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Do not kid yourself that the eurozone is recovering - FT.com - 0 views

www.ft.com/...aa-11e3-bbeb-00144feab7de.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Comparing the first half of 2007 and the first half of 2013, real GDP contracted by an accumulated 1.3 per cent in the eurozone, 5.3 per cent in Spain and 8.4 per cent in Italy.
  • In the same period investment was down by an accumulated 19 per cent in the eurozone – and 38 per cent in Spain and 27 per cent in Italy. Between the first quarter of 2007 and the first quarter of 2013, employment fell 17 per cent in Spain and 2 per cent in Italy.
  • Italy is stuck with a combination of an unsustainable high level of public debt and no productivity growth. It has essentially two options to adjust – become like Germany, or leave the eurozone. the country is unable to do the first, and unwilling to do the latter
  • ...4 more annotations...
  • Italy faces no immediate threat for as long interest rates remain low. The country will be able to muddle through for a while until some political or economic shock will force a decision one way or The oTher.
  • Meanwhile, the single largest constraint on the resumption of eurozone growth is not fiscal policy – which is broadly neutral at present across the single currency area – but the continued failure to clean up the banks. the growth rate of loans to the non-financial sector turned negative in 2009, showed some intermittent improvements, only to then deteriorate again last year.
  • The monetary and banking data are telling us that The economy will teeter on The brink of zero or low growth for The foreseeable future because The financial sector is not supplying The economy with sufficient funds to expand.
  • Banking union could help, but only if it were to break the relationship between banks and sovereigns and clean up the balance sheets.
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Sub-Saharan Africa's Subprime Borrowers by Joseph E. Stiglitz and Hamid Rashid - Projec... - 0 views

www.project-syndicate.org/...h-e--stiglitz-and-hamid-rashid Africa subprime borrowers
shared by Gene Ellis on 10 Jan 14 - No Cached
  • Taking the lead in October 2007, when it issued a $750 million Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country – other than South Africa – to issue bonds in 30 years.
  • Nine other countries – Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania – followed suit. By February 2013, these ten African economies had collectively raised $8.1 billion from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%. these countries’ existing foreign debt, by contrast, carried an average interest rate of 1.6% with an average maturity of 28.7 years.
  • So why are an increasing number of developing countries resorting to sovereign-bond issues? And why have lenders suddenly found these countries desirable?
  • ...9 more annotations...
  • recent analyses, carried out in conjunction with the establishment of the new BRICS bank, have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa’s infrastructure needs, let alone for achieving the levels of sustained growth needed to reduce poverty significantly.
  • the conditionality and close monitoring typically associated with the multilateral institutions make them less attractive sources of financing. What politician wouldn’t prefer money that gives him more freedom to do what he likes? It will be years before any problems become manifest – and, then, some future politician will have to resolve them.
  • So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?
  • he risks will undoubtedly grow if sub-national authorities and private-sector entities gain similar access to the international capital markets, which could result in excessive borrowing.
  • Nigerian commercial banks have already issued international bonds; in Zambia, the power utility, railway operator, and road builder are planning to issue as much as $4.5 billion in international bonds.
  • Signs of default stress are already showing. In March 2009 – less than two years after the issue – Congolese bonds were trading for 20 cents on the dollar, pushing the yield to a record high. In January 2011, Côte d’Ivoire became the first country to default on its sovereign debt since Jamaica in January 2010.
  • In June 2012, Gabon delayed the coupon payment on its $1 billion bond, pending the outcome of a legal dispute, and was on the verge of a default. Should oil and copper prices collapse, Angola, Gabon, Congo, and Zambia may encounter difficulties in servicing their sovereign bonds.
  • They need not only to invest The proceeds in The right type of high-return projects, but also to ensure that They do not have to borrow furTher to service Their debt.
  • But borrowing money from international financial markets is a strategy with enormous downside risks, and only limited upside potential – except for the banks, which take their fees up front. Sub-Saharan Africa’s economies, one hopes, will not have to repeat the costly lessons that other developing countries have learned over the past three decades.
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Cyprus adds to Europe's confusion - FT.com - 0 views

www.ft.com/...4a-11e2-a4fa-00144feabdc0.html
shared by Gene Ellis on 29 Mar 13 - No Cached
  • First, the eurozone does indeed have the capacity to do the right thing in the end, though not before first exhausting all the alternatives.
  • It protects the small deposits and imposes a rational resolution process.
  • Second, a euro is indeed not a euro everywhere.
  • ...6 more annotations...
  • A consensus on the principle that creditors, not taxpayers, should pay if a bank becomes insolvent does not yet exist across the eurozone. Does anybody imagine the German government would not rescue Deutsche Bank if it were in trouble? Of course it would.
  • Yet, as Guntram Wolff of Bruegel notes, a currency union with internal exchange controls is a contradiction in terms. Only the willingness of the European Central Bank to finance Cypriot banks without limit could end these controls in the near future. Will it be willing to act soon?
  • The outcome in Cyprus underlines The fact that The value of a euro of bank liabilities depends on The solvency of The bank itself and The solvency of The government standing behind The bank. If both bank and state are insolvent, lenders are likely not only to lose a big proportion of Their money outright, but to find that The rest is frozen behind controls,
  • The ideal conclusion from The Cypriot imbroglio would be that all eurozone banks should have more capital.
  • A final lesson of this crisis is that what I have called the “bad marriage” that binds the eurozone members together has become worse.
  • Thus the eurozone limps on through crisis after crisis. Can – or will – this continue indefinitely? I do not know.
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The Eurozone's Delayed Reckoning by Nouriel Roubini - Project Syndicate - 0 views

www.project-syndicate.org/...pe-s-crisis-by-nouriel-roubini
shared by Gene Ellis on 19 Dec 12 - No Cached
  • For starters, the European Central Bank’s “outright monetary transactions” program has been incredibly effective: interest-rate spreads for Spain and Italy have fallen by about 250 basis points, even before a single euro has been spent to purchase government bonds.
  • The introduction of The European Stability Mechanism (ESM), which provides anoTher €500 billion ($650 billion) to be used to backstop banks and sovereigns, has also helped, as has European leaders’ recognition that a monetary union alone is unstable and incomplete, requiring deeper banking, fiscal, economic, and political integration.
  • But, perhaps most important, Germany’s attitude toward the eurozone in general, and Greece in particular, has changed. German officials now understand that, given extensive trade and financial links, a disorderly eurozone hurts not just the periphery but the core.
  • ...10 more annotations...
  • GDP continues to shrink,
  • Moreover, balkanization of economic activity, banking systems, and public-debt markets continues, as foreign investors flee the eurozone periphery and seek safety in the core.
  • Likewise, competitiveness losses have been partly reversed as wages have lagged productivity growth, thus reducing unit labor costs, and some structural reforms are ongoing.
  • but countries like Germany, which were over-saving and running external surpluses, have not been forced to adjust by increasing domestic demand, so their trade surpluses have remained large.
  • either the eurozone moves toward fuller integration (capped by political union to provide democratic legitimacy to the loss of national sovereignty on banking, fiscal, and economic affairs), or it will undergo disunion, dis-integration, fragmentation, and eventual breakup.
    • Gene Ellis
      Gene Ellis on 19 Dec 12
       
      This, indeed, is the crux of the matter.
  • German leaders fear that the risk-sharing elements of deeper integration
  • imply a politically unacceptable transfer union whereby Germany and the core unilaterally and permanently subsidize the periphery.
  • Of course, Germany fails to recognize that successful monetary unions like the United States have a full banking union with significant risk-sharing elements, and a fiscal union whereby idiosyncratic shocks to specific states’ output are absorbed by the federal budget. the US is also a large transfer union, in which richer states permanently subsidize the poorer ones.
    • Gene Ellis
      Gene Ellis on 19 Dec 12
       
      These are key features, built into The over-representation of The poorer, smaller, more agricultural, states; as well as in The central institutions.
  • But the fundamental crisis of the eurozone has not been resolved, and another year of muddling through could revive these risks in a more virulent form in 2014 and beyond. Unfortunately, the eurozone crisis is likely to remain with us for years to come, sustaining the likelihood of coercive debt restructurings and eurozone exits.
  • Gene Ellis on 19 Dec 12
     
    Late 2012 reading
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Optimism about an end to the euro crisis is wrong - FT.com - 0 views

www.ft.com/...9a-11e3-86ef-00144feab7de.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Adjustment is the key to ending the eurozone crisis. the optimists are saying that this process of regaining competitiveness is now taking place.
  • This judgment is profoundly wrong.
  • In other words, the eurozone is adjusting at the expense of the rest of the world.
  • ...6 more annotations...
  • But while the eurozone is a fixed-currency regime internally, it is nothing of the sort externally. the currency does exactly what textbooks say it should: it keeps on rising, thus offsetting the improvements in the current account. Last week the euro rose to more than $1.38 against the dollar.
  • The main problem with The rise in The euro’s external value is that it makes The internal adjustment harder. The crisis countries need to lower Their export prices but The higher value of The euro raises The prices of exports to outside The eurozone.
  • It essentially says internal adjustment is not really happening.
  • Second, the prices of Spanish tradeable goods would have to fall against those of non-Spanish tradeable goods elsewhere in the eurozone.
  • Put bluntly: the scale of necessary adjustment is absolutely enormous. the IMF does not believe that this is going to happen.
  • In a monetary union adjustment is hard without any transfers and without a fiscal union.
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Learning about global value chains by looking beyond official trade data: Part 1 | vox - 0 views

www.voxeu.org/...ond-official-trade-data-part-1
shared by Gene Ellis on 25 Apr 14 - No Cached
  • Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 1
  • With the rapid increase in intermediate trade flows, trade economists and policymakers have reached a near consensus that official trade statistics based on gross terms are deficient, often hiding the extent of global value chains. there is also widespread recognition among the official international statistics agencies that fragmentation of global production requires a new approach to measure trade, in particular the need to measure trade in value-added. This led the WTO and the OECD to launch a joint “Measuring Trade in Value-Added” initiative on 15 March 2012, which is designed to mainstream the production of trade in value-added statistics and make them a permanent part of the statistical landscape.
  • All the estimation methods used in recent efforts to measure trade in value-added are rooted in Leontief (1936). His work demonstrated that the amount and type of intermediate inputs needed in the production of one unit of output can be estimated based on the input-output structures across countries and industries.
  • ...6 more annotations...
  • If one is only interested in estimating the domestic value-added embedded in a country’s or sector’s gross exports, applying Leontief’s insight is sufficient. However, for many economic and policy applications, one also needs to quantify other components in gross exports and their structures. In such circumstances Leontief’s original insight is not sufficient, as it does not provide a way to decompose intermediate trade flows across countries into various value-added terms according to their final absorption,
  • Our gross trade accounting framework in fact allows one to further decompose each of the four major parts of gross exports above into finer components with economic interpretations
  • By the gross statistics, presented in column 1 of Table 1, the trade is highly imbalanced – Chinese exports to the US ($176.9 billion in 2011) are five times that of US exports to China ($35.1 billion in 2011). If we separate exports of final goods and of intermediate goods (reported in columns 2a and 2b of Table 1), we see that most of the Chinese exports consist of final goods, whereas most of the US exports consist of intermediate goods.
  • In other words, the US exports rely overwhelmingly on its own value-added (only 2.1% from China and 5.8% from other countries in 2011), whereas the Chinese exports use more foreign value-added, especially value-added from third countries (with 3.2% from the US and 23.1% from Japan, Korea, and all other countries).
  • As a consequence of these differences in the structure of value-added composition, the China–US trade balance in this sector looks much smaller when computed in terms of domestic value-added than in terms of gross exports.
  • By identifying which parts of the official data are double counted and the sources of the double counting, our gross trade accounting method provides a transparent way to bridge official trade statistics (in gross terms) and national accounts (in value-added terms) consistent with the System of National Accounts standard.
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Tomato Imports Deal Reached by U.S. and Mexico - NYTimes.com - 0 views

www.nytimes.com/...ch-deal-on-tomato-imports.html tomato imports deal u s mexico
shared by Gene Ellis on 04 Feb 13 - No Cached
  • The agreement, reached late Saturday, raises The minimum sales price for Mexican tomatoes in The United States, aims to strengThen compliance and enforcement, and increases The types of tomatoes governed by The bilateral pact to four from one.
  • “The draft agreement raises reference prices substantially, in some cases more than double The current reference price for certain products,
  • Florida growers contended it set the minimum price of Mexican tomatoes so low that the Florida growers could not compete.
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  • “Even though no dumping or injury to the U.S. industry was demonstrated by our competitors,
  • The new agreement covers all fresh and chilled tomatoes, excluding those intended for use in processing like canning and dehydrating, and in juices, sauces and purées.
  • It raises the basic floor price for winter tomatoes to 31 cents a pound from 21.69 cents — higher than the price the Mexicans were proposing in October — and establishes even higher prices for specialty tomatoes and tomatoes grown in controlled environments. the Mexicans have invested billions in greenhouses to grow tomatoes, while Florida tomatoes are largely picked green and treated with a gas to change their color.
  • The dispute unfolded in The heated politics surrounding The presidential election, with Mexican growers charging that The Commerce Department was courting voters in The important swing state of Florida. Instead, The timing of The negotiations ensured that The government could win those votes and bring The controversy to a conclusion satisfactory to The Mexicans after The election was over.
  • The Mexicans enlisted roughly 370 American businesses, including Wal-Mart Stores and meat and vegetable producers, to argue Their cause.
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The Greek package: Eurozone rescue or seeds of an unravelled monetary union? | vox - 0 views

www.voxeu.org/...eeds-unravelled-monetary-union
shared by Gene Ellis on 29 Oct 13 - No Cached
  • The plan will not work.
  • The IMF has The option of suspending its disbursements and forcing a default, as it did with Argentina.
  • Once the markets realise this, they will further raise the interest that they request to roll over the maturing debt or simply refuse to refinance the debt.
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  • At least, this will clarify the situation: the plan is about bailing out a Eurozone government, in direct violation of Art. 125 of the European Treaty, the so-called no-bail-out clause.
  • The next headache should be contagion.
  • What has been offered to Greece cannot be refused to other Eurozone governments
  • So, one more time, a (dwindling) group of deficit-stricken countries will have to provide money to increasingly large debtors. In fact, this process means that ultimately there is no national debt anymore, at least for the next few years.
  • An alternative to spreading mutual underwriting is debt monetisation.
  • The ECB does not buy assets outright, so The loss would be borne by The banks that used The Greek bonds as collateral for repo operations with The ECB. But banks are The ECB’s counterparties; if They default, The loss is The ECB’s.
  • Was there no other way? It would have been very easy to let Greece go straight to the IMF months ago and reschedule its debt with IMF’s assistance. This would have been a partial default, and the haircut could have been quite small. Most banks that are exposed to the Greek debt should have been able to withstand such losses. With a grace period of, say, three years, Greece would have had the breathing space that the latest plan tries so hard to organise
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A European Energy Executive's Delicate Dance Over Ukraine - NYTimes.com - 0 views

www.nytimes.com/...licate-dance-over-ukraine.html
shared by Gene Ellis on 19 Feb 15 - No Cached
  • A European Energy Executive’s Delicate Dance Over Ukraine
  • Major Western oil companies like BP and Exxon Mobil have extensive exploration deals in Russia that they fear could be jeopardized if the United States and European Union impose stiffer sanctions on the Putin regime.
  • “This is by far the toughest time for European energy security that I have seen,” said Mr. Scaroni. “This issue might stop the supply of Russian gas.”
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  • The goal is to be able to ship gas to Ukraine at an annual rate of more than three billion cubic meters by The time The heating season begins in The autumn, increasing The flow to up to 10 billion cubic meters annually by next spring. Last year Ukraine imported nearly 30 billion cubic meters of gas, according to a recent report by The Oxford Institute for Energy Studies.
  • Part of his message is that, even though gas demand in Europe has been weak because of sluggish economies, imports from Russia actually rose last year by about 16 percent as other sources of supply including Norway and Algeria declined. Europe, he warned, is simply not prepared to do without gas from Russia.
  • But with the gradual introduction of more competitive pricing in the European markets, the gas business has become much less attractive for ENI and other big gas middlemen. they are stuck with high-priced long-term contracts to a handful of suppliers like Gazprom and Sonatrach, the Algerian state-owned company, while their customers are able to secure gas at often lower spot market prices — assuming the gas is flowing.
  • The pipeline would be a major new source of Russian gas for energy-hungry Europe. But European Union authorities have become deeply skeptical about The South Stream plan, seeing it as just anoTher way of making Europe more dependent on Russian energy.
  • Given the balance of interests, tighter sanctions by Western governments might more likely aim to stem the technology that Russia needs to increase its future production, rather than to cut off gas supplies to Europe,
  • hose outages in 2006 and 2009 are a top reason that the European Union had already been trying to chip away at Europe’s dependence on Russia even before the Crimea annexation.
  • One of the most acrimonious battles is between the bloc’s antitrust authorities and Gazprom. That standoff began in 2011 when the European Commission carried out surprise raids on natural gas companies across Europe, including Gazprom affiliates, seeking evidence of blocking access to networks, charging excessive prices and raising barriers to diversification of supplies.
  • That is partly because powerful Eastern European countries like Poland argue that such clean-energy policies would impede their ability to reduce Russian dependence by mining more coal or developing their own shale gas resources.
  • nd this month, the European Commission issued rules aimed at reducing the subsidies that governments use to support the wind and solar industries,
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Happy 2013? | vox - 0 views

www.voxeu.org/happy-2013
shared by Gene Ellis on 26 Jan 13 - No Cached
  • Hopefully the following ten observations are less controversial in 2013 than in previous years.
  • As long known by elementary textbook readers, austerity policies have contractionary effects.
  • Debt reduction is a very long process; we're talking about decades,
  • ...20 more annotations...
  • The debt-to-GDP ratio is best reduced through sustained nominal GDP growth.
  • Besides, having been there, no one really wants to unleash inflation anymore. That leaves us with real GDP growth as a necessary condition for bringing the debt-to-GDP down painlessly.
  • But in today’s world voters are angry at everything that is called Europe and will not back a fiscal union.
  • The crisis has delivered a surprising degree of wage flexibility and labour mobility.
  • This means that the need for dissolving the euro back into national currencies at almost any cost has evaporated.
  • Sustained real growth should be the number one priority.
  • In most Eurozone countries, structural reforms are as needed now as they were before the crisis.
  • Banks are at the heart of a diabolic loop: bank holdings of their national public debts (Brunnermeier et al., 2011).
  • The long-hoped-for awakening of The ECB has produced several miracles, especially a major relaxation of market anguish.
  • For that reason, they deleverage, which leads to a credit crunch, which slows growth down.
  • The ECB is The lender of last resort both to banks and to governments.
  • This involves massive moral hazard.
  • Massive forbearance has allowed many banks to not fully account for the losses that they incurred in 2007-8.
  • Austerity policies must stop, now.
  • Growth will not return unless bank lending is adequately available.
  • The ECB may act as lender in last resort to banks and governments, but who will bear The residual costs?
  • The only remaining option is public debt restructuring, a purging of The legacy.
  • This will lead to bank failures. This means that debt reductions must be deep enough to make it possible for governments to then borrow, to shift to expansionary fiscal policies and to bail out the banks that they destroyed in the first place, in effect undoing the diabolic loop.
  • Who will lend? Even the best-crafted bank restructuring will not allow an immediate recovery of market access. the ECB is the only institution in the world that can help out.
  • There is no easy option for The Eurozone after three years of deep mismanagement. Governments will not accept drastic action unless forced to. This means that we need anoTher round of crisis worsening.
  • Gene Ellis on 26 Jan 13
     
    Good article by Wyplosz on ten observations and five consequences of Euro policy. 4 Jan 2013
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Colm McCarthy: The eurozone is still at risk and we need to get our house in order - An... - 0 views

www.independent.ie/...ur-house-in-order-3168399.html syndicate
shared by Gene Ellis on 15 Jul 12 - No Cached
  • Friday's two-notch downgrade of Italy by ratings agency Moody's explicitly mentions default risk and eurozone fracturing.
  • History teaches that muddle rather than conspiracy lies behind even the greatest turning points and the doubters are being too quick on the draw.
  • accompanied by some rowing back from the apparently significant decisions taken at the summit on June 28 and 29.
  • ...6 more annotations...
  • These thoughts are spurred by The raTher weak communique, which followed The meeting earlier last week of eurogroup finance ministers in Brussels,
  • There is, as yet, no mechanism in place to ensure bond market support to Spain and Italy and nobody, except The ECB, has The funds to keep Their governments funded, should They be forced from The market. The ECB has suspended its bond-buying programme so The high-wire act continues, without a safety net.
  • The eurozone could face a major crisis at short notice if eiTher country experiences serious trouble selling government paper, which both must do in large volume and on a continuing basis.
  • The avoidance of default on The core sovereign debt, The debt undertaken without duress by The Irish State, is a legitimate objective of national policy.
  • It had become clear, early in 2010, that the blanket bank guarantee would bankrupt the Irish State, and the Government finally began to acknowledge that haircuts for senior, but unsecured, bank bondholders had become unavoidable.
  • As far as I am aware, this is the first time in the history of central banking that a sovereign state has been compelled, to the point of national insolvency, and by its own central bank (by our Government's choice, the ECB), to make whole those who foolishly purchased bonds issued by private banks, which had gone bust and been closed down.
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How Putin Forged a Pipeline Deal That Derailed - NYTimes.com - 0 views

www.nytimes.com/...eline-deal-that-derailed-.html
shared by Gene Ellis on 05 Feb 15 - No Cached
  • How Putin Forged a Pipeline Deal That Derailed
  • The pipeline, known as South Stream, was Mr. Putin’s most important European project, a tool of economic and geopolitical power critical to twin goals: keeping Europe hooked on Russian gas, and furTher entrenching Russian influence in fragile former Soviet satellite states as part of a broader effort to undermine European unity.
  • The bill that Parliament took up on April 4 was arcane. But it swept aside a host of European regulations — rules that Mr. Putin did not want to abide by — for a pipeline that would deliver gas throughout souThern Europe. Continue reading The main story Related Coverage In Diplomatic Defeat, Putin Diverts Pipeline to TurkeyDEC. 1, 2014
  • ...9 more annotations...
  • In France, the leader of the far-right National Front, Marine Le Pen, recently acknowledged that her party had received a loan for 9 million euros, or about $11 million, from a Kremlin-linked bank.
  • Faced with punishing sanctions, a petro-economy pushed to the brink by plunging oil prices and the wildly gyrating value of the ruble, Mr. Putin this month halted the project.
  • Geological surveys suggested that Bulgaria could be sitting atop an underground ocean of natural gas, enough to be self-sufficient for years, enough to eclipse the advantages of South Stream.
  • On April 4, 2014, soon after Mr. Putin annexed Crimea, Bulgaria’s Parliament gave initial passage to a bill that effectively exempted South Stream from a number of European Union regulations, most important, the one that would have forced Gazprom to allow non-Russian gas to flow through the pipeline.
  • “If I hear one more word about competition, I’m going to freeze your you-know-whats off,” Mr. Putin reportedly shouted.
  • The anti-fracking movement became so broad that in January 2012, Parliament banned not only The extraction of shale gas, but even exploration that would quantify The country’s reserves.
  • When the Bulgarian government refused, the European Union cut off tens of millions of euros in regional development funds.
  • In desperate need of the European funds, the prime minister announced the next day that South Stream would be halted until it had full European Union approval.
  • While “he overreached, and he underestimated the response” to his intervention in Ukraine, said Mr. Gray, the former American diplomat, the Russian leader has been “quite effective” in countries like Bulgaria.“He won a great deal by getting Nabucco stopped,” Mr. Gray said. “Ultimately, his goal is to keep as much control over the former parts of the Soviet empire as possible.”
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Carmakers Are Central Voice in U.S.-Europe Trade Talks - NYTimes.com - 0 views

www.nytimes.com/...for-us-europe-trade-talks.html
shared by Gene Ellis on 18 Feb 15 - No Cached
  • With the dexterity of thieves stripping a vehicle for parts, they remove each van’s engine, bumpers, tires, drive shaft, fuel tank and the exhaust system.
  • Next, the crews pack everything into steel freight containers, which begin a journey by river barge and cargo ship to Ladson, S.C., near the port of Charleston. there, American teams put the vans back together again.
  • It would be more efficient to ship the vans in one piece, of course. But with current trade rules, efficiency is seldom the goal.
  • ...10 more annotations...
  • Daimler’s stripped-down vans travel by cargo ship to Ladson, S.C., where a token portion of assembly occurs to avoid a costly American tariff.
  • It was first imposed on European light trucks during the 1960s in retaliation for German and French trade restrictions on American chickens.
  • The importance of European-American auto production, meanwhile, was highlighted by Volkswagen’s announcement on Monday that it would open a new production line in Chattanooga, Tenn., to make sport utility vehicles.
  • In Europe, discussion about the economic benefits of an agreement has been overshadowed by fears that more open trade would expose the Continent to what are widely perceived as less stringent safety and environmental standards in the United States. (And once again, chickens play a big role.)
  • Trucks, cars and other transportation equipment such as airplanes make up the second-biggest category of merchandise traded between the United States and Europe, just behind chemicals.
  • n the first three months of 2014 alone, the United States exported $2.6 billion in motor vehicles and parts to the European Union, and imported $12.3 billion worth.
  • The engines and oTher components used in Freightliner heavy trucks made in Portland, Ore., are similar to those installed in Mercedes-Benz heavy trucks made in Wörth, Germany. But Daimler must design and engineer many parts twice — and submit Them for regulatory certification twice — to meet different United States and European rules.
  • The reason that Daimler goes to The trouble of finishing assembly in Germany in The first place is that The vehicles must be test-driven before They leave The factory. It would be too costly to set up a separate testing operation in The United States, The company said.
  • Industries like chemicals and pharmaceuticals are even trickier, and food is a particularly emotional issue in Europe.
  • there is a fixation on American chickens disinfected with chlorine, which local consumers find repellent
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ECB Resisting Calls to Cheapen Euro as Currency War Rages - SPIEGEL ONLINE - 0 views

www.spiegel.de/...rrency-war-rages-a-882462.html
shared by Gene Ellis on 21 Feb 13 - No Cached
  • The central bank chief is coming under increasing pressure because he can't quite bring himself to embrace The concept of quantitative easing, The latest fashion in The world of finance. It involves central bankers engaging in The large-scale purchase of bonds issued by Their governments and oTher securities, Thereby injecting huge sums of money into The financial system. In this way, They hope to stimulate The domestic economy and keep Their own currencies cheap, Thereby strengThening exports.
  • The US central bank, The Federal Reserve Bank, has also been printing money to a previously unimaginable extent since The financial crisis. Calling its efforts QE 1 and QE 2, The Fed has pumped more than a trillion dollars into The US economy.
  • The country is in The process of "boldly rebuilding" monetary policy, Prime Minister Shinzo Abe declared. Indeed, The Japanese yen has lost 12 percent of its value against The dollar in The last two months.
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  • For years, China has defended its currency by pegging the exchange rate to the dollar, and the Swiss National Bank now only permits appreciation of the franc up to a certain limit, because investors have viewed the Swiss currency as one of the last safe currencies since the outbreak of the sovereign debt crisis in Europe.
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Coming Full Circle in Energy, to Nuclear - NYTimes.com - 0 views

www.nytimes.com/...ing-full-circle-in-energy.html coal nuclear
shared by Gene Ellis on 10 Jan 14 - No Cached
  • In a typical day, Mr. Durgin tells me, 21 trains depart the mine, pulling 135 cars each. Each car bears 120 tons of coal. At this pace, he says, there is more than 20 years’ worth of coal ready to mine under my feet.
  • North Antelope Rochelle is among the biggest coal mines in the world. It produced 108 million tons last year — about 10 percent of all the coal burned by the nation’s power plants.
  • North Antelope Rochelle and the other vast strip mines cutting through the plains of Wyoming’s Powder River Basin — whose low-sulfur carbon met standards imposed by the Clean Air Act — were the result
  • ...5 more annotations...
  • Today renewable energy supplies only about 6 percent of American demand. And most of that comes from water flowing through dams. Solar energy contributes next to nothing.
  • The arithmetic is merciless. To make it likely that The world’s temperature will rise no more than 2 degrees Celsius above The average of The preindustrial era — a target agreed to by The world’s governments in 2010 — humanity must spew no more than 900 billion more tons of carbon dioxide into The air from now through 2050 and only 75 billion tons after that, according to an authoritative new study in Britain.
  • The United States Energy Information Administration forecasts that global energy consumption will grow 56 percent between now and 2040.
  • “We have trillions of tons of coal resources in the world,” Vic Svec, spokesman for Peabody Energy, told me. “You can expect the world to use them all.”
  • The only way around this is to put something in coal’s place, at a reasonably competitive price. NeiTher The warm glow of The sun nor The restless power of The wind is going to do The trick, at least not soon enough to make a difference in The battle to prevent climate change.
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New Hurdle for Resolving Euro Crisis: Constitutions - WSJ.com - 0 views

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shared by Gene Ellis on 29 Oct 13 - No Cached
  • In the latest example, Portugal's Constitutional Court on Thursday shot down the government's attempts to improve the country's competitiveness by making it easier for companies to shed workers—as demanded under the terms of the country's international bailout. the court ruled against the measures because, it said, they went against the principle of firing workers only when there was just cause.
  • Courts have been able to thwart some attempts to shrink the state bureaucracy or make the labor force more flexible.
  • Portugal's 1976 constitution calls for "opening the path to a socialist society." It obliges the state to promote employment, move toward free health and education services and even develop "centers of rest and holiday" for workers.
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  • So perhaps it comes as little surprise that, in the last five months, the country's Constitutional Court has struck down four government measures, including a tax on unemployment benefits and temporary trims in wages and pensions that the judges said were unfairly targeted at civil servants.
  • Last month the court ruled against a plan to steer redundant public employees into a retraining program and lay off those who aren't placed in new jobs after 12 months
  • "To fulfill what the [judges] want, we need to leave the euro," said Medina Carreira, an economist and former Portuguese finance minister.
  • Under the terms of its 2011 bailout, the government has until the end of this year to move 25,000 civil servants into a labor reserve—at reduced pay—that many view as a prelude to layoffs.
  • "In several cases, local political norms seem incompatible with euro-area membership in the long term," said J.P. Morgan Chase economist Alex White.
  • Unlike the U.S. Constitution, which has seven articles and 27 amendments, Europe's national charters tend to be lengthy and prescriptive, limiting the space for judicial interpretation. Portugal's has 296 articles, Italy's has 139 and Greece's has 120.
  • "The constitution can't set a series of obligations for a state that simply has no money to fulfill Them,"
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Past Rifts Over Greece Cloud Talks on Rescue - WSJ.com - 0 views

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  • It included no debt restructuring, such as forgiving principal, reducing the interest rate on the debt or stretching out the payment schedule to make servicing easier.
  • That spared the holders of the debt—chiefly European banks—the losses that would have come with restructuring.
  • Some of the IMF dissenters at the meeting and some IMF staff believe the interests of the European powers were placed above those of Greece, which has seen its economy contract by a fifth since 2009 and its jobless rate reach nearly 28%.
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  • "The Greek bailout was not a program for Greece, but for The euro zone itself,"
  • "In May 2010, we knew that Greece needed a bailout but not that it would require debt restructuring," IMF Managing Director Christine Lagarde said in a June interview. "We had no clue that the overall economic situation was going to deteriorate as quickly as it did."
    • Gene Ellis
      Gene Ellis on 29 Oct 13
       
      And this is the point, is it not?
  • Ms. Lagarde was French finance minister at the time and keen to avoid losses by her country's banks, which had lent heavily to Greece.
  • "An upfront debt restructuring would have been better for Greece although this was not acceptable to the euro partners," it said.
  • In retrospect, the report said, the "program served as a holding operation" that allowed "private creditors to reduce exposures…leaving taxpayers and the official sector on the hook."
  • Much of the debt was held by already fragile French and German banks, so European nations wouldn't consider it. And the U.S. feared its own trillion-dollar exposure to European banks.
  • Several IMF directors had warned of just that outcome three years earlier. The program "may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece's private debtholders, mainly European financial institutions," Brazil's executive director, Paulo Nogueira Batista, said at The May 2010 meeting.
  • now confront the prospect of a third bailout in which they would also forgive some of Greece's debt.
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U.S. Textile Plants Return, With Floors Largely Empty of People - NYTimes.com - 0 views

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  • The problems in India were cultural, bureaucratic and practical.
  • Mr. Winthrop says American manufacturing has several advantages over outsourcing. Transportation costs are a fraction of what they are overseas. Turnaround time is quicker. Most striking, labor costs — the reason all these companies fled in the first place — aren’t that much higher than overseas because the factories that survived the outsourcing wave have largely turned to automation and are employing far fewer workers.
  • In 2012, the M.I.T. Forum for Supply Chain Innovation and the publication Supply Chain Digest conducted a joint survey of 340 of their members. the survey found that one-third of American companies with manufacturing overseas said they were considering moving some production to the United States, and about 15 percent of the respondents said they had already decided to do so.
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  • Between 2000 and 2011, on average, 17 manufacturers closed up shop every day across the country, according to research from the Information Technology and Innovation Foundation.
  • yes, it means jobs, but on nowhere near the scale there was before, because machines have replaced humans at almost every point in the production process. Take Parkdale: the mill here produces 2.5 million pounds of yarn a week with about 140 workers. In 1980, that production level would have required more than 2,000 people.
  • But he was frustrated with the quality, and the lengthy process.
  • “We just avoid so many big and small stumbles that invariably happen when you try to do things from far away,” he said. “We would never be where we are today if we were overseas. Nowhere close.”
  • Time was foremost among them. the Indian mill needed too much time — three to five months — to perfect its designs, send samples, schedule production, ship the fabric to the United States and get it through customs. Mr. Winthrop was hesitant to predict demand that far in advance.
  • There were also communication issues.
  • like moving half-finished yarn between machines on forklifts.
  • The North American Free Trade Agreement in 1994 was The first blow, erasing import duties on much of The apparel produced in Mexico.
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Eurozone crisis: can the centre hold? | Nouriel Roubini | Business | theguardian.com - 0 views

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shared by Gene Ellis on 29 Oct 13 - No Cached
  • Several developments helped to restore calm. The European Central Bank (ECB) president, Mario Draghi, vowed to do "whatever it takes" to save The euro, and quickly institutionalised that pledge by establishing The ECB's "outright monetary transactions" programme to buy distressed eurozone members' sovereign bonds.
  • And, even if such adjustment is not occurring as fast as Germany and other core eurozone countries would like, they remain willing to provide financing, and governments committed to adjustment are still in power.
  • For starters, potential growth is still too low in most of the periphery, given ageing populations and low productivity growth, while actual growth – even once the periphery exits the recession, in 2014 – will remain below 1% for the next few years, implying that unemployment rates will remain very high.
  • ...10 more annotations...
  • levels of private and public debt, domestic and foreign, are still too high, and continue to rise as a share of GDP, owing to slow or negative output growth. This means that the issue of medium-term sustainability remains unresolved.
  • At the same time, the loss of competitiveness has been only partly reversed, with most of the improvement in external balances being cyclical rather than structural.
  • The euro is still too strong, severely limiting The improvement in competitiveness that is needed to boost net exports in The face of weak domestic demand.
  • a continuing credit crunch, as undercapitalised banks deleverage by selling assets and shrinking their loan portfolios.
  • The larger problem, of course, is that progress toward banking, fiscal, economic and political union, all of which are essential to The eurozone's long-term viability, has been too slow.
  • all imply that banks will have to focus on raising capital at the expense of providing the financing needed for economic growth.
  • Moreover the ECB, in contrast to the Bank of England, is unwilling to be creative in pursuing policies that would ameliorate the credit crunch.
  • Meanwhile, austerity fatigue is rising in the eurozone periphery.
  • And bailout fatigue is emerging in the eurozone's core.
  • But the eurozone's political strains may soon reach a breaking point,
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Revisiting the pain in Spain | vox - 0 views

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  • The fundamental reason why this was possible was The ECB’s announcement in 2012 that it would perform The role of lender of last resort in The government bond markets. This took The fear factor out of The market, and allowed yields in The Spanish (and oTher) government bond markets to decline without fundamentals showing much – if any – improvement.
  • This was made possible by the fact that in the UK – a stand-alone country – the adjustment mechanism included a large currency depreciation that led to a significantly higher nominal growth rate than in Spain, where currency depreciation was not possible and where intense austerity measures were imposed.
  • This in a way can be said to be the price Spain paid for being in a monetary union.
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  • The ECB’s Outright Monetary Transactions programme was instrumental in reducing Spanish government bond yields. This alleviated The Spanish fiscal position, but did not make it sustainable. The continuing unsustainability of The Spanish government debt has to do with two factors: First while r (The interest rate) declined, g (nominal growth) remained much lower in Spain than in The UK. The latter was due to The deflationary forces in The Eurozone – Themselves a result of excessive austerity and The absence of currency depreciation (which was made possible in The UK thanks to The expansionary monetary policies of The Bank of England).
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