@23:30, 10/11/12

.


The view of the world economy may be changing.

Krugman put this up the day before yesterday:

http://krugman.blogs.nytimes.com/2012/10/09/a-tragic-vindication/

. . . "I did want to weigh in on the just-released first chapter of the new IMF World Economic Outlook (pdf), which contains among things a meditation on multipliers. Basically, the Fund looks at the severity of the downturns in countries practicing severe fiscal austerity and says, gee, maybe fiscal policy has a big impact after all.
OK, I’m being a bit unfair. Olivier Blanchard, the chief economist of the Fund, who co-wrote the relevant box, has always been of the view that fiscal policy has serious impacts. But there was a widespread determination in the immediate aftermath of the financial crisis to dismiss the notion that in a liquidity trap there are large impact of fiscal policy, positive or negative. Those of us who argued that we were now in a very Keynesian world were definitely marginalized in practical policy debates.
But we were right — a fact demonstrated not so much by stimulus as by anti-stimulus, which has had all the negative effects traditional Keynesian macro said it would.
Unfortunately, a large part of the political spectrum remains determined not to learn that lesson."

I think I saw a discussion of multiplyers a few days before this but have not found it.  The search box would help. He followed it with this:

http://krugman.blogs.nytimes.com/2012/10/09/deleveraging-shocks-and-the-multiplier-sort-of-wonkish/

"October 9, 2012, 5:09 pm112 Comments

Deleveraging Shocks and the Multiplier (Sort of Wonkish)

Jonathan Portes — who will be my teammate in a debate on fiscal policy in London next week — weighs in on the IMF’s multiplier mea culpa. He confirms that policy makers in many places were working with the assumption of a multiplier on fiscal contraction much less than 1, whereas experience now suggests that it’s actually more than 1.
What I thought might be worth pointing out is that the logic for a biggish multiplier and the logic of the crisis itself are very closely linked: times like these, the aftermath of a credit bubble, are precisely when you expect fiscal multipliers to be large. And that in turn says, once again, that fatalism — or worse yet, demands for fiscal retrenchment — in the aftermath of such a bubble are deeply destructive.
So, the simple but surely broadly correct story of the mess we’re in is that we had a period of excessive complacency about leverage, which came to a sudden end. Household debt in particular surged, then was suddenly perceived as excessive:

The crucial thing from a macroeconomic point of view is that leveraging and deleveraging are not symmetric in their effects. Leveraging up, other things equal, leads to high aggregate demand — but this can be and is in practice offset by the central bank, which can always raise rates. Deleveraging, on the other hand, can’t be offset equally easily; the central bank can cut rates, but only to zero, and unconventional monetary policy is both controversial and an iffy proposition (which doesn’t mean that it shouldn’t be tried).
So a large leveraging/deleveraging cycle is likely to be followed by a persistent shortfall in aggregate demand that can’t be cured using ordinary monetary policy; what I consider depression economics.
Now, the same thing that makes deleveraging so hard to handle also makes the fiscal multiplier larger than it is in normal times. Normally, expansionary fiscal policy is offset by monetary tightening, contractionary policy by monetary loosening. Hence the lowish multiplier estimates based on recent history. But if deleveraging has pushed you into a liquidity trap, there are no offsets.
So how big would you expect the multiplier to be under these conditions? Bigger than one.
Start by provisionally assuming a frictionless world in which consumers have perfect foresight and perfect access to capital markets. In that case the multiplier should be exactly 1, with consumer demand neither rising nor falling in the face of a change in government purchases (so that the change in purchases translates one-for-one into a change in GDP). Why? Well, a rise in government spending does mean higher expected future taxes — but it also means higher incomes right now, and those two effects should exactly cancel each other.
Now add in realistic frictions, notably households that are liquidity-constrained and/or use rules of thumb based on current income to make spending decisions. (By the way, as Gauti Eggertsson and I have pointed out, once you’re using a debt/deleveraging model you are already in effect assuming that many households face liquidity constraints). These frictions will mean that a rise or fall in current income due to fiscal policy will lead to at least some movement of consumption in the same direction. So we get a multiplier bigger than 1.
But, you say, confidence! OK, if people believe that a movement in government spending now presages even bigger moves in the future, you could reverse this conclusion. But there is no reason at all to believe this when it comes to fiscal stimulus, which has proved completely temporary; and it’s a highly dubious proposition for austerity imposed in response to a fiscal panic, too.
So there really was no good reason to be surprised by large fiscal multipliers. They were a predictable consequence of the kind of crisis we’re in; and the unjustified assumption of small multipliers has helped make the crisis worse."

Today this:

http://krugman.blogs.nytimes.com/2012/10/11/the-imf-and-the-gop/

"October 11, 2012, 4:45 am127 Comments

The IMF and the GOP

Econowonks are still buzzing about the new IMF World Economic Outlook, which offered grim warnings about the world economy, and also argued forcefully if discreetly that a big reason for the worsening outlook is that policy makers have gotten the basic economics wrong.
Of particular interest is the discussion in Chapter 1 (pdf) on fiscal multipliers. I and others have been arguing for a while that the experience of austerity in the eurozone clearly suggests pretty big Keynesian effects. Here, for example, is what a scatterplot of fiscal consolidation (from the IMF Fiscal Monitor) and growth (including an estimate for next year, from the World Economic Outlook) looks like:

But, you might object, maybe the causation runs the other way; maybe countries in trouble are forced into fiscal consolidation, so it’s not the austerity what did it. But the IMF has an answer to that: it looks at forecast errors versus austerity. Part of the reason for doing this is to figure out why things are going so much worse than expected; but there’s also the fact that the forecasts already included the known problems of the economies in question, so that you’re more or less getting an estimate of the impact of austerity over and above the known problems (and the initially assumed effect of austerity, which was supposed to be small). It looks like this:

As it says, this indicates that the contractionary effects of fiscal consolidation are substantially bigger than policy makers were assuming.
So one thing I haven’t seen pointed out is that this directly contradicts current GOP doctrine. To the extent that the GOP has a theory of recession-fighting, other than the view that the animal spirits of job creators will soar once that evil Obama is gone, it was embodied in the Joint Economic Committee manifesto Spend Less, Owe Less, Grow the Economy (pdf), which declared that

In the short term, fiscal consolidation programs that rely predominately or entirely on spending reductions have expansionary “non-Keynesian” effects that may offset the contractionary Keynesian reduction in aggregate demand.
-
In some cases, “non-Keynesian” effects may be strong enough to make fiscal consolidation programs expansionary in the short term.

Tell that to the Greeks.
The reality is that everything that has happened economically since the turn away from stimulus to austerity, from interest rates to inflation to output, has refuted the doctrine the GOP is pushing. Since there has of course been no concession of error, this does not bode well for the US economy if Romney wins."

Followed by this:

"October 11, 2012, 7:52 pm7 Comments

A Global 1937

Back in 2009, when there was (briefly) a policy consensus in favor of active fiscal policy to fight the slump, there were many warnings to the effect that we must not repeat the infamous mistake of 1937, in which FDR was persuaded to focus on balancing the budget while the economy was still weak, terminating the recovery from 1933 and sending America into the second leg of the Great Depression.
And what policy makers proceeded to do was, of course, to repeat the mistake of 1937.
The new IMF World Economic Outlook is, in effect, an extensively documented exercise in hand-wringing over the consequences of this repeat of bad history. Kudos to the Fund for having the courage to say this, which means bucking some powerful players as well as admitting that its own analysis was flawed.
There is, however, one point I think is getting skewed in the discussion of the IMF’s new concern over premature austerity. Much of the discussion seems to focus on the question of relaxing the demands on debtor countries — which is certainly a crucial issue for the eurozone. However, the global 1937 we’re now experiencing isn’t just about forced austerity in Spain, Greece, etc.. It’s also — and I think mainly — about unforced austerity in countries that remain able to borrow very cheaply.
Let’s look at estimates of the cyclically adjusted budget deficit from the IMF’s Fiscal Monitor, measured as a percentage of potential GDP. I don’t think you want to take these numbers as gospel — for Britain, at least, there’s a very good case that the IMF is greatly understating potential output and hence overstating the structural deficit, and I suspect that this is true to a lesser extent for the US. But in any case the point is that even cheap-money countries facing no pressure either from the market or from external forces to engage in immediate austerity are nonetheless engaged in sharp fiscal contraction:

This is taking place in an environment in which the private sector is still deleveraging ferociously from the debt binge of the previous decade; so we’re creating a situation in which both the private sector and the public sector are trying to slash spending relative to income. And whaddya know, the world economy is sputtering.
The truly amazing thing is that this calamitous error is not, for the most part, the result of special interests, or an unwillingness to make hard choices. On the contrary, it’s being driven by Very Serious People who pride themselves on their willingness to make hard choices (which, naturally, involve inflicting pain on other people). In fact, I’d argue that the desire to make hard choices, or at least to be seen as doing so, is the reason the VSPs chose to ignore the extensive and, we now know, completely accurate warnings from some economists of what would happen if they gave in to their austerity obsession.
FT Alphaville says that I’m feeling a bit “smuggish” about all this; well, I’m only human. But truly, this is a terrible thing to behold."

Bloomberg has Richard Koo of the Nomura Research Institute:

http://www.bloomberg.com/news/2012-10-10/europe-dispensing-wrong-fiscal-medicine-in-koo-warning.html

Europe Dispensing Wrong Fiscal Medicine in Koo Warning

"European policy makers are dispensing the wrong medicine by tackling the euro-area’s fiscal ills with austerity, according to Richard Koo, chief economist of Nomura Research Institute.
The budget cuts and structural reforms prescribed to nations such as Spain by German Chancellor Angela Merkel and European Central Bank President Mario Draghi are in Koo’s eyes akin to the treatment of diabetes sufferers, who must eat carefully and exercise to improve their long-term health.
The trouble is Europe’s cash-strapped peripheral countries have the economic equivalent of pneumonia, which is more deadly and is best beaten by ensuring ample nourishment, said Koo. To the 58-year-old former Federal Reserve economist that means greater fiscal stimulus if the euro crisis is to end soon.
“The patient can have both, but doctor has to cure the pneumonia first even if the treatments contradict those required for the diabetes,” Koo said in an interview in Tokyo yesterday. “In Europe, austerity is the only game in town.”
The advice goes to the heart of Koo’s theory that like their Japanese counterparts in the 1990s, policy makers in Europe are failing to see that their region is suffering from a “balance-sheet recession.”

Rock-Bottom Rates

That’s when the end of an asset boom cripples companies and households with debt they need to minimize and leaves them with little desire to borrow and spend even with rock-bottom interest rates. Koo’s solution is to offset private sector savings with government spending, the opposite of what Merkel and Draghi are advocating in the euro-area, where Spain is mulling whether to become the latest country to request a sovereign bailout.
“If governments do nothing, economies enter a deflationary spiral,’ said Koo. ‘‘When you look around Europe you see balance-sheet recessions.’’
The lessons of Japan’s lost decades are getting a sounding this week as the International Monetary Fund hosts its annual meetings in Tokyo. The world’s third largest economy has grown less than one percent on average in the past two decades and average consumer prices have fallen in seven of the last 10 years.

Boom, Bust

A Taiwanese-American, Koo was born in Japan before moving to San Francisco when he was 13. He studied economics at the University of California-Berkeley and John Hopkins University before winning a fellowship from the Fed in Washington.
Supposed to stay on at the Fed when that ended, he ran into President Ronald Reagan’s public sector hiring freeze, prompting him to move to the Fed Bank of New York, where he worked on issues such as Latin American debt. In 1987 he returned to Tokyo to join Nomura, planning to return to the U.S. after a couple of years. Instead, he remained through Japan’s boom, bust and subsequent malaise, honing his ‘‘balance-sheet recession” argument which was detailed in 2008’s “The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession.”
Koo is now taking the experience of Japan to Europe, making four trips to the continent this year and awaiting a translation of his book into German.
While he has addressed policy makers on his travels, his views may not be getting traction where it counts. Merkel said Sept. 28 that Europe must curb its budget deficits and doing so will generate long-term benefits. Draghi said Oct. 9 that there is no alternative to austerity even if it hurts output.

Spanish Deficits

In the case of Spain, Koo says the euro area’s fourth- largest economy is in pain following the collapse of a housing boom which led households and companies to boost saving to a net 6 percent of gross domestic product after borrowing and spending 12 percent of GDP as the property bubble inflated.
While the government initially ran budget deficits to offset a loss in private demand equal to almost 20 percent of GDP, the economy took a turn for the worse in 2010 when it began cutting back as the Greek-led crisis gripped markets, he says.
He makes the case that this was the wrong choice by noting that despite the budget consolidation, private savers fled for German bonds, causing Spanish yields to rise even further. The 10-year Spanish bond reached a peak of 7.62 percent in July.
Koo uses Japan’s experience to demonstrate the errors he sees being repeated in Europe. In 1997, Prime Minister Ryutaro Hashimoto’s government increased taxes and cut spending, while pushing structural reforms to offset the pain. The problem was the private sector was trying to lower debt and already failing to respond to zero interest rates, he said.

European Stimulus

The result was five consecutive quarters of contraction and falling tax revenues, provoking a 68 percent increase in Japan’s fiscal deficit. Even though Hashimoto reversed course, it took Japan a decade to haul back its budget deficit, Koo said.
Europe can avoid a similar trap if the ECB and IMF agree Spain and other crisis-torn countries can revive stimulus and nations in better shape such as the U.S. and Germany spend the capital flooding their economies, said Koo. He also proposes a rule prohibiting euro-area governments from selling debt to the citizens of another country, limiting the ability of private savings to move abroad and hurt yields.
While Koo acknowledges such policies may not find favor among Germans or investors, he says a recent trip to Berlin persuaded him some in Germany warm to his ideas. He suspects investors also may rethink their ardor for austerity if stimulus meant there was a prospect of growth recovering.
“We’ll keep at it and maybe in two years or hopefully sooner, people will get it’s a different disease requiring a different treatment,” Koo said.
He is more hopeful his ideas will gain a following in the U.S., noting Fed Chairman Ben S. Bernanke has read his book and is warning against premature fiscal consolidation as $600 billion in government spending cuts and tax increases loom unless the law is changed.
“If they’re not careful, the U.S. could fall off the fiscal cliff,” he said, estimating it amounts to 3 percent of GDP, the same as Japan’s 1997 budget cuts.
To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net"

I pulled up The Telegraph front page and found this:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100020688/spain-keelhauled-by-germany-and-aaa-chicanery/



"As Gary Jenkins from Swordfish says this morning: Spain is junked if it does, and junked if it doesn’t.
A key reason for Standard & Poor’s two-notch downgrade of Spain to near junk last night is the refusal of premier Mariano Rajoy to bite the bullet on a rescue. His "hesitation" is "potentially raising the risks to Spain’s rating".
By contrast, Moody’s said earlier that it will cut Spain to junk if it DOES request a bail-out. What a marvellous mess.
Here is S&P’s rationale:

A severe and deepening economic recession that could lead to increasing social discontent and rising tensions between Spain’s central and regional governments;
A policy setting framework among the eurozone governments that in our opinion still lacks predictability. Our understanding from recent statements is that the Eurogroup’s commitment to break the vicious circle between banks and sovereigns – as announced at a summit on June 29 – does not extend to enabling the European Stability Mechanism to recapitalise large ongoing European banks. Our previous assumption was that official loans to distressed Spanish financial institutions would eventually be mutualised.

So there you have it. The decision by the AAA bloc of Germany, Austria, Finland and Holland to walk away from the June summit deal for direct ESM recapitalisation of Spanish banks (lifting the burden off Madrid's shoulders) has keelhauled Spain.
Yes, the AAA quartet now claim they never agreed to cover "legacy assets" or the mess left from the EMU bank bubbles of the Noughties (in which German and Dutch banks were central players). That is a very dubious claim.
The Council document circulated for several days and was discussed by key officials from all countries. The purpose was crystal clear: to break the vicious circle between banks and sovereigns. Everybody knew that it was intended to stop Spain spiralling out of control.
I have been assured by Council officials that the text was not changed in the small hours of the night. The leaders agreed to it, then discovered they could not sell the package to their own parliaments – especially the Bundestag – and are now wriggling out on a technicality.
No doubt it is difficult for a small country like Finland to resist the crushing peer pressure of EU summits, but that does not apply to Germany. It is hard to conclude that Chancellor Merkel has behaved in an honourable fashion.
Personally, I can fully understand why the German people do not wish to be led by the nose into a fiscal union (or a backdoor version called a banking union) that is not properly accountable to any elected body and would ultimately eviscerate German democracy. Indeed, Germany should have no part of this constitutional leap in the dark.
However, if Germany is going to pursue that course, it must face up to the consequences. It must accept that EMU has fundamentally failed and should not be saved.
It must prepare for the least traumatic way to break up monetary union, which is the withdrawal of Germany and its satellites from the euro.
As we have all discussed many times on this thread, that would allow the south to keep the euro and to uphold their euro debt contracts. The Latin euro would fall to an equilibrium value.
The D-mark bloc would have a huge stake in pegging their currency to the euro for a while to prevent an exchange rate overshoot and huge losses for their own banks and insurers.
Once the dust had settled, the Latins et al could carry on together under French leadership or, if they chose, restore their historic currencies without the risk of spiralling devaluation.
The problem is that nobody is willing to grasp the bull by the horns, least of all the French. Nobody can bring themselves to accept that the status quo is deeply destructive, and the euro not worth saving. The crisis drags on and on, and as the IMF said this week, the lasting damage from failure to act is rising all the time.
The AAA volte-face is perhaps the most shocking chicanery, deception, and cowardice that I have seen over the 20 years or more that I have been writing about Europe’s affairs (on and off). The EU has broken its word to the markets. The Latins feel betrayed. So do the Irish. There will be deep consequences, even if these are not obvious at first.
There have been worse outrages from the EU of course, though of a different kind. The decision to relaunch the European Constitution in dressed-up form (the Lisbon Treaty) after it had already been rejected by voters in France and Holland was a disgrace. Then to override a fresh rejection by voters in Ireland – the only country to hold a referendum – was unforgivable.
Chancellor Merkel was the driving force behind the Lisbon Putsch. It was the Kanzleramt that cooked up the revival plan and pushed it through. France’s Nicolas Sarkozy went along with it – shamelessly – for his own motives. The acquiescence of the Dutch government was pitiful. As for Gordon Brown’s refusal to be photographed in the same room in Lisbon signing the treaty, well, what can one say?
As is now obvious, the Lisbon Treaty solved nothing in any case. Europe’s governance is as dysfunctional as ever.
So to those German readers who think I am too harsh on Berlin, my answer is that your leader – while a paragon of democracy at home – has been the arch-exporter of anti-democratic and authoritarian excess on the European level.
Yet having pushed relentlessly for "more Europe", we can now see all too clearly that Germany will not in fact accept the implications of "more Europe" when push comes to shove. So we have a disaster.
The sooner Germany outgrows its schizophrenia on Europe and takes its full place as a flourishing, proud, and democratic nation state – as it deserves – the better for all of us. "Less Europe" would a splendid development.
With that off my chest, here is a some more on the S&P note.

Spain is enduring a severe and, in our view, deepening economic recession as reflected in our real GDP forecast of -1.8% in 2012 and -1.4% in 2013. The pace of private sector deleveraging, together with the government’s budgetary consolidation measures, is likely to lead to an even deeper contraction of investment and consumption in both the public and private sectors.
Since 2008 the policy responses from Europe’s monetary and political authorities have not, in our opinion, been effective in permanently reversing the tight financing conditions faced by large parts of the Spanish private sector. While lending rates have declined in recent months for blue chip corporate borrowers, small and medium sized enterprises (which employ 76% of the national workforce) are paying average interest rates of 6.6% as of August on borrowings up to five years, versus 4.8% in 2009. In our view, the shortage of credit is an even greater problem than its cost. According to data published by the Banco de Espana, loans to nonfinancial domestic enterprises have declined by €161 billion from the end of 2008 through August 2012. We estimate this to equal about 15% of GDP.
Overall, against the backdrop of a deepening economic recession, we believe that the government’s resolve will be repeatedly tested by domestic constituencies that are being adversely affected by its policies. Accordingly, we think the government’s room to manoeuvre to contain the crisis has diminished.

One has to feel sorry for Mr Rajoy. Having agreed to stringent terms on Spain’s bank rescue only to be shafted on the ESM, it is understandable that he is very reluctant to submit to fresh terms on a sovereign bail-out only to face treachery a second time.
Judging by comments from his team, he hopes to muddle through on the mistaken assumption that "speculators" will not dare to short Spanish debt as long as the ECB stands in the wings waiting to crush them.
If this were a story of speculators, such a strategy might work. Spreads would stay low. But that is not the story. The risk for Spain is that "real money" investors such as sovereign wealth funds, central banks, pensions funds, insurers, etc, will take advantage of the lull to extricate themselves from Spain at reduced loss.
If that happens – and the IMF gave a very broad hint that this is exactly what will happen – the spreads will creep back up, with knock-on effect for Spanish companies. Each month of delay traps Spain deeper in depression.
But feeling sorry for Spain is perhaps not the right emotion. The country can at any time restore control over its own destiny by leaving the euro. It comes down to cojones."

The Telegraph financial crisis page looked like this:

Global banks bet on green shoots, defy IMF gloom

 

The US economy appears to have turned the corner at last after flirting with danger earlier this summer, according to a rash of new data.

11 Oct 2012

| 11 Comments

Why would Scotland turn itself into Greece?

 

A fatal financial contradiction infects the Scottish National Party’s independence plan, says Jeremy Warner

11 Oct 2012

| 190 Comments

Debt crisis: as it happened - October 11, 2012

 

German thinktanks warn euro crisis putting a strain on German economy and halve forecast for German growth next year to 1pc, warning there is a "great danger" of recession in Germany if euro situation deteriorates.

11 Oct 2012

| 290 Comments

Greece's biggest company moves abroad

 

The effectiveness of Greece’s capital markets was called into question on Thursday, as the country’s biggest business announced it was moving its listing to the London Stock Exchange.

11 Oct 2012

| 3 Comments

Germany in 'great danger' of falling into recession

 

Germany is in "great danger" of plunging into recession, four respected think tanks have warned, as they slashed the country's 2013 growth forecasts in half.

11 Oct 2012

| 49 Comments

Greece's biggest company moves abroad

Coca Cola Hellenic is to move its headquarters to Switzerland and list its shares in London, in a further blow to the struggling eurozone country.

11 Oct 2012

| 69 Comments

Global spat erupts over power of developing countries at IMF

A spat has broken out between developing countries and the US over Washington’s refusal to sign off a deal struck two years ago that would give the smaller nations greater influence at the International Monetary Fund.

11 Oct 2012

| 42 Comments

Lagarde urges eurozone action to end 'terrifying' jobless rates

Christine Lagarde has called for decisive action from world leaders to end uncertainties in the global economy that are prolonging “terrifying and unacceptable” levels of unemployment.

11 Oct 2012

| 318 Comments

Nothing has been added since.

The Guardian:

Christine Lagarde: act bravely together to save world economy

11 Oct 2012: Head of International Monetary Fund at Tokyo conference voices rest of world's frustration with eurozone crisis dragging on

• 

  Greece has not faced up to the ghosts of its past

  11 Oct 2012: Constantine Giannaris: As Angela Merkel makes a futile attempt to prop up Greece's political class, the country is on the brink of self-destruction

• Eurozone crisis as it happened: Spain downgrade ups bailout pressure

  11 Oct 2012: Ratings agency S&P downgrades the country's credit rating to BBB-minus as IMF head Christine Lagarde calls on governments to co-operate to heal the world economy
  

• Eurozone crisis: how long can stricken countries buy time?

  11 Oct 2012: Ashoka Mody: Delaying strategy by indebted EU nations presupposes that growth will strengthen the capacity to repay debt down the line – but a strong economic revival is unlikely

• Christine Lagarde: act bravely together to save world economy

  11 Oct 2012: Head of International Monetary Fund at Tokyo conference voices rest of world's frustration with eurozone crisis dragging on
  

• Downgrade raises pressure on Madrid to accept bailout

  11 Oct 2012: S&P says it has lowered the rating on Spain's debts two notches – to BBB- – following slump in country's fortunes

I found nothing in the Times on the financial troubles of Europe.

Growth Warning Top German Economists Say Greece Is Lost

SPIEGEL ONLINE - October 11, 2012 Several top German economic institutes on Thursday warned that German growth is slowing as the country continues to be hampered by the ongoing euro-zone debt crisis. And Greece, they say, will be unable to "free itself from its debt burden" and will need another haircut. more... [ Forum ]

Cloistered from the Crisis Greeks Seek Solace in Mt. Athos Monasteries

SPIEGEL ONLINE - October 11, 2012 Mount Athos, a self-governed peninsula in northeastern Greece, has been attracting pilgrims to its Orthodox monasteries for centuries. But the debt crisis has led to a sharp rise in the number of guests seeking calm and solace there. Women still aren't welcome, though. By Daniel Steinvorth more...

Growth Warning Top German Economists Say Greece Is Lost

REUTERS

The German port of Bremerhaven: Exports are still keeping Germany's economy afloat.

Several top German economic institutes on Thursday warned that German growth is slowing as the country continues to be hampered by the ongoing euro-zone debt crisis. And Greece, they say, will be unable to "free itself from its debt burden" and will need another haircut.

Chancellor Angela Merkel had been hoping that her trip to Athens earlier this week would help demonstrate Germany's solidarity with Greece as it struggles to overcome its debt crisis. Just two days later, however, leading economic institutes in Germany have darkened the mood considerably. The institutes presented their autumn economic forecast on Thursday, and cast doubt on whether Greece would be able to remain part of the euro.

"We believe that Greece cannot be saved," said Joachim Scheide from the Kiel Institute for the World Economy, one of several top economic institutes tasked by the German government with examining the state of the country's economy twice a year. Oliver Holtemöller, of the Halle Institute for Economic Research, was also pessimistic at the Thursday press conference called to present the evaluation. He said it is unlikely that Greece will ever be able to free itself from its debt burden -- and called for a new debt haircut for the country.
The idea is not likely to go over well. Any new restructuring of Greek debt would necessarily involve the country's international creditors rather than solely affecting private investors as last spring's €100 billion haircut did. On Thursday, German Finance Minister Wolfgang Schäuble rejected a debt-haircut proposal by the International Monetary Fund, saying it was not helpful. Euro-zone finance ministers also oppose the idea and the European Central Bank has said that forgiving the Greek debt it has on its books is out of the question.
Bad News for Germany and Europe
Alternatives, however, are few and far between. And that, combined with the threat of further euro-zone turbulence, the report makes clear, spells bad news for both the German and European economies.
Specifically, the report forecasts that German economic growth for 2012 will only end up being 0.8 percent, slightly down from recent predictions, and that growth next year will likely be weak. Instead of the 2 percent previously forecast, the report released on Thursday now estimates GDP growth of just 1 percent in Germany in 2013. That growth, such as it is, will come almost entirely from exports, which are holding up, the report says.
But that is the best-case scenario, based on the assumption that the debt crisis in the euro zone does not worsen. The report's authors, however, do not believe the worst has passed. "The current evaluation of the German economy is based on the assumption that the situation in the euro zone … will gradually stabilize and investor confidence will return. That, however, is in no way assured," the report reads. "Downside risk dominates … and the danger is great that Germany will fall into recession."
Furthermore, Germany's top economic institutes made clear that they are dissatisfied with the steps thus far taken in the euro zone to solve the ongoing crisis. First and foremost, the analysts repeated a demand made in earlier reports that the euro zone come up with a framework for ensuring orderly bankruptcy proceedings for member states. "Domestic debate in countries like Germany and Finland have made it clear that there is a decreasing willingness to increase aid payments or make transfer payments," they write. As such, they say "it makes more sense for creditors to take part in the costs of the crisis."
Inflation Warning

Report co-author Kai Carstensen, of the Kiel Institute for the World Economy, put it more clearly at the Thursday press conference. Referring specifically to the unlikelihood that Greece will be able to manage its debt burden anytime soon, he said, "it is time to draw the consequences: No to aid payments, yes to debt restructuring." The report was also heavily critical of the European Central Bank's plan to purchase unlimited quantities of sovereign bonds from debt-ridden euro-zone member states on secondary markets. "The ECB is becoming the guardian of national budgetary policy and possibly even holds sway over the solvency of individual countries," the report reads. "In addition to the bank's independence, its credibility is also in danger."
Furthermore, the report adds, such behavior could trigger high inflation, which would seriously damage the ECB. "Should higher rates of inflation result, it will be extremely difficult to re-establish the ECB's credibility," the report says. Still, for 2013, the research institutes forecast a modest inflation rate of 2.1 percent.

cgh -- with wire reports"

I do not need mechanical or pharmacological help as yet.
It is not as demanding as it once was several decades ago.

My driving license is in decent order. If yours is not we should discuss how to deal with that.
Motorcycle licenses are often separate things. That would get you to work in fair weather.

I had an insurance problem so my costs are high for another two years.


Sooner is better.  As soon as you can is best.  Be persistent.

Thursday, October 11, 2012

Links 10/11/12

I hate giving apologies of sorts BUT Lambert and I spent a fair chunk of Wednesday on the phone with two different firms that might help with our tech mess. This is the first time we’ve felt cautiously optimistic that we might find service providers who could help. In the mean time, our current software guy will be making some changes over the next week that should improve performance (we need to work through that first before we can address the Mystery of the Disappearing Comments).
The Chinese Soft-Shelled turtle urinates through its mouth QI Elves. Yet another anti-antidote from Richard Smith.
For Some Drivers, an Electric Motorcycle Could Be the Best of Both Worlds New York Times (furzy mouse). I resolved never to own a car, but this might be an acceptable compromise. If you can carry a bag or two of groceries as well, it would be a great device.
Lance Armstrong accused in USADA files of being the ringleader of biggest doping conspiracy in sporting history Telegraph. I know this has been in the news a while, and I really hoped that Armstrong would prove his critics wrong. But the use of performance enhancing techniques is so widespread in sports, it’s hard to believe that many accomplishments at the very top end these days are real.
Europe Dispensing Wrong Fiscal Medicine, Economist Koo Warns Bloomberg. What is most interesting is that in the “for the masses” version of the site, this story has the most prominent placement.
Spain’s credit rating downgraded to near junk Telegraph
Spanish Bond Yields Rise Wall Street Journal
Carlyle’s China problem: some questions for David Rubenstein John Hempton
The Nation’s deeply deceptive Obama-endorsement editorial Vast Left Wing Conspiracy (Lambert). A top notch shredding.
Rep. Ann Marie Buerkle, Ursula Rozum agree to four town hall meetings without Dan Maffei Syracuse. I know this is really parochial, but Ann Marie Buerkle is the stupidest person I have ever seen appear on television. A potted plant has a higher IQ. I can’t fathom how she has a driver’s license, much the less got into Congress. Reader bob (a local) writes: “Danny muffin decided he doesn’t want to play. Ursula is pretty brave, those “town hall meetings” that AMB organizes are notorious for a hand picked crowd and questions, and threats.” So if you are in the Oswego area and are free tomorrow at 6 PM, you might see if you can snag a seat.
When Conservative Republicans Loved Keynes and Expansionary Fiscal Policy Brad DeLong (Scott)
The Disingenuous James Bullard Tim Duy
Controversies over economics and genetics Tyler Cowen
Do falling trade costs benefit all countries equally? VoxEU
Neil Barofsky on the Fed Stress Test mathbabe
E-Mails Cited to Back Lawsuit’s Claim That Equity Firms Colluded on Big Deals New York Times (Richard Smith)
Goldman’s ‘muppet hunt’ draws a blank Financial Times. The literalness is a cute distraction. And as Congressional investigations of Goldman show, the firm’s staff are far more careful about what they say in e-mails than staff of other shops.
Fed’s Tarullo Calls for Cap on Bank Sizes Wall Street Journal
Canadian bank goes after homes to collect credit card debts Bay Citizen (Lisa Epstein)
The Marshmallow Study revisited EureakAlert (Mark Thoma). This is important. Poor people are accused of being bad at math and/or deferred gratification (known formally as hyperbolic discounting) but this suggests that behavior may be a rational response to environmental instability.
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Read more at http://www.nakedcapitalism.com/2012/10/links-101112.html#XAKd7ODvATcq3lHb.99

Europe News

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  EU Said to Consider Delaying Basel Bank Rules for Up to a Year

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  The European Union may consider pushing back when lenders need to start phasing in tougher Basel bank-capital rules by as much as a year after warnings that pressing ahead with the original timetable may drive up costs, according to three people familiar with the talks.
  
• U.K. Home Values Drop as Olympic Knock-On Extends Summer Lull

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  U.K. house prices fell for a third month in September as mortgage availability remained constrained and a lull during the London Olympics the previous month reduced sales, Acadametrics Ltd. said.
  
• Copper Traders Most Bearish Since June on Economies: Commodities

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  Copper traders are the most bearish in four months on mounting concern that demand for industrial metals will weaken as growth slows from China to Europe.
  
• Putin Braces for First Russian Elections Since Return to Kremlin

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  Russia’s first gubernatorial elections in eight years offer the biggest test yet of President Vladimir Putin’s efforts to reassert control after the largest protests in more than a decade.
  

More Europe News

• G-7 Discusses Potential Fiscal Measures If Growth Falters

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• Hollande Robbed of Growth Driver as Companies Curb Investments

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• U.K. Regulator Tells 62 Online Stores to Change Terms

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• Sprint’s Softbank Deal Seen Roiling U.S. Mobile Market

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    Updated 2 hours ago
• EADS CEO Faces Terminator Torment After Merger Judgment

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• Solar Silicon to Bottom as China Halts Factory Expansion

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• Morgan Stanley E-Mails Show Doubts in Doomed Vehicle

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• China’s Mo Yan Wins Nobel Literature Prize, Academy Says

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    Updated 2 hours ago
• Europe Wins Praise From Geithner, Cohn as IMF, Germany Spar

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• True Believers Biden-Ryan Contrast More Than Obama-Romney

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• Turkey Says Pilot of Syrian Airplane Ignored Its Warning

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