7 replies on “Too early to call the end of the eurozone recession…”
I would humbly suggest the application (or not) of the word “Recession” is far more important to political Punch and Judy stuff – and by extension, to journalists – than to the study of macro economics, where the data series are there for you to interpret sensibly.
The committee seems to have the task of applying a binary descriptor when currently a more appropriate answer would be “It rather depends how you want to look at it.”
One might form a committee to deliberate on whether a particular shade of mid-grey should be declared black or white.
Perhaps it’s not a cycle.
It might be more like an L shape. For slow learners.
“The ECB, however, appears to believe that the right policy in the face of below-potential growth, below-target inflation and likely further disinflation is to shrink the balance sheet of the eurosystem – by 26 per cent since mid-2012. After setting the deposit rate below zero, aggressive monetised balance sheet expansion through outright purchases of private and sovereign debt and through long-term fixed-rate repos at rates very close to zero, are required if the euro area is to avoid secular stagnation. “
The medical profession was able to come up with the name ‘Bird-flu’ to describe a new a virulent strain of an existing virus.
It is beyond time for the economics profession to come up with a new word to define the disaster that has been inflicted upon many European citizens since 2008.
Something slow lie a tortoise, painful like torture, and just cession as we don’t know whether its a depression or a recession. A torcession perhaps!
John Authers is concerned about an oil price spike. Would not be ideal for the EZ
@ seafóid: Keep plugging this crude oil production ‘problem’. Its THE economic problem – and its intractable.
I have convinced myself that the relevant folk know exactly what this problem is, and its inevitable nasty outcomes for our economies and the subsequent knock-on affects on their respective political and social cohesions. They are just keeping quite, for now anyway, and letting the PR canaries sing-along with their ‘happy’ tunes. Best not scare the sheeple. But behind the scenes – in private? And the military establishments?
Here in Ireland? No one is aware? Again, I doubt it. We’ll just have to wait and see what pops up. In the meantime, get a farm or learn how to grow your own food and how to live on less than 2 litres of fuel per day.
Fun times ahead.
@ BWS
This and climate change are coming together at the same time. Can’t see too many valuations holding up when reality sinks in. Valuations are based on future earnings, not current assets.
Debunking the Hype about the European “Recovery”
Posted on June 19, 2014 by Yves Smith
Just because periphery county bond yields are down thanks to the tender ministrations of the ECB does not mean that Europe is on path to a recovery. And in a even clearer-cut case than the US, a technical recovery (as in hitting a bottom and showing some improvement from that) is a terribly pale shadow of the real think.
A new and suitably data-driven post by Zsolt Darvas and Pia Hüttl at the Bruegel blog throws cold water on the notion that Europe’s hardest-hit economies are on the mend. The key section:
Do these undoubtedly benign developments suggest that the three euro-periphery countries [Portugal, Greece, and Ireland have reached a sound and robust fiscal situation? Unfortunately, the answer is no….On the one hand, our findings continue to suggest that the public debt ratio is set to decline in all three countries under the maintained assumptions and in fact their future levels are now projected to be slightly lower than in our February simulations (eg for 2020 our new results are 2-3 percent of GDP lower). But on the other hand, the debt trajectories remain highly vulnerable to negative growth, primary balance and interest rate shocks, especially in Greece and Portugal, though also in Ireland.
For example, if nominal GDP growth turned out to be 1 percentage points lower than in our baseline scenario (either due to weaker real growth or lower inflation), Greek public debt would still be 133% of GDP in 2020 and 113% in 2030, the Portuguese debt ratio would be 119% in 2020 and 106% in 2030, while the Irish debt ratio would be 107% in 2020 and 87% in 2030…
Under the combined shock of 1 percentage point slower growth, 1 percent of GDP smaller primary budget surplus, 1 percentage point higher interest rate and 5% of GDP additional bank recapitalisation of the banking sector by the government (which is not an extreme scenario), the debt ratio would explode in Greece and Portugal and stabilise at a high level in Ireland (Figure 2).
Furthermore, we highlight that our goal with the debt simulation was not the calculation of a baseline scenario which best corresponds to our views, but to set-up a baseline scenario which broadly corresponds to official assumptions of the IMF and the European Commission and current market views….
We think that today’s markets may be overly optimistic …
7 replies on “Too early to call the end of the eurozone recession…”
I would humbly suggest the application (or not) of the word “Recession” is far more important to political Punch and Judy stuff – and by extension, to journalists – than to the study of macro economics, where the data series are there for you to interpret sensibly.
The committee seems to have the task of applying a binary descriptor when currently a more appropriate answer would be “It rather depends how you want to look at it.”
One might form a committee to deliberate on whether a particular shade of mid-grey should be declared black or white.
Perhaps it’s not a cycle.
It might be more like an L shape. For slow learners.
Here’s Buiter from February
http://www.ft.com/cms/s/0/aec80aa8-6662-11e3-aa10-00144feabdc0.html
“The ECB, however, appears to believe that the right policy in the face of below-potential growth, below-target inflation and likely further disinflation is to shrink the balance sheet of the eurosystem – by 26 per cent since mid-2012. After setting the deposit rate below zero, aggressive monetised balance sheet expansion through outright purchases of private and sovereign debt and through long-term fixed-rate repos at rates very close to zero, are required if the euro area is to avoid secular stagnation. “
The medical profession was able to come up with the name ‘Bird-flu’ to describe a new a virulent strain of an existing virus.
It is beyond time for the economics profession to come up with a new word to define the disaster that has been inflicted upon many European citizens since 2008.
Something slow lie a tortoise, painful like torture, and just cession as we don’t know whether its a depression or a recession. A torcession perhaps!
John Authers is concerned about an oil price spike. Would not be ideal for the EZ
http://www.ft.com/intl/cms/s/0/1add303a-f63a-11e3-a038-00144feabdc0.html
http://crudeoilpeak.info/world-crude-production-2013-without-shale-oil-is-back-to-2005-levels
@ seafóid: Keep plugging this crude oil production ‘problem’. Its THE economic problem – and its intractable.
I have convinced myself that the relevant folk know exactly what this problem is, and its inevitable nasty outcomes for our economies and the subsequent knock-on affects on their respective political and social cohesions. They are just keeping quite, for now anyway, and letting the PR canaries sing-along with their ‘happy’ tunes. Best not scare the sheeple. But behind the scenes – in private? And the military establishments?
Here in Ireland? No one is aware? Again, I doubt it. We’ll just have to wait and see what pops up. In the meantime, get a farm or learn how to grow your own food and how to live on less than 2 litres of fuel per day.
Fun times ahead.
@ BWS
This and climate change are coming together at the same time. Can’t see too many valuations holding up when reality sinks in. Valuations are based on future earnings, not current assets.
Debunking the Hype about the European “Recovery”
Posted on June 19, 2014 by Yves Smith
Just because periphery county bond yields are down thanks to the tender ministrations of the ECB does not mean that Europe is on path to a recovery. And in a even clearer-cut case than the US, a technical recovery (as in hitting a bottom and showing some improvement from that) is a terribly pale shadow of the real think.
A new and suitably data-driven post by Zsolt Darvas and Pia Hüttl at the Bruegel blog throws cold water on the notion that Europe’s hardest-hit economies are on the mend. The key section:
Do these undoubtedly benign developments suggest that the three euro-periphery countries [Portugal, Greece, and Ireland have reached a sound and robust fiscal situation? Unfortunately, the answer is no….On the one hand, our findings continue to suggest that the public debt ratio is set to decline in all three countries under the maintained assumptions and in fact their future levels are now projected to be slightly lower than in our February simulations (eg for 2020 our new results are 2-3 percent of GDP lower). But on the other hand, the debt trajectories remain highly vulnerable to negative growth, primary balance and interest rate shocks, especially in Greece and Portugal, though also in Ireland.
For example, if nominal GDP growth turned out to be 1 percentage points lower than in our baseline scenario (either due to weaker real growth or lower inflation), Greek public debt would still be 133% of GDP in 2020 and 113% in 2030, the Portuguese debt ratio would be 119% in 2020 and 106% in 2030, while the Irish debt ratio would be 107% in 2020 and 87% in 2030…
Under the combined shock of 1 percentage point slower growth, 1 percent of GDP smaller primary budget surplus, 1 percentage point higher interest rate and 5% of GDP additional bank recapitalisation of the banking sector by the government (which is not an extreme scenario), the debt ratio would explode in Greece and Portugal and stabilise at a high level in Ireland (Figure 2).
Furthermore, we highlight that our goal with the debt simulation was not the calculation of a baseline scenario which best corresponds to our views, but to set-up a baseline scenario which broadly corresponds to official assumptions of the IMF and the European Commission and current market views….
We think that today’s markets may be overly optimistic …
http://www.nakedcapitalism.com/2014/06/debunking-hype-european-recovery.html