The Eiffel group: for a Euro community

Here.

I dare say it will strike most people as pie in the sky, but it makes sense that people who want to preserve the Euro start formulating proposals such as this. Two reasonable conditions attaching to any such proposal seem to me to be that: (a) entry to any such community be decided by popular referenda in each country; and (b) that there be some sort of Connecticut compromise in place so that the rights of small states are protected.

Comments

comments

85 thoughts on “The Eiffel group: for a Euro community”

  1. The euro is a currency without a country, unless we create a country–it’s less likely the euro will survive.

  2. @ JC

    This is an export surplus dominated conglomerate, governed by unelected representatives, claiming to work on behalf of more than half a billion citizens.

    They are a captured group of representatives, besieged and captured by vested interests, who cultivated an atmosphere of ‘There is no other way’ politics, applied exclusion.

    So the opposite could happen as well, that the conglomerate does not survive as long as the currency.

  3. @ Kevin

    a) 18 states are member of the Euro Currency. Could you explain, what would happen if one of these states would vote NO, or non-Euro states would vote YES?

    Would that just mean, that those who vote no have no say in any Euro institution, but those non-Euros can vote in this parliament?

    b) So far EU states had singular veto rights, being systemetically eliminated after far too much abuse (Tsipras still dreaming about it) going far beyond what I see as the main effect of the Conneticut compromise, namely fine tuning a power balance between slave holder south and the North

  4. These people may be well-intentioned. But their very first line is untrue:

    “Everyone expected that Economic and Monetary Union would bring prosperity and improve the living conditions and employment possibilities of Europe’s citizens, prior to political rapprochement.”

    There was cogent economic criticism of EMU from many experts. Consider Professor Peter Neary and Professor Rodney Thom to name just two, Irish, critics. They concluded in 1997 (in “Punts, Pounds and Euros: In Search of an Optimum Currency Area”) that:

    “The evidence presented in this paper suggests that there are significant asymmetries between Ireland and the European core. In the tradition of the literature on Optimum Currency Areas this implies the possibility of non-trivial costs if Ireland were to join a monetary union with countries such as France and Germany. At the very least, this suggests that the case for Irish entry without the UK is far from clear.”

    Their arguments echoed the 1972 warning of British Treasury official Derek Mitchell. He wrote a secret note for his political masters on the implications of a possible monetary union in Europe. That note warned:

    “Full EMU would deprive member countries of many of the policy instruments needed to influence their economic performances and (particularly in the case of the exchange rate) to rectify imbalances between them. . . . In an EMU, equilibrium could only then be restored by inflation in the ‘high performance’ countries and stagnation in the ‘low performance’ countries, unless central provision is made for the imbalances to be offset by massive and speedy resource transfers.”

    This pretty much describes the predicament now facing the Eurozone.

    Yet there remains a fundamental unwillingness to accept the reality that the problem is not that we have a monetary union with flaws which we now need to fix but that we have a monetary union upon which we should never have embarked in the first place.

    It can be argued that “we are where we are”. That is true. But among the policy options we now need to actively consider is that of reversing out of the monetary union ditch altogether.

    We are therefore making a grave mistake, when we gather around the policy-making campfire, if we think that we can advance matters by chanting Kumbaya or by uttering untruthful and unhelpful pieties such as “Everyone expected that Economic and Monetary Union would bring prosperity” as an alternative to facing up to some hard truths.

  5. @ Cormac Lucey

    Is not the quote from Derek Mitchell simply a disguised reference to the removal of the capacity to devalue in order to “restore” competitiveness? The UK retained this capacity but this did not render it immune to the global economic crisis.

    We are stuck with the euro now as any scenario involving abandoning it is worse than any under which the country retains it.

    I think our national worries are but part of a much bigger picture, the absolute priority being to follow the German example of concentrating on producing goods and services that the world wants at competitive prices. Getting companies out of the clutches of the financiers and putting them back in the hands of entrepreneurs has to be the absolute priority as ably argued by Daniel Pinto with George Lee this morning when discussing his book “The Economic War between East and West”.

    http://www.rte.ie/radio1/the-business-with-george-lee/

    It is something of an irony that it is the close links between politicians, banks and business, coupled with co-decision between workers and management, that place Germany also in pole position with regard to this particular fight.

  6. @DOCM

    I think our national worries are but part of a much bigger picture, the absolute priority being to follow the German example of concentrating on producing goods and services that the world wants at competitive prices. Getting companies out of the clutches of the financiers and putting them back in the hands of entrepreneurs has to be the absolute priority as ably argued by Daniel Pinto with George Lee this morning when discussing his book “The Economic War between East and West”.

    Ah, the big picture.

    Every country must be a low wage exporting power house. I see no inherent contradictions in this even allowing for the trifling issue that two thirds of trade in the EU is internal.

    Of course everyone must emulate Germany’s social and economic model, and the fact that the Germany economy enjoys large economies of scale and an internal market bigger than that of any other country in Europe is a small issue for small minds.

    Like Germany every country must have leading brands in goods with inelastic prices, obviously.

    Finally who would not agree that the part of the economy engaged in what used to be unironically called “financial innovation” were not true entrepreneurs? How could they be when entrepreneurship is so important and healthy?

    Time to take another suck of the crack pipe and pull out my “Road to Serfdom” I think.

  7. I would be distinctly uncomfortable with both the analysis offered by the Eiffel Group and its solution.
    The analysis appears to be directly out of the model of ‘economic competitiveness’ as a priority and at all costs.

    “Public and private over-indebtedness risk choking economies, while the suffering of Europe’s citizens feeds political radicalisation. This analysis must not lead to consolidation efforts being abandoned but rather, in the interest of those countries with excessive debt, to them being completed.”

    The consequences of abandonment of the Euro are not necessarily as described.
    “Devaluation would mathematically increase the cost of the debt, denominated in euros, often held by foreigners;”
    Who said that if the euro collapsed, creditors would be paid in euros? Wishful thinking by creditors, I suggest.

    The solution offered, a Eurozone Super State, with an obligatory velvet glove nod to democracy and an iron fist to State compliance with rules, leaves little to the imagination.
    “Finally, one of the serious shortcomings of the current Economic and Monetary Union is that no sanctions are foreseen for States who breach their obligations. In a state of law, it is important that a judge can decide in the case of disputes.”

    And in return for all this:
    “It is imperative that this budget is financed through own resources, in order to avoid inappropriate and counterproductive debates about a “fair return”, which we have experienced in the EU. Amongst the resources which can be envisaged we can mention corporation tax or environmental taxes (carbon tax). The creation of a Community budget will be the occasion to move forward with a certain degree of tax harmonisation (harmonisation of tax bases, even if this means leaving Member States with a certain flexibility concerning the rates, within a range)”

    And a new Super State throwing its weight around with the big boys:
    “However, unity requires greater efforts.The European Union’s “common foreign and security policy” remains far below expectations. Even at the International Monetary Fund, called in to help with the emergency situations which arose in multiple European countries, the eurozone is not represented as a single entity. Vis-à-vis China, other emerging countries or the United States, the decisions of Europe’s capitals to continue to go it alone is a decidedly short-term vision. ”

    I would, however, agree with one statement made in the paper.

    “A section of public opinion has been lost.”
    One wonders why!

  8. @Cormac

    You could alternatively draw the conclusion that in the view of the authors, the legions of analysts who did not have those expectations were just ‘nobodys’.

    @DOCM

    “Is not the quote from Derek Mitchell simply a disguised reference to the removal of the capacity to devalue in order to “restore” competitiveness? The UK retained this capacity but this did not render it immune to the global economic crisis.”

    Are you suggesting, as you appear to be, that we should regard exchange rate flexibility as of no import unless we can show that the global economic crisis had no effect whatever on countries that have their own floating currencies?

  9. @ grumpy

    Absolutely not! The point that I am making is that (i) the euro is not the source of all our troubles and (ii) that devaluation, as is well known but often ignored, does little other than give a temporary and artificial boost to exports, usually quickly offset in the increased cost of imports and, generally, rising inflation, unless well managed (as in the case of Sweden, the best European example).

    It was, however, IMHO the most important of the “many policy instruments” that the UK thinks it would have foregone had it decided to join the euro. It might have done better to have been deprived of a few of the others cf. Martin Wolf and the speech by the former head of the FSA, Adair Turner (cf embedded link).

    http://www.ft.com/intl/cms/s/0/1cd67c18-93e6-11e3-a0e1-00144feab7de.html#axzz2tD78nIc8

    Neither, incidentally, do I think that “equilibrium could only then be restored by inflation in the ‘high performance’ countries and stagnation in the ‘low performance’ countries, unless central provision is made for the imbalances to be offset by massive and speedy resource transfers”. There is no necessary connection between any of these elements.

  10. Cormac is absolutely right to some extent . There were plenty of credible voices who argued against the folly of joining the euro. They were ignored by an elite in all capitals who ignored the sceptics. The Swedes and the Brits were the only ones to avoid the disaster. That said, euro membership is like Catholic marriage of the 1950s- no painless way out. There is no prospect of a negotiated exit. It has to be default, immediate correction of fiscal imbalances and the institution of new currencies.

  11. @Tull
    I think the Danes stayed out too. The Swiss pegged the Stutz to the Euro a while ago. It is fairly complicated even with hindsight.

  12. @ seafóid

    The position of Denmark relative to the euro is accurately summed up in this Wikipedia entry.

    http://en.wikipedia.org/wiki/Denmark_and_the_euro

    Notably;

    “Since 1 January 1999, the krone has been part of the ERM II mechanism, under which it is required to trade within 2.25% either side of a specified rate of 1 euro equal to 7.46038 kroner (making the lower rate 7.29252 and the upper rate 7.62824).[3] This band, 2.25%, is narrower than the 15% band used for most ERM II members. However, the exchange rate has kept within 0.5% of the defined rate, even less than the set limits.[4] The independence of the Danish central bank is therefore limited in practice. Its aim is to keep the krone within this exchange rate band. This policy marks a continuation of the situation that existed from 1982–1999 with regard to the Deutsche Mark, which provided a similar anchor currency for the krone. The ECB is also obliged to help protect the Danish currency in the case of speculative attacks.”

    Leaving aside the nuisance of having to change currency in Copenhagen airport, where do you think is the advantage to the Danes in this situation?

  13. @ DOCM

    I suppose the Danish Cookie Tin industry wanted more forward guidance .
    I don’t think Sweden is doing particularly well . The UK has its own well- documented problems. France is on a shaky scraw.
    It all looks very messy, really. Hard to see any sanctity anywhere.

  14. Most of the people in charge of the EZ are over 50 and probably more into Dire Straits or Van Halen than the National but this song is really on the money for the EZ at the moment, I think

    http://www.azlyrics.com/lyrics/national/slowshow.html

    Standing at the punch table swallowing punch
    Can’t pay attention to the sound of anyone
    A little more stupid, a little more scared
    Every minute more unprepared

    I made a mistake in my life today
    Everything I love gets lost in drawers
    I want to start over, I want to be winning
    Way out of sync from the beginning

    I wanna hurry home to you
    Put on a slow, dumb show for you and crack you up
    So you can put a blue ribbon on my brain
    God, I’m very, very frightening, I’ll overdo it

    Looking for somewhere to stand and stay
    I leaned on the wall and the wall leaned away
    Can I get a minute of not being nervous
    And not thinking of my dick?

    My leg is sparkles, my leg is pins
    I better get my shit together, better gather my shit in
    You could drive a car through my head in five minutes
    From one side of it to the other

    http://www.youtube.com/watch?v=-KhGUE_KjIo

    and what a slow show it is

  15. Seafood,
    As DOCM points out the Danes have kept an escape hatch as have the Swiss. The Swedish and the UK economy are doing nicely thanks to decent governance. It is the EZ economies that are nailed to the Iron Cross of German monetary orthodoxy that are struggling. Although, the required dose of QE may be on the horizon.

  16. It is harder to have a community when the current system has the small countries snarling at each other. Example: Slovenia thinks we went easy on the subbies —

    Interview with Benoît Cœuré, Member of the Executive Board of the ECB,
    and Delo, conducted by Miha Jenko, 15 February 2014

    Haircutting the subordinated debt in Slovenian banks attracted a lot of public attention and even anger in recent months in Slovenia. Why was it necessary to perform this haircut in Slovenia, but not, for instance, in Ireland or other countries?

    This is not specific to Slovenia. Europe has learned the lessons from the past crises and has adopted a principle of responsibility for investors in bank bonds. All investors who put their money in these bonds have to know that they will be part of the effort if anything bad happens because bonds are an investment, not a deposit. These are the bail-in rules that have been decided by the European authorities and are intended to protect taxpayers, who should not be responsible for the situation of banks. When saving a bank, taxpayers should come last, with shareholders coming first, followed by bond owners. This distribution of responsibilities is now clear. This is not a decision of the ECB, it is a decision of the European Council and the Commission, but one that we support.

    http://www.ecb.europa.eu/press/inter/date/2014/html/sp140215.en.html

  17. Shay

    this is of course also just some evil trick of the germans neoliberals, conspiring with the evil Union IG Metall (2.5 Mio voluntary members and rising)

    to force, in your words “goods with inelastic prices,” onto hapless consumers and well-intentioned GOP senators

    http://www.marketwatch.com/story/workers-reject-union-at-tennessee-vw-plant-2014-02-15

    and take a look at the comments : – )

    And we are not giving up, somehow this work council will happen : – )

  18. @Frank Galton

    That quote from Benoît Cœuré is even more disingenuous than I would have expected.

    His answer seems to suggest that bondholders will get burned, but depositors will not!
    Was he asleep during the Cyprus episode?
    Has he not heard of covered bonds, a neat kind of investor arrangement that pushes his so-called protected depositors further out the plank.
    And who will cover the so called guarantee to depositors under €100,000. Does the ECB intend to provide insurance cover for bankrupt states that cannot meet the €100000 payout?

    @Tull
    “Although, the required dose of QE may be on the horizon.”
    Really? You must have long distance binoculars. What is it on the horizon that makes you think QE is possible.

  19. @DOCM

    Leaving aside the nuisance of having to change currency in Copenhagen airport, where do you think is the advantage to the Danes in this situation?

    How about a five percent unemployment rate and a AAA credit rating? Would that qualify as an advantage do you think?

    In addition to that any reasonable and decent person would hold that it is important that the Danish government represents the wishes of the Danish people in this matter. Democracy and all that. Not a popular sentiment in the institutions of the EU obviously but not everyone is sold on rule by incompetence neoliberal technocrats and some of them still get to choose.

    Finally I think most people can tell the difference between an expensive and uncomfortable hotel and a prison, certainly the Danes could. They have options, albeit extreme options, that Eurozone countries do not have in the event of the disaster of monetary policy in the EU continuing. Countries left ERM1 after all.

    Euro Skepticism Grips Danish Voters Even as Debt Crisis Abates

    Some helpful numbers for Euro enthusiasts, just to keep you in touch with the hoi polloi.

    * Sixty percent of Danes oppose joining the Euro.
    * Seventy percent of Poles oppose joining the Euro.
    * Eighty percent of Swedes oppose joining the Euro (Endless postponement of their de jure “obligation to self harm” a distinct possibility.

    Any moderately prosperous country with a functioning economy which has its own currency wants to maintain a safe distance from the car crash of Eurozone economic and monetary policy and the people who make it.

    Let us hope that the Euro project fails in as painless a manner as is possible for the citizens of the EU and in as a painful a manner as possible for the technocrats and ideologues responsible for it.

  20. @Francis

    Just to avoid confusion the production of goods with inelastic prices is not a bad thing, though in many cases it demonstrates very serious problem in modern capitalism.

    I think that the undeniable strength and quality of German industry has given cover to the weakness and inferiority of German economic thinking, in much the same way that the huge US military protects the US from having a decent and sane set of foreign policies.

    In fact it helps to think of Germany’s effective control of EU fiscal and monetary policy as the George W Bush presidency of the EU: Based on convenient lies, focused on the wrong problems and motivated largely by self interest but without effective opposition because of a failure of democratic structures.

  21. We still talk as if we were that little speck of a divided country with a 4 million population surrounded by a 32% tariff wall with the exception of unprocessed agricultural goods. Even the cattle could not be slaughtered and butchered in Ireland, they had to walk onto the ship.

    Now we are in a half a billion truly free trade area, without non tariff barriers. On top of that we enjoy a solid currency which is signalling that collapse is nowhere in sight. The whole market is ours to exploit responsibly. The freedoms we could only have dreamed of in 1922 are now taken for granted and rarely consciously recognised. Free movement of capital, labour, goods services the answer to all our prayers.

    What have we done with our opportunity? We in the form of our Government and its Ministry of Finance, Central Bank, Finance Regulators, Retail Banks and related near banks were encouraged to run amok using cheap money courtesy of the EZ. If, as a taxpayer you disagreed with this you were a begrudger who should jump of a bridge at the earliest opportunity. Then to put salt in our wounds the government without a gun to its head had the taxpayers make whole the whole nest of incompetents. Now we are at the stage where we are already rewriting history. Since we had the best fiction writers on earth at one time it will be a good story. Replete with the heroes (Irish) and the villains (Brussels, Frankfurt). Reality is for people who cannot face up to drink.

    We should pinch ourselves and realise we have it all except competense and a modicum of a grasp on reality.

  22. The French thought they could compete better with Germany by being part of a currency union but trade is about more than prices.

    As for elites, just observe how official spin gains traction in Ireland in a system of weak media and messenger TDs.

    Mickey Hickey rightly points out that the opportunities provided for trade within the single currency area have not been exploited by Ireland.

    The ERM instability in the early 1990s boosted the public argument for the euro but countries such as France and Italy would likely be still facing serious economic challenges today with their own currencies.

    Some EMU members foolishly thought that the euro would be a cure for long-term domestic problems.

    Still, Turkish manufacturers are having to deal with a 12% key interest rate and they had assumed that the economy would continue to develop as it had in recent years.

  23. The Economist has a cover story in its Asia edition this week on the decline of Argentina.

    Brazil which is back in recession, is a middle income country for the second time in recent decades.

    China may not overtake the US in the next decade but it has the capacity and flexibility for more growth. What has been achieved in the past 20 years in the southern industrial heartland is very impressive – of course there are some negative factors.

    Italy’s next PM may change the Italian trajectory but he needs luck as well as grit.

    A CENTURY ago, when Harrods decided to set up its first overseas emporium, it chose Buenos Aires. In 1914 Argentina stood out as the country of the future. Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy (universal male suffrage was introduced in 1912), an educated population and the world’s most erotic dance. Immigrants tangoed in from everywhere. For the young and ambitious, the choice between Argentina and California was a hard one.

  24. Colm McCarthy, in the Sunday Independent

    “The GCC [German Constitutional Court] has pulled the rug out, whatever the verdict, from the European Court, now no longer the competent authority on European law when viewed from the provincial capital of Baden in southwestern Germany. The markets will come to terms with this lawyers’ coup in due time.”

    ‘Draghi’s eurozone project needs Germany to lead from the front’

    http://www.independent.ie/opinion/columnists/colm-mccarthy/draghis-eurozone-project-needs-germany-to-lead-from-the-front-30013712.html

  25. @Tull
    I think Denmark and Switz chose to follow the Euro because they didn’t want or couldn’t afford to become haven currencies. All that herd money looking for a safe home , driving up the exchange rate and crippling exports. Anything with a pulse and the only way to beat them off is to lower interest rates but then that might set off a housing bubble. It is very complicated.

  26. Off-topic Sunday question for grumpy, Shay, Seafoid, and anyone who is interested.

    In ‘Economic Possibilities for our Grandchildren’ (1930), Keynes writes:

    “In Europe we are held back by temporary obstacles, but even so it is safe to say that technical efficiency is increasing by more than 1 per cent per annum compound. There is evidence that the revolutionary technical changes, which have so far chiefly affected industry, may soon be attacking agriculture. We may be on the eve of improvements in the efficiency of food production as great as those which have already taken place in mining, manufacture, and transport. In quite a few years-in our own lifetimes I mean-we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.

    “For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come–namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.

    “But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of afar greater progress still.”

    I’ve been reading about the ‘Secular Stagnation’ argument and at first glance took it as an unalloyed Bad Thing – he West might need bubbles and massive demand spending or similar to maintain full employment. But as in this FT Alphaville article and in other places, I see that the counter could be that we are in an era of plenty, where:

    “Banks operate according to incentives. Always have done and always will. Currently — due to *abundance*, technological efficiency, ‘secular stagnation’ et cetera — banks have less of an incentive to lend (and in so doing add to productivity and resources) and more of an interest to facilitate business for those who monopolise resources and restrict production by cornering markets.”

    With me marking out *abundance*.

    So, is secular stagnation in some way an example of Keynes’s prediction becoming true? That ultimately, depending on class and political struggle, there is a future possibility shorter working hours for just as much reward, a reunderstanding of what rewarding labour is, and so on?

    For the moment I put to one side finite resources and environmental degradation.

    http://ftalphaville.ft.com/2014/02/14/1771522/information-asymmetry-bad-incentives-and-taibbi/

  27. @ GK

    The GCC is the ultimate appelate court in matters relating to the German constitution. The judgement expected in March is by it in relation to the ESM, if I am not mistaken. There has been no request for an accelerated procedure to the ECJ for its judgement on the referral of the OMT to it by the GCC. This could take some time.

    The assessment overall by Colm McCarthy is fundamentally wrong as it assumes that the GCC is representative of German government policy. If such were the case in relation to the actions of constitutional courts, Ireland would be out of the EU by now.

    Schaeuble is a more reliable guide. If the promised shoot-out between the GCC and the ECJ eventually takes place, it will be a damp squib.

  28. As for GCC:

    The federal German Constitutional Court was established 1951, the European Court of Justice in 1952. In the past 63 years there was not a single ruling that the German supreme constitutional court had referred to the ECJ

    The German constitution was diluted by Ms. Merkel and her political cronies, it was bent to breaking point to suit the European treaties that were forced down the Irish throat in two, not one referenda.

    The Lisbon treaty degraded the German constitution and allows the treaty agenda to overrule German constutitional law.

    So far so bad, but did we really need Karlsruhe to understand that the ECB overstepped their mandate and broke the treaties? I don’t think so!

    This was crystal clear and it made no difference whether GS Banker, Group of 30 member or ECB-Draghi, all the same anyways, reiterated that he was acting inside his mandate, the fact remained that he acted against article 123 of the european treaty.

    No, there was no need for a supreme court to understand that the ECB broke the treaty and it’s mandate. So what do you think the ECJ ruling will be?

    I have absolutely no doubts on that result to come down the pipe.

    The power grab of European technocrats and their disasterous politics of the past six years is here to see for everyone with a clear mind. The talking shop of European Parliament has no democratic impetus worth mentioning.

    The undemocratic forces in the EU continue to force feed 550 million people with their agenda.

    …credo quia absurdum est …

  29. further… on ECJ:

    The well known critics of the politics-law shifting and the power grab the ECJ was perceived to execute for many years are not to be dismissed.

    European integration through law, well, good luck with that one! Politically insufficient and incompetent institutions paired with an ever increasing democratic deficit are the unhealthy fundament, already showing ‘earthquake’ induced cracks running from south to north, a fundament where judicial means is supposed to derive from.

    Go figure…

  30. 2 useful links I think:

    ‘ The term “Ordoliberalism” is never used in Finland, because there is no need for any separate name for what is viewed as mere common sense ‘

    http://mainlymacro.blogspot.com/2014/01/ordoliberalism-neoliberalism-and.html?showComment=1390506063504#c7114699218948972174

    “Finland thus lived up to a reputation established as the only World War I debtor nation which punctually made its payments to the U.S.”

    http://content.time.com/time/magazine/article/0,9171,935747,00.html

    Finland has a hyper stellar AAA rating for good reasons.

    They have also repeately gone through pretty hard times, living at finis terre, the cold end of the world, and never did welsh.

  31. @ Gavin

    “So, is secular stagnation in some way an example of Keynes’s prediction becoming true? That ultimately, depending on class and political struggle, there is a future possibility shorter working hours for just as much reward, a reunderstanding of what rewarding labour is, and so on?”

    I think we would need a load of new memes for that.

    I was reading “Auditors In” by Patrick Kavanagh the other day

    “What is distressing
    is walking eagerly to go nowhere in particular”.

    Slavoj Zizek calls it “compulsive purposeless dynamism”

    It’s supposed to be a rational system but it’s nuts.
    I think.

    But then maybe it is all based on the human brain and how it works. Never happy with what we have. always feeling the need to do something.
    http://www.youtube.com/watch?v=5HbYScltf1c

    Even if it is pointless.
    Did Keynes know much about Dopamine ?

    http://www.postcarbon.org/article/331819-the-psychological-roots-of-resource-over-consumption

  32. @seafóid

    I think Denmark and Switz chose to follow the Euro because they didn’t want or couldn’t afford to become haven currencies. All that herd money looking for a safe home , driving up the exchange rate and crippling exports.

    The Danes still had unpleasant capital influx problems because of the the perception that they were at a safer distance from the geniuses at the ECB, cue negative official interest rates and large purchases of foreign currencies.

    http://www.bloomberg.com/news/2012-08-01/denmark-has-lessons-for-draghi-as-official-rates-go-negative-1-.html

    As you say, the Euro is a huge problem for everyone around it and a mess that will not be resolved without a purge at the top or something much more messy at the base.

  33. @ seafóid

    It took until the 1960s for pollution in the West to become a political issue. It is already one in China.

    There is a cycle in development and it will take time to implement change as it did in the West.

    How many countries anywhere have minimal corruption?

    @ All

    It maybe reassuring to view the problems in Europe as being a responsibility for others.

    Some are at national level, others at community level. However, solidarity is often seen as an obligation for others.

  34. For those who revel in ‘the sky is falling’ stories, there is an interesting takedown of Matt Taibbi in FTAlphaville

    http://ftalphaville.ft.com/2014/02/14/1771522/information-asymmetry-bad-incentives-and-taibbi/

    Alert, alert! Matt Taibbi of Vampire Squid fame has discovered contango in a five-page mega opus for Rolling Stone magazine, in which he blames all the usual names for crimes against markets, people and everything good in the world. It’s also a running continuation of his “everything is rigged” theme.

    But it’s a terribly nauseating read for anyone following the story since 2008.

    First off, Taibbi turns out to be a dependable repackager of other people’s stories. Facts and ideas unearthed by others are borrowed and twisted until they fit his own version of reality (often without citation or attribution). Case in point, the “vampire squid” description is surprisingly similar to popular writer ‘Coin’ Harvey’s 1894 description of the Rothschild bank as a black octopus stretching its tentacles around the world.

  35. Yorkshire people were the first to make the connection between modern prosperity and pollution. The phrase they used was “Where there be muck there be brass.”

    Up until the sixties people were dying by the thousands of pollution in heavily populated and industrialised areas. London had its killer smogs and the Ruhr had high incidence of COPD. In Ireland we had the balm of foggy dew and the poverty that went with it. Granted we lacked coal.

    Fifty years on we are looking down our noses at people who are developing in exactly the same way as industrialised Europe and America developed.

    Karzai and Afghanistan are in the news again after their parliament passed a law abolishing the law implemented after the invasion by the West in 2002. Women will be subservient to their husbands after Feb. 24th. This is what happens when the West ignores the necessary 200 years of industrialisation and imposes their PC views on people who have yet to escape tribalism.
    There are no simple solutions. Every country has to find its own way and make its own mistakes as we are still doing and will continue doing, long into the future.

  36. @Michael Hennigan

    Wowzers Mr Hennigan. That FT piece is as heartfelt a defense of the financial system as ever I have read, but a takedown of Matt Taibbi it aint.

    My favorite bit:

    But none of that changes the fact that neither Goldman Sachs or Morgan Stanley broke any rules or laws when they bought up physical assets in the last decade or so.

    With all due respect that is one god damned dumb sentence to put to paper and the author knows it as the offhand “in the last decade or so”. shows. Banks (someone in the industry correct me here) faced heavy restrictions on physical asset ownership up until the gutting of the Glass Steagall act in 1999, which they lobbied for heavily. Incidentally the Treasury Secretary in the US at the time was Robert Rubin who had 26 years in which bank behind him before he got the job?

    Goldman Sachs of course. Nothing to see here though. Pay no attention to that bank behind the curtain.

    So Wall Street lobbying and the related private/public sector revolving door is behind much of the weakened legislation of the financial sector in the US. The big banks remained technically within the bounds of the laws they helped formulate the technicalities of. How good of them.

    The author even goes on to defend the aluminum warehouse scam in the US as the the fault of the market (ie: everyone in general and no one in particular) and denies the banks have any agency at all in the matter. We were only following investor demand your honour.

  37. @Michael
    Just off the top of my head China has got issues with air quality, desertification, coast vs inland, population pyramid post one child policy, freshwater supply and a credit bubble. The Party also has some management issues. The deal is forget about your rights and we’ll deliver prosperity. If that prosperity drive is weakened by the risks mentioned above I wonder what will happen. Western countries did have pollution issues in the 60s. Some of them were addressed via technology but others were just exported to China.

  38. @Michael Hennigan

    Obviously I know you do not necessarily endorse the FT Alphaville piece but I think the post (and it was only a blog post) was on a trajectory that has passed through Jesuitical was passing through disingenuousness and heading towards flat out dishonesty.

  39. “First off, Taibbi turns out to be a dependable repackager of other people’s stories. ”

    So was Steve Jobs . Very few original thinkers out there
    OK, perhaps making it white was genius

  40. Goldman Sachs spun the lies for Greek’s entry to the euro,and Nana Mouskouri dedicated this song to them;

  41. @Shay Begorrah

    On ‘the psychopathology of neoliberalim’ and its backers:

    Some empirial if illustrative evidence [great graphic]

    A rare look inside the Koch brothers political empire

    The labyrinthian design of the political network backed by the Koch brothers and their fellow conservative donors serves several purposes, but one of the biggest is to ensure the privacy of its financial backers. As we detailed last month, the money flows through a complex maze of tax-exempt groups and limited liability corporations, creating multiple barriers that shield the identities of the donors. Such anonymous contributions should be allowed, Charles Koch has argued, to protect people from the attacks that he and his brother David and their company have fielded. Critics say the Kochs and their allies seek to influence elections without accountability.

    http://www.washingtonpost.com/blogs/the-fix/wp/2014/02/05/a-rare-look-inside-the-koch-brothers-political-empire/

    p.s. Elements within the Blind Biddy Hedge School are presently mapping the Hibernian equivalents; no point in waiting for the Unis! The EZ equivalents are reasonably well known at this stage [DOCM might clarify in a moment of sublime consciousness]

  42. @Mickey Hickey

    ‘… what happens when the West ignores the necessary 200 years of industrialisation and imposes their PC views on people who have yet to escape tribalism.

    Look at Libya – a present disaster mainly due to Sarkozy’s little napoleonic illusions. Look at Iraq ….. And the poor Tauregs – hammered again by the French in northern Mali … and all the Libyan arms now availble throughout north and central Africa. That said, heroin production in Afghanistan is up again this year …. the brudder will be pleased and Swiz banks remain open!!!

    @all
    Text from Blind Biddy from a reliable source:

    ‘Anonymous’ had nothing to do with GSOC.

  43. I think that Izzy article from Alphaville is incoherent.

    “The point is to help outsiders learn how the markets operate so that they can make wiser decisions and realise the information disadvantage they’re up against. It’s all a bit like the Krypton Factor, a giant puzzle that needs solving and figuring out in the name of efficient markets
    As we noted on Thursday, information asymmetry is always to be expected in a free-market.
    Yet, if you believe in the miraculous self-correcting force of the free market — in which acting according to your own interests results in a cybernetic balance of wonderfulness for everyone —

    And 95% of the post collapse gains in the States went to the top 1%.
    Very efficient.

    As for wisdom, over to Harry Eyres, who should really take her under his wing

    http://www.ft.com/intl/cms/s/0/6b74f01c-3365-11dd-8a25-0000779fd2ac.html

    ” Take three kinds of environmental problem. First, common resources such as fisheries tend to be over-exploited in the absence of either social ownership or the limitation of harvest; stocks collapse suddenly, so price signals do not work. Second, public goods such as air cannot be divided up in separate parts, which poses a problem for markets. Air pollution costs nothing to polluters, so without regulation there is an incentive to pollute. Third, future generations, who will be especially affected by environmental problems such as global warming, do not participate in markets. Market solutions to problems affecting the future tend to employ discounting – less value is placed on the future than the present. In the case of global warming, most cost-benefit analyses have advocated doing nothing.”

  44. @DOCM

    “Schaeuble is a more reliable guide. If the promised shoot-out between the GCC and the ECJ eventually takes place, it will be a damp squib.”

    The backdrop to this particular shoot-out can be gleaned from a post by Seamus Coffey, one chart of which gives the amount of EZ government debt that falls due for renewal in 2014 and 2015.
    In the case of Italy, for instance, the amount to be renewed is 35% of Italian GDP, or approx €700 billion.

    http://economic-incentives.blogspot.ie/2014/02/why-cant-we-repay-imf-early.html

    Without a politically and legally secure OMT program, any potential buyer is leaving themselves open to a severe loss.

    You may argue that the GCC decision and referral is a sideshow. But to have the constitutional court of any EZ country taking cannon shots at the only solid pillar supporting the entire EZ government refinancing program, is hardly irrelevant.

    The assumption surely must be that their lordships in Karlsruhe must have some idea of the consequence of their views being vindicated, either by the ECJ or in Germany.
    That being the case, their decision and the referral of it, can only be seen as a serious shot at the structure and existence of the EZ itself.
    The intention of the GCC is clearly to bring the entire house down.

  45. The figure above for Italy bond/bill renewals for 2014/2015 should be $700 billion or approx €500 billion euros, a small difference!, but with little consequence to the argument.

  46. “The hunger for yield was on show at a sale of 7.5 billion euros ($10 billion) of three-, seven- and 30-year Italian bonds early on Thursday. Rome sold the top planned amount and paid the cheapest three-year debt costs since the launch of the euro.”http://mobile.reuters.com/article/idUSL5N0LI2BO20140213?irpc=932

  47. @JG

    That may be the case, and I know little about investing.
    But the very first ‘yield’ item I would look for is confidence in getting the capital back. Without OMT, or with an OMT program being torpedoed from a distance, I would be more than a little uneasy.

  48. @JG

    Who is buying that Italian stuff? Yields aren’t going to go much lower so where do they get capital appreciation ?

  49. @Gavin Kostick

    So, is secular stagnation in some way an example of Keynes’s prediction becoming true? That ultimately, depending on class and political struggle, there is a future possibility shorter working hours for just as much reward, a reunderstanding of what rewarding labour is, and so on?

    Firstly I have to admit that I can not really get my head around secular stagnation, it seems like a good description of an effect with no root cause.

    Supply is low because demand is low, demand is low because of high unemployment (and deleveraging), unemployment is high because the private sector is retrenching and also because of “technological unemployment”, the private sector is retrenching because the government is not willing to engage in counter cyclical spending, the government is not willing to engage in counter cyclical spending because, well, why exactly?

    I suppose I think that there must be a change in the priorities that governments have and there is not a really good explanation. It is some interaction of globalization, income distribution, resource competition, democratic dysfunction and the increased influence of capital but the complexities do not seem to be worked out.

    I liked this New Yorker article ‘Is Larry Summers Right About “Secular Stagnation”?’ but I still do not understand the concept despite a blizzard of articles. Even the mighty Krugatron could not sell me on it.

    On the original question of whether technological advances will make us all women and men of leisure, or ay least less work, I can not see how that happens when almost all the means of production is privately owned and these private owners have no motivation to employ more people to do the same amount of work. What is in it for capital? If there is nothing in it for capital then can we imagine how the state forces them to change behavior in a world where capital is so mobile and powerful? Given the austerity policies in Europe it is hard to imagine that most states even have improving the quality life of the average person as a priority, either because democracy no longer works or the weakness of the state.

  50. @ seafóid, & Shay Begorrah

    Thanks for the replies and links.

    Some disconnected thoughts:

    I skimmed the longer article, seafóid, and may return to read in full but I must admit to being suspicious about attempting to ground ‘everything’ in the latest bio-science. I note that the idea of consciousness is often given as the latest technology – Roman writers seeing the mind as aqueducts and piping, watch mechanics in the 18th century and like a computer (or cloud computing) now. I’m not a mysterion when it comes to the issue of consciousness but I am wary of ‘all the brain/genes/chemistry arguments.

    Slightly differently John Waters and associated Iona people are attempting to ground traditional religious arguments in genetics, which, one suspects will be held for as long as it is useful but no longer.

    Freud did think ‘rewarding labour’ was one thing that might help avoid unhappiness, but of course, that doesn’t necessarily mean wage labour. But Hobsbawm points out that even in the 19th century British miners invested a lot of self worth in their shared profession whilst attempting to educate their children so that they wouldn’t have to do the same – and looking down at them for it. A conflict brought out very well in Zoolander.

    http://www.youtube.com/watch?v=YnYJYYLvYbs (around 5.20)

    After reading the NYT article, I can’t help thinking that the assumption that economists and politicians want to ensure full employment is decent but naive. After all, Olli Rehn, is basically happy to see mass unemployment in Spain for another ten years or more.

    At a more extreme level, things like this are being openly articulated:

    ‘Multimillionaire venture capitalist Tom Perkins says the 1 percent should get more votes’

    http://www.salon.com/2014/02/14/multimillionaire_venture_capitalist_tom_perkins_says_the_1_should_get_more_votes/

  51. @Gavin

    “After reading the NYT article, I can’t help thinking that the assumption that economists and politicians want to ensure full employment is decent but naive.”

    Surely there is a loads of work that is not being done that could be done and there is lots of money being hoarded that could be put to use and that it all depends on how we measure things

    But neoliberalism will have to go first.

    The plutocrats are probably a great bunch of lads but they don’t seem to be what we need right now

  52. Randal wray on the secular stagnation

    In the General Theory, Keynes had addressed the demand-side effects of investment: rising investment generates income that in turn induces consumption spending. Keynes singled out investment as the major “autonomous” component of spending, as it is focused on future sales and expected profits over the life of the plant and equipment. Hence, fluctuations of investment “drive” the economy. Because Keynes was most interested in explaining the determination of aggregate output and employment at a point in time, he tended to hold constant the productive capacity of the economy. Whether the economy was operating at full capacity or with substantial excess capacity could then be attributed to the level of effective demand, itself a function of the quantity of investment.

    If the economy were operating below full capacity, then the solution would be to raise effective demand—either by encouraging more investment, or by increasing one of the other components of demand. After WWII, “Keynesian policy” came to be identified with “fine-tuning” of effective demand, accomplished through various investment incentives (tax credits, government-financed research and development, countercyclical management of interest rates) and countercyclical fiscal policy. In practice, policy tended to favor inducements to invest over discretionary use of the federal budget—indeed, “more investment” has been the proposed solution to slow growth, high unemployment, low productivity growth, and other perceived social and economic ills for the entire postwar period.

    However, Domar had already recognized the problem with such a policy bias at the very beginning of the post-war period. When we turn to the subject of economic growth, it is not legitimate to ignore capacity effects as investment proceeds. Not only does investment add to aggregate demand, but it also increases potential aggregate supply by adding plant and equipment that increase capacity. To be more precise, a portion of gross investment is used to replace capital that is taken out of service (either because it has physically deteriorated, or because of technological obsolescence), while “net investment” adds to productive capacity. Further, note that while it takes an increase of investment to raise aggregate demand (through the multiplier), a constant level of net investment will continually increase potential aggregate supply. The “Domar problem” results because there is no guarantee that the additional demand created by an increase of investment will absorb the additional capacity created by net investment. Indeed, if net investment is constant, and if this adds to capacity at a constant rate, it is extremely unlikely that aggregate demand will grow fast enough to keep capital fully utilized. This refutes Say’s Law, since the enhanced ability to supply output would not be met by sufficient demand. As such, “more investment” would not be a reliable solution to a situation in which demand were already insufficient to allow full utilization of existing capacity.

    Vatter and Walker carried this a step further, showing that after WWII, the output-to-capital ratio was at least one-third higher than it had been before the war. Due to capital-saving technological innovations, it takes less fixed capital per unit of output so that the supply-side effects of investment will persistently outpace the demand-side multiplier effects (for example, as a constant level of net investment adds to capacity at a rising rate). The only way to use the extra capacity generated by net investment is to increase other types of demand. These would consist of household spending (on consumption goods, as well as residential “investment”), government spending (federal, state, and local levels), and foreign spending (net exports).

    Vatter and Walker believed that growth of government spending would normally be required to absorb the capacity created by private investment. Indeed, they frequently insisted that government spending would have to grow at a pace that exceeds GDP growth in order to avoid stagnation.

    This should not be interpreted as endorsement of Keynesian “pump-priming” to “fine-tune” the economy. Indeed, Hansen had previously demonstrated that pump-priming would fail. If government increases its spending and employment in recession, raising aggregate demand and thus, economic activity, only to withdraw the stimulus when expansion gets underway, will simply take away the jobs that had been created, restoring a situation of excess capacity. The larger the government, the harder it becomes to cut back spending because jobs, consumption, income, and even investment all depend on the government spending. According to Vatter and Walker, in a well-run fiscal system, government spending will rise rapidly when investment is rising (to absorb the created capacity), and then will still rise rapidly when investment falls (to prevent effective demand from collapsing). They call this a “ratchet”—rather than countercyclical swings of government spending, “government as a share of the economy should rise indefinitely”. Adolf Wagner had argued that economic development leads to industrialization and urbanization, which generates an absolute, as well as a relative, increase in the demand for more government services (of course, J.K. Galbraith made a similar point). Hence, for political and socioeconomic reasons, government should grow faster than the economy. If it does not, not only will this leave society with fewer publicly provided services than desired, but it will also generate stagnation through the Domar problem.

    These arguments concerning secular trends can be supplemented by the Kalecki/Minsky analysis of the role of government over the cycle. Aggregate profits are equal to investment, plus the government deficit, plus the current account surplus, plus consumption out of profit, and less saving out of wages. When investment falls, profits fall. As Minsky put it, past investment undertaken on the expectation of future profits cannot be validated at the lower level of investment, depressing current investment, and further lowering profits through a process of cumulative causation. In a big government economy with a budget that automatically swings in a counter-cyclical manner, deficits are created that attenuate effects on profits. Capital-saving innovations increase the capacity effects of investment, thus, so long as investment remains above replacement levels, potential aggregate supply rises. To utilize this new capacity, aggregate demand must increase even though investment has fallen to a lower level.

    Unless another source of demand fills the gap, the government’s budget must become more stimulative. This is more easily accomplished with a bigger government because of the larger potential swings of its budget balance relative to the size of the economy as a whole. Minsky argued that government must be at least as large as investment, however, government will have to be larger to the extent that investment swings are large and if automatic swings of the budget are relatively small. Further, as discussed below, persistent trade deficits will increase the role of government in maintaining profits and demand.

    http://www.economonitor.com/lrwray/2013/11/21/bow-down-to-the-bubble-larry-summerian-endorses-bubbleonian-madness-and-paul-krugman-embraces-the-hansenian-stagnation-thesis/

  53. According to EU treaties all members of the Union have to adopt the euro once the conditions are fulfilled, although two have negotiated an opt-out. That would imply an eventual membership of at least 26 of what is already far from an optimal currency area.The US has 50 members of its own currency area but that is a Federal State with a relatively high Federal Budget so it would seem that the euro ‘s survival probably requires much deeper political integration – a process which may or may not garner much electoral support.
    Note also that once the euro gets to 19 members from the current 18 the current position of 1 vote per country (plus the 6 governing council members) will change, with the five largest countries getting 4 votes and the other 14 sharing 11 votes, with the latter falling further on expansion.

  54. @ Ciaran

    another angle

    http://www.ft.com/cms/s/0/079ff1c6-d2f0-11e0-9aae-00144feab49a.html

    “There must be much inflation, or great loss, or there will be low growth. The real economy is too full of rent seeking and too devoid of value creation. There is not enough room for new endeavors. Until the day when those with capital are forced to put it to work and risk loss — much more so than is the case today — or until the day when those with capital lose a great portion of it, the economy will not be healthy. It will simply subsist, in statis, in order to provide for those who have previously accumulated capital. Those who are not needed in capital-servicing tasks will remain unemployed. This is the way I see it. ”

    What a mess

  55. @ francis

    As requested.

    http://www.reuters.com/article/2014/02/04/ecb-vote-lithuania-idUSL5N0L33K520140204

    It – the idea of a rotating vote for the big five – must have seemed a good idea at the time!

    Herewith the views of an Irish “unrepentant anti-federalist”.

    http://www.irishtimes.com/news/politics/federalists-gearing-up-for-move-towards-european-state-cautions-mcdowell-1.1693973

    Both are equally wrong. To quote McDowell;

    “Intergovernmentalism is not a dirty word in my mind. The idea that member states continue to be the source of EU legitimacy is one with which I am very comfortable.”

    So should everyone be!

    The member states continue to be the source of EU legitimacy whether this is exercised in an inter-governmental or federal manner. The way the situation is developing in Europe, there will be a reduction of the federal conduct of some business and an increase in others. Scare-mongering or exaggeration in favour of one or the other is equally to be condemned.

  56. DOCM,

    glad to learn the name of this Barthle : – )

    In the moment you think a little bit about it, it does not matter really, if one camp has one vote more or less. What is more important is that the number of votes is limited.

    I commented on the importance of the Tagesspiegel before, but want to cite it in this case:

    “ Spötter finden, dass der Unterschied minimal ist – bislang wurde Weidmann im EZB-Rat meist überstimmt.“

    What really matters is the vote in the ESM, and the legal restrictions to what the ECB can decide („within our mandate“)

    The European Commission also needs a similar reform, the 28 have become unwieldy, and the EC must be curtailed in their constant power grab. The CSU proposal is to cut the EC in half, have clear rules how to fire each and everybody in there, and then there will be no place for Reding and Barroso any more : – )

    Basically we have 2 extremes,

    a) the English Europe a la carte approach, preferable as a free trade only version

    b) the French approach, which with constant flowery proposal like the thread topic, basically want full federalization,

    and

    c) from a German perspective I am not really unhappy about that both extremes have no chance : – )

  57. @ Ciaran

    It was one of the comments. It is somewhere below the article
    The article is well worth a re-read as well.

    The problem would appear to be too much capital sloshing around looking for a bit of rent from the real world
    Somewhat like those ghost houses in Mayo

  58. text from Blind Biddy:

    “@Minister Ruairí Quinn

    Carpe diem Ruairí! Location & timing are propitious for a sensible coup. We could sort out Hibernia and make Hibernia a ‘real’ EZ success story.

    p.s. I have the ICA on standby … and a few significant others. ‘Biddy.”

  59. You know I think that’s more or less what randall is saying , that capitalism is too productive for its own good and that without a gradual ratcheting up of government spending to absorb the excess capacity ,stagnation is inevitable .

  60. @ francis

    I would not disagree with your final conclusion.

    However, on the voting issue, there is a real problem of political perception if the Bundesbank representative is deprived of a vote every five months irrespective of the standing of the person or media outlet drawing attention to it.

    Another item to be added – perhaps usefully – to the list of issues to be resolved during 2014 (as discussed on the “Europhoria” thread)?

  61. ‘At the moment, the movement of the bond yields has nothing to do with the real economy’… ‘the traders are making money, that’s all that counts to them…they believe that the ECB will backstop the investments no matter what..’

    Paul Summerville on RTE business just now!

    Lesson?

  62. super comment on the NZZ site sort of translated below

    http://www.nzz.ch/wirtschaft/wirtschafts-und-finanzportal/wiens-regierung-in-sachen-hypo-unter-druck-1.18245416

    Ihre Berichterstattung ist deutlich kritischer als in den deutschen Medien. Es fehlt aber meines Erachtens der Hinweis, dass sich auch hier die österreichischen Großbanken durchgesetzt haben. Bei einer Bad Bank liegen die Lasten vollständig beim Staat, bei einer Insolvenz wären auch die Anleihegläubiger bzw. Großeinleger herangezogen worden. Da die HAAG sich fast vollständig mit Interbankengeld bzw. Einlagen von Institutionellen refinanziert hat (nur 1% der Einlagen stammt von Privatanlegern), wären auf die Bankengläubiger erhebliche Belastungen zugekommen. Aber das ist ja jetzt effektiv verhindert worden.
    Was wirklich unglaublich ist, ist die Tatsache, dass in vier Jahren seit der Notverstaatlichung niemand die (nicht so zahlreichen) Alternativen durchgerechnet hat, und jetzt mit einer üblen Hektik und Zeitnot entschieden wird, ohne dass die Alternativen quantifiziert wurden.

    Your coverage is much more critical than in the German media. In a bad bank situation, the load is totally borne by the State whereas in a bankruptcy, the bondholders or large depositors would have to pony up. Since the HAAG was almost completely refinanced with interbank money or deposits from institutions (only 1% of deposits comes from private investors), a considerable burden would have to be met by the bank creditors. But this has been effectively ruled out until now .
    What is truly amazing is the fact that in four years since the bailouts started no one (or at least very few) have looked at alternatives, and now everything is done in a rush and a massive panic without the alternatives even being considered.

  63. Text from Mad_Oul_Jozie down the road:

    “Signal of neutrino dark matter

    … a recent analysis of X-ray spectrum of galactic clusters claims the presence of a monochromatic 3.5 keV photon line which can be interpreted as a signal of a 7 keV sterile neutrino dark matter candidate decaying into a photon and an ordinary neutrino. It’s a long way before this claim may become a well-established signal. Nevertheless, imo it’s not the least believable hint of dark matter coming from astrophysics in recent years.
    […] the simplest UV-complete models that generate masses for the active neutrinos require introducing at least 2 sterile neutrinos, so there are good reasons to believe that these guys exist. A sterile neutrino is a good dark matter candidate if its mass is larger than ~keV (because of the constraints from the large-scale structure) and if its lifetime is longer than the age of the universe.

    http://resonaances.blogspot.sg/2014/02/signal-of-neutrino-dark-matter.html

    And I want to know what dey were smokin in dat koffee shop, who was there, and what was being discussed both offline and online. I have the bus pass at the ready – and a box of matches. I demand a High Level Expert Group (HLEG) to investi_gate this matter urgently; I think dat Jacinta Heisenberg from Ballybrack might be available …. or simply ask the N_S_A on Paddy’s Day!”

  64. @DOCM
    Is not the quote from Derek Mitchell simply a disguised reference to the removal of the capacity to devalue in order to “restore” competitiveness? The UK retained this capacity but this did not render it immune to the global economic crisis.

    And how about the interest rates? The low interest rates during the boom are held up as the major reason that the builders, developers, politicians and who else all partied.
    I concede low interest rates have saved the banks’ (and our bacon) during this recession.

  65. Re low interest rates

    http://www.rte.ie/news/business/2014/0117/498527-esm-ireland-bondholders/

    “Low borrowing costs may be ‘reward’ for not burning bondholders – ESM chief”

    They may also be a sign that neoliberalism is f#$%ed. No sign of equilibrium anywhere. FT was very happy with EZ growth at the weekend – “the Netherlands also expanded by a brisk 0.7%”

    http://www.ft.com/intl/cms/s/0/ca72edac-955d-11e3-9fd6-00144feab7de.html

    Brisk my ####.

    Credit Suisse get excited about 1.5% interest rates on savings.
    https://www.credit-suisse.com/sites/bonviva/de/paket.html

    Welcome to the new normal

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