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Todd Neel
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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://www.bloomberg.com/news/2012-01-11/bernanke-doubling-down-on-housing-bet-asks-government-to-help-mortgages.htmlBloomberg is a competitor of the WSJ.Editorily it is only slightly saner.
http://hat4uk.wordpress.com/
GREEK CRUNCH: I WAS RIGHT – THIS IS THE EU’S BIGGEST TEST YET
Papademos…forked tongue in cheekSource warns: “Without change of heart by Berlin, lenders hold all the cards”
Slog suspicions vindicated as Reuters backs view that bondholders spoiling for fightYesterday morning I suggested that Merkozy and Greek PM Lucas Papademos had one version of the Troika/bondholders/Greeks situation, whereas a usually trustworthy Slog source held the opposite view. The source is now shown to have been right, as Reuters expanded last night GMT:‘Hedge funds are taking on the powerful International Monetary Fund over its plan to slash Greece’s towering debt burden as time runs out on the talks that could sway the future of Europe’s single currency. The funds have built up such a powerful positions in Greek bonds that they could derail Europe’s tactic of getting banks and other bondholders to share the burden of reducing the country’s debt on a voluntary basis….They either prefer letting the country go under, which would trigger the credit insurance they have bought, or hope to get paid out in full if enough others sign up. That puts them in direct conflict with the IMF, which wants to force Greece’s cost of financing down to an affordable level.’
But things are heading towards stand-off in alarming ways.
I am permitted to tell you that my source works with (not for) a eurobank bondholder – not a Hedge Fund. The Reuters piece stresses that the Hedgies have little motive for folding at the poker table, whereas my source was at pains to say that the whole operation was a fantasy and needed serious EU/ECB intervention. Either way, the result is the same: the debt forgiveness/next IMF tranche scheduling process is light years away from the done-deal impression given bythe Franco-German installed bankerGreek Prime Minister Papademos yesterday.
Returning to the source this morning, I have no doubt about the validity of his view. He added within the last two hours:
“The original IIF [Institute of International Finance] deal about 50% forgiveness is completely stuck in the mud, let alone this one for the wider bondholding community. But even that can’t bring Greece back. What we have here is a fight to the death between private debt-holders on the one hand, and sovereign debtors worried about their banking systems on the other. But I stick by my view completely: those who will survive this mess hold all the cards. The EU doesn’t – and [Mario] Draghi needs to somehow persuade Merkel that this is the case”.
Hedge Funds are, let’s face it, at the bottom of a pretty rancid barrel. They’ve been piling up Greek bond holdings since September/October time – snapping up the March 20th due-date bond for 40% of face value. They have been looking for a showdown on this one – and they have little motivation to back off.
Let me make this as clear as I can: as I have maintained all along with eurodebt, this situation will not be resolved by private haircuts on anything but a minimal scale. The money to save Greece – and thereby the French banks – is going to have to come from somewhere else.
Meanwhile, as also predicted widely, the better-balanced Eurobanks are hoarding the ECB’s record 489 billion-euro injection into the banking system, thwarting attempts by Mario Draghi to avert a credit crunch across the EU. They’re still happy to park this money at negative net interest at the ECB rather than lend to other banks or business – an obvious sign that things are in a very bad way indeed.
Today, Italian Prime Minister Mario Monti met Angela Merkel to make a plea for more help to overcome the debt crisis. He told the Italian media that without more active EU help, there will be spreading disturbances in ClubMed. He also clearly wants to ECB to cut rates tomorrow….as do many others.
Draghi and Merkel must act now – and act in concert – or it’s all over. I wonder what the chances are of that happening?"
Wednesday, January 11, 2012
Links 1/11/12
WikiLeaks: US targets EU over GM crops Guardian and Leaked: US to Start ‘Trade Wars’ with Nations Opposed to Monsanto, GMO Crops Natural Society
Fearful of Genetically-Modified Crops? You’re Too Late FastCoExist
We’re Eating Less Meat. Why? Mark Bittman, NewYork Times. Speak for yourself. I was a vegan ten years ago.
Live : Minamisoma blogger is on Ustream Fukshima Diary (hat tip reader mk – human sacrifice near Fukushima). Can’t verify but this does strike me as authentic.
The 10 worst states for retirees in 2012 This libels Maine! It nixes going Down East because the winters suck (true) but claims it has the coldest winters in the US. Huh? Did they look at population distribution? Most people live near the coast, which tempers the winters a lot. Please, the Upper Peninsula of Michigan and Minnesota have vastly nastier winters than Maine. And Brunswick is actually becoming a magnet for retirees.
Twitter lashes out at Google search changes Raw Story. Reminds me of Godzilla versus Mothra, except that movie had a happy ending.
PBS’s Dishonest Iran Edit FAIR (hat tip Lambert)
Mafia now “Italy’s No.1 bank” as crisis bites-report Reuters (hat tip Lambert)
The Greek parents too poor to care for their children BBC (hat tip Mark Ames). Sophie’s choice, updated.
Europe’s $39 Trillion Pension Threat Grows Bloomberg
Beijing’s air: like standing downwind from a forest fire Christian Science Monitor (hat tip reader furzy mouse)
How US Policies Fueled Mexico’s Great Migration Truthout (hat tip reader May S)
Attack Film Depicts Romney as ‘Ruthless’ Rich Bloomberg.
Death of Private Danny Chen: Military Admits Chen Was Target of Race-Based Hazing on Daily Basis Truthout (hat tip reader May S)
Treasury emails outline Countrywide’s mortgage crisis McClatchy (hat tip Buzz Potamkin)
Opacity Protection: Vikram Pandit rolls out a ‘new way to measure risk’ Trust Your Instincts
Big Banks Face Inquiry Over Home Insurance New YorkTimes . Over force placed insurance, but this probe comes from the NY Department of Financial Services, not the Attorney General’s office.
Why the Fed Needs to Talk More About Housing Chris Whalen
Antidote du jour:
She is a nice woman who is a bit on the fringe.
Being correct does not make one a prophet.
http://krugman.blogs.nytimes.com/
Uncompassionate Conservatism
David Atkins, over at Digby’s blog, gets at what I’ve been trying to say about Romney, and more eloquently:
But watching the video clip is profoundly disturbing in a way that goes beyond just a thoughtless gaffe. James Fallows postulates that it’s because he used the word “enjoy” in the context of the act of firing someone–an act that should in no way be enjoyable for the person on either end of the pink slip, if they have any empathy.
The point isn’t necessarily that Romney has lived in privilege all his life; so did FDR. It’s his apparent inability or unwillingness to imagine what it’s like for those less privileged, his complete failure to try, even in his imagination, walking in someone else’s shoes that stands out."
But not even that gets at the heart of what is so wrong with Romney’s statement. It goes much deeper, to Romney’s sense of privilege, and a relationship to the world around him that is alien to most Americans and reinforces everything that is wrong with the 1% in America.
The key part of what’s off-putting about the gaffe isn’t the first part about liking to fire people, so much as the second part about “who provide services to me.” Liking to fire people is bad enough, but this is the real kicker.
When it comes to basic services like healthcare, almost no one in America sees the relationship that way. Most of us wouldn’t speak of “firing” our health insurance company. No matter how much we might detest our insurance company, we probably wouldn’t describe the experience of removing ourselves from their rolls an enjoyable one.
But most of all, we don’t see the health insurance company as providing us a service. We see ourselves, rather, as indentured supplicants forced to pay exorbitant monthly rates for a basic need that responsible people with means can’t get out of paying for if we can help it. We don’t see ourselves as in control of the relationship with them. They are in control of us–and no more so than when we get sick and need the insurance most. If the company decides to restrict our coverage or tell us we have a pre-existing condition after all, we’re in the position of begging a capricious and heartless corporation to cover costs we assumed we were entitled to based on a contractual obligation. It’s precisely when we need insurance most that we’re least able to “fire” the insurance company.
The same goes for the rent/mortgage, for the utilities, for the car, for the cell phone bill, for nearly everything.
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Romney talks about paying for health insurance as if it were the same as getting a pedicure, hiring an escort or getting the fancy wax at a car wash. It’s a luxury service being provided to him, and he doesn’t like it, he can take his business elsewhere. Romney’s is the language of a man who has never wanted for anything, never worried about where his next paycheck would come from, never worried about going bankrupt if he got sick.
It is the language of an entitled empowerment utterly alien to the experience of most Americans.Feel the Expansion
The WaPo has a heartrending story on the suffering being imposed on ordinary Greeks. So much for the doctrine of expansionary austerity.
I do have a small bone to pick, however. Here’s the discussion of why such harsh austerity is being imposed:
European powers, led by fiscally conservative Germany, have been insisting that Greece correct years of mismanagement by enacting swift waves of cuts and other major economic reforms to regain the confidence of investors and ensure the integrity of the euro. Slashing the deficit quickly is essential to ushering in a sustainable future, they have argued, and the resulting social pain is necessary to impress on Greek politicians and society that such excesses should never happen again.
Most of that is right — but not the bit about regaining the confidence of investors — or at any rate, that’s not what it’s about these days. For it’s quite clear that at this point investor confidence is unregainable. Greek borrowing costs aren’t coming down to affordable levels for a very long time.
So now the austerity isn’t market-driven — it’s political, the pound of flesh official lenders are demanding for maintaining the trickle of cash. And it really is in large part about punishment; we’ve now seen a fairly impressive demonstration that big budget cuts in a depressed economy hardly even reduce the deficit, because they drive the economy down and tax receipts with it.
I really don’t see how this can continue. But, you say, the alternative is default and a euro exit. Well, that’s a terrible scenario — but how can it be worse than what’s happening now?"
http://www.calculatedriskblog.com/2012/01/herman-van-rompuy-eurozone-needs-fiscal.html
Herman Van Rompuy: Eurozone needs a fiscal strategy that is "growth friendly"
by CalculatedRisk on 1/11/2012 12:53:00 PM
A few comments from Herman Van Rompuy, president of the European Council (translation via Google Translate):
It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an "optimum currency area"
This is a prelude to the next European Union summit meeting in Brussels on January 30th - the key topic will be a growth agenda.
It's not just government, to "sovereign debt" but also excesses in the financial sector, real estate etc.
We must do everything to avoid recession. ... We need a fiscal strategy that is "growth friendly"
Fiscal consolidation will not tell us to say "no" to all or which is cut everywhere. We must "prioritize"
We ask each member state to establish a "job plan", we make commitments we can evaluate
Maybe even Germany will pay attention to growth now that the German economy appears headed into recession too (no surprise since they export to other EU countries that are already in recession), from the WSJ: German Economy Shrank Slightly at End of 2011Germany's statistics office said
GDP slid around 0.25% in the fourth quarter from the third, ending a two-year expansion.
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zb
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President Obama, Reinvigorated
Once again the Republican response is all about "no tax increase". Its time someone calls them on their lie - and it is a lie. Make no mistake, when you cut government spending of any kind you are effectively increasing taxs on those who receive the benefit. For example, cutting student loan programs is the same as a tax increase because it now costs more for education; cutting funds to state and local government is a tax increase because it means they will have to raise taxes or pass the added cost on to taxpayers; cutting medicare or social security is the same as an increase in taxs because now it costs more for healthcare and retirement living. The fact is the Republican proposals are nothing but a giant tax increase, mostly on the poor and middle class while giving a giant tax decrease to the wealthy. Taken together all the forms of taxes, the working poor and middle class pay a far higher percentage of income to taxes then the wealthy. If you want to see a real job killing program just look at the Republican budget proposal of soak the working poor and middle class and give away money to the rich.There really is a difference between costs and taxes.A big difference is where the money goes after it leaves the payer.Obama is still jammed by the Republicans.
http://krugman.blogs.nytimes.com/2012/01/11/are-we-almost-out-of-the-liquidity-trap-wonkish/
Are We Almost Out of the Liquidity Trap? (Wonkish)
Aha. Greg Mankiw tells us that when you apply the coefficients for his suggested simple Taylor rule (a rule for setting the Fed funds rate), it shows the desired rate closing in on zero from below, suggesting that the end of the liquidity trap may be near.
Three responses, in decreasing order of triviality.
First, Greg’s estimate was from the 1990s; I re-estimated the same kind of rule (with equal coefficients on unemployment and core inflation) in 2010, and got somewhat different coefficients; here’s what the picture looks like with the updated numbers:
Not so close to exit from the liquidity trap, is it?
Some readers may already be asking whether it makes sense to say that the newer version of the rule is “right”; hold that thought for a minute.
Next, as Ryan Avent says, it’s far from clear that the numbers will actually move us closer to the crossover point in the near future. Core inflation, after rising for much of 2011, seems to be heading back down; unemployment may not fall much even if job creation is pretty good, because discouraged workers will come back into the work force.
But the main point is that using historical estimates of the Taylor rule is not a good way either to predict Fed policy or to recommend Fed policy at this point in our history.
Remember, a Taylor rule estimated on historical data is in effect an estimate of how the Fed thinks, not what it should be doing. So if your Taylor rule calls for a positive interest rate, it’s saying that this is what the Fed would do if it still thought the way it did on average over the period 1988-2008.
Yet why should the Fed still think the same way? There has been rather a lot of information coming our way since 2008, wouldn’t you say? If nothing else, we’ve learned that the liquidity trap is neither a figment of our imaginations nor something that only happens in Japan; it’s a very real threat, and if and when it ends we should nonetheless be guarding against its return — which means that there’s a very strong case both for a higher inflation target, and for aggressive policy when unemployment is high at low inflation.
The bottom line is that the Fed almost surely won’t, and very surely shouldn’t, start raising interest rates any time soon."
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Haitians Find Hope in Brazil
There is some hope there just now.
There is none in Haiti.
What Haitians need is income. -
Brooklyn's Rube Goldberg
A series of incidents in need of composition.
Sooner is better. As soon as you can is best.
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