Category Archives: Globalization

“Europe plans its next crisis”

By Delusional Economics, who is unhappy with the current dumbed-down vested interest economic reporting. Cross posted from MacroBusiness

With the economic world firmly focussed on the US debt debacle this week it is likely that Europe will slip off the radar a little. I suspect, as many people do, that for the US there will be an eleventh hour resolution followed by a short lived bounce in the world markets. Once that bounce heads back to earth again it is likely that the world’s eyes will turn back to Europe. There is much to see.

Victor Shih on the Risk of Capital Fleeing China

We’ve written about Victor Shih’s work on Chinese banks and wealthy households. He argues that the Chinese financial system and economy are at risk if enough capital moves overseas. While the release of this video is coming at a juncture when the US and Europe seem to be engaged in a beauty contest between Cinderella’s stepsisters, Chinese business have been making aggressive investments in other economies as well, such as agricultural land in Africa, so it’s worth remembering that advanced economies are far from the only targets for offshore funds.

This video gives a short, high level overview of his provocative thesis. Enjoy!

Moody’s Downgrades Greece Three Notches More

Oh, this is beginning to feel like the crisis all over again in at least two respects: news events taking place on the weekend (well at least from the US perspective) and multiple wobblies happening at the same time.

Frankly, Greece should have been rated junk long before it was relegated to that terrain (note this Moody’s downgrade just takes Greece further into speculative territory, from Caa1 to Ca, which is a degree of refinement that many might deem to be irrelevant). And I’m told by a former ratings agency employee that the agencies have absolutely no methodology for rating countries (although given how well their methodologies worked in structured credit, this shortcoming probably means less than it ought to).

But at least the narrative is pretty realistic. From the Wall Street Journal:

Alexander Gloy: Greece – Two Bail-outs and a Funeral

Yves here. Quite a few readers in comments expressed confusion over the announcement of the latest Greek bailout, and some of the details were admittedly a bit murky. This piece will hopefully help clear matters up.

By Alexander Gloy of Lighthouse Investment Management

Here we go again. Another bail-out. [Sigh.]

I’ll try to make this as entertaining and easily readable as possible – but first the details of the bail-out agreed on July 21st:

We Speak on BNN Re the Latest Euro Rescue, Launch of Consumer Financial Protection Bureau

We had a wide ranging conversation today on Business News Network. Enjoy!

“Trade Imbalances Lead to Debt Imbalances” or Why Mercantilist Nations Shouldn’t Beef About Their “Profligate” Customers

Michael Pettis, a respected economist and commentator on China, provides an important contribution on the global imbalances theme. Many observers have pointed fingers at debtor nations like Greece, Portugal, Spain, and the US and argue that they need to start consuming less. While narrowly there is some merit to that argument, Pettis points out that the trade deficit countries (the debtors) are not the ones in the driver’s seat and it it the trade surplus countries that must take the lead in making adjustments.

Marshall Auerback: The European Monetary Union is the Titanic

By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Deal 2.0

The Iceberg Cometh: An economic and financial crisis will soon be brought about by the collapse of the European Monetary Union. And everyone goes down with the ship!

Soliciting Nominations for the FEMA Awards for Exceptional Financial Crisis Management

We are in the process of seeking recommendations for our inaugural FEMA Awards for Exceptional Financial Crisis Management. We must thank our reader Swedish Lex for providing the inspiration for establishing these prizes.

We are looking for nominees in each category. We have provided some illustrative candidates for specific prizes. Readers are also encouraged to suggest additional categories if they feel we have overlooked noteworthy types of crisis behavior that are worthy of recognition.

Our initial categories:

Eurozone Song

The lyrics are clever and it’s peppier than most parody/humor songs. Enjoy!

From the Guardian, hat tip reader Carol B:

Eurozone Leaders Fiddling as Rome Starts to Burn? (Updated)

Worries about the Eurozone have heretofore been depicted as afflicting the periphery. But even though Italy is geographically on the margin, if the crisis engulfs it, it irreparably damages the core. And that time seems to be upon us.

Partying on the Edge of the Eurozone Volcano

The Financial Times has two heated articles (relative to the each writer’s normal emotional register) on the continuing Greece neverending bailout saga, one from Wolfgang Munchau, the other from John Dizard. Munchau and Dizard reach the same conclusion from different fact sets: the latest Greek patch-up exercise is only going to make matters worse, politically and economically.

Look What You Can Buy in the Greek Liquidation Sale!

Sorry if you were looking for listing of the various Greek assets on offer. You need to be a really heavyweight investor (and have been verified as such) to get a real viewing. And you are late if you are taking interest only now. The Guardian last week visited a road show of sorts in London (note that the properties were being hawked BEFORE the Greek parliament had approved the sale). The potential bidders were very cool:

DSK Prosecution on the Verge of Collapse

The conspiracy theorists in France will have a field day with this development. And I must say, with good reason.

The New York Times reports that even though the forensic evidence makes clear there was a sexual encounter between the former head of the IMF, Dominique Strauss-Kahn, the prosecutors (!) have found the witness to have told enough lies to them to put their case in jeopardy. She may have connections to drug dealers and criminal rings.