I am a strong believer that good reasons, arguments, and evidence are what matter, not credentials. So the short answer to “when should we trust an expert simply because they are an expert?” is “never.” We should always ask for reasons before we place trust. Hannes Alfvén was a respected Nobel-prizewinning physicist; but his ideas about cosmology were completely loopy, and there was no reason for anyone to trust them. An interested outsider might verify that essentially no working cosmologists bought into his model. But a “good reason” might reasonably take the form “look, this is very complicated and would take pages of math to make explicit, but you see that I’ve been doing this for a long time and have the respect of my peer group, which has a long track record of being right about these issues, so I’m asking you to go along this time.” In the real world we don’t have anything like the time and resources to become experts in every interesting field, so some degree of trust is simply necessary. When deciding where to place that trust, we rely on a number of factors, mostly involving the track record of the group to which the purported expert belongs, if not the individual experts themselves. So my advice to economists who want more respect from the outside world would be: make it much more clear to the non-expert public that you have a reliable, agreed-upon set of non-obvious discoveries that your field has made about the world. People have tried to lay out such discoveries, of course — but upon closer inspection they don’t quite measure up to Newton’s Laws in terms of reliability and usefulness.

European finance ministers on Friday heaped pressure on the Greek government to accelerate its privatisation programme and implement deeper spending cuts, after they told Athens a crucial €8bn (£6.9bn) bailout payment would be delayed until next month. Luxembourg prime minister Jean-Claude Juncker, who chaired a meeting of the eurogroup of single currency finance ministers in Poland on Friday, said officials recognised the renewed efforts by Greece to meet its fiscal targets, but a decision on releasing the next tranche of cash would not be taken until October. The move was met with incredulity by Greek officials. They have already warned they will be out of money by mid-October and are reported to be making contingency plans to lay off public sector workers. Inspectors from the ECB, EU and International Monetary Fund (IMF) are currently in Athens and should report back on progress in early October, European commissioner for monetary affairs, Olli Rehn said – meaning that the next disbursement of aid to Greece from its first bailout could be paid by mid-October. Concerns that statistics from Athens failed to present an accurate picture of its finances were given weight after two members of the government's statistics board resigned and another was quoted as alleging that 2009 deficit data had been artificially inflated in order to ensure bailout funds would be forthcoming.

MARSEILLE, France—The German government has nominated Jörg Asmussen to succeed Jürgen Stark on the executive board of the European Central Bank, Finance Minister Wolfgang Schaeuble said Saturday. At a news conference after weekend meetings of the finance ministers and central-bank governors of the Group of Seven leading industrialized nations, Mr. Schaeuble said he hoped that Mr. Asmussen would be able to assume Mr. Stark's duties toward the end of the year. Jörg Asmussen, Germany's deputy finance minister, has been nominated to the executive board of the ECB. Mr. Asmussen is currently deputy finance minister. His position there is something of an anomaly, as he is a member of the Social Democratic Party in a center-right government of Christian Democrats and Free Democrats. He originally had been appointed by the previous finance minister, Peer Steinbrück, who served under Chancellor Angela Merkel in a "Grand Coalition" until autumn 2009. Finance Minister Schaeuble had kept him on because of his first-hand experience of the first wave of the financial crisis. Mr. Schaeuble said he had notified Jean-Claude Juncker, head of the euro group of finance ministers, of the government's proposal earlier Saturday. The proposal must be endorsed first by the euro group and the euro-zone's heads of state, and the European Parliament and the ECB itself must also be consulted. With Mr. Asmussen having accumulated profound experience of the euro zone's debt crisis over the past three years, and with the substantial political will of Germany behind the proposal, it is unlikely that the nomination will fail.

The FTSE 100 closed down 2.35pc, the Dax in Frankfurt fell 4.04pc, and the CAC in Paris was down 3.6pc following the news that Mr Stark, the top German official at the ECB, was leaving due to "personal reasons". Sources said his departure reflected a deep rift at the heart of the ECB, with Mr Stark opposed to the bank's policy of buying eurozone bonds to support highly indebted countries like Italy and Spain. Mr Stark was considered to be a hawk at the bank, favoring looser monetary policy including higher interest rates. The news came amid clear divisions in the G7 ahead of the two-day meeting, which began on Friday. Before arriving in Marseilles, Chancellor George Osborne was adamant that he would not waver from his austerity plan. "Britain will stick to the deficit plan we've set out," he said. However, Christine Lagarde, the head of the International Monetary Fund, said that policymakers in advanced economies should use all available tools to boost growth as the world economy entered a "dangerous new phase". Speaking alongside the Chancellor at Chatham House, she said that while Britain's £110bn deficit reduction plan was "appropriate", policymakers should be "nimble." An EU official in Marseilles admitted that Mr Stark's resignation was unhelpful: "People weren't expecting this and the timing is bad," he said. Joshua Raymond, chief market strategist at City Index, took a similar line: "[Stark's departure] escalates investor fears that Europe's leaders and central bankers are far from united in ideology at a time when the markets need to see credible and definitive action to prevent the sovereign debt crisis from sending European economies back into recession." Just hours after his resignation, Mr Stark called for drastic reforms to strengthen economic governance of the euro zone. He said that a "quantum leap" is necessary "at the European level" to reinforce its institutions. He added that "a large reform of decision-making mechanisms and sanctions" is necessary in order to secure in the future effective coordination of economic and fiscal policies of the euro zone countries. "We find ourselves in a situation where risks to public budgets undermine financial stability," wrote Stark.

PRAGUE—The Czech Republic's euro-skeptic leadership is taking some new swipes at the neighboring single-currency zone, which is struggling to quell internal dissension about how to deal with its weaker members' debt woes. On Monday, Czech Prime Minister Petr Necas told a group of Czech diplomats: "We agreed to join a [monetary] union, not a transfer union or debt union." He went on to say that an independent currency was critical to the country's economic health. The Czech Republic, along with all the former Eastern Bloc countries now in the European Union, is required to adopt the euro eventually, as a condition of membership. But there is no deadline for joining, and Prague has long made it clear it is in no rush. Other Central European states that once hungered to belong to the euro zone are also backing away from the troubled union, hesitant about tying their fates to those of struggling and more profligate neighbors. Last week, Czech President Vaclav Klaus, speaking at an economic and political forum in Austria, dismissed Czech participation in the euro zone as "not an issue," blamed the euro for the financial crisis now roiling Europe. Mr. Klaus said the euro-zone states were too different to fit into the "straitjacket" of the single currency. He said the euro could only survive by cutting the number of countries using it or by draconian enforcement of common economic policies. He said he preferred the first option. The euro zone would like to have more countries like the Czech Republic. Its outstanding public debt is about 40% of annual gross domestic product, and its annual budget deficits are relatively narrow.

A remarkably gloomy assessment of the world economy - Ms Lagarde warned that urgent action is required to stave off the threat of global recession and another credit crisis. Sounding a stark warning to stronger European countries such as Britain and Germany, the new IMF chief said: "We could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis." To reduce these risks, she called for "substantial" and mandatory recapitalisation to bolster European banks' balance sheets, which will be "key to cutting the chains of contagion". Ms Lagarde, who was speaking at the US Federal Reserve's annual forum at Jackson Hole, said the recapitalisation should first be financed through private channels, but could also be sourced from a Europe-wide bail-out fund. "Developments this summer have indicated we are in a dangerous new phase. The stakes are clear. We risk seeing the fragile recovery derailed. So we must act now," she said. Put simply, macroeconomic policies must support growth. Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation." Ms Lagarde's comments risk creating new panic about the funding levels and financial stability of European banks. There have been concerns that lending between banks has started drying up over recent weeks, which was a key sign of the "credit crisis" in 2008.

Spanish politicians took a dramatic step to try to win back market confidence by agreeing on a reform of the country's constitution to introduce a cap on future deficits. The socialist party (PSOE) of outgoing prime minister José Luis Zapatero and the conservative opposition People's party (PP) said the cap would come into effect in 2020. The limit will be set at 0.4% and will effect all levels of Spain's highly devolved administration, including the regional governments that run health and education. The move came at the end of a month that has seen Spain's sovereign debt under severe pressure in the markets, amid fears that it might need a bailout similar to those of fellow eurozone nations Portugal, Greece or Ireland. It also came a week after Germany's Angela Merkel and France's Nicolas Sarkozy called for eurozone countries to establish legal limits on their deficits to integrate their economies. So far only Germany has such a cap. Spanish politicians claimed the measure was a step towards eurozone integration. "August has been a month of financial instability. Investors have lost confidence in the eurozone," said Alfredo Pérez Rubalcaba, the PSOE candidate for prime minister in November's general election. "We have to win back confidence and show we are solvent." The PP, led by Mariano Rajoy, had been demanding such a measure for years. "We want to be amongst the countries in the vanguard of European economic policy," said spokeswoman Soraya Saénz de Santamaría.

BRUSSELS—Euro-zone policy makers on Thursday appeared no nearer to settling a dispute over Finland's collateral demands in exchange for participating in a €110 billion ($158.6 billion) bailout for Greece, raising concerns that the Mediterranean nation may default. Markets have grown more worried about the potential for a Greek debt default amid an apparent lack of progress in resolving the collateral issue this week. Finland, meanwhile, shows no sign of backing down. Students protesting legislation trimming education spending scuffled with riot police Wednesday in Athens. Also Thursday, German Chancellor Angela Merkel unexpectedly canceled a trip to Russia in early September to shepherd through parliament a crucial change to the euro-zone bailout fund. The cancellation comes at a sensitive time for relations with Russia, and amid growing nervousness about dissent within the ranks of her own party over her handling of the euro-zone debt crisis. "The date collides with the introduction of the [European Financial Stability Facility] treaty into the Bundestag," a German government official said Thursday, adding that the chancellor wants to stay in Berlin due to the significance of the issue. Yields on Greek two-year bonds rocketed Thursday to a record of over 43%, according to Tradeweb, and the cost of insuring Greek government bonds against default also rose sharply. Greek five-year sovereign credit-default swaps were 1.37 percentage points wider at 22.75 percentage points, according to Markit. Euro-zone governments are looking into alternative forms of collateral after a cash deal reached earlier between Greece and Finland was rejected by key member countries, including Germany and the Netherlands. Under terms of that deal, Greece would pay Finland hundreds of millions of euros from its bailout loans as collateral for those same loans at the expense of other euro-zone countries. Since Finland is set to contribute just 2% of Greece's total rescue package, guarantees from the richer euro-zone nations would be going directly to Finland. The collateral dispute, if not resolved soon, could derail a second bailout package for Greece agreed by euro-zone leaders on July 21. Without support from all 17 euro-zone countries, no funds can be released, while changes to the European Financial Stability Facility, the currency bloc's bailout fund, can't go forward either. The International Monetary Fund, which has been contributing to Greek bailout loans, opposes any deal that would threaten its preferred-creditor status, which ensures the fund is always first to be repaid.

The German Banner Economy is a lie / allways has been ! Germany could not survive whithout the US and England !

German business confidence made its steepest drop this month since the aftermath of the Lehman Brothers collapse in late 2008, raising fresh doubts about the broader European economy as it grapples with a crippling debt crisis. The Munich-based Ifo thinktank said on Wednesday its business climate index, based on a monthly survey of some 7,000 firms, fell to 108.7 in August from 112.9 in July, well below a consensus forecast in a Reuters poll of 42 economists for a 111.0 reading. The last time the index fell so sharply was in November 2008, just after the collapse of Lehman Brothers when the German economy was in its deepest postwar recession. It was the lowest reading for the index since June of last year. Ifo economist Klaus Abberger told Reuters that the slowdown of the US economy and twin debt problems in the US and Europe were the main reasons for the worsening outlook. "The German economy has been infected," Abberger said. "I wouldn't speak of a recession at this moment. The companies still have a cushion of orders. And not every cooling results in a recession, but the recovery is slowing very significantly." The German economy has been a pillar of strength since the debt crisis in the eurozone first broke out in Greece at the end of 2009. But data last week showed gross domestic product (GDP) growth slowed to a meagre 0.1% in the second quarter of the year, pushed down by weakening private consumption and declines in the construction sector.

“Economists are pessimists: they've predicted 8 of the last 3 depressions”

Bank of America continued its tailspin on Tuesday as shares in the largest US bank tumbled by another 6.4% to their lowest level since March 2009, fuelling fears of a second banking crisis. As concerns mounted that BoA will need to take huge additional write-offs on bad mortgages, the cost of insuring the group's debt jumped to record levels and investors became increasingly concerned that the financial system could be facing a fresh credit crunch. BoA's share-price fall followed a 7.9% drop on Monday, which took the stock to less than half its value at the start of the year – a decline that wiped about $65bn from its market capitalisation. "It does sap investor confidence to see a bank of this stature struggling so mightily," said David Dietze, chief investment strategist at Point View Financial Services in New Jersey. "It casts a shadow over the entire financial sector and puts a negative spin on the growth picture," added Nick Kalivas, of MF Global Research in Chicago. Dennis Dick, of Bright Trading in Detroit, said: "Every day it's the same story. BoA keeps leading the charge down on financials and every trader is probably using that as an indicator to trade the rest of the financials too." Investors continued to offload BoA's shares on fears that its huge exposure to the rapidly declining US housing market and European sovereign debt mean it will need to make much bigger provisions for bad debts. This would force the bank to raise billions of dollars in additional cash to restore its capital ratios, a move that could push the bank's shares considerably lower.

Markit's monthly healthcheck of the eurozone found that the total activity across the region was flat month-on-month at 51.1, above the 50-point mark that separates expansion from contraction. But French manufacturing output dropped to 49.3, its first contraction since July 2009. The overall eurozone manufacturing sector came in at 49.7. Germany's manufacturing sector, the powerhouse of Europe, increased its output to 52, but this was marred by a drop in service activity to just 50.4. Williamson said that the eurozone economy had suffered from a drop in global demand, which dampened demand for exports. The ongoing euro debt crisis has also hit business confidence. Seperate data from Germany underlined how the financial crisis has hit sentiment. The ZEW index, which tracks invester confidence, fell sharply this month. Economists said the size of the drop was surprising, and matched the plunge seen after the collapse of Lehman Brothers. The ZEW economic expectations index dropped to -37.6 from a reading of -15.1 in July. "The skepticism with regard to future economic growth shown by a growing number of financial market experts during the previous months has increased dramatically," said Wolfgang Franz, president of the Mannheim-based Center for European Economic Research, or ZEW.

Would Germany subscribe to euro-zone bonds ? The market is hinting at the price of Germany's commitment to Europe. The cost of insuring its debt with credit-default swaps has risen sharply during the past month-and-a-half, to the point where five-year U.K. CDS are now cheaper than equivalent German ones. Although flight-to-safety trades have supported demand for German bonds, the CDS market suggests that might not last long if Germany were to commit to backstopping a common euro-zone bond. There's a further irony in Franco-German demands that all countries in the bloc boost their competitiveness. One of the major imbalances in the single currency is the lack of competitiveness of peripheral countries relative to the core. Unless the core is willing to lose ground here, the region is at an impasse. Saying every country in the euro zone should become more competitive is like saying every child in Lake Wobegon is above-average. A nice idea but it defies the math. Instead, what the Franco-German deal seems to have created is the circumstance under which peripheral countries will be forced out of the single currency. Then again, things were probably heading in that direction anyway.

US Federal Regulators (FTC) - are stepping up their scrutiny of the US arms of Europe's largest banks, amid mounting concerns that the eurozone debt crisis could spill into the American banking system. The Federal Reserve Bank of New York, which oversees the US operations of many large European banks, has been asking for more information about their ability to fund themselves, the Wall Street Journal reported. It wants to know whether they have reliable access to the funds needed to operate on a day-to-day basis in the US, and is pushing them to turn their US businesses into self-financed organisations that are better insulated from potential problems with their parent companies. Officials at the New York Fed are "very concerned" about European banks facing funding difficulties in the US, a senior executive at a major European bank who has attended talks with officials told the Journal. The New York Fed has also been co-ordinating with New York's superintendent of financial services, Benjamin M Lawsky, to monitor European banks' funding positions, amid fears that those in trouble could siphon money out of their US arms. According to Federal Reserve data, foreign banks, many of which have big trading operations in the US, have seen their funding positions there fluctuate wildly in recent months.

Switzerland's central bank announced further measures to weaken the franc, but failed to take the anticipated step of pegging the franc to the euro to discourage safe-haven investors. The Swiss National Bank (SNB) said it would further boost liquidity by expanding "sight deposits" – overnight deposits by banks to help liquidity – to Sfr 200 bn (£152bn) from Sfr 120 bn and was prepared to take more action if necessary. The measures saw the euro strengthen initially, past Sfr1.15 for the first time this month. But once it became clear that the bank had stopped short of radical action, heavy buying of the franc resumed. Over the past 18 months the franc has risen 25pc against the euro, squeezing Switzerland's vital export market. Almost 50pc of Swiss products, from cheese to pharmaceuticals, are exported. Tourism has also been hit by the currency swing as the price of goods has soared. Clive Lennox, head of foreign exchange trading at Clear Currency, said: "The supposedly neutral Swiss are causing some amount of trouble. The SNB shied away from its threat to peg the Swiss franc to the euro, boosting the safe-haven currency. Investors initially wound down their speculative short franc positions as protection against eurozone sovereign debt and global growth concerns."

Google’s surprise $12.5 billion bid for Motorola Mobility this morning is a bold attempt to move the needle for Google on several fronts. Google is going all in, dipping into its $39 billion of cash to make its biggest acquisition ever. The deal signals that mobile will be one of Google’s main growth drivers and that growth will come from entering new markets, specifically mobile hardware. With the acquisition, Google gains a portfolio of 17,000 patents and another 7,000 patents pending globally, an area where it is a currently a laggard. But more than anything, it signals how crucial it is for Google to control the Android experience from soup to nuts. There may now be 150 million Android phones and phones running the Android operating system command the largestmarket share smartphone , but Android the most popular single smartphone by far is still the iPhone. Buying Motorola is an acknowledgement on Google’s part that it must control the experience from software to hardware if it hopes to unseat Apple.

The lack of confidence in international governments to address the issues underlying current economic turbulence is a "serious malaise", the chancellor George Osborne has claimed. In an article for the Financial Times, co-authored by other finance ministers from around the world, Osborne said they believed the biggest barriers to economic recovery were political, not economic and they called for "political leadership and courage" and for the eurozone to take further steps to reassure markets. "The eurozone has taken steps to deal with the problems of contagion via an enhanced role for the European financial stability facility, and the European Central Bank's purchases of sovereign bonds. Now it needs to demonstrate commitment to greater fiscal integration and governance arrangements that avoid moral hazard and entrench fiscal responsibility," they said. But they are demanding action to be taken on the amount of credit that banks store: "Greater political resolve is also needed to strengthen bank balance sheets on a sustainable basis." The call comes as the president of the World Bank warned that stock markets were entering a "new danger zone" in a scathing critique of economic leadership in the US and Europe. Robert Zoellick said the global economy was going through a multispeed recovery with western economies stuck in the slow lane following the downgrading of US government debt and the ongoing crisis in the eurozone.

BERLIN—Barely 12 hours after a reluctant European Central Bank breathed new life into the euro project, German politics dashed hopes that Europe would soon receive a bigger bulwark against a spreading government-debt crisis. A spokesman for German Chancellor Angela Merkel, Christoph Steegmans, removed hopes of a more robust European Financial Stability Facility, saying the fund will stay as agreed at a July 21 European Union summit. "The EFSF will remain what it is, and keep the volume it had before July 21," Mr. Steegmans said at a regular government press conference. The ECB Sunday made a landmark decision to expand its bond-buying program to include Italian and Spanish government debt, a step aimed at stopping a market sell-off that threatened to send their borrowing costs to unsustainable peaks. The ECB hesitated last week to take such a step, which greatly expands its role as an underwriter of government finances. But it was deemed critical to buy time until an improved bailout fund, the EFSF, could be ratified and implemented before October. The changes to the EFSF mandate would allow the fund to buy government bonds in the secondary market. The European Commission has asked for a massive increase in the EFSF's current lending capacity of €440 billion ($628.23 billion) guaranteed by euro-zone governments. Market watchers said a new volume of up to €1.5 trillion or more might be needed to reassure investors that the fund can offset government solvency threats. The euro promptly lost much of the ground gained from the overnight ECB announcement as investors responded to German opposition to a massive build-up in the euro-zone's defenses against debt contagion.

08/08/2011 - -7.44am: Japan's stock market has now closed after a pretty nervy session, but one where we didn't see a full-blown panic. The Nikkei ended 2.18% lower at 9,097.56, down 202.32 points, having been as low as 9,057.29 at one stage.

"The three main concerns are S&P's downgrade of the U.S. debt rating, the ongoing European debt problems and inflation worries in China," Masanaga Kono, chief strategist at Amundi Japan, told Reuters. Most Asian markets are still trading, and they are all suffering losses. China's Shanghai Composite is down by over 4%. We'll do a full round-up of the Asian markets once they've closed - they've already helped to set the mood in Europe....

The European Central Bank will hold a conference call of its governing council to discuss its response to the debt crisis, an ECB source said. Italy's pledge to speed up austerity measures and whether the ECB should buy Italian government bonds are expected to be discussed. S&P's downgrading of the US credit rating on Friday added to fears over debt levels and economic growth in the world's biggest economy and in large European nations, such as Italy and Spain. As the effect was felt across the globe, China, the largest foreign holder of US debt, issued an extraordinary demand that Washington change its economic ways and address its "debt addiction". It said the rating reduction would be followed by more "devastating credit rating cuts" and global financial turbulence if the US failed to learn to "live within its means". "China, the largest creditor of the world's sole superpower, has every right to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," it said. It also insisted the US should slash its "gigantic military expenditure and bloated social welfare costs", and repeated its demand for a new global reserve currency to replace the dollar. In London, opinion was split between those who believed the markets would take the US credit decision in their stride and others who believed it could trigger a series of events that would do untold damage to the global financial system. "The US government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," the statement continued.

America did receive some support yesterday, with Francois Baroin, France's finance minister, insisting that he had total confidence in the US economy, while Russia said it would keep the current level of its US investments in national reserve funds.

The following is a statement issued by Standard & Poor's announcing the downgrade in US government debt from AAA to AA+

Overview :
• We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

• We have also removed both the short- and long-term ratings from CreditWatch negative.

• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

• The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Rating Action
On August 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA'. The outlook on the long-term rating is negative. At the same time, Standard & Poor's affirmed its 'A-1+' short-term rating on the US. In addition, Standard & Poor's removed both ratings from CreditWatch, where they were placed on July 14, 2011, with negative implications. The transfer and convertibility (T&C) assessment of the US – our assessment of the likelihood of official interference in the ability of US-based public- and private-sector issuers to secure foreign exchange for debt service – remains 'AAA'.