When I first heard about the Cyprus ritual execution bailout, I had thought that the widespread predictions that the island nation’s economy would contract by 20% to 30% over the next two years were off base.
Michael Hudson continues his discussion of banking on Real News Network by focusing on the role banks played in different economies in the early period of industrialization.
Read more...The IMF says that Slovenia will need to issue €3 billion in bonds this year. The country may be forced to seek painful assistance from the Troika. Will Germany be the heavy as it was with Cyprus?
Read more...Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment.
Read more...By Gaius Publius. Follow him on Twitter @Gaius_Publius. Cross posted from AmericaBlog
I’ve been writing about Obama’s Legacy Tour (sorry, his second term) from time to time without focusing on the legacy itself. So this post will lay down a marker — in brief, what’s on Obama’s economic legacy list, and what will he get if he succeeds?
Read more...By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
The ominous term, “competitiveness” has been bandied about as the real issue, the one that causes European countries, in particular some of those stuck in the Eurozone, to sink ever deeper into their fiasco. To fix that issue, “structural reforms,” or austerity, have been invoked regardless of how much blood might stain the streets. And a core element of these structural reforms is bringing down the cost of labor. But productivity, infrastructure, transportation costs, corruption, training and education, etc. all figure prominently into this equation. Cost of labor is not the only factor.
Read more...By Nathan Tankus, a student and research assistant at the University of Ottawa. You can follow him on Twitter at @NathanTankus
Remember, things are darkest before they go completely black.
Read more...Yves here. I find this story of a Chinese acquisition gone pear shaped interesting for several reasons. Since academic research consistently finds that the majority of acquisitions are losers for the buyers, it’s not a surprise that the deal did not work out. But this one looks to be a particularly extreme fail. Having worked a bit on international deals, and for companies operating in foreign markets, cross border transactions have an even lower success rate than domestic ones. The big reason is the one mentioned here, which is marked cultural incompatibility between the seller and buyer. Here the Chinese did less badly than they could have (they could have tried forcing Chinese practices on the German operation, which would have destroyed the value of the asset). But the logic of the transaction was unclear. Was it technology transfer? Consolidation? It appears both might have been goals, and neither happened very much.
Read more...The official sick man list of Europe has long been the PIIGS, or if you prefer, the GIPSI: Greece, Ireland, Spain, Italy, Portugal. As the Cyprus restructuring drama has moved into high gear, it’s obscured news of a serious deterioration in the French economy and the weakened condition of Slovenia, which has a population and GDP roughly 1.5 times as large as that of Cyprus.
Read more...Paul Krugman, in a post earlier today, Cyprus: The Sum of All FUBAR, acts as if he has figured out what is the real problem with Cyprus. The only problem is his math is all wrong, and a better analysis undermines his major assertions.
Read more...Yves here. You will notice that this list of options for Cyprus is very depressing and does not envision Russia riding in to the rescue in a big way. It also treats a 20% fall in GDP as a possibly optimistic base case.
Read more...Cyprus, as its President Nicos Anastasiades predicted but no one outside Cyprus quite believed would happen, has resoundingly defied the will of the Eurozone in failing to surrender a single Parliamentary vote to a diktat to haircut depositors to save its number two bank, whose failure would in all likelihood bring down Cyprus’s entire banking system. The members of the President’s own party abstained despite his resigned support for the deal. And mind you, this was after the terms revised to allow for deposits under €20,000 to be spared.
The EU was utterly unprepared for this rebellion.
Read more...Yves here. Even the China bulls are coming to see the financial system as a risk factor.
Read more...By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil
Dreaming, I was only dreaming
I wake and I find you asleep– Billie Holiday “Gloomy Sunday”
The criticisms of Modern Monetary Theory (MMT) on the internet and in academia can be placed into three categories: the cranks; the nit-pickers; and the Kaldorians.
Read more...The state of play in Cyprus is that negotiations in Parliament are underway, with the hope of a yes vote on a “Plan B” today. The Cypriot officialdom has allowed for slippage in this timetable, with the bank holiday in effect till Thursday. The latest events were largely a nothingburger, aside from the big news of the failure to approve the president’s plan yesterday: European ministers confirmed that they’ll approve an agreement so long as Cyrpus obtains €5.8 billion from depositors. Monday night, President Nicos Anastasiades gave his version of the Hank Paulson armageddon speech on national TV, laying out the fact that no deal means an immediate collapse of “one bank” (presumably Liaki), and a possible exit from the Eurozone.
The widespread assumption is that the Cypriots will fall into line, since the alternative really does look even uglier. But the runway is pretty short.
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