Category Archives: Economic fundamentals

Europe Holds Back the Fire for Now

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 MacroBusiness.

Two weeks ago I wrote a post on Professor Sinn and the growing concern from the German central bank about TARGET2 liabilities. The pressure from the German camp is on-going and late last week it appears they had a win of sorts.

Daniel Alpert: Consumer Credit Growing at Highest Rate in Past Decade – Unhealthy and Unsustainable?

Alright, got your attention. But the headline above is not offered merely by way of titillation, as a former partner of mine would say—it has the added advantage of being true.

China’s Real Choices for Growth

Yves here. I particularly like this post because Michael Pettis takes some boundary conditions about China and works through their implications. One quibble I have is that he talks of “debt capacity limits.” That depends who the issuer is. The national government could in theory “print,” it has no need to issue debt to fund its activities. But the constraint on that sort of approach is inflation, and China is trying to cool off inflation without crimping growth too much. So China is pretty much in the conundrum Pettis describes, but for slightly more complicated reasons.

Cross posted from MacroBusiness

An exclusive excerpt from Michael Pettis’ most recent newsletter:

Last week’s news was dominated by the sudden but not wholly unexpected removal of Bo Xilai as mayor of Chongqing.

After the initial shock wore off, much of the speculation within China has moved on to what his ousting says about the evolution of power and, for economists, how it will affect the reform and rebalancing of the Chinese economy. More importantly, it seems to me that too many analysts over emphasize the intentions of the Chinese leadership when projecting China’s future.
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Europe’s Counterproductive Economic Policies Proceeding as Expected

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 MacroBusiness.

Anyone who has been following my European commentary for any length of time will know that I have been running a number of risk themes on Europe due to what I consider to be misguided and one-sided policy which will ultimately be counterproductive.

Mark Ames: The One Percent’s Plan for the Rest of Us – Livestock to be Milked for “Rent”

Yves here. Mark Ames’ post discusses the institutionalization of a regressive policy, that of trying to eke more corporate growth out of extracting more and more out of workers rather than sharing the benefits of productivity gains with them.

Wolf Richter: China, the Number One Foreign Investor in Germany

The latest success—I suppose you could call it that, at least for those involved on the financial end—was the Kiekert deal last week. The company was founded in 1857 near Düsseldorf, Germany, and became the largest manufacturer of automotive door-lock systems. Its customers are GM, Ford, VW, BMW, and other automakers around the world. But now a Chinese company bought Kiekert, the sign of a sea change.

Bill Black: (Re) Occupy Greece

Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives.

While the Occupy Wall Street (OWS) movement set its sights on occupying a financial center, Germany has accomplished the vastly more impressive feat of occupying an entire nation – Greece. Germany has experience at occupying Greece having done so during World War II. The art of occupying another nation is to recruit a local puppet to do the dirty work required to repress the citizens. Germany used several puppets, most notoriously the murderous Ioannis Rallis, to (nominally) rule Greece and terrify the Greek people during World War II. (After Germany’s defeat, Rallis was executed for his treason.)

This time around, Germany has been far more successful in recruiting and using a puppet to (nominally) rule Greece and terrify the Greek people before the German occupation.

Philip Pilkington: The Irish Begin to Wake Up to the Fact That They are Repaying Money That is Then Burned

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

About a year ago a couple of friends and I were sitting around drinking beer and talking. As so often happens today in day-to-day Irish conversation, the economic situation and the repayment of debts was raised. One of my friends said that, naturally, the debts had to be repaid. I pointed out to him that by repaying the debt we were just sending away money to be effectively destroyed.

Satyajit Das: “All Feasts Must Come to an End” – China’s Debt & Investment Fueled Growth (Part 1)

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)

The re-emergence of China has dominated recent economic and political discourse. The Chinese economy is forecast to expand by around 60% in the period between 2007 and 2012, compared to around 3% for developed economies. While China’s rise is important, its drivers are frequently misunderstood and poorly analysed.

China’s economic structure is deeply flawed and fragile. The Chinese growth story may be ending. As an old Chinese proverb, probably apocryphal, holds: “There is no feast that does not come to an end.”

Lynn Parramore: Schools Without Toilet Paper? The Pain in Spain Falls Mainly on the Plain Folks

By Lynn Parramore. Cross posted from Alternet

Lately, European elites have been congratulating themselves for averting disaster in the eurozone. But who, exactly, is breaking out the champagne?

The New Priesthood: An Interview with Yanis Varoufakis Part II

Yanis Varoufakis is a Greek economist who currently heads the Department of Economic Policy at the University of Athens. From 2004 to 2007 he served as an economic advisor to former Greek Prime Minister George Papandreou. Yanis writes a popular blog which can be found here. His treatise on economic theory ‘Modern Political Economics: Making Sense of the Post-2008 World’, co written with Nicholas Theocrakis and Joseph Haveli is available from Amazon.

Interview conducted by Philip Pilkington.

Philip Pilkington: In the book you talk about how humans are extremely hard to model – you go as far as to call them a ‘radical indeterminacy’. Now, some of this comes back to the classical theory of value that we already discussed. That theory of value seeks out the basis of value in the human capacity for labour – essentially putting humans out front and centre when modelling is undertaken. But the neoclassical theory of value – that is the marginal theory of value – also relies on humans to build models, in that it concentrates on their consumption preferences and derives so-called laws from these. Could you talk about this a little?

Europe’s Recession Has Barely Begun

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 MacroBusiness.

The reserves from the ECB’s LTRO stage II operation are making their way back into the excess reserve facility at the ECB. The overnight holdings were at an all time record of €820.81bn. As I explained previously, this in itself isn’t a problem. In fact, unless the reserves are moving to some other non-commercial bank accounts at the ECB there is little other place they can go. However, what is the problem:

…is that the increasing use of the ECB’s marginal lending facility shows that not all of these parked reserves are actually “excess to market requirements”.

The statistics from last night show that for the last 3 days there is still €783 million being rolled over using the ECB’s margin lending facility. With €0.8trn technically available for interbank lending it is certainly a concern that there is at least one bank still having to lean on the ECB for overnight liquidity.

Wolf Richter: The Debacle of My Last Post

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience, who writes at Testosterone Pit.

As some readers have pointed out, there was a major problem in my last post, Deep Trouble at the Core of the Eurozone. I thank all commenters who criticized or defended my post, and I apologize for the errors it contained.

Adrift in a Sea of Economic Data

Yves here. This post from MacroBusiness provides a good point of departure, and I’ll provide some comments further down.

By Sell on News, a global macro equities analyst. Cross posted from MacroBusiness

A little known fact about John Maynard Keynes, detailed in Jane Gleeson-White’s book “Double Entry” is that he was responsible for the development of national economic statistics and that he expected them to be aggregated only on a temporary basis.

It was being done for the war effort, and would, he reasoned, not be necessary afterwards. This certainly puts “Keynesianism” in a different perspective, and poses the intriguing question: where would we be without economic statistics?
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