Slow train wreck

Why is anyone shocked at the political news from France this morning? Everyone is saying that the FN got a boost from the November 13 atrocities, and perhaps they did, but there are far longer run forces at play here.

One is the corruption and sleaze that characterises Parisian politics. But there are also economic factors that are having a predictable impact on attitudes (and if they are predictable, then economists don’t have the right to ignore them). Globalisation creates losers as well as winners, for example, and if no-one really cares about the losers, and we just pay lip service to the problem, then it is predictable that there will be a backlash. The Euro has not only locked in a set of distorted real exchange rates, but a macroeconomic policy mix with a pronounced deflationary bias. If times remain tough enough for long enough, and politicians hear your pain but don’t actually do anything about it, some people will eventually respond by voting for candidates who reject existing constraints on policy making. “Europe” is increasingly experienced as a set of constraints preventing governments from doing what their people want them to do, rather than as a means of empowering governments to collectively solve problems.

So why would anyone be surprised that Mme Le Pen has done so well; and is it not likely at this stage (though 2017 is a long way away) that absent major policy shifts she will come first in the first round of the Presidential election? And let there be no mistake: if she actually won the second round, either then or in 2022, this would mean the end of the EU as we currently know it.

What is so frustrating about all this is that it has been so predictable. Here are some links dating back to 2010, a year that risks being viewed by future historians as a fateful one:

Adam Posen

And me, with apologies for the self-indulgence, writing for Eurointelligence.

I am pretty sure Martin Wolf was saying similar things back then, and that many others were too.

The good news is that, as recent Irish experience shows, the populist vote stops rising when the economy recovers. (The decline in the independent vote share is quite striking, and SF have clearly stopped rising. And no, I’m not saying that anyone is like the French National Front, but support for these parties is the closest Irish equivalent to the French anti-establishment protest vote that is benefiting the FN so much.) And 2017, and even more so 2022, are a long way away. But Eurozone monetary and fiscal policy, and social policy too I would think, need to start taking into account the fact that the entire European project, the good bits as well as the harmful bits, is now facing an existential threat.

Update: Paul Krugman weighs in here.

Comments

comments

71 thoughts on “Slow train wreck”

  1. The really great feature of the French two-round electoral system, which has become the standard at all levels in France, is that, if the outcome of your first vote scares the hell out of you, you can correct your fire in the second round to calm your nerves.

    It would be a pity if this rather important detail was overlooked.

  2. The markets don’t care about the European project. Algorithms are even less interested. Votes for Le Pen are a sign that the system is broken.

    At times like these, darkness has a hunger that’s insatiable. And lightness has a call that’s hard to hear.

    Hollande brought Obama to L’Ambroisie (3 Star Michelin) . That sort of thing is what Le Pen loves.

  3. Rachman on the similarities between Trump and Le Pen

    http://www.ft.com/intl/cms/s/0/e7b61eae-974d-11e5-9228-87e603d47bdc.html

    This paper is also germane- at a time of economic chaos, some working class people vote extremist, others slowly kill themselves . 2015 is a pretty grim year for those who don’t feel the system has anything to offer them. Things have changed lot since Lehman went under, and not necessarily for the better.

    http://equitablegrowth.org/must-read-anne-case-and-angus-deaton-rising-morbidity-and-mortality-in-midlife-among-white-non-hispanic-americans-in-the-21st-century/

  4. According to the ‘structural adjusters’, France still has a long way to go.

    The ‘losers’ need to be educated in the knowledge that the act of losing is all their own fault; as the winners seek to consolidate their wins, the product of their own hard work exclusively, (plus a little help from Bettencourt).

    Le Pen is unlikely to succeed to the presidency, primarily because Sarkozy will adopt a multitude of her ‘policies’.

    The rot goes on.

  5. Nice to know that there is apparently a ‘right’ type of election result and a ‘wrong’ type of election result, and the bien pensant all agree on which is which. Perhaps we should simply communicate this to the electorate and then we could dispense with elections altogether.

  6. Papa Le Pen beat Jospin in the first round in 2002 so the FN does have form.
    If the Euro were to lead to an FN prez you would have to ask whether it was worth it. Draghi says there are “no limits” to getting inflation back to 2% but tearing France apart isn’t one of his policy tools and I’m pretty sure it’s not in his mandate.

  7. It is wrong to put the blame for the rise of the FN on rigidities in the Euro system. It goes much deeper than that and goes back much further than that.

    The reality is that France has been in relative freefall since its cultural marxist revolution in 1968. In the 1960s under De Gaulle, a conservative Catholic, not wholly unlike De Valera, France was a spectacularly successful country. In fact, the relative success of the French economy in the 1960s aroused considerable envy in Britain (and Ireland) and was the main factor in the conversion of the British (and Irish) political class to the idea of joining the Common Market (as it was then).

    But, come 1968 and all this was swept away. The success of the cultural marxists was initially limited to the media and academia. So, its economic growth continued for a while post-1968. But, by the 1980s the ‘children of 1968’ had moved to positions of control in every corner of the economy and society. France has been tumbling downhill ever since at an accelerating rate. Among the ‘achievements’ of France’s cultural marxist rulers over recent decades have been:

    (a) The destruction of France’s work ethic by restrictions on working hours that have no parallel elsewhere and by granting whole swathes of public sector workers retirement at 50.

    (b) The destruction of France’s entrepreneurial culture by high taxes and bloated welfare.

    (c) The ruination of France’s education system by political correctness and ceding control to tinpot marxist teacher union dictators. France came way down the league table in the recent PISA tests, miles below Ireland.

    (d) The eradication of France’s glorious Christian (mainly Catholic) inheritance. And, as in other countries, the destruction of the traditional family as the main pillar of society.

    (e) Unlimited immigration from Muslim countries to the point where large areas in all its major cities are for all practical purposes no longer part of France but of the Caliphate.

    The result of this is total economic stagnation and social breakdown. France is unable to grow by more than 1% annually even in a year like 2015 when oil prices (France’s main import) have fallen by 60% and the Euro is 20% to 25% down against the dollar and sterling. The same combination is resulting in 6%-8% growth in Ireland.

    The success of the FN is essentially the start of the counter-revolution against the cultural marxist elite that took power following the 1968 revolution. That there always remained considerable opposition to this elite became clear in the huge demonstrations in favour of traditional marriage that took place in 2014. Some of these attracted over 1 million people. The Paris massacres seem to be merely the straw that broke the camel’s back. The ousting of the cultural marxist elite and its replacement by a more traditional more conservative political leadership now seems inevitable. Not before time. The FN wouldn’t be my cup of tea. Ideally the more mainstream conservative political leaders will take control of this counterr-revolution and steer it away from any entanglement with racism or fascism.

  8. I don’t agree with the idea that a drift to extreme political parties is linked to the euro in the case of France.

    The French are reluctant to alter their labour and social welfare policies. They want to protect the good life and their leaders won’t be in office if they threaten this. Even if they had retained the franc, I think they’d face the similar shift to le pen

    That said, there are many problems with the euro.

  9. A vibrant European social democratic union, a stable potential reserve currency, backed up by a more than credible military force …..

    …. represents an ‘existential threat’ to NATO, the US military-industrial complex, and the neo(ordo)liberal illlusion very well spun by the ~all powerful financial system elite.

    Fascism d_Mark II.

    European Republicans are weeping …. musta forgotten how to fight!

  10. The Front National (FN) got 28% of the vote compared with Sarkozy’s Républicains at 27% and Hollande’s socialists at 22%.

    Regional voter turnout was 43.01% compared with 39.29% in 2012.

    Le Pen’s father won 18% of the second round vote for the presidency in 2002.

    It’s not obvious that France without the euro would have performed very differently as the currencies of most members of the EU would have devalued. Most of the trade is within Europe.

    France had a shallow recession and its banking system remained largely intact.

    In 2014 general government expenditure was at 57.5% of GDP — second highest in Europe after Finland. The tax burden was at 45% compared with 36.5% in Germany and 33% in the UK. The gross public debt is almost 100%.

    The standard of public services is apparently good.

    Public jobs ex healthcare (public + private) fell in 2000-2009 after 600,000 were added in the 1980s and 400,000 in the 1990s.

    France has a problem with youth unemployment and in contrast with Germany, Austria, Denmark and Switzerland, it has not a significant tradition in apprenticeships.

    When Louis X1V revoked the Edict of Nantes in 1685, he triggered an exodus of an estimated 200,000 French Huguenots (Protestants) in subsequent decades. The refugees were mainly town dwellers who were skilled artisans and businessmen. In England they helped to sow the seeds of the Industrial Revolution. Sir John Houblon, grandson of a French Huguenot refugee and a prominent city merchant, was the first governor of the Bank of England.

    The FN was once an advocate of free market policies but in more recent times it has advocated protectionism.

    Subsidiaries of foreign companies account for almost a third of French exports.

    When a four-time bankrupt, political naif and billionaire, becomes a champion low income whites in the US, we should not be surprised with similar developments in Europe.

    In 1973 after three decades of growth, the Communist Party in France won 20% of the national vote — three years later when the developed world was in recession, the communist party in Italy, the PCI, reached its all-time maximum electorally: 34.4% in the 1976 general election.

  11. First, I would like to thank Kevin O’Rourke and the other contributors for stepping up to the plate during the enforced absence of the proprietor.

    Secondly, I think we should wait until we see the outcome of the second round of voting in France before announcing the imminence of the apocalypse.

    Thirdly, I doubt very much that the arguments advanced by any number of economists, irrespective of the eminence or competence of these economists or the reasonableness or relevance of these arguments, will persuade the national and EU political, administrative and corporate elites to alter course and prevent the inevitable damage to the process of democratic governance.

    Fourthly, we need to recognise that most of these economists, while they might bridle a little and profess their disinterested, academic credentials, would find it difficult to reject an assertion that they tend to pursue a left-of-centre or progressive stance. And we must also recognise that they are relatively few – even if they make a lot of noise. What is significant is the relative silence of the large majority of economists – or, when pushed, their weasel-worded, self-serving, disingenuous defence of the status quo. Most of the professional classes – and those in the media and PR (who who yearn to be treated as professionals, but in reality ply a trade) – have their snouts in the trough. Why would they do or say anything that might restrict or divert their current supply of unearned largesse?

    And finally, there is a big world out there and EU navel-gazing and the indulgence of existential angst won’t help us deal with it. On one level, it’s not just the BRICS – even if Brazil is at a low ebb currently and Russia doesn’t fit from an economic perspective, it’s the multitudes of other medium and to large emerging economies. As these advance and more and more people are being lifted out of poverty they want the kind of life that Europeans enjoy. The opportunities for mutually beneficial trade, co-operation and collaboration are potentially infinite.

    On the other level, where fear and distrust is too easily sown, the primacy of the UN must be re-established to suppress the efforts to establish a viable state in Syria and Iraq that purloins and abuses archaic and extreme aspects of the Sunni strand of Islam to secure a measure of legitimacy in the region and that seeks to provoke a violent reaction in the west. It is true that the west, by supporting autocratic rulers who suppressed all civil society dissent, has done much to encourage popular reliance on fundamental strands of Islam to generate opposition to these autocrats. But that is in the past, and the focus must now be on containing the long simmering Sunni v Shia feud – which, as is almost always the case, is a political and economic power struggle beneath the banners and shibboleths of conflicting religious beliefs and traditions.

  12. @JTO

    Body blows to “France’s glorious christian tradition” go back a few years before 1968. Cluny was trashed during the revolution.

    Single families are your bane of everything to do with economic incoherence. Never inequality or elite snout work.

    “Unlimited immigration from Muslim countries to the point where large areas in all its major cities are for all practical purposes no longer part of France but of the Caliphate.”

    https://www.youtube.com/watch?v=jMesCFh5BBQ

    For most Muslims the priorities are Metro, Boulot , dodo, like everyone else

  13. One feature of the ongoing EZ crisis is how it has slowly destroyed the usual political narrative. So many leaders have been brought down. Parties have been eviscerated in Greece and Ireland. And voters remember betrayals. Another factor leading to the rise of the far right.

    http://www.theguardian.com/world/2012/may/06/french-elections-2012-nicolas-sarkozy-failure

    “Sarkozy’s courtship of the far right ultimately failed. By bringing the favourite topics of the Front National into the mainstream, namely immigration and fear of Islam, he served only to
    strengthen its leader, Marine Le Pen. He also dented his own legacy, leaving himself for the time being remembered in French minds not for what he defined as his bullishness in defending France abroad, or for reforms such as lowering the pension age, but for a divisive, stigmatising campaign that even some in his own camp privately felt was repulsive.
    Sunday’s vote was a personal referendum on Sarkozy. At the start of his mandate, he was briefly the most popular president since Charles de Gaulle; then he plummeted to record lows for four years and festered there. Rejection of the “president of the rich” was not just about his ostentatious vaunting of money – celebrating his 2007 win at a flash restaurant with the nation’s richest people and borrowing a millionaire’s yacht when he had promised to retreat to a monastery. It was not just about unpresidential manners – sending text messages during an audience with the pope, saying “Sod off, you prat” to a man who refused to shake his hand at an agricultural fair or parading his first public date with Carla Bruni at Disneyland weeks after his high-profile divorce.
    All this combined with a feeling of betrayal and disappointment at his record in office after he had promised to transform France to its core. Sarkozy had vowed to be the president who restored the values of work and reward, but he left France with 1 million more unemployed people and millions who struggled to make ends meet. The rich got richer on the back of his tax breaks for them, and France had a growing sense of injustice and doublespeak. Before the election, polls showed that 64% of French people were unhappy with Sarkozy and viewed his record in office as negative. Crucially, a majority felt he had never intended to keep his promises to France”

    Hollande will probably get the same treatment. Not unlike the 1930s where the centre failed.

  14. @ JohnTheOptimist

    It can hardly be disputed that the French are quick to shout “aux barricades” and politicians have generally caved in to the demands of public protests.

    Choosing the student revolt of 1968 dovetails with your Northern Irish social conservatism but the reality of the extreme schism between the monarchist Catholic right and the left dates back much further if not to the Revolution, we could take 1871 in the aftermath of the Prussian defeat and the massacre of 100,000 or so people in the city of Paris when the commune was crushed.

    The right had worried about a conspiracy to destroy France’s Catholic identity and almost a quarter of a century later Alfred Dreyfus, a French army officer of Jewish origin, was falsely charged with treason with the connivance of the Army General Staff.

  15. 4 years on from 2011 very little has happened.QE bought time but demand is still missing in action.
    Politics have become very messy. Unemployment hasn’t been tackled. Markets trade as if everything is fine.

  16. Currency union without fiscal union.
    Labour market union without welfare union.
    Passport union without security union.
    Banking union without deposit union
    And “ever closer union” without voting union.

    The miracle is that the thing has held together as long it has, with such incompetence at the top.

  17. Not to mention the fact that the thing just keeps growing; from six members originally to twenty-eight today!

    That must scale up the number of incompetents dramatically.

  18. from NakedCapitalism.com

    French Far Right Victory Brings Eurozone Disaster Closer Fortune Swedish Lex: “We began warning about this five years ago, I think, when Merkel and Sarkozy imposed austerity and Sarkozy domestically turned xenophobic in order to win votes from le FN:

    But, as CER’s Tilford points out, “the politics have been moving in a worrying direction for a long time.” Unless something changes the direction of travel, it’s only a matter of time before Europe’s pivotal economy and body politic finds itself ruled by a motley bunch of neo-, crypto- and quasi-fascists absolutely irreconcilable with Europe’s current status quo.

    http://fortune.com/2015/12/07/french-far-right-victory-brings-eurozone-disaster-closer/

    plus Sarkozy’s headlong rush to bomb Libya [French jets were first in] …. mainly for domestic political gain ….. and look at the disaster, not only for decent Libyan Citizenry, but for all of N. Africa and the Sahel ….. and now we could be looking at MerKozy Mark II in 2017.

    Bombing Libya was completely unnecessary …. Joint French/Italian/British diplomatic/economic pressure would have sufficed: after all, they created the Libyan state from 3 regions ….. Sarkozy, imho, is a bigger threat than Le Pen

  19. not a monetary union part 654

    http://www.ft.com/intl/cms/s/0/76a651b8-9db8-11e5-b45d-4812f209f861.html
    “Germany’s finance minister has warned he is prepared to go to court to overturn Brussels’ plans for a eurozone-wide deposit guarantee scheme
    . In a sign of heightened tension over the deposit insurance plan, Wolfgang Schäuble also fired a shot across the bow of the European Central Bank for advocating it, saying Frankfurt was improperly intervening in a policy beyond its monetary remit. “

  20. Meanwhile the IT reports that the final report of the Oireachtas banking inquiry is expected to claim that the Central Bank had a contingency plan to avoid a bank default in September 2008.

  21. @Frank Galton

    Could not agree more Frank.
    You are spot on.

    I think people generally want it to “hold together” because they are afraid of the “unknown”. I mean, suggest to a “normal” person that we should leave the Euro and they look at you like you’ve just poured a large McDonalds chocolate milkshake over your own head. I’ve tried it (the suggestion, not the milkshake) and (again, “normal”) people immediately proclaim that a Punt Nua would collapse on the market and we’re too small and too open to float our own currency etc. etc. Then I suggest that New Zealand has a far smaller GNP, a similar population and their currency floats just mighty fine…..

    The first step of recovery is to hope the Brits vote “out” so that we can use that (dishonest as it maybe) as a front for leaving the Euro via a route of ERM in reverse.

    With monetary sovereignty, comes fiscal sovereignty, comes the tools to move away from the mad German mercantilist hegemony and toward some rational policies.

  22. @Michael Hennigan

    The history of France in recent centuries is one of sharp swings (sometimes violent) between periods of dominance by the nationalist Christian (mainly Catholic) right and the secular anti-religion left. It looks like the most recent long period of ascendancy by the latter is now nearing its end. Hardly surprising, given how they’ve destroyed the French economy and society. Since you have agreed with me that France’s economic decline long predates the Euro, to what do you attribute it?

    Ironic that you mention the tribulations suffered by one Jew a century and a quarter ago. Today Jews are fleeing France in droves. The alliance between the cultural marxist elite and the large Muslim immigrant population is producing an extremely hostile environment for Jews in France. Attacks on synagogues and Jewish businesses are increasing dramatically.

  23. @JTO

    there isn’t gong to be a revival of catholicism in France. Secularism is there to stay, quoi.

    France’s economic malaise is down to being stuck in the Euro and the general state of capitalism.

    the UK isn’t much better. Check out the survey on how people feel about the UK and the words most associated with the UK today.

    http://www.fearandhope.org.uk/project-report/themes

    Le Pen is winning most votes amongst social classes D and E just like UKIP

  24. For a likely explanation as to why Schaeuble is so irate cf. this earlier post.

    @ CMcC

    On the issue of deposit insurance, before the example of Illinois comes up again, this somewhat dated paper from the FDIC, culled from the Web, is informative.

    https://www.fdic.gov/bank/analytical/banking/1999may/1_v12n1.pdf

    N.B.

    “In addition to the funding advantage, other dimensions of deposit insurance allow a gross subsidy to accrue to insured depository institutions. This is because deposit insurance differs from market-provided insurance
    in two important ways. First, the premium is not set by the market. As we discuss below, it is very difficult to measure what a market rate for deposit insurance should be. Second, there are two parts to deposit insurance: the insurance funds administered by the Federal Deposit Insurance Corporation (FDIC),3 and a call on the full faith and credit of the U.S. government. This call is similar to a standby letter of credit provided by the government. There has never been an explicit charge for this call. But measuring the value of this call is also quite difficult, since the call is in the money only if one of the insurance funds becomes insolvent. Hence its value varies over time with the health of the banking industry and the strength of the insurance funds. In the more than 60-year history of deposit insurance, reliance on the full faith and credit of the U.S. Treasury has been necessary only once to clean up the savings-and-loan (S&L) debacle of the 1980s. Nevertheless, the fact that credit from the U.S. government is available for deposit insurance purposes enables insured institutions to borrow in the marketplace at lower interest rates than uninsured financial institutions.

    Footnote 2 One example of an implicit government guarantee is the so-called too-big-to-fail policy, under which it is believed that the government would protect extremely large money-center banks from failure in order to maintain the stability of the U.S. financial system.”

    The Germans are not ready to have the EU, in its far from federal state, have the possibility of a call on its “full faith and credit”. They suspect, rightly, that it would apply mainly to them. A good measure of the risk is the level of EU collective “federal spending” of about 2% of GDP, equating to the level of federal spending of the US in 1900 (!). In net terms i.e. in terms of what is put into the EU budget against what countries take out, the Germans are, of course, already the biggest contributors.

  25. Maybe ZIRP will be the difference between now and the thirties. Maybe it won’t

    http://michaelrosenblog.blogspot.co.uk/2014/05/fascism-i-sometimes-fear.html

    I sometimes fear that
    people think that fascism arrives in fancy dress
    worn by grotesques and monsters
    as played out in endless re-runs of the Nazis.
    Fascism arrives as your friend.
    It will restore your honour,
    make you feel proud,
    protect your house,
    give you a job,
    clean up the neighbourhood,
    remind you of how great you once were,
    clear out the venal and the corrupt, (Muintir DOCM, peut etre)
    remove anything you feel is unlike you…

    It doesn’t walk in saying,
    “Our programme means militias, mass imprisonments, transportations, war and persecution.”

  26. The Posen article is v interesting

    “The likely reason monetary stimulus will be insufficient on its own to bring sustained recovery is the ongoing fragility of the financial system limiting lending to new and small business. Having some day-to-day financial stability due to guarantees is not the same as having a fully functional banking system – the proof of functionality is in lending, not stress tests.”

    This all comes back to investment and productivity leading to decent pay rises. QE benefits flow to the wrong people. Share buybacks are not helpful either.

  27. re: Merkel as ‘Time’ Person of Year.

    Her stance on the refugee crisis is as much to be admired, as her stance on the Greek and euro debacle is to be utterly condemned.

    In terms of who deserves ‘person of year’, in terms of the refugee crisis, surely it is Tsipras or Renzi, who have shown themselves head and shoulders above other European leaders, in terms of what their respective countries (and peoples) have done to help refugees; and to counter the naked xenophobia, racism and savagery emanating from several other European countries.

  28. @DOCM

    “As to Schaeuble, those going up against him should consider a basic rule of European integration, the politicians re[resenting their countries call the shots, both legally and as a matter of power politics.”

    That’s reads very much like a ‘might is right’ argument.

    In terms of common deposit insurance, Schaeuble is as usual trying to have it both ways, or should that be every which way.

    He wants freedom of capital movement, he wants to be the beneficiary of capital flight, but does not want to pay for the destruction caused by capital flight. Its hard to discern the notion of either ‘common’, ‘European’ or ‘union’ in his stance.
    Schaeuble’s austerity-first, approach to the euro and banking crisis, is one the more important underlying causes of the swing that has Le Pen leading in France.

  29. Let’s get some perspective on the ‘success’ of the populist parties in Europe. Outside France, they actually are not doing too well, as Tony Barber argues in this piece:
    http://www.ft.com/intl/cms/s/0/e56fbd2a-9dcf-11e5-8ce1-f6219b685d74.html#axzz3tph9k7F7

    It should certainly be borne in mind that the legacy of France’s messy withdrawal from Algeria is still an influence on French politics that does not have parallels in other European countries.

  30. @grumpy

    Hitler also got the Time Person of the Year award.

    It’s given to the person that “for better or for worse…has done the most to influence the events of the year.”

    I think we can all agree she deserved the award. Schäuble must be fuming.

  31. @Seafoid

    Its generally unwise to make long-term predictions on these things. When I was at Queens University in the late 1960s, few of the many marxists and socialists who ran the Students Union would have believed for a moment that 20 years later a Pope would bring down the whole Soviet empire and the great socialist experiment with it.

    As for France, if it wishes to continue with its current post-1968 cultural marxist leadership, it is welcome to. Just means its decline will continue and accelerate, euro or no euro.

  32. As far as left-liberals are concerned, Angela Merkel seems to be presenting them with the same problems in deciding what to think as Tyson Fury (whom I never heard of until a week or so ago) does. With Mr Fury, its award 20 brownie points for coming from a Traveller background, but deduct 20 for being against gay marriage and abortion. With Ms Merkel, its deduct 50 brownie points for screwing Greece and Ireland into the ground (although with little effect in the latter case as the economy grows by 6%-8% annually), but award 100 for inviting a million Syrian ‘refugees’ to come and live in Germany.

  33. But JTO’s claim that “a pope” brought down “the whole Soviet empire” sounds like something The Donald would say.

  34. The EZ reminds me of this :

    http://economics.mit.edu/files/3344

    “The main problem of  the standard moral hazard view is its disregard for the incentive problems it generates within crises. In real life, unlike in many of our models, crises are not an instant but a time period. This time dimension creates ample opportunity for all sort of strategic decisions within a crisis. Distressed agents have to decide when and if to let go of their assets, knowing that a miscalculation on the right timing can be very costly. Speculators and strategic players have to decide when to reinforce a downward spiral, and when to stabilize it. Governments have to decide how long to wait before intervening, fully aware that delaying can be counterproductive, but that the political tempo may require that a full-blown crisis becomes observable for bickering to be put aside.Each of these agents is in the game of predicting what  others are likely to do. In particular, the likelihood of a bailout and the form it is expected to take change  the incentives for both distressed firms and speculators within the crisis. These incentives are central,  both to the resolution of the current crisis as well as for the severity of the next crises. ”

    It’s a fabulous paper. For the next time.

  35. @ JohnTheOptimist

    “Ironic that you mention the tribulations suffered by one Jew a century and a quarter ago. Today Jews are fleeing France in droves.”

    As a native of a place of ethnic strife, I would suggest that you should understand the difference between the hatred and past violence between the communities of the Falls Raod and Shankill Road areas in Belfast and the role of governments in fomenting it.

    The Dreyfus case reflected a conspiracy by the authorities in Paris and a half century later, Marshal Pétain and his Vichy government facilitated the Nazis in murdering Jews.

    The government of France today does not victimise Jews.

    You may sneer at Marxists. Some of them had a valiant role in fighting Nazis compared with the many collaborators including Mitterrand, who was later president in 1981-1995.

  36. Meanwhile since we don’t have a Front Nationale in Ireland, the next election will return a record number of Independents

    The phrase It’s the Economy Stupid was never more apt

    And the EU is still blindly following the German line – if Francois Hollande biggest is the failure to change the EU rules to end austerity across the continent

  37. @ JTO

    Making long term predictions about church attendance in France is as safe as making them about Latin.

  38. Why just the EU elite ?

    It’s a comprehensive failure at so many levels, political and economic, national and trans communautaire

  39. @Michael Hennigan

    The marxists in France weren’t fighting to liberate France from Nazi tyranny and establish democracy. They were fighting to remove it from one tyrannical socialist state led by a man with a moustache (National Socialist Germany) and incorporate it in another tyrannical socialist state led by a man with a moustache (Union of Soviet Socialist Republics). Quelle Difference! Thanks to DeGaulle they failed miserably and for a quarter of a century after France prospered..However, they did win the culture war that followed DeGaulle’s death.

  40. @seafoid

    More on the Buy-Back Binge

    ‘As corporate America engages in an unprecedented buyback binge, soaring CEO pay tied to short-term performance measures like EPS is prompting criticism that executives are using stock repurchases to enrich themselves at the expense of long-term corporate health, capital investment and employment.

    http://www.reuters.com/article/us-usa-buybacks-pay-specialreport-idUSKBN0TT2AH20151211#yEqKza9xU2BqvkQp.97

    @JohnTheOptimist

    Spose the ‘Marxists’ who defeated Fascism at Kursk, the defining battle of WWIII, under Marshall Zhukov should just have followed your ‘croppy lie down’ ideology? Willie -John is not impressed – says you are letting down the black prod republican tradition in Tyrone.

    Then again, you are prone to a fair bit of gently sh1t-stirrin so I’ll give you the benefit of the doubt.

    @Michael Hennigan

    The 2 drenched Marxists in Bandon appreciate your impartiality!

    You might have passed Math at Queens but methinks you failed history

  41. Oops

    @JtO

    This was for your good self; Michael Hennigan knows his history.

    ‘You might have passed Math at Queens but methinks you failed history.’

  42. @DOD

    http://howestreet.com/2015/11/the-fed-induced-farce/

    it seems the buyback happy CEO’s of the S&P 500 conglomerates have used the strong dollar as their excuse de jour for their profits falling. Good old globalization has not only resulted in millions of good paying jobs being shipped to foreign lands, it has now made the S&P 500 corporations dependent on foreign markets for 30% of their sales and 40% of their profits. The continued appreciation of the dollar will result in lower profits for our mega-corporations, which will prompt the CEOs to fire more Americans and ship their jobs to the Far East, while ramping up the billion dollar buybacks of their stock. It’s the American way.#

    http://us.anygator.com/article/what-will-happen-to-corporate-profits-if-the-fed-hikes-in-december__6651257
    Q3 will be the first quarter in which the US officially suffers an earnings recession: two consecutive quarters of declining annual EPS growth despite hundreds of billions in stock buybacks reducing the per share denominator in the EPS calculation. Q4 will not be any better and while EPS are expected to decline one again, it will be the fourth consecutive decline in revenues in the S&P that will be the highlight.
    The reasons for this slowdown in both sales and profits are well-known: the surge in the dollar, the slowdown in global trade, the collapse in commodity prices, and the suddenly weak consumer (just look at retail stocks in the past month).
    Furthermore, and contrary to conventional wisdom, net income is declining both with and without energy companies. As Socgen notes, Net
    reported income is declining not just in energy, but in a variety of other sectors and those who do not yet have negative EPS growth have very low single digit growth numbers.#

    And EPS is a crap metric. It is so easy to manipulate via buybacks

  43. So in the end, the National Front won no regions. That shows yet again that it is not enough just to win a share of the vote… to form governnment, alliances are needed and only parties capable of forming alliances are likely to hold any power. There is a lesson there too for Irish politics.

  44. DOD

    ‘Michael Hennigan knows his history’

    He is good at passing on statistics and highlighting some particularly moralizing piece of text in bold but what makes you think he understands history? Because of a bit of boilerplate about Dreyfus?

  45. @COH

    I wouldn’t be so blase about the FN. Papa Le Pen got to the second round in 02 when the macro situation was far more rosy than it is know. Sa fille is gunning for 2017 and the macro picture will only deteriorate in the meantime. Saving all those bond investors including your guvnor who couldn’t price tail risk has been at the cost of demand and economic growth. For working class Europeans there is very little belief in elites and le Pen can run with this til the cows come home.
    Bernard, the Republican who beat her at the weekend said that France had its last chance.

  46. @seafoid

    The sheer ‘scale’ of buy-backs was new to me …. BIG KRASH comin. Or a BIG WAR!

    @Sean Coleman

    Michael Hennigan needs no assistance from me on ‘newbie’ little bites.

    The history of the blog, and his own one, does it for him.

  47. DOD

    ‘Michael Hennigan needs on assistance from me on ‘newbie’ little bites.’

    I may not post much but I have been reading this blog on and off (admittedly more off than on) since the start. That’s not to imply criticism of those who post regularly.

    I am disagreeing with your assessment of MH’s historical abilities. Whether he needs your help, or Blind Biddy’s, isn’t really the point and I don’t care. Maybe his command of the subject was on display on the ‘off’ days and I missed it. I’ll grant that he seems to know a lot of facts about American history and his quotes are memorable.

    We exchanged views in September on the Immigration Juggernaut thread (my reply to him isn’t there, not that it matters). On that occasion he linked to an article about the Irish govt taking in nazis after WW2, which had nothing to do with anything. Here it’s Dreyfus and valiant communists.

    There is an automatic left-wing bias in the Irish media (which is bad news for the rest of us) and it seems to be the case here too, and historical facts are selected accordingly, which might explain the incoherence. On the strength of this thread JtO’s arguments are obviously better.

    By the way, if anyone wants an alternative assessment of Franco and can understand Spanish they should look up Pio Moa on YouTube. There’s a good recording of him in a discussion programme where the young Socialist firebrand is sulkily playing with her phone all the while he speaks, breaking in in the end with a stream of what Moa describes as infantile rhetoric.

  48. @Sean Coleman

    My views stand.

    But, now! now! Sean, we won’t be gettin into Catalan … my views have stood there for a while!

  49. The ‘automatic left-wing bias’ in Irish media is extremely limited.

    It’s certainly not translating into left wing votes.

  50. DOD

    I’ll give myself cover by volunteering that my own history leaves a lot to be desired (but nobody has ever said it was anything else). Of course, someone could, theoretically at least, disagree with you and still be a good historian. However why make it easy for them?

    Fergal

    Left wing as short-hand for a narrow range of views (and policies – the KO’R’s article refers) held across all the media and all the parties leaving just enough room for branding. On the spot and off the cuff I’d describe it socially as politically correct and economically as ‘insider’. This is called ‘moderate’ (even though some of it would have been dismissed as radical even a decade or two ago) while dissent is labelled ‘extremist’. As in drink driving, the ‘extremist’ loses his licence, whether it’s one pint or ten.

    The recent non-discussion of mass immigration was a good illustration of how it is barely respectable to mention some things.

    The danger is of the moderate ‘extremists’ being driven into the arms of the ‘not as extremist as they once were but who knows what may happen if things turn ugly? extremists’.

    ‘It’s stupidly wrong and self-deceiving… yet I can take no delight in the results.’

    http://hitchensblog.mailonsunday.co.uk/2015/12/frances-new-maginot-line-cannot-hold-indefinitely.html

  51. @DOD

    humungous crash coming. Just waiting for the inflection point.
    The Central Bankers bought time but very little fixing resulted. Most SNP500 CEOs stateside are creaming buybacks with no interest in tomorrow. Monetarism cannot generate growth. there is just too much debt for that. Companies have to invest for growth and they cannot be ars3d. Communism failed in 1989. Capitalism got a few more years but the same shortsightedness catches up with all these systems.

  52. Re FN the French press has been really interesting this week. It is such a pity that so few Irish people speak French. English is really limiting at times like these. France is going to be fascinating over the next few years. It is really headed into the unknown. An editorial in Charlie hebdo compared Le Pen to one of Moliere-s doctors / stupid, ignorant and something else. Take this tablet and in 3 days you-ll feel better. The immigrants will have disappeared.

  53. Seafóid

    I find it hard to listen to the discussions on France Radio because there seems to be so little insight in any of it. Only three interesting things can I remember from the last few months.

    Firstly, the Flemish journalist Clementine Le Forrissier who had worked as a correspondent in Berlin for several years and had never seen Merkel make any decision that had not been carefully planned beforehand until her decision in December to admit the economic immigrants. She described her décision as ‘rapide, émotionelle et pas intellectuelle’.

    Secondly, an interesting programme about the Egyptian Copts.

    Thirdly, in an otherwise soporific programme about Flaubert the presenter (not the expert guests) had some good insights. These were borrowed from Kundera’s Le Rideau, but he’d had the wit to have read it and to use it.

    On matters such as immigration (and probably everything else) any dissent seems to be in code, like some kind of French-speaking Pravda. Of course the BBC, RTE and the others are no better.

    On German radio it is no different. Those who have reservations about *continuing* mass immigration express them, again, very carefully, usually by saying that they don’t yet have the resources to cope with current inflows.

    The leaders in closing down discussion appear to be the Swedes. (I can understand that as well though I barely speak any of them. Yes, I know, a mis-spent middle age.) There was a random murder in an Ikea store some weeks ago that was big news around the world and by some coincidence I had happened to be listening to the following day’s news radio programme programme (P1 Morgon) on a podcast. It wasn’t mentioned in the first half hour or so. Hearing about the story, I checked through it later and a brief, twenty second report, saying nothing but that a murder had been committed, was buried around the hour mark. They gave it more prominence the next day. Still no information about who had been arrested or what his motives were, but rather agonizing over the H&S implications of putting sharp knives on sale.

    I have watched Le Pen on YouTube (never heard her on France Radio) but find it harder to follow, which is usually the case. She is confident and amusing when dealing with journalists, telling one that he was picking up the governmental vocabulary very well and asking another to deny that he was a political advocate. The first one was gracious enough not to argue the case, the second felt obliged to put up a token bluster.

    ‘The immigrants will have disappeared.’

    Have they been calling for this? Isn’t the point to stop taking in more? Of course, if FN get in you can’t be sure what else you might get. What is your own suggestion? Keep the head down and wait and see what the Germans do? Put your faith in the economic benefits mantra and open the borders? Education? Abolish the Angelus? I take your point about it being fascinating, but I think it will be worrying and depressing.

    By the way, talking of stupid and ignorant, doesn’t that apply to Charlie Hébdo themselves?

  54. @Sean Coleman

    What would I suggest?

    Europewide investment in infrastructure for climate change. Drop monetarism. It doesn’t work. QE doesn’t work . Central Banks dont understand how it interacts with the real economy. Maybe a more equitable spread of the QE money might help ?

    It doesn’t have to be worrying and depressing.

  55. Seafóid

    If it were purely, or even mainly, an economic thing your optimism might (but probably wouldn’t – but what do I know?) be justified.

    As for your first suggestion, couldn’t resources be used for something useful? Looking at historical climatic patterns cold weather is on its way. If it’s AGW you are talking about, surely you must know it is a mass delusion.

  56. @SC

    I am not particularly optimistic but the EZ has not yet run out of time. The Yanks will probably put pressure on the Germans to cop on during 2016. The global economy cannot really afford an EZ drifting aimlessly in the direction of catastrophe.

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