Yves here. Varoufakis gives a high-level overview of the political and economic constraints on Merkel in dealing with the festering Eurocrisis. While many of the political issues have received decent coverage in the English language press, the nature and severity of Germany’s economic challenges have gotten scant notice.
Read more...Is it merely a coincidence that the troika rode its Trojan horse into Athens again on the very day Angela Merkel went awfully close to an absolute majority in German elections? I’m sure it is. But it’s still very bad news for the Greeks, who now have their perhaps last chance to throw out the international financial system and decide their own fate, before most of their valuables have been sold off to foreign interests. Greece is where democracy started, and the way things are going, it may be where it will end as well.
Read more...The German word for election, Wahlen, comes from the word “choice”, and in this general election there wasn’t really one. And that’s too bad for the rest of Europe.
Read more...By Satyajit Das, a former banker and author of Extreme Money and Traders Guns & Money
Benn Steil (2013) The Battle Of Bretton Woods: John Maynard Keynes, Harry Dexter White, And The Making of The New World Order; Princeton University Press
Neil Irwin (2012) The Alchemists: Inside The Secret World Of Central Bankers; Headline Publishing Group
Economist Brad DeLong observed in 2008: “It is either our curse or our blessing that we live in the Republic of the Central Banker”.
Read more...Yves here. This post may strike some readers as a bit wonky and a bit too well-fitted to the woes of the Eurozone. Varoufakis argues that it has broader applicability. And consider: our Richard Smith has speculated that the US civil war was really the result of a strained currency union. I’m not terribly knowledgeable about the economics of 19th century America (I studied England and France during that period instead) but on a first pass, Varoufakis’ ideas appear to have some relevance for that period as well.
Read more...No debacle is allowed to interfere with Chancellor Angela Merkel’s efforts to hang on to her job, and any debacles get swept under the rug at least until after the elections on September 22. Every time uppity opposition voices stir up some controversy, it’s brushed off, denied, ridiculed, or minimized – and it has worked admirably well so far.
Even Edward Snowden’s revelations day after day in Der Spiegel – which had received copies of documents detailing German involvement in NSA spying activities, among other sins – were successfully shuffled off. Though the discussion continues to be heated, it is, like in the US, a bi-partisan debacle, compromising political figures from both sides. The scandal is spreading and festering, but apparently without political fallout.
Read more...So now India is the latest casualty among emerging economies. Over the past 10 days, the rupee has slid to its lowest-ever rate, and the Indian economy may well be on the verge of a full-blown currency crisis. In this febrile situation, it is open season for rumours and pessimistic predictions, which then become self-fulfilling.
This means that even if there is a slight market rally, investors quickly work themselves into even more gloom. Each hurriedly announced policy measure (raising duties on gold imports, some controls on capital outflows, liberalising rules for capital inflows and so on) has had the opposite of the desired effect. Everything the government does seems to be too little, too late – or even counterproductive.
Read more...The latest Fed confab at Jackson Hole is demonstrating that central bankers were so keen to avoid taking much blame for the global financial crisis that they also failed to learn critical lessons from it. That lapse in turn is directly related to the present emerging markets upheaval that has the potential to morph into something worse.
Read more...Yves here. Even though Delusional Economics has moved into a guardedly positive stance on Europe, the “recovery” is halting enough in Europe that there are still quite a few analysts on the other side of the fence.
Read more...We’ve been pointing out for some time that Germany has refused to budge from wanting contradictory things relative to the Eurozone. Now something still has to break, but some of my correspondents who’ve just been in Europe now think that we will see a political crisis in Europe before we see an economic one, and that, like objects in your rear view mirror, may be closer than it appears.
Read more...Yves here. I don’t want to be withholding good news when there is good news to be had. But remember, the ISM results for Europe are just over 50, which is the difference between growth and contraction. So in this context, “good news,” given how high unemployment is in the Eurozone periphery, is sort of like “the vital signs are improving enough that the patient might be able to leave intensive care and go into a regular hospital room.”
Read more...Data out of Europe is showing relative improvement on several important fronts, but is this merely stabilization or “less bad” as opposed to finally turning a corner?
Read more...Yanis Varoufakis provided the English translation of a new interview with James Galbraith published in Suddeutsche Zeitung. Galbraith focuses on institutional arrangements, the need for restructuring and reform, and constraints on growth.
Read more...As I’ve been covering over the last few months the data coming out of Europe of late has been slowly getting better, and last nights’ PMI continued the trend. But “better” still needs to be put in context.
Read more...Yves here. One of my colleagues is back from a month in Europe (a lot of travel, and lots of meetings with economists and political types). I need to debrief him more fully, but his short take was Portugal is clearly in crisis, with Spain and Italy not far behind, and that the political train wrecks will hit faster than the economic ones. Although I can’t see how the former won’t accelerate the arrival of the latter.
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