Categories Uncategorized Mody on European QE Post author By Philip Lane Post date May 6, 2014 50 Comments on Mody on European QE Mody writes here. Related ← Labour Markets During Crises Conference → NYT: Review of Swing 50 replies on “Mody on European QE” From the Project Syndicate article that appears to have given Mody this idea: “But QE would present a problem for the ECB that the Fed and other central banks do not face. The eurozone has no centrally issued and traded Eurobond that the central bank could buy. (And the time to create such a bond has not yet come.) By purchasing bonds of member countries, the ECB would be taking implicit positions on their individual creditworthiness. That idea is not popular with the eurozone’s creditor countries. In Germany, ECB purchases of bonds issued by Greece and other periphery countries are widely thought to constitute monetary financing of profligate governments, in violation of the treaty under which the ECB was established. The German Constitutional Court believes that the OMT scheme exceeds the ECB’s mandate, though it has temporarily tossed that political hot potato to the European Court of Justice. The legal obstacle is not merely an inconvenience; it also represents a valid economic concern about the moral hazard that ECB bailouts present for members’ fiscal policies in the long term. That moral hazard – a subsidy for fiscal irresponsibility – was among the origins of the Greek crisis in the first place.” http://www.project-syndicate.org/commentary/jeffrey-frankel-urges-the-ecb-to-buy-us-treasuries-to-expand-the-monetary-base#XXKSULCpT0I2mLy0.99 !. It seems to me they are missing the obvious possibility of the ECB simply buying EZ country bonds pro-rata according to the respective ECB capital. 2. It is not clear that the currency movement they suggest viz USD/EUR would follow as they think. Swing currency movements are difficult to reliably predict, and the sellers of US Treasuries on the ECB bid will have the option of investing in Euro denominated assets anyway, rather than the further yield suppressed US Treasury market. 3. Do they really think they are likely to get international agreement? Mody is clearly a believer in the biblical advice that a “soft answer turneth away wrath” or, at least, the inclusion of a gentle reference does. The G7 statement referenced is, however, unequivocal. http://www.bankofengland.co.uk/publications/Pages/news/2013/027.aspx Moral hazard is clearly only a problem when the poor stand to benefit from it. When German pension funds benefit? Not so much. What is the purpose of QE if undertaken by the ECB?. In a recent BoE paper Weale concluded that QE had indeed weakened the dollar but that QE in the UK had not affected sterling so it is not a given that the buying of euro area government bonds(buying foreign assets is very unlikely ) by the ECB would lead to a depreciating euro. Indeed, the prospect of such purchases has led to a substantial fall in peripheral bond yields which in turn has supported the single currency. Negative deposit rates might be a better option if the ECB wants a weaker euro but the Bank has spent a lot of time recently flagging the prospect of various policies while doing nothing, and that approach has started to yield diminishing returns. grummel, same thing, fixed for typos and html code problem!, please remove prior 3 attempts, and this line : This Mody is increasingly getting on my nerves. Lets go along the figures Fig. 1 US & EU rates Well, in hindsight, the ECB might have been a little more aggressive. They also do not have a long term experience model and data, like the FRBUS, just some DSGE, which might be more stylish, but apparently much less predictive, especially with constantly changing constituencies. Fig.2 Shadow rate What this plot clearly shows, that it is nonsense, in times a very large player, the Fed, is massively manipulating the market, something Mr. Mody is apparently not aware of. Just look at Pimco PTRAX for example. The job of the ECB is not to manipulate exchange rates, buying US Treasury is clearly against G7 agreements. It does not matter, where inflation is in some particular country. What matters is the weighted whole Euro Area, and the rule slightly below 2.0% over midterm. We have now 6 months with yearly inflation smaller than 1.0%, just like End of 1998, when everybody tried to dress up like a good boy, and become an Euro member. We also had episodes of inflation larger than 3.0%, like 2007M11- 2008M10, 4Q2011, where were the doomsayers then, uh, oh, the ECB can’t control inflation? People like Mody have apparently become so fixated on somehow to get the ECB to break the rules, that they have lost any sense for how bizarre they look to other people. We have the same here with the Waldschlößchenbrücke. 9 years after losing the referendum, and trying every foul trick imaginable, some folks still can’t give up, and desperately try to come up with ideas how to hurt car drivers without any benefit for public transport or bicycles. Completely bizarre. text from Blind Biddy in Kharkov: “Mody recently argued that Ukraine needs a sov debt write-down; instead, the IMF is offering further citizen-serf debt facilitated by an unelected gov installed by ‘fu*k the eu’ Nuland and others: this gov included far-right Svoboda & Right Sector bully boys – backed by the so-called ‘westh’ in our name: see below from Robert Parry – a distinguished investigative journalist – ‘Fascism Is Rearing Its Ugly Head in Ukraine The fire in Odessa, killing dozens of ethnic Russians, has disrupted the US media’s efforts to deny the existence of neo-Nazis May 6, 2014 | Like this article?Join our email list:Stay up to date with the latest headlines via email. As much as the coup regime in Ukraine and its supporters want to project an image of Western moderation, there is a “Dr. Strangelove” element that can’t stop the Nazism from popping up from time to time, like when the Peter Sellers character in the classic movie can’t keep his right arm from making a “Heil Hitler” salute. This brutal Nazism surfaced again on Friday when right-wing toughs in Odessa attacked an encampment of ethnic Russian protesters driving them into a trade union building which was then set on fire with Molotov cocktails. As the building was engulfed in flames, some people who tried to flee were chased and beaten, while those trapped inside heard the Ukrainian nationalists liken them to black-and-red-striped potato beetles called Colorados, because those colors are used in pro-Russian ribbons. “Burn, Colorado, burn” went the chant. As the fire worsened, those dying inside were serenaded with the taunting singing of the Ukrainian national anthem. The building also was spray-painted with Swastika-like symbols and graffiti reading “Galician SS,” a reference to the Ukrainian nationalist army that fought alongside the German Nazi SS in World War II, killing Russians on the eastern front. The death by fire of dozens of people in Odessa recalled a World War II incident in 1944 when elements of a Galician SS police regiment took part in the massacre of the Polish village of Huta Pieniacka, which had been a refuge for Jews and was protected by Russian and Polish partisans. Attacked by a mixed force of Ukrainian police and German soldiers on Feb. 28, hundreds of townspeople were massacred, including many locked in barns that were set ablaze. The legacy of World War II – especially the bitter fight between Ukrainian nationalists from the west and ethnic Russians from the east seven decades ago – is never far from the surface in Ukrainian politics. One of the heroes celebrated during the Maidan protests in Kiev was Nazi collaborator Stepan Bandera, whose name was honored in many banners including one on a podium where Sen. John McCain voiced support for the uprising to oust elected President Viktor Yanukovych, whose political base was in eastern Ukraine. During World War II, Bandera headed the Organization of Ukrainian Nationalists-B, a radical paramilitary movement that sought to transform Ukraine into a racially pure state. OUN-B took part in the expulsion and extermination of thousands of Jews and Poles. Read on: http://www.alternet.org/world/ukraine-catastrophe-offers-many-frightening-reminders-nazi-era?akid=11782.1920389.e9lOu-&rd=1&src=newsletter989688&t=7 What is the European Union doing supporting these very nasty people? Paddy Zhukov is close to despair, And this friday in Kharkov he and I are attending a commemoration of WWII victory over fascism. “ Italy and France are in trouble and you would wonder for how long the market morphine will work. There is a big wave of mergers coming driven by US corps fat on QE cash with Euro companies in the sights and Le Pen in France is doing well on anti globalisation. Italy needs growth but very hard to see where it will come from. seafoid, would you like to expand a little how QE helps US corps to buy Euro companies? After all the Dollar is undervalued by 10 – 15% http://www.ft.com/cms/s/0/3209a580-d6a1-11e3-b251-00144feabdc0.html “Mario Draghi has signalled that the European Central Bank will loosen monetary policy next month to combat persistently low inflation in the eurozone, as it left its benchmark interest rate at a record low for the sixth month in a row. The ECB president said at his monthly press conference on Thursday that the “governing council is comfortable with acting next time”, adding there was consensus within the ECB council over “dissatisfaction about the projected path of inflation”. “ Also in that FT article- the French point out that asking workers for wage cuts to help competitiveness is tricky when the euro is so overvalued…. fyi – ‘the Odessa File’ ‘Certainly the history of the Black Sea port is a rich whirl of different races and cultures. Captured for Catherine the Great of Russia from the Ottomans by a Spanish-Irish soldier of fortune, Don Jose de Ribas, it began its rise with Armand Emmanuel Duc de Richelieu, a great-nephew of the French cardinal, as governor. One of his successors was Mikhail Vorontsov, who had a Russian father and a British mother who was a sister of the Earl of Pembroke. Even the Odessa Steps were built by an English engineer. http://www.independent.co.uk/news/world/europe/ukraine-crisis-the-odessa-file–how-a-cultural-melting–pot-boiled-over-into-sectarian-strife-9334328.html seafoid, so this QE US corp buying spree argument doesnt exist, right ? 10 – 15% misalignement to whatever who sees as fair value is the norm, and not the exception, at least since the break down of Bretton Woods. ECB Policy: 2008-2014 :Investor Concerns: Action immediate. 2008-2014 :Low Flation: Next Month, we’re thing about it. 2008-2014 :Employment Concerns: Next Year, we’re thing about it. [Its a bit like the old Jack Benny gag: Robber: Hands up, hands up. Your money or your life. Benny: Wait a minute, wait a minute, I’m thinking about it.] ECB: Making Europe safe for investors, terms and conditions apply. Could have harmful side-effects for low paid and no paid people. Joseph, you just cut your minimum wage, hire&fire conditions, unemployment benefits to the US levels, and you will get official unemployment numbers like the US. No problem. If that is what you want. That should be worth a new topic : http://www.ft.com/intl/fastft Irish bond yield falls below the UK Are we really expecting the Drag to do any serious QE? He’s famous for making the right noises, not for actually doing anything. @seafood Asking French workers for pay cuts is tricky even at the best of times! @Ernie Ball “Moral hazard is clearly only a problem when the poor stand to benefit from it.” T’was always so. How would you like me to spin it for you? @Francis US corporates are sitting on record cash piles thanks to QE – debt is refinanced with interest rates on the floor and the money sits on the balance sheet- largest 50 companies have $1 trillion in cash . Even dud companies look good under QE @Francis Where in its all important mandate does it say that the ECB should or can intervene in FX markets to lower the value of the euro? Where in its mandate does it say the the ECB should, can, or must protect large institutional creditors? And just in case somebody is tempted to say that all these interventions are done I t.he name of “financial stability”, “financial stability” for whom? Stability for the large investor at the expense of stability for earners and the general public? Even Dan O’Brien in todays Irish Independent seems to be getting fed up with the one sided applicaton of the ECBs mandate as interpreted by itself. To whose benefit is it to lower the euro rate? Michael Hudson: Stockholm Syndrome in the Baltics – Latvia… We did a lot of this before 2008 e.g. property tax, corporate tax. Uncanny resemblances, flight of labour indicative of recovery. http://www.nakedcapitalism.com/2014/05/stockholm-syndrome-in-the-baltics-latvias-neoliberal-war-against-labor-and-industry.html I posted this link on another thread which may be a pointer as to why Irish bond rates are now below those of the UK. http://www.voxeu.org/article/historical-lessons-target-imbalances The euro has passed the stage of questioning as to its future existence. The markets know this even if an amazing number of economists seemed to have failed to notice. The debate has now turned to the real economy and the risk of deflation. fyi – a little MUST READ geo-HISTORY ‘Cheney’s geopolitical ideas have become the consensus of both Republicans and Democrats and have assumed a permanent place in “mainstream” American political thought and governance under Obama. For a foreign government to anticipate how the U.S. will act, their analysts need to understand Cheneyism as a controlling ideology in U.S. policy, just as American intelligence analysts were steeped in theories of Marxism and Stalinism during the Cold War. U.S. citizens should understand the tenets of Cheneyism, too, since this arrogant ideology has the potential for disastrous consequences. Indeed, there is a German precedent for Cheney’s ideology that is not Nazism. Following the failure of the Imperial German Army in World War I, philosophical militarists such as Ernst Junger and authoritarian legal philosophers like Carl Schmitt came together in the “Conservative Revolutionary Movement.” Celebrating war and authoritarianism, they believed that Germany was the “exceptional” nation of Europe, deserving of military expansion in both eastern and western Europe. The German Conservative Revolutionaries didn’t all become Nazis, but they created a hospitable culture for them. With hindsight, they could have been called proto-Cheneyites. Not only are Cheney and Neocons back … they never actually left. The neoconservatives planned campaigns of destabilization all over the world 20 years ago, and Obama is implementing the same plans today.’ http://www.washingtonsblog.com/2014/05/cheney-largely-responsible-war-ukraine.html cf Civilians vs Tanks in Maeiupol today! I hope Blind Biddy is OK. Seafoid, could you a) quantify (hint: e.g. cash vs balance sheet), b) with reference, and c) in relation to lets say Germany (DE, as a must, the core Euro reference), and FR(ance), UK, and whatever you deem important your statement “US corporates are sitting on record cash piles thanks to QE” how that relates to QE, would be a d) an added benefit to the discussion, I am not strictly insisting on : – ) e) when I looked the last time at earnings (PE ratios) lets say S&P500 SPY vs EWG, EWQ (for France), (to keep the notation in Dollar, and relate it to easily tradeable securities with by now sufficient history) I just saw the last time nothing beyond the little higher capital leverage of European companies, I am used to, but I do not check frequently. Just to illustrate my baseline thinking for you. Joseph Ryan, Who is Dan O’Brien? Why should the ECB care about him? The rest of your argument I don’t get. Especially how it relates to what I said. Misunderstandings happen, for me too. Soo, maybe you try to rephrase, relate to …… hmm, …. Treaty rules, numbers? I thought, I scoffed here visibly at the idea of manipulating exchange rates. Do you mix me up with somebody else? I did that before with the Brian Woods. @Mickey Hickey Excellent article and, as you say, uncanny resemblances to Ireland. The Al Munia letter to Latvia, with support conditional on foreign bank creditors getting their money, might well be a photocopy of the yet to be seen Trichet letter to Lenihan. Extraordinary! I was not aware of how the neoliberal policy of shifting taxes away from property and capital and onto labour, was the exact opposite to that of classical free market thinking. It seems as if a jihad has been waged on labour since the Chicago school era, and the Jihadis have won hands down, so far. One thing I poured over today, was OECD data of real GDP data 2000 – 2015. everybody of you can pull easily, adjust for labour force growth, and consider catch up. The result is boring, as > 95% usual 1.1 1.33 Australia 0.6 1.15 Austria 0.4 1.13 Belgium 0.6 1.23 Canada 2.2 1.04 Czech Republic 0.6 1.02 Denmark 3.6 1.02 Estonia 1.1 1.05 Finland 0.4 1.10 France 0.7 1.07 Germany 0.0 1.05 Greece 1.1 1.08 Hungary 1.3 1.15 Iceland 0.7 1.23 Ireland 1.0 1.45 Israel -0.3 1.07 Italy 1.1 0.97 Japan 2.6 1.20 Korea 0.0 1.39 Luxembourg 0.4 1.33 Mexico 0.2 1.11 Netherlands 0.9 1.27 New Zealand 0.6 1.18 Norway 3.2 1.05 Poland -0.2 1.05 Portugal 3.4 1.07 Slovak Republic 1.2 1.04 Slovenia -0.4 1.29 Spain 1.3 1.13 Sweden 0.7 1.18 Switzerland 0.8 1.13 United Kingdom 1.1 1.12 United States 0.3 1.11 Euro area 0.9 1.14 Total OECD first column average growth per year per labor force in percent, second column is labor force growth factor from 2000 – 2015 third is country who here wants to highlight something unusual? welcome to reality Here are two french economists suggesting that Germany will exit to stop the drain to the PIIGS and France will exit to correct the currency imbalance and other restraint son competitiveness. http://www.lefigaro.fr/vox/economie/2014/05/09/31007-20140509ARTFIG00087-et-si-l-allemagne-et-la-france-s-entendaient-pour-sortir-de-l-euro.php Google translated: IGAROVOX/TRIBUNE- For economists Jean- Jacques Rosa and Gerard Lafay , it must end with the single currency, which destroyed Europe’s economies . But the output of the euro can not be unilaterally and must be agreed. Jean- Jacques Rosa is an economist and professor at the Paris Institute of Political Studies . In 1998 in his book The European mistake, he had already warned against the single currency. It has not changed my mind since and advocates leaving the euro. Gerard Lafay is an economist and professor at the Université Panthéon -Assas and author of numerous books including saving the latest 12 keys out of the crisis ( Harmattan ) . European elections have recently shown that voters in France and Germany, took good measurement of the essential realities of supranational monetary . They understood what particularly harmful role played in the euro worsening problems of countries in the currency area , the growth of real Gross Domestic Product , the lowest in the world, having been by an average of 1 3% per year since inception until 2013. This finding is now widely recognized , even by the most convinced pro-European but not yet derive no education. Yet it is the euro that keeps well below its potential growth economies that have adopted it. The reason is their wide opening to the outside. In 2012, the GDP share of trade in goods and services with the rest of the world accounts for 28 % in Italy , 30 % in France , 32 % in Spain , 47 % in Germany , and it reaches above 75 % figures for the smaller countries. And the proportion of these exports and imports making within the euro area accounts , as appropriate , between one third and two thirds of the total foreign trade of the member countries . Also for open economies , the exchange rate is obviously THE most important award because it affects those of all imports and all exports . But the euro removes any possibility of correcting differences in costs between member countries by the simple and effective way of changes in nominal exchange rates. And it was , again, significantly revalued against the dollar and the yuan over the years . It is therefore necessary to end the euro because the system will remain harmful for structurally dissimilar countries. Two factors have condemned our economies and destruction. On the one hand , the general overvaluation of the euro from 2003 to the current nominal rate of 1 euro against 1.4 dollars , the average price level of the area exceeds 17% of the price in the United States and 32 % of the price of the whole world . On the other hand , structural inflation differentials between member countries widened : vis-à- vis Germany , they reached thus accumulated between 1998 and 2011 , 11 % in France , 17% for the Italy , 19 % in Greece , 21 % in Portugal , 29 % in Spain . Try to reduce such disparities by deflation , as now, is a slow process , economically costly and socially unbearable. It is therefore necessary to end the euro because the system will remain harmful for structurally dissimilar countries. But isolated from one country output is problematic because it would help to increase the external debt in euros due to devaluation of the new currency. In no country wants out first for fear of being branded as the gravedigger of the “European construction” which is the common religion of our political elites. A cooperative solution is then needed to break the deadlock . Germany and France , the two main responsible for the creation of the euro, could recognize , in the light of the election results as that of the non-negligible risk of deflation now , they now consider essential to escape, even if their reasons are different. Germany, for fear of having to subsidize the south in perpetuity in an “economy of transfers” ; France to prevent sinking ever deeper into deflation and depression. A cooperative solution is then needed to break the deadlock . Germany and France , the two most responsible for the creation of the euro could now recognize that they consider essential to escape, even if their reasons are different. The Franco -German cooperation to assume shared responsibility for necessary changes and play a vital role, but to promote the return to growth in all member countries instead of driving , as now, to competitive deflation and political strife . This would be an effective solution that pragmatism necessary because we must recognize that a more democratic trading solution 18 is virtually impossible in a matter that requires both speed and secrecy, because of foreseeable implications on the international financial markets . Moreover, a Franco-German euro exit would reduce the “residual” , insofar as it exists , which would facilitate all the output of each individual country in the south by reducing the real burden of its external debt in euros . We thus go to a full adjustment of parities of new national currencies prerequisite back to the expansion and employment . The external public debt in euros for each country would be converted into the national currency , while private external debt would be converted into an equivalent to the old shield and close in its definition of what would be an accountant euro common unit of account . Meanwhile, financial assistance agreements should be negotiated at all partners to facilitate the transition countries in partial financial default. Losses would be so evenly distributed among the creditors. European cooperation which would replace this way the current fracture finally help restore growth for the continent. @ JR Latvia has popped up repeatedly in the “austerity wars” cf most recently on this blog. http://www.irisheconomy.ie/index.php/2013/09/19/boom-bust-recovery-forensics-of-the-latvia-crisis/ The Economist also reviewed the work of Blanchard and his colleagues. http://www.economist.com/news/finance-and-economics/21586603-new-study-asks-whether-latvia-exception-or-exemplar-extreme-economics?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07 The only definitive conclusion that can be drawn is that the Latvian experience is not really representative. Incidentally, there is a very good comment on the first link thread rebutting a point made by MH that Germany was “rebalancing” its export surplus away from the other countries of the EZ. In fact, what is striking to the non-economist on reading the Voxeu article by Professor Bordo – see link above – on the lessons to be drawn from the management of the currency aspect of the euro crisis to this point, is the mechanistic nature of such crises. Latvia is now within the embrace of the euro and the impact that this will have has yet to be assessed. The one thing that the country has in common with Ireland is that both joined for the same political rather than economic reason; getting out permanently from under the shadow of a big neighbour. There is also an interesting reference in the Bordo article to the fact that Germany actually revalued the Dm on two occasions. As I understand the record, this was also a means to disguise a devaluation of the French franc to cover the continuing incapacity of the French ruling elite to achieve anything near the economic capacity of Germany. This option is no longer available. The open question is whether the design of the euro payments system is actually helping to overcome this lack when coupled with the necessary “internal devaluations”. The evidence from the markets is that the answer is yes. I am inclined to place more confidence in its unseen hand rather than the opinion of economists. (That is not in any way to downplay the importance of the role of the latter). @ Francis DIY One aspect of the situation vis a vis the EZ is how the Americans seem to drive developments with the ECB playing catch up. This was an interesting comment in the FT a while ago http://www.ft.com/cms/s/0/35e0fe3e-c318-11e3-b6b5-00144feabdc0.html ” Professor Stark does not admit that the ECB made a huge mistake in 2003 when it adopted the aim to keep inflation below but close to 2% over the medium-term rather than the aim of stable prices over the very long run. And his predecessor as German board member, Professor Issing, was the architect of that ill-fated change which meant that Europe was left defenseless against the Fed-generated virus of asset price inflation. Today, this virus is again attacking European markets – irrational exuberance in the weak sovereign debt markets, leveraged loan markets, and bank debt markets. And amidst much bluster the Bundesbank again fails to stand firm against fashionable monetary doctrine in the US and elsewhere. “ @ Mickey Hickey I had not read your post when I drafted mine. (The MH reference is to Michael Hennigan, incidentally). The two economists in question seem to think that France’s economic problems can be solved simply by repeating history. Too late! seafoid, you claimed a connection between QE and US corp cash piles, which are in your unquantitative opinion (compared to what??) very large. You have to explain your thinking, and no me guessing what might be on your mind to make this connection, I dont see. The differences of DE to both US and JP are not new, but ancient. On the one extreme US was operating with a soft about 2.5% target and a clear connection to business cycle / unemployment (Taylor rule). On the other extreme the BoJ was doubting until recently that a 2.0 % target can be achieved. Well, Abe economics is set out to change this. The Bundesbank in between since ancient times has the a little bit under 2.0% in the mid term (mostly taken as a vague 2 -5 year term) target. The German acceptance of the Euro, with was conditio sine qua non to its existence, was conditional on no bail out , inflation targeting only, and both are written into the treaty. And nobody at the ECB who wants to go criminal, stays on the job for much longer, see the noble man Lorenzo bin Smaghi : – ). What wonders us is the endless criminal attempts to overturn the treaties, especially by stupid alien (to EuroArea) criminals. The US has it easier, that the Federals can force the states to balance their budgets, if necessary by the use of force (civil war, little rock integration). Germany will certainly not invade any budget rule violator. In the last year the Fed and the BoJ finally also got the BuBa Religion and adopted the formal 2.0% rule. So this is apparently “modern”. Finally they see the light. I follow the Case Shiller index closely, with models and the whole nine yards, but I do not see how the massaging of the prices, gives an advantage to US corps. The ECB architecture is the only possible one, that we don’t get robbed, and the Buba has not made any mistakes. Others did, by letting their national inflation get off target. Shane Ross in the Sindo http://www.independent.ie/opinion/columnists/shane-ross/john-morans-parting-words-leave-me-speechless-30262519.html “Reading between the lines, Moran is frustrated at the Department of Finance. Last Thursday, buried in his eulogy of the economy and the improvements in the department on his watch, were words of warning about how the public service had become a place where people tried to avoid working. It had improved under his guidance, but much more needed to be done. He lashed out at others, claiming that the quality of information “on which we have to base our decisions … is still very much below what I would consider to be an optimum level. We are a long way from being able to data mine the wealth of information present across other organs of government.” It’s quite a damning parting line.” fyi – from Blind Biddy ‘Some lite reading – between the lines of nulandish-propaganda: http://www.washingtonsblog.com/2014/05/people-massacre-civilians-odessa-politico-blames-putin.html Paddy Zhukov and I are acting as ‘observers’ today.’ DOCM, both MH’s What the graph in the economist so perfectly shows, is that bubbles (8.9% per anno growth until 2007) in catch up growth mode correct much faster to a still pretty respectable 3.9% growth until 2013. Nothing surprising in the German view, but why is this for some IMF Olivier Blanchard surprising??? Where is the outlier to what model? David, do you still speak German good enough? Please be careful, to not be taken for an English or American. I think it was the guardian, I read that at least 3rd time, that English reporters are escorted out as spies or beaten, while German media like Bild can report freely, and are not seen as the enemy . @David O’Donnell re: Ukraine IMHO, there is only one more massacre of Russian speaking Ukrainians, between Putin and the Dnieper river. Russia will not allow eastern Ukraine to become another Syria. They may on a geo-political basis trade support for Syria for full control of Eastern Ukraine. That’s about as good a deal as the ‘West’ is likely to get, and more than the ‘West’ deserves for its intervention, on the side of quasi-fascists, in a divided country. Pat Cox on radio (when the crisis broke) talked about Ukraine as part of what Russians call the ‘near-abroad’, but in the Russian psyche I doubt that Russians consider Ukraine the ‘near-abroad’; Kievan Rus is much nearer to the Russian psyche than any near-abroad. @DOCM Thanks for above links, but I haven’t had the opportunity to read them. Suffice to say that the EZ may have a comparison to the fabled medieval virginity belt; no matter how well the ECB lords of the manor devise the rules, nature unrequited will eventually out. Joseph, after the fall of Homs, american supported jihadist, all on european gov’s terror watch lists by now, are done. Your definition of “the West” is just Washington and London, and their respective (financial) news outlets The English parliament defeated Hague on the Syria war resolution, and in the very moment, it became clear, that the libya agression went beyond the UN mandate, German warships got orders from home and turned around. The Bundeswehr is a parliaments army, we are the only relevant western panzer force in Europe, and we will certainly not waste our grenadiers for the benefit of alien speculators. We can dispose legally a chancellor and her cabinet within one day, if there would be a need. Fortunately we do not have a presidential system, like Ukraine, France, US @francis I speak straight – and a bit of russo-gaelic. Blind Biddy has borrowed a few of those ‘panzers’ – somewhat ironic considering the role of Kharkov in the Battle of Kursk. We agree [is this a 1st?] that neither of us support the Nuland installed neo-fascists in Kiev. p.s. one of those figleafs has been pardoned! @Joseph Ryan Russia has never wanted to intervene militarily in SE Ukraine – but some US neo-kons are clearly trying to force Russia to do so; when the regular Ukraine army/police refused to attack civilians – they have sent in the heavy gang of svoboda/right sector in uniform to do so – the consequences are now visible and some Media are beginning to report some realities …. most worring is that US Pres is going along with the cheneyites in the state dept. The EU is feeble. Syria is a separate matter; rem the soviet era chemical stuff from Libya via Turkey to nusra/quaida trying to get NATO involved. Some nasty schemers around at the mo. The EU has been captured by Fin Sys, Corp Sys, & Neokon Sys. Not a good time. looks like local politics dominated, again, by the ‘price of a pint’ of .. er ..water! Very tuff times for citizen serfs. http://www.ft.com/intl/cms/s/0/f6f4d6b4-ca2e-11e3-ac05-00144feabdc0.html#axzz31QaG5p3f @ Francis Do you think the euro has been saved ? I think we’ll have to wait until interest rates are normalised to say that . This study on comparative labour costs just released by Destatis is of interest. https://www.destatis.de/EN/PressServices/Press/pr/2014/05/PE14_164_624.html;jsessionid=1214B16A09C6552F6F4EFD35D739F41E.cae2 It suggests that the process of re-balancing of the European economies is continuing, most notably in the narrowing of the comparable level of costs as between France and Germany (which make up more than half of the EZ economy). Notable also is the fact that neither Ireland or Spain have seen any fall in average hourly labour costs. (Austerity?). The disparity in non-labour costs for employers as between the “Continental” and the “Anglo-Saxon” world is as striking as ever, reflecting, one would assume, the wide differences of approach with regard to the statutory organisation of work. (Zero hour contracts and all that?). Can anyone explain to me what “re-balancing” means? I think it is a code word for falling wages caused by widespread unemployment caused by austerity caused by neoliberalism caused by German dominance of EU institutions and political structures. Am I missing anything? An element in considering the future trajectory of the European economies is, of course, the possible impact of the crisis in the Ukraine. The magazine Stern has seen the confidential paper prepared by the Commission (before Easter) detailing the impact of full-scale sanctions. http://www.stern.de/wirtschaft/news/sternde-exklusiv-eu-geheimbericht-schuert-angst-vor-haerteren-russland-sanktionen-2109156.html With any luck, it will not come to this. Even if it does not, the end result is likely to be simply another link in the cordon “insanitaire” with which Putin evidently intends to surround Russia i.e. bits of sovereign states under near total Russian control but unrecognised by the international community. The one logic that might be advanced for so doing – accepting all the strictures with regard to the inept approach of the Alliance under US direction to dealing with Russia – is that the level of corruption and mis-government in Russia itself will be less noticeable by contrast with the situation in these satellites, experience to date showing that the new indeterminate status quo in these territories can fester for decades to the great disadvantage of their inhabitants. This probably unavoidable scenario is almost explicit in the most recent conclusions of EU foreign ministers. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/142561.pdf Checking my spelling on Google, I came across this letter to the FT. http://www.ft.com/intl/cms/s/0/7a3c9736-d45d-11e3-a122-00144feabdc0.html#axzz31RAiZDJ1 @DOCM It ain’t ur spellin dat’s the problem; ’tis da spin! @all Rumour going round that Blind Biddy has been added to ‘the listh’! tbc This recent comment in Der Spiegel sums up the current situation. http://www.spiegel.de/politik/ausland/ukraine-krise-merkel-und-steinmeier-wollen-diplomatische-loesung-a-969056.html Germany is the key player in the efforts to bring about a change in direction from escalation to cooperation towards finding a solution. The true intentions of Putin – assuming he has actually decided on a set course of action – cannot be much longer hidden if no Russian cooperation is forthcoming with regard to allowing peaceful elections to take place even in the disputed regions. Gideon Rachman has an interesting piece on the possibility of excluding Russia from the Swift system of international payments. (Merkel makes clear in her most recent interview that Germany is ready to move to the final – stage three – sanctions if Putin fails to change direction). http://www.ft.com/intl/cms/s/0/d6ded902-d9be-11e3-920f-00144feabdc0.html#axzz31RAiZDJ1 @DOCM Victoria Nuland of the US State Department [and fu*k the EU infamy], with her corporate backers [cf little 50 yr fracking deal & big ag etc], organised the Kiev putsch which installed the puppets with the support of the far right Svoboda and the Neo-Fascist Banderite Right Sector who acted as the bully boys on Maidan. Must have slipped or spun out of your bizzy little mind; a little error of judgment p’raps? seafoid, I posted my last FT link, because it looked at the time of the posting weird in form and content, and I was running out of laptop power on a camping trip. I notice more and more often how massive FT articles can change over time, not just minor corrections or addendums. From my perspective, the Euro is indeed mostly fixed by now. ESM with strings attached and the nuclear option OMT lurking in the background has driven down the risk premiums probably even a little more than justified. DOCM, I think Gideon also clearly pointed out, that any attempts to politizes SWIFT and similar tools would hasten massively the determination of Russia, China, Brazil to end any vulnerability to blackmail, the End of the Dollar as reserve currency. Germany also built North Stream around any possible racketeer, as the result of the Timochenko actions and weird talking of politicians of Poland. Der Spiegel has a pretty accurate IMHO read on the situation. http://www.spiegel.de/international/world/strong-eu-economic-sanctions-against-russia-unlikely-a-968913.html That is the problem with brinkmanship! It can go one way or the other. On balance, optimism rather than pessimism would seem justified. If either side pushes it too far, it is a question of mutual assured destruction (MAD). That, and the difficulty for Putin of where to draw the line – literally in geographic terms – in Ukraine, should see the situation subside into a stagnant stalemate; miserable for all involved directly. One aspect unlikely to be considered until after the crisis in relation to the Ukraine has been overcome is not so much the fact of the existence of the EU but of the institutional structure it provides that allows the democratic societies of Europe (i) to remain democratic (ii) to arrive democratically at a common position (however weak!) and (iii) ensure its implementation. This situation may be contrasted with the situation which obtained prior to the two major conflagrations in Europe in the 20th century. The citizens of Europe may even have noticed! http://www.pewglobal.org/2014/05/12/a-fragile-rebound-for-eu-image-on-eve-of-european-parliament-elections/ just something I ran across at the guardian. http://www.theguardian.com/commentisfree/2014/may/13/ukraine-us-war-russia-john-pilger Presently I am toying around a little bit with a more mobile lifestyle for the summer, and what surprised me, is that on all camping places I went to, there is a substantial number of “long – term campers”. Lifestyle decision, or cash driven? For how many Germans has their personal situation / income really improved substantially since 2006? But , in international comparison, they are way more satisfied now. from the John Pilger link (h/t Prudent Hans ‘The name of “our” enemy has changed over the years, from communism to Islamism, but generally it is any society independent of western power and occupying strategically useful or resource-rich territory, or merely offering an alternative to US domination. The leaders of these obstructive nations are usually violently shoved aside, such as the democrats Muhammad Mossedeq in Iran, Arbenz in Guatemala and Salvador Allende in Chile, or they are murdered like Patrice Lumumba in the Democratic Republic of Congo. All are subjected to a western media campaign of vilification – think Fidel Castro, Hugo Chávez, now Vladimir Putin. Washington’s role in Ukraine is different only in its implications for the rest of us. For the first time since the Reagan years, the US is threatening to take the world to war. With eastern Europe and the Balkans now military outposts of Nato, the last “buffer state” bordering Russia – Ukraine – is being torn apart by fascist forces unleashed by the US and the EU. We in the west are now backing neo-Nazis in a country where Ukrainian Nazis backed Hitler. Having masterminded the coup in February against the democratically elected government in Kiev, Washington’s planned seizure of Russia’s historic, legitimate warm-water naval base in Crimea failed. The Russians defended themselves, as they have done against every threat and invasion from the west for almost a century.’ David, I dont care ANY about the “F*ck the EU” quote in a supposedly private conversation. But: http://www.spiegel.de/wirtschaft/unternehmen/biden-und-ukraine-sohn-des-us-vizepraesidenten-arbeitet-fuer-gaskonzern-a-969348.html … then after the ‘fu*k’ she notes that Yats would be the ideal ‘puppet’, didn’t fancy the boxer – and thus it came to pass: with the bully boy tactics of the fascist Svoboda/Right Sector: and who sent in those snipers? and where did they come from? Nasty ol times – nasty ol times. So Biden fixes up the son – who runs a fundie with Biden’s brudder. Prob see the SeeEye-A siblings gets fixed up shortly; and one assumes Victoria will see some read dividends as her hubby fixed up a 50 yr fracking deal with Chef-Ron! An Europe stood idly by …… Comments are closed.