If the plan of the Troika was to starve the Tsipras government and produce either capitulation or a loss of domestic credibility, their effort appears to be on track.
Read more...As we pointed out early on in the oil price bust, following the argument of John Dizard of the Financial Times, shale gas operators, aka frackers, were often carrying so much debt that they simply could not afford to cut production. They’d keep pumping, even at a loss, to generate cash flow to keep servicing their obligations. Over-production would tail off only when the money sources dried up.
As we’ve since chronicled, even though rig counts have fallen, shale gas production has actually increases. Arthur Berman provides a detailed look at tight oil and shale gas output, and confirms that the rig count cuts for shale gas have not been deep enough.
Read more...It’s hard to fathom Greece’s approach to its dealings with its oppressors, um, creditors.
Read more...A high private debt to GDP ratio is a strong indicator of a coming financial crisis. China is well into the danger zone.
Read more...The battle between the ‘haves’ and ‘have-nots’ of global financial policy is escalating to the point where the ‘haves’ might start to sweat – a tiny little. This phase of heightened volatility in the markets is a harbinger of the inevitable meltdown that will follow the grand plastering-over of a systemically fraudulent global financial system.
Read more...Offshore banking and tax haven expert Nicholas Shaxson has launched a new blog, Fools’ Gold, to look at issues of ‘competitiveness’ and so-called ‘competition’ between nations. We’ve often taken issue with that policy goal, since it gives precedence to crushing labor as a way of lowering product prices to stoke exports. This approach is dubious for anything other than small economies, since all countries cannot be net exporters. Undue focus on exports as a driver of growth results in increasing international friction, such as the currency wars that are underway now. Moreover, as we have discussed separately, trade liberalization has gone hand in hand with liberalization of capital flows, in no small measure due to US efforts to make the world safe for what were then US investment banks. Yet Carmen Reinhardt and Ken Rogoff pointed out in their study of financial crises, higher levels of international capital flows are associated with more frequent and severe financial crises.
In addition, lowering wage rates reduces domestic demand. In countries like the US, where the domestic economy is much larger than the export sector, lowering internal demand to stoke exports is misguided.
Here we look at a first case study, the real reasons behind the growth and meltdown of the famed Celtic tiger, Ireland.
Read more...Michael Hudson recaps the theory, or perhaps more accurately, political justifications for quantitative easing, as opposed to how it works in practice.
Read more...Core inflation is telling a very different story than headline inflation, leading the ECB to diverge markedly from the Fed’s posture.
Read more...Lambert here: Who woulda thunk the Fed’s easy money policy — no, not for you! — would contaminate millions of gallons of water and create exploding “train bombs”? Life’s little ironies…
Read more...Why New Keynesians look a lot like Friedmaniacs.
Read more...Ambrose Evans-Pritchard has a new article on Greece’s scramble to find the funds to meet it March IMF payments, which are €1.5b in total, with €300 due on Friday. Note that IMF payment dates aren’t as hard and fast as credit card due dates; the agency allows borrowers some leeway if they have a clear intent to pay.
Nevertheless, Evans-Pritchard’s most important observation may be the one at the close of his article:
Whatever piece of paper they signed in Brussels 10 days ago, the two sides are still talking past each other.
In other words, the two sides disagree profoundly as to what the memo means. And that may mean that in reality, there is no deal at all.
Read more...I’m at risk of getting whiplash from watching the speed at which Greece is changing its position on key issues. And while I’d be delighted to be proven wrong, there are reasons to think this pattern does not bode well for the government’s ongoing negotiations.
Read more...Let us begin with what should be indisputable: the Eurogroup agreement that the Greek government was dragged into on Friday amounts to a headlong retreat.
Read more...As we indicated earlier today, the Eurogroup appears to still have its hand in the mix of determining whether the reform list submitted by Greece is adequate. A meeting is set to review the proposed Greek reforms tomorrow. The journalists who are in the mix are sending tweets that suggest that they are not yet clear on some key issues in the state of play. As of this posting, only some high level details of the reform list have leaked out.
Read more...As most readers may know, Greece and the Eurogroup ministers agreed to a memorandum last week that would replace the bailout that expires on February 28 with a four-month deal that the memo stresses is in the same framework.
But as much as the memo language was agreed by the ministers, it is not yet a done deal. And it is already looking like we might have a wild ride among the negotiators today.
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