It is not difficult to conjure up doomsday scenarios. Here are just three: First, the global financial system is exposed as a giant pyramid selling scheme – piles of dodgy loans leveraged up against inadequate capital base. The house of cards collapses and the global economy implodes. Secondly the global economy is panning out the way Marx said it would, in a race to the bottom as the owners of capital look for ever-cheaper sources of labour to prevent profits falling, leading eventually to class war. And thirdly, the stresses and strains in the global economy are symptoms of a planet operating well beyond its carrying capacity. Environmental Armageddon awaits. Were any of these dystopian visions of the future to come to pass, they would make the 1930s seem pretty benign by comparison. All that said, there are big differences between the world of 2011 and that of 1931. For one thing, in the west we are all a lot richer than we were 80 years ago and have more fat to live off. Emerging economies, such as China, Brazil and India, have been growing fast and while all three have wobbled recently, they are still expanding at a fair old lick. Prices are rising not falling, unemployment is nowhere near as high as it was during the Great Depression and for those unfortunate enough to be out of work, welfare states are bigger and more generous.
Access Investments-Building Awareness - European Union-ROMANIA
Sunday, December 18, 2011
It is not difficult to conjure up doomsday scenarios. Here are just three: First, the global financial system is exposed as a giant pyramid selling scheme – piles of dodgy loans leveraged up against inadequate capital base. The house of cards collapses and the global economy implodes. Secondly the global economy is panning out the way Marx said it would, in a race to the bottom as the owners of capital look for ever-cheaper sources of labour to prevent profits falling, leading eventually to class war. And thirdly, the stresses and strains in the global economy are symptoms of a planet operating well beyond its carrying capacity. Environmental Armageddon awaits. Were any of these dystopian visions of the future to come to pass, they would make the 1930s seem pretty benign by comparison. All that said, there are big differences between the world of 2011 and that of 1931. For one thing, in the west we are all a lot richer than we were 80 years ago and have more fat to live off. Emerging economies, such as China, Brazil and India, have been growing fast and while all three have wobbled recently, they are still expanding at a fair old lick. Prices are rising not falling, unemployment is nowhere near as high as it was during the Great Depression and for those unfortunate enough to be out of work, welfare states are bigger and more generous.
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Europe minister says government had to consult parliament before deciding on whether to join the new EU fiscal compact treaty
Nicolai Wammen, Danish minister for European affairs (left), with his Polish counterpart, Mikolaj Dowgielewicz, in Brussels today announced the priorities of the Danish EU presidency (Photo: Scanpix)...Two weeks before Denmark takes over the rotating EU presidency, the Europe minister, Nicolai Wammen, released the government’s four main priorities for the country's six month term.
While the official priorities were vague – a responsible, dynamic, green and safe Europe – Wammen told journalists at press conference in Brussels this morning that handling the Eurozone crisis will be the presidency's main focus.
“Our most important job will be to build a bridge between Eurozone countries and countries outside the Eurozone,” Wammen said. “Denmark is taking over the presidency at one of the most difficult times, but is nonetheless looking forward to the challenge.”
Denmark will have a less visible role during this presidency than its last in 2002, in which it oversaw the expansion of the EU by ten new member states.
But with Danish representatives chairing vital EU meetings, Denmark’s role as mediator will be important.
“We will do our utmost to show that the EU can still make decisions and negotiate. There is no need for long discussions and institutional battles between countries. Europe needs action,” Wammen said. “Europe’s citizens are looking to us and expect us to find solutions to the problems that they are facing every day.”
On the question of Danish participation in the European fiscal compact treaty, Wammen maintained the government line that they would not make decision until all the facts were available and parliament had been consulted.
“We haven’t yet made a decision. We will participate constructively and actively in the process and when we know the details of the deal the Danish government will assess the economic, legal and political consequences of the deal, and then after meeting the political parties in the Danish government, we will make our position known.”
Denmark’s euro opt-out may prove problematic if the government decides to introduce the tightened financial regulation and budgetary discipline that the fiscal compact treaty entails.
This is because the regulations may be deemed to remove sovereignty from Denmark, in which case the opt-out states that Denmark has to hold a referendum. Such a vote, however, would be unlikely to pass due to negative public sentiment about the euro.
“Denmark has opted out of the euro and we will of course respect that,” Wammen said.
The cabinet found itself at odds last weekend after Villy Søvndal, the foreign minister, appeared to contradict PM Helle Thorning-Schmidt by stating that Denmark might have trouble joining the treaty if it meant the country would be unable to run a deficit in order to stimulate its economy.
The treaty would prevent member countries from running deficits of more than 0.5 percent, with those exceeding three percent facing automatic penalties.
In an attempt to weaken the Danish krone, which has been gaining strength against the euro, Denmark’s central bank, Nationalbanken, decided on Thursday to lower the lending rate another 0.1 percent to a record-low of 0.7 percent.
The national interest rate is now approximately 0.30 percent below the European rate.
Sydbank’s senior economist, Jacob Graven, suggested that the central bank was running out of options for stabilising the krone against the euro.
An American hedge fund is placing bets that Denmark is headed for an Iceland- or Ireland-style economic collapse.
The New York-based Luxor Capital investment fund has been short-selling Danish credit default swaps (CDS), on the presumption that Danske Bank, Denmark’s largest, is too heavily leveraged and too big to save.
The theory goes that if the euro crisis deepens or the Danish housing market declines – two possibilities that many experts are beginning to consider inevitabilities – Danske Bank could go belly-up, and Denmark would not have the reserves to bail out its flagship.
Call you a cynic, sure, but I think "ignoramus" is more fitting:
1. Luxor is an SEC registered investment advisory group and private equity fund. It is not a hedge fund, which by implication is unregistered.
2. Short selling some Danish CDS's when they have over $4 billion in total assets under managment does not represent them facing "massive losses". Since A) they didn't disclose their how deep their position was in the first place, and B) even if the CDS run flat they can be flipped with minimal losses on a short sale. So where exactly does your claim they "now face massive losses" come from?
3. Luxor makes investments in distressed assets, so this individual investment aside, they invest in projects/companies that are failing and turn them around, thereby saving jobs and recreating value where it had been previously lost.
4. Luxor flies under the PR radar and does not "desperately" try to talk anything down... or up for that matter. They are registered professional investors and economists, not hype artists like the Danish media, which ran this story in the first place. Get you facts straight and be glad that we finally got news that wasn't "we are the best at everything..."
5. Using paedophilia in a lame attempt to sound whimsical is classless, yet ironically you call people you don't know, who making investments you don't understand "scum". Get off the Occupy bandwagon and know what you are talking about before putting fingers to keyboard
Executive board member Juergen Stark, who announced his surprise resignation from the ECB earlier this year, said disagreements over the central bank’s bond-buying programme was behind his decision.
In an interview with German weekly WirtschaftsWoche to be published on Tuesday, Mr Stark said he did not agree with the way the euro crisis has been handled. He particularly criticised the use of monetary measures, or the wholesale purchase of sovereign bonds by the bank, to contain the crisis.
The statement is in contrast to what the Bank said in September to explain his surprise resignation, which was put down to “personal reasons”.
In the interview he said: “It is the fundamental arrangement of this currency union that it does not allow the monetary funding of sovereign debt by the ECB. Without these rules, there would be no economic and currency union.”
So far the ECB has bought €210bn (£176bn) of state debt. The controversial move has been supported by the UK, France and the USA, but opposed by Germany. The reasons behind Mr Stark’s resignation go some way to revealing how deep the opposition to monetary intervention runs.
The current account deficit for the past quarter was L2bn, about the lowest for a decade, and the trailing twelve-month current account deficit/GDP has fallen from 3.3% to around 2%.
And this is not unexpected. The same thing happened after the devaluations of 1931 and 1992.
I am pointing this out simply to make the point that some of the arguments in favour of austerity and hard money are based on false *facts*, not just bad reasoning.
I get my data from a site called Trading Economics, and here is their comment on the numbers:
"United Kingdom exports were worth 41.9 Billion GBP in October of 2011. The United Kingdom is the world's fifth-largest trading nation, highly dependent on foreign trade. The United Kingdom's major export commodities are manufactured items like telecommunications equipment, automobiles, automatic data processing equipment, medicinal and pharmaceutical products and aircraft. Main export partners are USA, Germany, France and Ireland."
A lot has changed in the last two years. Two years ago, both France and Italy exported more than the UK. Now France exports about 80% (E35bn) as much and Italy has dropped to 75% (E33bn).
I note with some interest that one of the most potentially wealthiest countries in the world ( a majority of the worlds banks are there holding billions of dollars) refuses to join the EU, that country is Switzerland, the reasons the Swiss government state is because the people of the country have voted no to `marriage` with the EU, being a sceptic and also being aware of the enormous amount of capital that is channelled through Switzerland, I don't think the worlds institutions would relish the idea of the EU getting their grubby hands on such a `pandoras box`, I thank the British prime minister for making a stand against the all consuming EU, no doubt he has been told in no uncertain terms by the British banking system they must be protected at all costs even if that includes `infuriating` our `Euro` partners.
I agree, and note that the EU has already tied to blackmail Switzerland into breaking its own laws and Banking regulations.
If the EU is the stable financial wonderland we hear about so often, I wonder just *why* the Eu has to go around leaning on other countries and trying to prevent capital flight.
Perhaps they remember that in the Thirties many families in Germany did transfer their financial assets to Switzerland. In fact you could call that the birth of the Swiss Banking industry. Before then Switzerland was mainly an agricultural country.
anthonyf
Today 03:31 AM
Clearly the Germans are the problem. Their hangups will destroy the Eurozone. The concern is that no-one is standing up to them - no, not Cameron either. There needs to be a much more sensible approach to stabilising the Eurozone. Once that is solved the EU could then think about breaking it up and after that move stop its ridiculous country expansion programme. Recommended by 3 people
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thommerrilin
26 minutes ago
The socialism for the masses and the capitalism for its masters is causing the collapse of the EU. This model was by design from day 1. The problem is that the UK and the USA understood this from day1.
You cant push rope and you cant pull a mule
"“Italian banks will be able to borrow [from the ECB] at 1 per cent, while the Italian state is borrowing at 6-7 per cent. It doesn’t take a finance specialist to see that the Italian state will be able to ask Italian banks to finance part of the government debt at a much lower rate.”"
Either Sarkozy, who said this, is an idiot, or he thinks Italian Banks are idiots, or he thinks we are idiots.
I am sure that Italian Banks can figure out perfectly well that if they borrow from the ECB at 1%, they are going to have to pay back to the ECB, and in Euros.
But if they lend to the Italian Government at 6%, they risk losing their principal in a haircut one fine day, or they risk being paid back in New Lira.
After all, that is *why* they can get 6% by lending to the Italian Government. Because of the risk, French clown.
Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world. But if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards…"
Brad de Long just posted this on his eclectic blog, and I am reposting it because it is such a beautiful counter to some of the bad arguments that are made here.
I think that what Keynes is saying above is that he is not claiming that classical Economics - prudence, balanced budgets, and so on - are "wrong". Instead he is saying that classical Economics concerns itself with mechanisms that are strong enough to return your economy to equilibrium after small deviations - mild recessions, for example.
But these mechanisms are not strong enough to get your economy back to equilibrium after shocks that cause major deviations. For example, the average recession following a financial crisis will take 9.5% off your GDP, with corresponding unemployment and loss of tax revenue and classical measures like balancing your budget will not fix that. You are simply too far out of whack.
So Keynes is saying that he is not trying to *replace* classical Economics, but that Government should intervene directly in order to get the economy back close enough to equilibrium that classical Economics can take over again.
It's not even that radical a claim. It's like saying that an auto-pilot can fly a plane in calm air, but sometimes you hit storm so severe that the pilot has to intervene to get the plane back on the straight and level, after which you can return to auto-pilot
Of course, you can then ask why the idiotic Labour Party was practicing Keynesian stimulus during a twenty-year expansion, but that's another question
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