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Central Bank Sets Bond Plan Meant to Ease Euro Debt Peril - NYTimes.com - 0 views

www.nytimes.com/...unchanged-at-0-75-percent.html central bank sets bond plan ease euro debt nytimes nytimes com com
shared by Gene Ellis on 06 Sep 12 - No Cached
    • Gene Ellis
      Gene Ellis on 06 Sep 12
       
      ON the open market, mimd
  • The European Central Bank said Thursday it had agreed on a framework for buying the bonds of troubled euro-zone countries on the open market in unlimited quantities, but left the timing unclear.
  • In essence, the bank left the next step to the beleaguered governments. They would be required to ask the E.C.B. formally to begin buying their bonds in the open market and would have to agree to follow detailed conditions for paying down their debt and hewing to fiscal discipline. It would be up to the E.C.B. to determine whether the terms of the agreement were acceptable, and whether the government was meeting those conditions over time.
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  • Small companies in Spain and Italy pay more than 2 percentage points more for loans than their German counterparts, according to E.C.B. data.
  • The E.C.B. has already indicated that it will concentrate on buying bonds that mature within two or three years, rather than longer-term bonds.
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Op-ed: Greece's Exit May Become the Euro's Envy - 0 views

www.iie.com/...oped.cfm greece euro
shared by Gene Ellis on 18 Jul 12 - No Cached
  • The immediate consequences of Greece leaving or being forced out of the euro area would certainly be devastating. Capital flight would intensify, fuelling depreciation and inflation. All existing contracts would need to be redenominated and renegotiated, creating financial chaos. Perhaps most politically devastating, fiscal austerity might actually need to intensify, since Greece still runs a primary deficit, which it would have to correct if EU and International Monetary Fund financing vanished.
  • But this process would also produce a substantially depreciated exchange rate (50 drachmas to the euro, anyone?) And that would set in motion a process of adjustment that would soon reorient the economy and put it on a path of sustainable growth. In fact, Greek growth would probably surge, possibly for a prolonged period, if it adopted sensible policies to rapidly restore and sustain macroeconomic stability.
  • Just look at what happened to the countries that defaulted and devalued during the financial crises of the 1990s. They all initially suffered severe contractions. But the recessions lasted only one or two years. Then came the rebound. South Korea posted nine years of growth averaging nearly 6 percent. Indonesia, which experienced a wave of defaults that toppled nearly every bank in the entire system, registered growth above 5 percent for a similar period; Argentina close to 8 percent; and Russia above 7 percent. The historical record shows clearly that there is life after financial crises.
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  • Today, Germany grudgingly does the minimum needed to keep the euro area intact. If exit to emulate Greece becomes an attractive proposition, Germany will be put on the spot—and the magnanimity it shows in place of its current miserliness will be the ultimate test of how much it values the euro area.
  • The answer might prove surprising. The German public might suddenly realize that the euro area confers on Germany not one but two “exorbitant privileges”: low interest rates as the haven for European capital and a competitive exchange rate by being hitched to weaker partners. In that case, Germany would have to offer its partners a much more attractive deal to keep them in the euro area.
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ECB Raises Pressure on Greece - WSJ.com - 0 views

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shared by Gene Ellis on 21 Jul 12 - No Cached
  • FRANKFURT—The European Central Bank said it would reject Greek government bonds as collateral for its normal lending operations beginning Wednesday,
  • Government bonds and other debt securities backed by Greece "will become for the time being ineligible for use as collateral" in the ECB's monetary policy operations, the bank said in a statement.
  • Greek banks, which are largely shut out of private markets for financing, depend critically on cheap ECB loans to meet their daily funding needs. In June, Greek banks tapped the ECB and Greece's central bank for a combined €136 billion ($166 billion) in loans through normal refinancing operations and emergency credit, an amount roughly equal to two-thirds of the country's gross domestic product.
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  • Banks can still access emergency funds through the Greek central bank, but at a higher interest rate than normal ECB loans. The credit risk stays on Greece's books and isn't spread throughout the 17-member currency bloc,
  • It is the second time the ECB declined to accept Greek bonds as collateral. The first was in February, after Athens imposed steep losses on private creditors in a debt restructuring. That suspension ended after a little more than an week, when the ECB received guarantees from euro-zone governments that Greek bonds posted to the ECB as collateral would be repaid.
  • For banks, which are already under intense pressure, it means that they will have to resort to emergency liquidity assistance which will lend them with a higher rate.It is bad news and all we can hope for is that it won't last for long," a senior Greek banker said.
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Spain to Test Bond Markets as Economy Minister Warns on Debt - NYTimes.com - 0 views

www.nytimes.com/...daily-euro-zone-watch.html
shared by Gene Ellis on 17 Jul 12 - No Cached
  • the country’s economy minister, Luis de Guindos, warned Tuesday that European debt markets were not working properly because foreign investors were being deterred by the euro zone’s slow and complex decision-making procedures.
  • In recent weeks the interest demanded by investors on longer-term debt has crept up around 6 percent for Italy and 7 percent for Spain, close to the level that analysts say could make government finances unsustainable in the medium term.
  • In an interview in the Spanish daily La Vanguardia, Mr. de Guindos said that foreign investors were increasingly staying away from bond auctions, leaving only domestic buyers.
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  • Debt auctions in Italy at the end of last week came off better than some observers had expected and, although borrowing costs remain high, the successful debt sale has increased the prospect that the euro zone can avert another crisis during the summer break.
  • Mr. de Guindos said that debt purchases between countries within the 17-nation single currency area had virtually ground to a halt.
  • The ministers are expected to hold talks on Friday to agree to extend 30 billion euros for the rescue by the end of the month. By agreement of European Union leaders last month, the debt will go direct to banks, rather than being added to the Spanish government’s finances, once plans for a new regulatory structure for Europe’s banks is put in place.
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The Nation: Who Will Avert A Euro Collapse? : NPR - 0 views

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shared by Gene Ellis on 16 May 12 - No Cached
  • Even as the mainstream media warned that Hollande's populism would be punished by the bond markets, the IMF's chief economist, Frenchman Olivier Blanchard — who is closer to Hollande's heterodoxy than might be expected — confessed that "schizophrenic" investors are now as scared by the impact of austerity on growth as they are of fiscal largesse.
  • "With zero growth and rising interest costs in Spain and Italy, no debt is sustainable," Fitoussi said. "Even France will be challenged if it goes into recession."
  • which, despite their recently elected conservative governments, are aware that only pan-European investment, eurobonds and the full support of the ECB can save the eurozone.
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Op-ed: The End of the Euro: A Survivor's Guide - 0 views

www.iie.com/...oped.cfm EUROCRISIS
shared by Gene Ellis on 16 Jun 12 - No Cached
  • Ms. Lagarde's empathy is wearing thin and this is unfortunate—particularly as the Greek failure mostly demonstrates how wrong a single currency is for Europe.
  • The Greek backlash reflects the enormous pain and difficulty that comes with trying to arrange "internal devaluations" (a euphemism for big wage and spending cuts) in order to restore competitiveness and repay an excessive debt level.
  • During the next stage of the crisis, Europe's electorate will be rudely awakened to the large financial risks which have been foisted upon them in failed attempts to keep the single currency alive. When Greece quits the euro, its government will default on approximately 121 billion euros of debt to official creditors and about 27 billion euros owed to the IMF.
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  • More importantly and less known to German taxpayers, Greece will also default on 155 billion euros directly owed to the euro system (comprised of the ECB and the 17 national central banks in the euro area). This includes 110 billion euros provided automatically to Greece through the Target2 payments system—which handles settlements between central banks for countries using the euro. As depositors and lenders flee Greek banks, someone needs to finance that capital flight, otherwise Greek banks would fail. This role is taken on by other euro area central banks, which have quietly lent large funds, with the balances reported in the Target2 account. The vast bulk of this lending is, in practice, done by the Bundesbank since capital flight mostly goes to Germany, although all members of the euro system share the losses if there are defaults.
  • But between Target2 and direct bond purchases alone, the euro system claims on troubled periphery countries are now approximately 1.1 trillion euros (this is our estimate based on available official data). This amounts to over 200 percent of the (broadly defined) capital of the euro system.
  • No responsible bank would claim these sums are minor risks to its capital or to taxpayers. These claims also amount to 43 percent of German Gross Domestic Product,
  • Jacek Rostowski, the Polish Finance Minister, recently warned that the calamity of a Greek default is likely to result in a flight from banks and sovereign debt across the periphery, and that—to avoid a greater calamity—all remaining member nations need to be provided with unlimited funding for at least 18 months. Mr. Rostowski expresses concern, however, that the ECB is not prepared to provide such a firewall, and no other entity has the capacity, legitimacy, or will to do so.
  • The most likely scenario is that the ECB will reluctantly and haltingly provide funds to other nations—an on-again, off-again pattern of support—and that simply won't be enough to stabilize the situation.
  • he automatic mechanics of Europe's payment system will mean the capital flight from Spain and Italy to German banks is transformed into larger and larger de facto loans by the Bundesbank to Banca d'Italia and Banco de Espana—essentially to the Italian and Spanish states. German taxpayers will begin to see through this scheme and become afraid of further losses.
  • there will be recognition that the ECB has lost control of monetary policy, is being forced to create credits to finance capital flight and prop up troubled sovereigns—and that those credits may not get repaid in full. The world will no longer think of the euro as a safe currency; rather investors will shun bonds from the whole region, and even Germany may have trouble issuing debt at reasonable interest rates.
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Investors Seek Yields in Europe, but Analysts Warn of Risk - NYTimes.com - 0 views

www.nytimes.com/...as-its-economies-languish.html investors europe analysts
shared by Gene Ellis on 22 Jan 14 - No Cached
  • Investors Seek Yields in Europe, but Analysts Warn of Risk
  • Once again, foreign investors are piling into the government bonds of Ireland, Spain and Portugal — countries that got into such debt trouble that they required bailouts. Now these countries are able to sell their bonds at lower interest rates than they have seen in years, renewing hope that Europe has turned a corner.
  • Claus Vistesen, the head of research at Variant Perception, a London-based economic research group, sees the ratio of debt to economic output as a continuing threat to a euro zone recovery.“People think growth is coming back,” Mr. Vistesen said, “but at the end of the day, debt is still going up.”
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  • Despite the suddenly easier terms under which Ireland and other recovering euro zone countries can borrow, the fact remains: These countries are still mired in stagnation.
    • Gene Ellis
      Gene Ellis on 22 Jan 14
       
      Do the maths here:  1600 a week jobs being lost equals, what, just over 80,000 jobs a year?  1200 jobs a week now being created, that's what, a little over 60,000 a year?  We've had 5-6 years of recession, so how many years to get back to where we were?  And, of course, the population was growing...
  • “Sixteen hundred jobs a week were being lost before we took office; we’re now in a position where 1,200 jobs a week are being created, and our consumer confidence numbers have been steadily growing.”
  • For the euro zone at large, though, a step back often follows each step forward. France and Italy, the bloc’s second- and third-largest economies, are increasingly seen as the latest sick men of the Continent. Even Germany, the bloc’s powerhouse, grew only feebly last year, by 0.4 percent.
  • In Ireland, more than 80 percent of the investment came from abroad, with banks and pension funds making up 37 percent of the offering and fund managers about half.
  • Mr. Kirkegaard cited “the hunt for yield.”
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Nigeria Pays Off Its Big Debt, Sign of an Economic Rebound - NYTimes.com - 0 views

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shared by Gene Ellis on 15 Jan 14 - No Cached
  • Nigeria reached a deal last October with the Paris Club, which includes the United States, Germany, France and other wealthy nations, that allowed it to pay off about $30 billion in accumulated debt for about $12 billion, an overall discount of about 60 percent.
  • Nigeria, which owed about $36 billion in overall debt, is one of the most indebted nations in the world.
  • Yet Nigeria had not been among the nations that have received write-offs or discounts on their debts, as several poor countries have. In part that is because of its reputation for corruption, earned by a succession of military governments that plundered the state treasury, and because Nigeria, with its oil wealth, is seen as being able to pay.
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  • But Nigeria's debt was largely accumulated under civilian governments,
  • The World Bank president, Paul D. Wolfowitz, announced on Friday an important step toward providing $37 billion in debt relief to 17 of the poorest countries, most of them in Africa. He said he had enough votes from donor countries on the board of the International Development Association, the bank arm that provides very low interest loans, to approve the measure.
  • The 17 countries will begin receiving the relief, worth close to $1 billion a year over 40 years, on July 1. They are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.
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The euro crisis: Debtors' prison | The Economist - 0 views

www.economist.com/...n-more-government-debt-debtors
shared by Gene Ellis on 29 Oct 13 - No Cached
  • But the reforms often fail to work. The Spanish law is intended to promote restructuring of viable firms but in practice most insolvencies end in liquidation after lengthy court proceedings.
  • High household debt helps explain why the Netherlands, along with Italy and Spain, remained in recession in the second quarter of 2013 even as the euro area in general embarked on recovery. Dutch GDP this year will be 2% lower than in 2011 and more than 3% below its previous peak, in 2008.
  • it illustrates the malign effect of high debt when house prices fall
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  • One aim of the exercise is to identify the bad debts that are fouling up euro-zone banks and preventing the flow of new credit. This is important because parts of the single-currency area are crippled not just by public borrowing but by private debt, most of which is sitting on banking books.
  • High private debt is more detrimental to growth than high public debt, according to recent research by the IMF.
  • The malign effect of high private debt becomes apparent in the busts that follow credit-driven booms. Households that have borrowed too much in relation to their income trim their spending, the main component of GDP. Overleveraged firms avoid investing and concentrate on shrinking their balance-sheets by paying off loans. As bad debts erode their capital, banks become more reluctant to lend. These adverse trends reinforce each other, increasing the overall drag on growth.
  • Other balance-sheet indicators also suggest that Italian business is in a bad way. For example, 30% of corporate debt is owed by firms whose pre-tax earnings are less than the interest payments they have to make. That share of frail companies is even higher in Spain and Portugal (40% and nearly 50% respectively).
  • Little progress has been made to lighten the private-debt burden since the crisis began. Though it eased in Spain from 227% of GDP in 2009 to 215% in 2012, it rose over the same period in Cyprus, Ireland and Portugal. In Britain, by contrast, private debt fell from 207% of GDP in 2009 to 190% in 2012 thanks to improvements by both households and firms.
  • There is an inherent contradiction between the need for debtor countries in the euro zone to regain competitiveness through lower prices and at the same time to ease excessive debt with a dose of inflation.
  • Firms that have overborrowed are reluctant to embark on new ventures, and banks are in any case reluctant to lend because their balance-sheets are peppered with bad debts. This unhappy state of affairs prevails throughout southern Europe though its precise causes vary.
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Fixing the eurozone is a labour worthy of Hercules - FT.com - 0 views

www.ft.com/...5d-11e3-8cb2-00144feab7de.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • But more important is the manner in which a damning verdict from the voters would make governments more cautious about eurozone integration, limiting the extent to which the strong support the weak and all feel they are in the same boat.
  • These four steps are: to set up a comprehensive banking union; to ensure hard-pressed companies in recession-hit southern Europe receive credit at interest rates comparable to those enjoyed by their competitors in the north; to reduce mass unemployment, especially among youth; and to make sustainable the public debts of Greece and other states deep in hock.
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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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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
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  • 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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How to Get a Job at Google, Part 2 - NYTimes.com - 0 views

www.nytimes.com/...et-a-job-at-google-part-2.html
shared by Gene Ellis on 25 Apr 14 - No Cached
  • How to Get a Job at Google, Part 2
  • “I was on campus speaking to a student who was a computer science and math double major, who was thinking of shifting to an economics major because the computer science courses were too difficult. I told that student they are much better off being a B student in computer science than an A+ student in English because it signals a rigor in your thinking and a more challenging course load. That student will be one of our interns this summer.”
  • “She was moving out of a major where she would have been differentiated in the labor force” and “out of classes that would have made her better qualified for other jobs because of the training.”
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  • “Humans are by nature creative beings, but not by nature logical, structured-thinking beings. Those are skills you have to learn. One of the things that makes people more effective is if you can do both. ... If you’re great on both attributes, you’ll have a lot more options
  • “Ten years ago behavioral economics was rarely referenced. But [then] you apply social science to economics and suddenly there’s this whole new field. I think a lot about how the most interesting things are happening at the intersection of two fields. To pursue that, you need expertise in both fields.
  • “What you want to do is say: ‘Here’s the attribute I’m going to demonstrate; here’s the story demonstrating it; here’s how that story demonstrated that attribute.’ ” And here is how it can create value.
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Why Do Americans Stink at Math? - NYTimes.com - 0 views

www.nytimes.com/...o-americans-stink-at-math.html
shared by Gene Ellis on 05 Feb 15 - No Cached
  • Why Do Americans Stink at Math?
  • The Americans might have invented the world’s best methods for teaching math to children, but it was difficult to find anyone actually using them.
  • In fact, efforts to introduce a better way of teaching math stretch back to the 1800s. The story is the same every time: a big, excited push, followed by mass confusion and then a return to conventional practices.
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  • Carefully taught, the assignments can help make math more concrete. Students don’t just memorize their times tables and addition facts but also understand how arithmetic works and how to apply it to real-life situations. But in practice, most teachers are unprepared and children are baffled, leaving parents furious.
  • On national tests, nearly two-thirds of fourth graders and eighth graders are not proficient in math. More than half of fourth graders taking the 2013 National Assessment of Educational Progress could not accurately read the temperature on a neatly drawn thermometer.
  • On the same multiple-choice test, three-quarters of fourth graders could not translate a simple word problem about a girl who sold 15 cups of lemonade on Saturday and twice as many on Sunday into the expression “15 + (2×15).” Even in Massachusetts, one of the country’s highest-performing states, math students are more than two years behind their counterparts in Shanghai.
  • A 2012 study comparing 16-to-65-year-olds in 20 countries found that Americans rank in the bottom five in numeracy.
  • On a scale of 1 to 5, 29 percent of them scored at Level 1 or below, meaning they could do basic arithmetic but not computations requiring two or more steps.
  • One study that examined medical prescriptions gone awry found that 17 percent of errors were caused by math mistakes on the part of doctors or pharmacists.
  • “I’m just not a math person,” Lampert says her education students would say with an apologetic shrug.
  • In the 1970s and the 1980s, cognitive scientists studied a population known as the unschooled, people with little or no formal education.
  • For instance, many of the workers charged with loading quarts and gallons of milk into crates had no more than a sixth-grade education. But they were able to do math, in order to assemble their loads efficiently, that was “equivalent to shifting between different base systems of numbers.”
  • Studies of children in Brazil, who helped support their families by roaming the streets selling roasted peanuts and coconuts, showed that the children routinely solved complex problems in their heads to calculate a bill or make change.
  • The cognitive-science research suggested a startling cause of Americans’ innumeracy: school.
  • The answer-getting strategies may serve them well for a class period of practice problems, but after a week, they forget. And students often can’t figure out how to apply the strategy for a particular problem to new problems.
  • In the process, she gave them an opportunity to realize, on their own, why their answers were wrong.
  • At most education schools, the professors with the research budgets and deanships have little interest in the science of teaching
  • Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald’s. The “4” in “¼,” larger than the “3” in “⅓,” led them astray.
  • Some of the failure could be explained by active resistance.
  • A year after he got to Chicago, he went to a one-day conference of teachers and mathematicians and was perplexed by the fact that the gathering occurred only twice a year.
  • More distressing to Takahashi was that American teachers had almost no opportunities to watch one another teach.
  • In Japan, teachers had always depended on jugyokenkyu, which translates literally as “lesson study,” a set of practices that Japanese teachers use to hone their craft. A teacher first plans lessons, then teaches in front of an audience of students and other teachers along with at least one university observer. Then the observers talk with the teacher about what has just taken place. Each public lesson poses a hypothesis, a new idea about how to help children learn.
  • The research showed that Japanese students initiated the method for solving a problem in 40 percent of the lessons; Americans initiated 9 percent of the time.
  • Similarly, 96 percent of American students’ work fell into the category of “practice,” while Japanese students spent only 41 percent of their time practicing.
  • Finland, meanwhile, made the shift by carving out time for teachers to spend learning. There, as in Japan, teachers teach for 600 or fewer hours each school year, leaving them ample time to prepare, revise and learn. By contrast, American teachers spend nearly 1,100 hours with little feedback.
  • “Sit on a stone for three years to accomplish anything.”
  • In one experiment in which more than 200 American teachers took part in lesson study, student achievement rose, as did teachers’ math knowledge — two rare accomplishments.
  • Examining nearly 3,000 teachers in six school districts, the Bill & Melinda Gates Foundation recently found that nearly two-thirds scored less than “proficient” in the areas of “intellectual challenge” and “classroom discourse.”
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Revisiting the pain in Spain | vox - 0 views

www.voxeu.org/...revisiting-pain-spain
shared by Gene Ellis on 05 Feb 15 - No Cached
  • 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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A Multibillion-Dollar Question for Airbus and Its A330 - NYTimes.com - 0 views

www.nytimes.com/...n-for-airbus-and-its-a330.html
shared by Gene Ellis on 05 Feb 15 - No Cached
  • A Multibillion-Dollar Question for Airbus and Its A330
  • While the A330 continues to generate around 40 percent of Airbus’s civilian aircraft profits, new orders for the plane have slowed significantly in recent years.
  • But with the wait times to receive new planes now stretching to more than six years, airlines have been slower to reach for their checkbooks.
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  • Analysts say a revamped A330 would probably not be able to compete with the fuel economy of Boeing’s three-year-old 787 Dreamliner or with the updated 777, which in addition to new engines will have lighter wings made of carbon fiber instead of aluminum.
  • A more attractive price tag, combined with earlier availability — analysts say a revamped A330 could be ready for service in four years — would probably attract a wide range of customers.
  • Still, a revamped A330 would burn around 15 percent more fuel than its newer competitors, meaning that it could be a tough sell, even at a discount.
  • "Will you end up selling any more than you would have if you stuck with the old version and cut the price?” asked Mr. Cunningham, the London analyst. He noted that the current low interest-rate environment was already reducing customers’ sensitivity to list price, while the recent instability in the Middle East was refocusing attention on the risk of rising oil prices.
  • “There is much more fragmentation” of the wide-body jet market, Mr. Lasou said. “Each aircraft type is covering a smaller range of routes. The market is becoming much more specialized.”
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The problem with TTIP | vox - 0 views

www.voxeu.org/...problem-ttip
shared by Gene Ellis on 05 Feb 15 - No Cached
  • The problem with TTIP
  • The TPP is a deep international integration arrangement between the US and 11 other Pacific states, which would cover 40% of world GDP and over 30% of world trade. It seeks to address as series of issues that 21st century commerce, but arguably its most obvious feature is that it excludes China – the world’s largest international trader and before long the world’s largest economy. There are, of course, the ritual genuflections towards ‘open regionalism’ – China can join if only it will agree to the necessary policy requirements – but this is about as much use as saying the Chief Rabbi can dine with you while insisting that the menu contains pork.
  • By signing TTIP Europe would be tying itself to a static rather than a dynamic part of the world economy and substantially reinforcing the US’s exclusionary policies.
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  • In the areas that are sound, it is mainly that TPP members will probably have to approach the US norms faster than desirable, and possibly faster than they can effectively administer. But there are also areas in which the TPP is not in the interests of most non-US members.
  • However, it is generally accepted that TTIP is more important to Europe than to the US, which greatly strengthens the US’s hand in negotiations.
  • it is widely accepted that the deeper intra-European integration fostered by the Single Market initiative was a major contributor to European prosperity between 1992 and 2007
  • he US has strongly promoted Investor-State Dispute Arbitration in which foreign-owned private firms can seek settlements against governments for taking actions that are not prohibited by the agreements but which reduce the value of investments that the firms have made in member countries.
  • For states that do not have a lot of, say, social or environmental legislation at the time TPP is signed, Investor-State Arbitration threatens to make progress in these dimensions difficult.
  • f China, India or Brazil felt that these disciplines were too arduous or just did not fit, the world trading system would be effectively be split with arguably the most dynamic areas excluded. And given that the TPP would be attractive to smaller economies and that the latter would probably be offered quite accommodating terms, the split would probably deepen rather than the opposite.
  • This reads very much like an agreement to cooperate to make sure that outcomes in the trading system are as the US and EU want them – and with around half of world GDP between them and a further 15% in the rest of TPP, it suggests that the choice facing other will be capitulation vs. exclusion. I fear the latter.
  • Champions of the multilateral system must be much more explicit about its virtues and value – and among these I include Europe (middle-sized countries with a strong belief in negotiated outcomes and order) and China (which has been a massive beneficiary of open markets and non-discrimination to date).
  • urope had better get on with an internally driven liberalisation, especially of services and utilities markets, to stimulate the recovery quite independent of the outside pressures of a trade negotiation;
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Europe has to do whatever it takes - FT.com - 0 views

www.ft.com/...49-11e4-8472-00144feabdc0.html
shared by Gene Ellis on 05 Feb 15 - No Cached
  • Europe has to do whatever it takes By Martin Wolf
  • Astonishingly, yields on Italian and Spanish 10-year debt have fallen from 6.3 per cent and 7.0 per cent, respectively, at the beginning of August 2012, to a mere 2.3 and 2.1 per cent early this month. That is below the yield on UK gilts.
  • Fiscal policy also continues to tighten, even though interest rates are at the zero bound: the OECD has forecast that the cyclically adjusted fiscal deficit of the eurozone would shrink from a mere 1.4 per cent in 2013 to an even more austere 0.9 per cent in 2014.
  • ...8 more annotations...
  • Huge divergences in competitiveness remain
  • This is forcing vulnerable countries into deflation, which raises the real level of their debt.
  • Furthermore, it is clear that the ECB would be taking on credit risk. It would be charged with monetary financing of governments. I believe it should go ahead. But the row between northern and southern Europe would surely be deafening.
  • It also hopes that, through this and other programmes it has announced, it will be able to expand its balance sheet
  • back to where it was two years ago.
  • Moreover, the range of measures taken reinforce the ECB’s forward guidance. It has locked itself into ultra-accommodative monetary policies for years, as it should.
  • this year Germany’s current account surplus might be as big as 8 per cent of gross domestic product.
  • What else is left? One possibility, suggested in Mr Draghi’s speech, is active use of fiscal policy.
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Syriza and the French indemnity of 1871-73 | Michael Pettis' CHINA FINANCIAL MARKETS - 0 views

blog.mpettis.com/...he-french-indemnity-of-1871-73
shared by Gene Ellis on 06 Feb 15 - No Cached
  • Fundamental to the argument that Spain (or Greece, or anyone else) has a moral obligation to repay in full its debt to Germany are two assumptions. The first assumption is that “Spain” borrowed the money from “Germany”, and that there is a collective obligation on the part of Spain to repay the German collective. The second assumption is that Spain had a choice in what it could do with the German money that poured into the country, and so it must be held responsible for its having mis-used hard-earned german funds.
  • There was plenty of irresponsible behavior in every country, and it is absurd to think that if German and Spanish banks were pouring nearly unlimited amounts of money into countries at extremely low or even negative real interest rates, especially once these initial inflows had set off stock market and real estate booms, that there was any chance that these countries would not respond in the way every country in history, including Germany in the 1870s and in the 1920s, had responded under similar conditions.
  • The winners have been banks, owners of assets, and business owners, mainly in Germany, whose profits were much higher during the last decade than they could possibly have been otherwise
  • ...3 more annotations...
  •  Second, it is the responsibility of the leading centrist parties to recognize the options explicitly. If they do not, extremist parties either of the right or the left will take control of the debate, and convert what is a conflict between different economic sectors into a nationalist conflict or a class conflict. If the former win, it will spell the end of the grand European experiment.
  • First, as long as Spain suffers from its current debt burden, it does not matter how intelligently and forcefully it implements economic reforms. It will not be able to grow out of its debt burden and must choose between two paths
  • Most currency and sovereign debt crises in modern history ultimately represent a conflict over how the costs are to be assigned among two different groups
  • Gene Ellis on 06 Feb 15
     
    Highly recommended!
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China's Hurdle to Fast Action on Climate Change - NYTimes.com - 0 views

www.nytimes.com/...ct-fast-on-climate-change.html
shared by Gene Ellis on 18 Feb 15 - No Cached
  • China’s Hurdle to Fast Action on Climate Change
  • Any hopes that American commitments to cut carbon emissions will have a decisive impact on climate change rely on the assumption that China will reciprocate and deliver aggressive emission cuts of its own.
  • Fast economic growth in China and India is projected to fuel a substantial increase in carbon pollution over coming decades, despite big improvements in energy efficiency and the decarbonization of their energy supply
  • ...6 more annotations...
  • The country accounts for over a quarter of global greenhouse gas emissions.
  • Over the next 20 years, China’s CO2 emissions will grow by an amount roughly equal to the United States’ total emissions today,
  • Even assuming that China’s population does not grow at all over the next 30 years, that the energy efficiency of its economy increases at a faster pace than most developed and developing countries and that it manages to decarbonize its energy sources faster than pretty much anybody else, China would still be emitting a lot more carbon in 2040 than it does today, according to E.I.A. calculations.
  • Can the United States or anybody else do anything to speed China down a low-carbon path?
  • The latest report from the United Nations Intergovernmental Panel on Climate Change, issued in April, suggested several ways to allot responsibilities. If one starts counting in the 18th century and counts only emissions from industry and energy generation, the United States is responsible for more than a quarter of all greenhouse gases that humanity has put into the air. China, by contrast, is responsible for 10 percent.But if one starts counting in 1990, when the world first became aware that CO2 was a problem, and includes greenhouse gases emitted from changes in land use, the United States is responsible for only 18 percent, and China’s share rises to 15 percent. Rich and poor countries, unsurprisingly, disagree on the proper measure. Photo
  • Not everybody will meet their Copenhagen pledges. Japan, which unplugged its nuclear energy after the disaster at the Fukushima nuclear power plant, will fall behind. So will Canada and Australia, whose new conservative governments have lost interest in the pledges of their predecessors.
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