when one needs a virtually unanimous decision for no CDS trigger event to occur (yes, ISDA, for some ungodly reason, you are still relevant in this bizarro world).

Fears rise over Commerzbank and MPS, by Patrick Jenkins in London, Rachel Sanderson in Milan and James Wilson in Frankfurt, January 18, 2012 8:14 pm, Financial Times, www.ft.com

European regulators are convinced that two of the continent’s banks will fail to produce credible plans to plug capital deficits by Friday’s deadline, exposing both to the risk of full or partial nationalization.

Officials said that it looked “almost inevitable” that a fresh injection of state funds would be needed at Italy’s Monte dei Paschi di Siena and Germany’s Commerzbank. “These are the big cases,” said one.

[Surferbeetle]

Charlie Rose and Dr. Jim O'Neill have an interesting talk on Thursday January 19, 2012. Topics covered include:

• The combined GDP of the BRIC countries is forecasted to exceed that of the US by 2015

• Will France leave the EMU?

• Will the EU muddle through the crisis?

• What happens if nationalist politics simultaneously come to the fore in Germany, France, and Greece?

• Will the Renminbi become a convertible currency in 2015?

• Chinese bilateral currency deals

• National control or housing prices

• Political polarization in the US

• The state of the US recovery

• Growth vs Austerity strategies

• The state of Russia

• Nation-state economic models

• Global governance

• Changes in the global energy economy

• War - nukes & cyber

• Israel

• Globalization

• Occupy Wall Street

• Teach First/Teach for America

• The role of women in society

Charlie Rose bio by wikipedia

Charles Peete "Charlie" Rose, Jr. (born January 5, 1942)[1] is an American television talk show host and journalist. Since 1991 he has hosted Charlie Rose, an interview show distributed nationally by PBS since 1993. He has also co-anchored CBS This Morning since January 2012.

Dr. Jim O'Neill bio by wikipedia

Jim O'Neill is presently the Chairman of Goldman Sachs Asset Management. He was previously head of global economic research and commodities and strategy research at Goldman Sachs.[1] He is best known for his prominent economic thesis regarding the economically related nations referred to as BRICs (Brazil, Russia, India and China). He coined the phrase in a 2001 paper entitled "The World Needs Better Economic BRICs." [2]. He also has coined the term MIKT that stands for Mexico, Indonesia, Korea (South) and Turkey.[3]

O'Neill has particular interest and success in the foreign exchange market, Gavyn Davies describing O'Neill as "the top foreign-exchange economist anywhere in the world in the past decade" in 2005.[4]

A 2011 report worth rereading by the Economist Intelligence Unit: After Eurogeddon? Frequently Asked Questions About the Breakup of the Euro Zone.

There are too many unknowns to make confident predictions about the trajectory of the crisis or the extent and speed of any break-up, should efforts to save the single currency fail. The following FAQ represents an exploration of alternative scenarios that diverge from our central forecast. We attach a 60% probability to this central “muddle through” scenario, not least because the catastrophic consequences of a break-up provide a strong incentive for policymakers to do whatever is necessary to save the euro. In contrast, we think there is a 35% chance of a break-up of the euro zone, in which the most likely scenario would be the exit from monetary union of the smaller so-called “periphery” economies, as well as both Italy and Spain. We assign a 5% probability to Greece leaving the euro zone on its own, without triggering other departures.

[Firn]

Doom and Gloom are of course dominating the headlines, and it is often hard to believe that live seems to go in many parts of Europe rather normally and the sun is still rising. Anyway a big decision has in my humble opinion been rather underreported:

Croatia votes to join the EU

The state referendum commission said that with almost all the votes counted, about 66 percent in Croatia supported membership, while 33 percent were opposed and 1 percent of the ballots were invalid. The commission put the turnout at about 44 percent of eligible voters.

The low turnout means that less then a third to eligible voters actually did vote "Yes", but the outcome was pretty much given. Perhaps the most surprising bit is the following one:

And in a surprise move, Croatia's wartime military commander Ante Gotovina - currently serving a long sentence abroad for war crimes against Serbs - earlier sent a message to his compatriots urging them to vote "yes" in the referendum.

Gotovina's flight from a war crimes indictment by The Hague - and Zagreb's perceived half-heartedness in tracking him and other war crimes suspects down - delayed Croatia's EU bid.

His conviction in 2011 sparked a surge of anti-European sentiment in Croatia, where he is viewed by many as a national hero.

Other then that I wonder how and when the talks about the 'voluntary' haircut on Greek debt will end. As a have written before I have a personal stake in the matter, having bought Greek bonds for roughly 40 Cent on the €.
A 50% cut would be fine with me, if the conditions are not too bad although after a couple of months it would be perfectly fine so, after I got that € for those 40 Cent. A 65% would mean that I get out slightly ahead, depending on the conditions and future inflation...

[Surferbeetle]

Firn,

Doom and gloom always seems to be in fashion, however, it certainly seems to be more so than usual of late. A motorcycle ride, or a day on the slopes, beach, etc always seems to help with returning to a baseline of sanity. Anyway, here are a couple of links to some of my morning reads today...

Income inequality comes out of the igloo at Davos, by Dr Gillian Tett, January 25, 2012 1:01 am by FT, Financial Times, www.ft.com

During the last year confidence among chief executives has apparently plunged, as many fear that the macroeconomic outlook looks dangerously uncertain. On a micro level, however, many companies say that their own operations are going quite well. In other words, even amid individual company success, the world seems a scary place.

Why? It might be tempting to point the finger at the euro (and, yes, those euro woes and Greek dramas will certainly dominate Davos debate). What came out of the FT panel debate is that the malaise actually has much deeper roots: businesses fear that that the current economic system is unsustainable in many senses. There are rising natural resource constraints; social pressures are growing; and political systems seem ill-equipped to cope. Add the destabilising impact of social media, and you get a combustible, and nerve-racking, mix — the Arab spring is just one case in point.

Edelman Trust Barometer, The Path Forward, and for all the powerpoint fans out there - the slide deck

The 2012 Edelman Trust Barometer examines trust in four key institutions -- government, business, media, and NGOs -- as well as communications channels and sources. This is the 12th year of the study and this year we took a deeper look at what drives trust.

The 2012 Trust Barometer reveals that the factors responsible for shaping current trust levels are less important than those that will build future trust. Consistent financial returns, innovative products and highly regarded senior leadership are the primary factors on which current trust levels lie. However, listening to customer feedback and putting customers ahead of profits are far more vital to building future trust.

[Surferbeetle]

A quick survey of the perceptions of various demographics regarding control, trust, and socializing private & public losses:

Russia Davos party has unusual opposition flavor, by Dmitry Zhdannikov
DAVOS | Sat Jan 28, 2012 10:08am EST, Reuters

Putin, Russia's president from 2000 to 2008 and now prime minister, is expected to return to the presidency after March elections, but is looking increasingly out of touch after the opposition brought tens of thousands of people onto the streets in December to demand a re-run of parliamentary elections.

Putin first dismissed the protesters as chattering monkeys financed from abroad, then backed a proposal from his protg President Dmitry Medvedev for gradual political reform, but later had a former KGB spy appointed as Kremlin chief of staff.

Kremlin insiders say the muted response is the result of a fight for the ear of Putin between the 'siloviki', men with a security services background, and a 'liberal' or 'moderate' faction whose influence has substantially weakened as Medvedev's term draws to a close.

Almost the entire "moderates" clan travelled to the World Economic Forum in Davos in Switzerland this week and used the event, previously attended by both Putin and Medvedev, to speak about the massive political challenges Russia faces.

Plan zur Finanzkontrolle, Griechenland strubt sich gegen EU-Aufpasser, 28.01.2012, Spiegel

Berlin - Die Debatte ber ein zweites Hilfspakets fr Griechenland wird hrter: Angesichts wachsender Zweifel an die Reformfhigkeit des Landes kommt aus Deutschland jetzt der Vorschlag, dass Griechenland im Gegenzug fr weitere Hilfen zulassen soll, dass die Haushaltspolitik von EU-Institutionen kontrolliert wird. Die Bundesregierung hat gemeinsam mit anderen Lndern die Idee eines Sparkommissars aufgeworfen. Dieser soll auch ein Veto gegen einen Etat einlegen drfen.

Die griechische Regierung will von solchen Vorhaben jedoch nichts wissen. "Es ist ausgeschlossen, dass wir das akzeptieren", hie es in Athen. "Diese Kompetenzen fallen unter die nationale Souvernitt."
ber die Zukunft Griechenlands wird derzeit auf verschiedenen Ebenen beraten. Zum einen verhandelte die Regierung in Athen weiter mit den privaten Glubigern ber eine Umschuldung. Ministerprsident Loukas Papademos hatte am Freitag gesagt, er erwarte eine Einigung innerhalb weniger Tage. Zum anderen prft die Troika aus IWF, EZB und EU-Kommission in Athen die Umsetzung der Verpflichtungen aus dem ersten Hilfspaket sowie die wirtschaftliche Entwicklung im Land.

Ein positives Urteil ist Voraussetzung dafr, dass das hoch verschuldete Land weitere Kredite im Rahmen eines zweiten Hilfspaketes erhlt. Nach SPIEGEL-Informationen reichen dabei die bisher kalkulierten 130 Milliarden Euro bis Ende 2014 nicht aus. Stattdessen wrden 145 Milliarden Euro bentigt.

Greeks reject German plan for EU budget commissioner, 28 January 2012 Last updated at 17:14 ET, BBC News

Greek officials have reacted angrily to a leaked German proposal for an EU budget commissioner with veto powers over Greek taxes and spending.

The Greek government said it must remain in control of its own budget.

The European Commission says it wants to reinforce its monitoring of Greek finances, but Greece should retain sovereign control.

Meanwhile, Greece and its private investors are close to a deal which will pave the way for a second bailout.

Negotiators say a tentative agreement could be finalised next week.

Greece must reach agreement in the next few days in order to receive the next tranche of funds from its first bailout.

It needs the money to pay off a significant number of bondholders whose bonds mature in March. Without the bailout funds, Greece could be forced into an uncontrolled default from the euro.

In Davos, Europe Is Pressed for Debt Crisis Solution, by Jack Ewing, Published: January 28, 2012, NYT

DAVOS, Switzerland World leaders turned up the pressure on Europe on Saturday to erect a more formidable wall of money against the sovereign debt crisis, warning that the euro zone continues to pose a severe threat to the global economy.

George Osborne, the chancellor of the Exchequer in Britain, said a bigger firewall was a key to unlocking further confidence, while Christine Lagarde, managing director of the International Monetary Fund, said the fund should be big enough to eliminate any doubts about European resolve.

If it is big enough, it will not get used, she said on Saturday during a panel discussion at the World Economic Forum here.

Echoing comments by United States officials, including Treasury Secretary Timothy F. Geithner on Friday, leaders in Davos said that aid to the euro zone from the rest of the world would be contingent on a larger commitment by Europe. Some critics have said it is perverse that the I.M.F., which is financed partly by developing countries, should be aiding wealthy Europe.

Europe has to be making more effort; otherwise, I dont think developing countries will want to pay more for the I.M.F., said Motohisa Furukawa, the Japanese official responsible for economic and fiscal policy.

The firewall, known formally as the European Stability Mechanism, would have a lending capacity of 500 billion euros ($656 billion) when it begins operating in July, replacing a temporary fund. European leaders are debating ways to increase the bailout funds resources to aid overindebted countries, but they face powerful opposition from voters in countries like Germany and have so far failed to act boldly enough to reassure financial markets.

Greece, Bankers Expect Debt-Swap Deal Next Week, by Marcus Bensasson and Maria Petrakis - Jan 28, 2012 2:04 PM MT, Bloomberg News

Greece and its private creditors said they expect to complete a debt-swap accord in the coming week, after bondholders signaled they would accept European government demands for lower interest rates.

The sides are close to completing a voluntary exchange within a framework outlined by Luxembourg Prime Minister Jean- Claude Juncker, the Institute of International Finance, negotiating on behalf of private creditors, said in an e-mailed statement in Athens today.

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds, said a person familiar with the talks, who declined to be identified because a final deal hasnt been struck yet.

Institute of International Finance: Greece

Greece remains mired in a damaging economic downturn. Despite a massive underlying fiscal adjustment of more than 12 percent of GDP during 2010-2011, EU-IMF fiscal targets been difficult to achieve with tax revenues undermined by weakening activity caused by the adjustment itself and an intensified credit contraction in response to growing liquidity pressures.

Liquidity pressures have grown with the ECB reluctant to assume unlimited Greek risk, which would have lessened the need for Euro Area creditor governments to provide additional financing with the government unable to issue new bonds in 2012, as the current EU-IMF program had assumed.

Agreements reached at the October 26-27 EU summit clear the way for a second EU-IMF program providing €130 billion in additional financing through 2014. Funding has been included for collateral for a revised voluntary agreement with bondholders reducing nominal bond values by 50 percent. Implementation, however, will require at least the interim support of Greece’s two largest political parties. This is likely to prove problematic amid jockeying ahead of elections now likely early next year.

European Central Bank, Mario Draghi, President of the ECB, Vítor Constâncio, Vice-President of the ECB, Frankfurt am Main, 12 January 2012

The Governing Council welcomes the European Council’s agreement to move to a stronger economic union, which was announced on 9 December 2011. The new fiscal compact, comprising a fundamental restatement of the fiscal rules together with the fiscal commitments that euro area governments have made, is an important contribution to ensuring the long-run sustainability of public finances in the euro area countries. The wording of the rules needs to be unambiguous and effective. The further development of the European financial stability tools should make the operation of the European Financial Stability Facility and the European Stability Mechanism more effective. The swift deployment of these tools is now urgently needed. Concerning the involvement of the private sector in financial assistance for indebted countries, we welcome the reaffirmation that the decisions taken on 21 July and 26 and 27 October 2011 concerning Greek debt are unique and exceptional.

[Fuchs]

I don't think they're serious about the commissioner. It's a model from the German constitution (in federal - states relations) that has never been applied in Germany (despite our three city states being in fiscal trouble for decades).

I suspect they're trying to push Athens into seeking an independent solution. Athens doesn't appear to be able to reform fully, and austerity in Athens merely wrecks the Greek economy a bit more - leading to less GDP and thus a higher debt : GDP ratio.

The obvious escape is to either declare bankruptcy, force lenders to accept a huge cut or to re-establish flexible exchange rates and re-create a lender of last resort by leaving the Euro zone. The latter is in combination with reforms the only really viable long-term solution.

[Surferbeetle]

Fuchs,

Not all technocratic solutions are politically feasible...

EURO-RETTUNG, Partner drngen Deutschland zu ESM-Aufstockung, 29.01.2012, 13:24 Uhr, Handelsblatt

Berlin/DavosDer internationale Druck auf Deutschland wchst, einer Aufstockung der Euro-Rettungsfonds zuzustimmen. Neben dem IWF und mehreren anderen auslndischen Regierungen forderte am Wochenende auch sterreichs Bundeskanzler Werner Faymann (SP) eine Erhhung der Kapazitt der Euro-Rettungsschirme auf rund 750 Milliarden Euro. Die SPD und Faymann dringen zudem darauf, dass der knftige dauerhafte Rettungsmechanismus ESM eine eigene Banklizenz erhlt, um sich bei der Europischen Zentralbank refinanzieren zu knnen. Whrend die Bundesregierung bei ihrer Linie bleibt, dass ber eine mgliche Aufstockung ohnehin erst im Mrz geredet werden soll, deutete der CDU-Haushlter Norbert Barthle im Reuters-Interview an, dass im Notfall die Rettungsschirme EFSF und ESM kombiniert werden knnten, um die Summe fr Hilfsaktionen fr angeschlagene Euro-Staaten erheblich zu erhhen.

Der Chef des ifo Instituts, Hans-Werner Sinn, warnte dagegen vor weiteren Haftungsbernahmen. Die Wirtschaftswoche berichtet, dass nach Berechnungen des ifo Instituts die deutschen Steuerzahler im Rahmen der Rettungsaktionen der EU-Regierungen und der EZB bereits Risiken ber 595 Milliarden Euro bernommen htten. Wrden die 190 Milliarden Euro deutscher Haftungsanteil des ESM hinzuaddiert, klettere die gesamte Haftungssumme auf 785 Milliarden Euro. Die Finanzmrkte taxieren die Wahrscheinlichkeit fr einen Staatsbankrott Deutschlands in den nchsten zehn Jahren schon jetzt auf zwlf Prozent, mit steigender Tendenz, warnte Sinn.

Hilfe unter Konservativen, Merkel macht Wahlkampf fr Sarkozy, 28.01.2012, Spiegel

Die CDU setzt bei den Wahlen in Frankreich auf den Amtsinhaber. Angela Merkel plant mehrere Wahlkampfauftritte mit Nicolas Sarkozy. Den sozialistischen Herausforderer bezeichnet Generalsekretr Grhe als "Hemmschuh fr die Zukunft der Europischen Union".

Global Agenda Council on Geopolitical Risk, Davos-Klosters, Switzerland 25-29 January 2012

Both the US and China desire to see the existing global order and institutions evolve to meet their particular strategic needs. The US wants to preserve its existing institutional advantages while managing its relative decline and China wants to leverage its growing size and influence while seeking to defer leadership responsibilities. The European Union remains the strongest defender of multilateral global organizations and governance, but its global leverage has been declining, even before the Eurozone crisis, which exposed enormous internal faults. As a result, the EU has lost significant credibility and influence.

Germany is a potential winner, yet perhaps reluctantly so, as it remains less than fully enthusiastic about the increasing leadership role it currently plays in Europe. No other state is financially able or willing to meet so many of the current challenges facing the region. And yet, Germanys historical attempts to play a leadership role within Europe have not always gone well, and this remains a defining characteristic of its bilateral and multilateral relationships within the EU.

A global power vacuum is the most daunting potential consequence of this weakening of global institutions and rules. While regional alliances will likely gain in importance, neither they nor individual countries will completely fill this global vacuum. Many countries now have both national and regional ambitions, yet only a few have global ones. Only the US and China appear willing and able to spend considerable resources far beyond their borders. Yet, neither can assume overt global leadership and responsibility nor does either want to. There is a significant difference between the respective levels of this reluctance on the part of China and the US. Each has a very different political philosophy, with those differences extending well beyond the issue of democracy. China remains primarily focused on its own domestic concerns chiefly development and tends to look at global issues through that prism. It is far more committed to addressing its own problems before advancing to a more internationalist agenda. The US, by contrast, retains incomparably greater diplomatic and military reach and is more outwardly engaged in the world, often requiring it to balance its own domestic and international concerns. The US remains willing to assume at least some of the functions of international leadership. Though the decline of the US should not be overstated, the US economy today limits the countrys ability to exercise unbridled global leadership. China still insists that its developing country status absolves it from shouldering too many global responsibilities, though it wants to make sure the world does not unify against it. No other mega-state is credibly thinking in global terms. As the world drifts towards what is increasingly seen as potentially a G2 world, with the US and China at the table, this could possibly lead to a world more prone to competition than a multipolar/multilateral world and could lead to more state-to-state conflicts. Yet, we might also be more likely to see conflicts within states, the rise of non-traditional threats including cyber threats and proxy conflicts, in which countries destabilize others in different ways. Such new conflicts could even escalate to a military level, especially if global crisis management mechanisms are weak.

[Firn]

I don't think they're serious about the commissioner. It's a model from the German constitution (in federal - states relations) that has never been applied in Germany (despite our three city states being in fiscal trouble for decades).

I suspect they're trying to push Athens into seeking an independent solution. Athens doesn't appear to be able to reform fully, and austerity in Athens merely wrecks the Greek economy a bit more - leading to less GDP and thus a higher debt : GDP ratio.

The obvious escape is to either declare bankruptcy, force lenders to accept a huge cut or to re-establish flexible exchange rates and re-create a lender of last resort by leaving the Euro zone. The latter is in combination with reforms the only really viable long-term solution.

A similar system also exists in Italy, but of course there it can wield some power while I hardly can imagine an EU appointed person doing a similar job in Greece. Indirect pressure is in general preferable, however so far it doesn't seem to work. Greece was never a first class economy, and the massive, decade long flow of money from the EU and the all the ups of the Euro did not result in deep structural reforms and great productivity increases but rather delayed and blocked progress. Even the best input can be turned into a terrible output, and while many regions and much of Eastern Europe profited from EU policy Greece and regions like southern Italy and southern Spain did certainly so. There nice Wall Street adage about something very similar, concerning ideas.

The problem is that austerity in a downturn is in general a terrible idea like the Great Depression has shown, even in more advanced and robust economies with much higher productivity. Cameron is trying to prove the point pretty hard. So while deep reforms have to made quickly to convince key European partners to help, as I don't think the Lehman argument will suffice in the mid term, a deep haircut is needed. Perhaps dropping the Euro might even be a good move, as frankly the economic situation is already so grim that it could be more of a liberation and create a clean sheet again. The external devaluation would make Greece a lot more productive.

On a side note Spain's housing bubble was and is certainly amazing and it is just incredible just how much was built in Spain compared to the rest of Europe and just how high the prices are still, despite the downturn. To some extent it reminds me a bit how the big three built and built and built cars far in excess of demand in the years before the big crash. However they had to sell those cars and to do so they cut deep into their pricing power.

P.S: Those bad days were however an excellent time to buy stock and I got Ford shares under 3$, a very rare amount of lucky timing. Sadly greed and stupidity let me sell them with a considerable profit, instead of trusting the company and the US government. Even after the recent drop they sell over 10$. Fortunately I was able to resist the urge to sell for other stocks which I bought around that timeframe when everything seemed doom and gloom. I still remember that rock solid enterprises who payed out only over 50% of profits in the forms dividends and still gave you a yearly yield of over 10%. It was a good times to switch from bonds to stocks, and with the last buys I have increased considerably that weighting already heavy due to capital gains. Even if the profits shrink a fair amount the dividends alone should yield in the region of good European bonds.

As it seems now the decision to buy cheaply stock of a country has bitten me almost as heavily my poor decisions to buy cheap stock of companies with bad fundamentals and no reliable creditor in form of a government like US one. It is always good to be reminded of his own stupidity, and it seems I'm trying hard to do so.

[Fuchs]

Hans-Werner Sinn

This guy is extreme. He had in my opinion a track record of being wrong on almost everything for years - until about two years ago when he began to make sense in new topics (typically only in regard to trade and fiscal stuff). Prior to that, he looked a lot like a totally purchasable speaker for big business who said the most obviously stupid and ignorant things.

In general, his opinion should be weighed with zero due to his past.

[Firn]

This guy is extreme. He had in my opinion a track record of being wrong on almost everything for years - until about two years ago when he began to make sense in new topics (typically only in regard to trade and fiscal stuff). Prior to that, he looked a lot like a totally purchasable speaker for big business who said the most obviously stupid and ignorant things.

In general, his opinion should be weighed with zero due to his past.

From what I have read he seems to be on a wave lenght with the so called freshwater school of economics. Some of his arguments make indeed sense, sadly success for a mission under certain conditions doesn't make the a certain approach always the correct one when things change.

So in a military sense a macroeconomic METT-TC analysis seems to be disregarded for ideological reasons.

[Fuchs]

He did for example argue against a minimum wage while it was obvious that corporations were increasingly ripping workers off due to weakened labour unions and a quite treacherous left government (which didn't behave 'left' at all).

His argument was a 1st semester economic studies basic model that lacked the plethora of real world complications which lead to a totally different conclusion.
The minimum age discussion at the time was about a sector which is not in competition with foreign businesses, where workers could not be substituted (except for faux self-employed workers) and where corporations were eroding formerly family-sustaining jobs into jobs that did at full time work not yield a living wage (necessitating public social transfers to full-time workers who previously had been net contributors to the social net!).

[Surferbeetle]

Guest post by Vladimir Putin: Russia needs more technology and less corruption
January 30, 2012 1:12 pm, Financial Times, www.ft.com

We are living through a period of serious changes in the world economy. Never before has technology advanced so quickly. What we see today would have seemed like science fiction only fifteen years ago.

In such circumstances it is important to ensure the stable development of our economy, to give our citizens maximum protection from the impact of global crises, and at the same time to renew all aspects of our economy. For Russia, it would be inadmissible to not have an economy that can guarantee stability, sovereignty and a decent standard of living.

We need an economy with competitive industries and infrastructure, a developed service sector, and effective agricultural system; in short an economy that harnesses modern technology.

Speaking plainly, we still have system-wide corruption. The cost of doing business varies depending on your “proximity” to specific individuals within the government machinery. In these conditions entrepreneurs quite rationally tend to find backers and strike deals with them rather then observe the law. Then, having made their deals, such businesses try to suppress competition.

Clearing the way for businesses prepared to win a competitive battle on a level playing field is our fundamental system-wide goal. And this cannot be attained through economic policy alone. We must transform the state itself, its executive and judiciary branches. We must dismantle the accusation-driven collection of law-enforcement, investigative and judiciary agencies and eliminate from our legislation all vestiges of the Soviet legal system.

Economic cases must be transferred from trial courts of general jurisdiction to arbitration courts. Together with the expert community, judges and entrepreneurs we should publicly discuss and introduce before the end of this year all the necessary initiatives to achieve this.

When it comes to economic policy, it must be adjusted in the coming years to reduce the level of government regulation, by replacing regulations with market-based mechanisms, and administrative control with liability insurance. The global crisis lent more credibility to the proponents of state-led management of the economy. But we understand that, as opposed to many other countries, the share of the state in the Russian economy and the degree of government regulation remains rather high.

[Firn]

Reflecting the whole crisis I have to say that it is to a good deal luck when a person gets born into relatively decently working economy with little employment. It is a lot easier to get a good job, live a nice life and to keep out of trouble and dark actions when you life in such a peaceful environment. Much harder to make your hands dirty under such circumstances. For a person in Bergamo it is much easier to resist the pizzo then for a guy working in Palermo.

Said that I really hope that the EU and the various governments work hard to resolve the crisis and lessen it's impact and that ways can be found to contain the increasing inequalities in Europe between the rich and the rest without harming productivity.

[Surferbeetle]

The website Punk Economics by David McWilliams

Lesson 1 on Youtube

David McWilliams bio by Wikipedia

David McWilliams (born 1966)[1] is an Irish journalist and economist.[3] McWilliams has worked with as an economist with Central Bank of Ireland and as a banker with UBS bank and the Banque Nationale de Paris. More recently, he has become a broadcaster and documentary-maker with TV3 and Raidi Teilifs ireann (RT), as well as publishing three books, The Pope's Children, The Generation Game, and Follow the Money.

McWilliams has called for a radical change in currency, arguing that Ireland should abandon the Euro project and establish a new punt.[4] McWilliams has also called for a different approach to the current crisis in Ireland, including a demand for a more aggressive negotiating stance with the European Union, the creation of an alliance between Ireland, Greece, Portugal and other debtor nations, default on the Irish bank debts (97 bn) held by the ECB and exploiting the deposits of multinational companies in the IFSC as a stimulus. He has also expressed a number of ideas about political reform, including extending the vote to the Irish diaspora.[5]

EU HAS HIT SELF-DESTRUCT BUTTON AS WORLD MOVES ON, by David McWilliams, February 1, 2012, Irish Independent

Think about the world as it is, not as the politicians who met on Monday night would like it to be.

Here in Italy, youth unemployment is running at 30pc. In Greece, it is 51pc. In Spain it is 48pc and in Portugal it is 31pc. In Ireland, unemployment amongst young men between 15 and 19 is 45pc and one in three young men between 20 and 24 are on the dole. (I have just read excellent research on Irish unemployment by economist at NUIM Aedin Doris. Sobering but realistic.)

How can austerity now be the answer when these young people are on the dole because of a lack of demand? Everyone knows you can’t go on spending indefinitely, but there is a stage in the cycle when the Government has to support demand and that stage is now.

Why else would Portuguese bond yields be at 17pc yesterday if it wasn’t because the market thinks it is impossible for Portugal to survive in this straitjacket? Are yields high because austerity is making Portugal more likely to pay its debts? I think not.

And if Europe is putting its financial house in order and confidence is returning to the market — which is what the politicians have assured us — how come eurozone banks are set to borrow about €1 trillion in emergency loans from the ECB at its next three-year money auction?

If everything was hunky dory they would be borrowing from each other, but they are not because no one trusts anyone.

Then there is the little point about democracy. On Monday night I chatted to one of Greece’s foremost political commentators, Pavlos Tsimas, who painted a picture of a country imploding. Greece is supposed to be in the European family but is being cast aside.

At the weekend we saw Germany demand that the Greeks “give absolute priority to debt service” and “transfer budgetary sovereignty” to the EU while refusing to allow the issue to be put to the Greek people in a referendum. How are the Greeks supposed to react?

I write not as a eurosceptic but as a graduate of the College of Europe, someone who believes in the EU and has voted ‘Yes’ in every referendum. However, the EU that I voted for is being dismantled in front of our eyes.

Reading music, Snow Patrol, New York

[AdamG]

Bucharest, Romania (CNN) -- Romania's prime minister resigned Monday in the wake of weeks of public protests against austerity measures and a deadly spell of bitterly cold weather.
The resignation makes Romania the sixth European country to see a prime minister fall amid the debt crisis sweeping European Union member states.

http://www.cnn.com/2012/02/06/world/...ics/index.html

[Fuchs]

Keep in mind there are about three dozen countries in Europe; some government is going to fail (in elections or otherwise) almost every month, even in normal times.

[Firn]

Merkozy not happy about progress in Greece

Mrs. Merkel signaled some exasperation with the Greek situation as well. She made it clear that Europe was losing patience with Athens, where politicians are arguing over whether and how to respond to demands by the country’s foreign lenders — the European Central Bank, European Commission and the International Monetary Fund. The lenders, known collectively as the troika, want the Greek leaders to take more steps to cut spending and revive the Greek economy before they hand over nearly $171 billion in new loans meant to stave off a disorderly default and sustain Greece’s membership in the euro zone.

“We want Greece to stay in the euro,” Mrs. Merkel said, but she added: “I want to make clear once again that there can be no deal if the troika proposals are not implemented. They are on the table; time is of the essence.”

Greece announced Monday that 15,000 government jobs would be eliminated this year, though the administrative reform minister, Dimitris Reppas, did not provide further details.

The signals have become very clear and rather harsh for European norms. First the rumours about the 'savings commissioner', now talk about a special 'saving account' which are in fact nothing less then demands to hand over some direct control over the budget.

As a matter of fact there has been a lot of talk about reform in Greece but very little action due inertia of quite poor bureaucracy, week governments, strike-happy population in terrible economic conditions (for a 'modern'European country). Every further lending for Greece will on the other hand be very hard to swallow for the voters in countries like Germany, Austria, the Netherlands, Finland but also hard to explain to the Baltic states, Slovenia, Slovakia and so forth.

I don't think Greece leaving the Euro zone is a terrible thing for the rest of the continent, perhaps it will even be a boost as fait accompli. For Greece itself it will be of course very difficult in every case.

[Fuchs]

It's no lending to Greece anyway.
It's rather taking the load of bad bonds from banks, insurances, funds and about delaying Greek bankruptcy till this socialisation of risk is about complete.