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p.yannick.j@gmail.com
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Does IMF Stand for Impressive Macroeconomic Flexibility?
So the IMF is holding a meeting on rethinking macroeconomic policy (I was invited but couldn’t make the timing work.) And the Fund’s chief economist has already made it clear that he’s open to some serious revision of the prevailing paradigm.
http://krugman.blogs.nytimes.com/2011/12/10/orwellian-currency-area/Orwellian Currency Area
Kevin O’Rourke has a very good point: what European leaders are describing as “fiscal union” is very nearly the opposite:
With this in mind, the most obvious point about the recent summit is that the “fiscal stability union” that it proposed is nothing of the sort. Rather than creating an inter-regional insurance mechanism involving counter-cyclical transfers, the version on offer would constitutionalize pro-cyclical adjustment in recession-hit countries, with no countervailing measures to boost demand elsewhere in the eurozone. Describing this as a “fiscal union,” as some have done, constitutes a near-Orwellian abuse of language.
Maybe it was always thus, but the relentless wrong-headedness of the Europeans, their insistence on seeing their crisis as something it isn’t, and responding with actions that deepen the real crisis, has been a wonder to behold. In the 1930s policy makers had the excuse of ignorance; there was nobody to explain what was happening. Now, their actions amount to a willful disregard of Econ 101."
http://krugman.blogs.nytimes.com/2011/12/10/lessons-from-europe/
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Lessons From Europe
Let me return for a minute to Kevin O’Rourke’s recent piece on the European summit. Aside from pointing out just how bad an idea the new super-stability pact is, O’Rourke makes an important observation about what the European experience teaches us about macroeconomics:
One lesson that the world has learned since the financial crisis of 2008 is that a contractionary fiscal policy means what it says: contraction. Since 2010, a Europe-wide experiment has conclusively falsified the idea that fiscal contractions are expansionary. August 2011 saw the largest monthly decrease in eurozone industrial production since September 2009, German exports fell sharply in October, and now-casting.com is predicting declines in eurozone GDP for late 2011 and early 2012.
Basically, European experience is very consistent with a Keynesian view of the world, and radically inconsistent with various anti-Keynesian notions of expansionary austerity and flexible prices.
A second, related lesson is that it is difficult to cut nominal wages, and that they are certainly not flexible enough to eliminate unemployment. That is true even in a country as flexible, small, and open as Ireland, where unemployment increased last month to 14.5%, emigration notwithstanding, and where tax revenues in November ran 1.6% below target as a result. If the nineteenth-century “internal devaluation” strategy to promote growth by cutting domestic wages and prices is proving so difficult in Ireland, how does the EU expect it to work across the entire eurozone periphery?
The world nowadays looks very much like the theoretical world that economists have traditionally used to examine the costs and benefits of monetary unions. The eurozone members’ loss of ability to devalue their exchange rates is a major cost. Governments’ efforts to promote wage cuts, or to engineer them by driving their countries into recession, cannot substitute for exchange-rate devaluation. Placing the entire burden of adjustment on deficit countries is a recipe for disaster.
The point about nominal wages is especially telling. Ireland has clearly — clearly — faced a massive demand shock; maybe Casey Mulligan will find some way to insist that 14.5 percent of the Irish work force has voluntarily decided to refuse employment, but it’s just not true. And Ireland is supposed to have flexible markets — remember, before the crisis it was hailed as an example of successful structural reform. Yet here’s what has happened to hourly wages in manufacturing in the face of catastrophic unemployment:
It is really, really hard to cut nominal wages, which is why reliance on “internal devaluation” is a recipe for stagnation and disaster.
The crisis really has settled some major issues in economics. Unfortunately, too many people — including many economists — won’t accept the answers."
It really was a quiet day as far as public news went. The Telegraph has gone to bed:
City can't avoid tide of regulation from Brussels
Britain's refusal to sign up to a new European Union treaty has turned the spotlight onto the tide of financial services regulation coming the UK’s way from Brussels.
10 Dec 2011| 3 CommentsEurozone leaders duck all the big issues
The EU treaty agreement reached by eurozone leaders last week isolated Britain and proposed a new 'fiscal compact’, but in reality it looks like just a 'lousy compromise’.
10 Dec 2011| 10 CommentsIreland's 'property chief' refuses to be a forced seller
Profile: Brendan McDonagh, the head of Ireland's National Asset Management Agency and first man of Irish property, tells James Quinn he won't be pushed around over Battersea Power Station or other state-owned assets.
10 Dec 2011| 1 CommentEU treaty: David Cameron faces cracks in cabinet over veto
Vince Cable warns the Prime Minister Britain has finished in a "bad place" after the acrimonious Brussels summit to resolve the crisis in the eurozone in which Britain stood alone against the 26 other EU nations.
10 Dec 2011| 284 CommentsWilliam Hague: Britain wanted a deal – not a row – in Brussels
The Foreign Secretary sets out why David Cameron was right to refuse to sign up to a deal in Brussels last week.
10 Dec 2011| 30 CommentsWe in Britain should pity those still trapped in the euro nightmare
Angela Merkel and Nicolas Sarkozy are engaged in something that has little to do with democracy, says Janet Daley, argues Janet Daley.
10 Dec 2011A silver lining peeps through the UK's economic cloud
He had no choice in the matter, of course, but the Prime Minister could not have picked a worse weekend for Britain to start enjoying its own company on the edge of an increasingly hostile Continent.
10 Dec 2011| 3 CommentsHard times bring harder hearts
As we grow more anxious about our own prospects, we are becoming less sympathetic to those less fortunate than ourselves, says Jenny McCartney.
10 Dec 2011| 13 CommentsFriends: The One where Dave Deploys His Veto
Sam winkles out the real story of Dave's trip to Brussels in the latest episode of our political sitcom by Iain Hollingshead.
10 Dec 2011| 2 CommentsDavid Cameron has at last learned to confront, not conciliate
Doing business with France and Germany requires hardheaded statesmanship, believes Robin Harris.
10 Dec 2011Britain is now free to decide its new place in Europe
Telegraph View: David Cameron must set out for us what sort of EU member we are going to be
10 Dec 2011EU treaty: Britain faces increasingly hostile Europe
Britain faces a wave of hostile legislation battered through the European Union by a new "Euro-Plus" bloc dominated by France and Germany as senior figures call for the British to be driven out of Europe.
10 Dec 2011| 195 CommentsEurozone leaders deluded over 'sticking plaster' treaty
So, now we know what the latest euro-crisis summit has to offer. The fifth comprehensive effort to stabilise the eurozone in nineteen months, this latest Brussels gab-fest produced a slew of headlines and initiatives. But what did it really achieve?
10 Dec 2011EU Treaty: talks 'mishandled spectacularly’, says Ed Miliband
Labour accused David Cameron of setting out to 'wreck' a pan-European deal on resolving the eurozone crisis, claiming that the Prime Minister 'spectacularly' mishandled the talks.
10 Dec 2011| 116 CommentsCameron can't protect the City by 'floating off into the Atlantic'
Lord Heseltine warn Prime Minister his attempts to safeguard Britain's financial services industry by cutting Britain off from Europe will fail, warning: "You can't protect those interests by floating off into the Atlantic".
10 Dec 2011| 202 Comments'Britain will always be at the table when it counts'
Chancellor George Osborne says David Cameron's decision to veto EU treaty changes was "very refreshing" and has insisted that Britain will still play a central role in Europe.
10 Dec 2011| 12 CommentsDavid Cameron 'sneaks out’ detail of talks with Rupert Murdoch
David Cameron has admitted for the first time that he met Rupert Murdoch weeks after the media tycoon launched his controversial bid for full control of the satellite broadcaster BSkyB.
10 Dec 2011Eurozone debt crisis: Britain may have to contribute to €200bn bail-out
Britain could be asked to contribute towards a €200 billion (£170 billion) attempt to support debt-stricken eurozone members, European Union officials have warned.
10 Dec 2011| 23 CommentsEU Treaty: Iain Duncan Smith leads Euro-sceptics’ praise of 'right thing for Britain’
Iain Duncan Smith publicly congratulated David Cameron on wielding Britain’s veto in Europe, as Tory Right-wingers stepped up their campaign to repatriate powers from Brussels.
10 Dec 2011EU Treaty: Britain and the EU - timeline of relations
A timeline of Britain's relations with the EU, as David Cameron vetoes key treaty change in Brussels.
10 Dec 2011| 8 CommentsEU Treaty: Britain left isolated by veto, says US
David Cameron’s decision to keep Britain out of the European agreement has been criticised by commentators in the US, who said the move may have long-term consequences for the country.
10 Dec 2011| 31 CommentsEU Treaty: how economic truths were hidden by 'blaming Britain'
It was the day they missed perhaps their last chance to save their tottering currency; the day they significantly reduced democracy, and locked in economic misery, for tens of millions of their people
10 Dec 2011The day Europe took revenge on Britain
The real hostility to the City of London and the free market festers in the German capital, says Daniel Johnson.
10 Dec 2011Eurozone crisis: traders back moves to prevent euro meltdown
The world’s financial markets rallied yesterday amid hope that fresh efforts to fix the European sovereign debt crisis would offer respite from the turmoil of recent weeks, in spite of Britain’s veto.
10 Dec 2011This is not quiet.
Zero hedge is yelling fire.http://www.zerohedge.com/"Swiss, Germans Set To Unleash Capital Controls As European Companies Prepare For Euro End
Submitted by Tyler Durden on 12/10/2011 - 17:01 Bond European Central Bank Eurozone Fail Germany Greece Swiss Franc Switzerland Term Sheet United Kingdom Zurich Even as Eurozone leaders attempted to instill some meager sense of accomplishment following the latest (but certainly not last) Euro summit culminating with yet another 7-page term sheet which achieved absolutely nothing, and in fact succeeded in alienating the UK even more, the real game continues behind the scenes. And it is a game which the euro looks set to lose. As Bloomberg reports, in the aftermath of the Telegraph's latest report confirming what has been said here all about the collateral crunch in Europe, Europe's CEO are now actively preparing for the worst case outcome: the end of the Euro (despite UBS' and other banks' repeated calls that such an event would result in an end of the world). To wit: "Grupo Gowex (GOW), a Spanish provider of Wi-Fi wireless services, is moving funds to Germany because it expects Spain to exit the euro. German machinery maker GEA Group AG is setting maximum amounts held at any one bank. “I don’t trust Spain will remain in the euro zone,” said Jenaro Garcia, founder and chief executive officer of Madrid- based Grupo Gowex, which provides Wi-Fi access in 15 countries. “We moved our cash and deposits to Germany because Spain will come back to the peseta"... Contingency planning for an unraveling of the currency involves cutting investment, moving money to Germany, transferring headquarters to northern Europe from southern, and even going out of business." And to all the chatterboxes on CNBC repeating ad inf that a Eurozone collapse would be "manageable" here is a person who actually knows what he is talking about: "“How do you control an explosion in a controlled way?” Fiat SpA (F) Chief Executive Officer Sergio Marchionne told reporters in Brussels on Dec. 2. “That’s a contradiction in terms. This will be an implosion of some size with potentially disastrous consequences." He is right, and while the outcome is certain, it will not stop Europe's financial leader Germany from intervening in an attempt to prevent a surge in Deutsche Marks once the currency returns, and will likely set up capital control measures - that last bastion to every failing monetary system - to halt what is sure to be a record inflow of post-collapse DEM appreciating capital."
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fiores.f.sierra@gmail.com
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shoofoolatte
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In Prison Reform, Money Trumps Civil Rights
“In Prison Reform, Money Trumps Civil Rights - http://nyti.ms/l5ifUF”
I wonder if Richard Nixon knew what he was doing.
http://en.wikipedia.org/wiki/Southern_strategyWest Virginia exists because it did not secede with the rest of the state. The coal mines have brought people up the hill more recently.Both these stories are about culture and impoverished culture.
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