One more post today, this time on Europe. I wrote this outline for Italy in November before the ECB’s Italian job. I didn’t and still don’t see an Italian exit or default as a baseline. However, a Greek exit for the eurozone has been my baseline for a number of months. Citigroup’s Willem Buiter has […]
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives
Here’s the draft of the supposed agreement to “sort out” the Greek debt problem once and for all. According to Bloomberg, here are the essentials:
Read more...Many writers tend to depict the effects of austerity in purely economic terms: loss of wealth and income, lesser income/social mobility. But depressions and accompanying changes in social norms can and do have more serious consequences.
A story in Bloomberg illustrates how the combination of budgets slashed thanks to austerity policies leads directly to deaths. The Wall Street Journal described last year how distress in the Greek economy had produced a significant increase in suicides. A new Bloomberg story recounts how severe cutbacks in hospital staffing have enabled superbugs that is hard to combat even under normal circumstances to inflict even more fatalities than usual in Greek hospitals.
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives
Another day andthe markets remain fixated on whether Greece comes to a “voluntary” arrangement with its creditors. The key word is“voluntary” because the myth of “voluntary compliance has to be sustained so that those deadly credit default swaps avoid being triggered.
But let’s face it: Greece is a pimple. If the rest of the euro zone could cut itlose with a minimum of systemic risk, Athens would have long gone the way of Troy. The real issue is whether the credit default swaps trigger such a huge mess with the counterparties that it creates renewed systemic stress which more than offsets the benefits to the holders of the CDSs.
The more interesting question is: suppose Greece finally does get a deal?
Read more...By Daniel Alpert, the founding Managing Partner of Westwood Capital. Cross posted from EconoMonitor
While we may be hours away from a partial (and certainly a stopgap) agreement in the talks among the Greek government, the troika and private sector creditors, it is doubtful that a deal will emerge in a fully constructed fashion that will survive its application in the real economy.
It is likely that the only common view amongst participants in the various talks is a desire to try to avoid a disorderly default. Beyond that there is a severe disconnect fostered by parallel realities that seem unable to intersect. Accordingly, a deal that can hold up both in the streets of Greece and in the markets is both illusive and unlikely. Here’s why I think so.
Recently I have had opportunities to meet with and question senior members of the economics establishment within the German government and the broader German intelligentsia. Our meetings were held under Chatham House rules so I can’t name names, but – after several meetings with policy delegations from Germany over the past 60 days – I am prepared to sum up what appears to be the pretty-universally-held German policy position as follows (my apologies if the below evidences some degree of frustration – but these encounters leave me quite chagrined):
Read more...By Philip Pilkington, a journalist and writer living in Dublin, Ireland
Recently the Irish Taoiseach Enda Kenny pandered to his base once again by saying that the Irish people are to blame for the current state of their economy due to reckless borrowing undertaken during the boom years. I refer not to his base in Ireland, of course — their opinion has hardly mattered since the election — I refer instead to his base among the international financial community. For it is these people that need Kenny’s confession because it is their economic model that has been proved false by the Irish crisis — and so a mea culpa is needed from the victims so that they can avoid the responsibility that they know they bear.
Read more...Unemployment is a staggering problem in Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16-24 year-olds, it’s an unimaginable 51.4%. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%. But highly educated young people have begun leaving in massive numbers—with harsh long-term consequences for their heavily indebted countries.
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as “Australia”. For convenience I will refer to the country by this older name. We will now turn to the outlook.
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager
News stories continue to suggest that Greece once again appears on the verge of reaching a deal with its private sector creditors on how much of a loss they would be willing to accept on their bond holdings.
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as “Australia”. For convenience I will refer to the country by this older name.
Read more...em>By Philip Pilkington, a journalist and writer living in Dublin, Ireland
Warren Mosler recently ran a very succinct account of why the Fed/Bank of England’s easy monetary policies – that is, the combination of Quantitative Easing and their Zero Interest Rate Programs – might actually be killing demand in the economy.
Warren Mosler recently ran a very succinct account of why the Fed/Bank of England’s easy monetary policies – that is, the combination of Quantitative Easing and their Zero Interest Rate Programs – might actually be killing demand in the economy.
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2012/01/greece-lines-up-portugal/“>MacroBusiness.
And so we roll on…
One of the things that amazes me about the European “crisis” is how symptoms of the underlying problems of the macro-economic system that is the Eurozone get confused with the actual problem. Let’s take the current situation in Greece for example:
Read more...Yves here. Even though both writers are affiliated with the Peterson Institute, this post talks about the need for countercyclical mechanisms in the eurozone, which makes it less austerian than the prevailing line of thinking in the officialdom. But some readers will not be so keen about the worship of Hamilton.
By C Randall Henning, Professor of International Economic Relations, American University and Martin Kessler, Research Analyst, Peterson Institute of International Economics. Cross posted from VoxEU
In the last few months, several Vox columns have drawn parallels between Europe today and an emerging – and even less stable – United States in the eighteenth century. This column stresses that Europe’s leaders in search of a fiscal union need not seek to replicate the US experience but they should at least learn from it.
Read more...By dint of news flow, we are having a private equity fest tonight. David Stockman, the former Reagan budget director, made a cogent case against the idea that being at the helm of a private equity firm has much to do with knowing how to run a business on Dylan Ratigan. I thought readers would enjoy this segment, not simply due to the content but also because Stockman is a compelling and blunt speaker.
Read more...I’m behind on commenting on various opinion pieces, thanks to a mild case of food poisoning (ugh), but I wanted to take note of Paul Krugman’s current New York Times op ed, “Is Our Economy Healing?”
As an aside, Krugman has written a lot of good pieces lately that we’ve linked to on income inequality the disastrous austerian policies in Europe, and Republican derangement and duplicity. But he tends to cut the administration far more slack than it deserves.
His current piece voices cautious optimism on the prospects for the economy based on some strengthening in various economic indicators. But astonishingly, the core of his argument rests on the outlook for the housing market:
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