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EZ crisis and historical trilemmas | vox - 0 views

www.voxeu.org/...risis-and-historical-trilemmas
shared by Gene Ellis on 30 Oct 13 - No Cached
  • The big difference in the EZ is that nations cannot go off the euro as they went off the gold standard
  • A major part of Lenin’s analysis, for instance, was devoted to the demonstration that Russia had become a quasi-colony as a result of the large scale capital imports, and that the foreign creditors in effect controlled Russia’s foreign policy.
  • The linkages of these issues can be summarized as a series of impossible trinities or trilemmas.
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  • The move in Europe to monetary union for weaker countries was a credibility enhancing mechanism that would lower borrowing costs. For countries that had strong creditor positions, the attractions of monetary union lay in the depoliticizing of the adjustment process (James 2012). The Eurozone worked quite well as a disciplining mechanism before it entered into effect, but much less well afterwards.
  • Banking expanded after the establishment of the euro (Shin 2012). No adequate provision on a European basis existed for banking supervision and regulation, which like fiscal policy, was left to rather diverse national authorities. An explosion of banking activity occurred simultaneously with the transition to monetary union and may well have been stimulated by the new single money.
  • The implicit national government backstop was really only credible because of the international commitment to the European integration project. It was that commitment that led markets to believe that – in spite of the no bailout provisions of the Maastricht Treaty – there were almost no limits to the amount to which debt levels could accumulate both in the private and the public sector.
  • When the democratic/popular backlash occurs, it takes the form of rejection of international/cross-border political commitment mechanism.
  • Opinion poll data shows a major increase in hostility to the EU in peripheral countries, but with no corresponding unpopularity of the common currency.
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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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U.S. Textile Plants Return, With Floors Largely Empty of People - NYTimes.com - 0 views

www.nytimes.com/...-textile-factories-return.html plants floors empty
shared by Gene Ellis on 20 Sep 13 - No Cached
  • In 1991, American-made apparel accounted for 56.2 percent of all the clothing bought domestically, according to the American Apparel and Footwear Association. By 2012, it accounted for 2.5 percent. Over all, the American manufacturing sector lost 32 percent of its jobs, 5.8 million of them, between 1990 and 2012, according to Bureau of Labor Statistics data. The textile and apparel subsectors were hit even harder, losing 76.5 percent of their jobs, or 1.2 million.
  • Gene Ellis on 20 Sep 13
     
    Video & graphs of the US textile industry semi-recovery, what it means and what it doesn't
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The Quality of Jobs: The New Normal and the Old Normal - NYTimes.com - 0 views

economix.blogs.nytimes.com/...-new-normal-and-the-old-normal
shared by Gene Ellis on 20 Sep 13 - No Cached
  • Despite 42 consecutive months of gains in private-sector employment, the unemployment rate is still at 7.3 percent; in December 2007 it was only 4.6 percent. The current unemployment rate is higher now than in 2007 across all age, education, occupation, gender and ethnic groups.
  • That’s despite the fact that about four million workers have left the labor force, driving the labor force participation rate to a historic low
  • Although the share of the long-term unemployed has fallen from its peak of 45 percent in 2011 to 38 percent today, it is still far above its 2001-7 average. And about eight million people are working part-time for “economic reasons,”
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  • 60 percent of the net job losses occurred in middle-income occupations with median hourly wages of $13.84 to $21.13. In contrast, these occupations have accounted for less than a quarter of the net job gains in the recovery, while low-wage occupations with median hourly wages of $7.69 to $13.83 have accounted for more than half of these gains.
  • Over the last year, more than 40 percent of job growth has been in low-paying sectors including retail, leisure/hospitality (hotels and restaurants) and temporary help agencies.
  • Based on history, what’s distinctive about this recovery is its sluggish pace, not the composition of its jobs.
  • The economy’s growth rate has been less than half the rate of previous recoveries and the employment losses in the Great Recession were more than twice as large as those in previous recessions.
  • What is distinctive during this recovery relative to earlier ones is the growing disparity in wages across sectors, a trend that was apparent long before the Great Recession.
  • Since then, however, wage growth has fallen far short of productivity growth, and that’s true for workers regardless of education, occupation, gender or race.
  • But technological change and the globalization it has enabled have played major roles, and these driving forces have probably strengthened during the recovery.
  • Jobs that are routine, that do not involve manual tasks and that do not need to be done near the customer are being replaced by computers and automation or are being outsourced to low-cost workers in other countries.
  • According to another study, the top 1 percent of households captured 65 percent of real family income gains (including realized capital gains) between 2002 and 2007 and 95 percent of the gains between 2009 and 2012. In 2012, the top decile claimed more than 50 percent of income, the highest share ever.
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U.S. Textile Plants Return, With Floors Largely Empty of People - NYTimes.com - 0 views

www.nytimes.com/...-textile-factories-return.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • 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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Ghana Flunks at Math and Science: Analysis (1) - 0 views

mobile.ghanaweb.com/...article.php
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Since Ghanaian students took the test in English (the so-called official language of Ghana), those whose first language is non-English are at great disadvantage.
  • In some of the participating countries grade eight teachers have university education in mathematics, even some at the post- graduate level; while in others the teachers have an equivalent of two years university education in mathematics. In Ghana, a grade eight mathematics teachers may not have such a background in mathematics.
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Is Germany Responsible for the Euro Crisis? - Businessweek - 0 views

www.businessweek.com/...esponsible-for-the-euro-crisis
shared by Gene Ellis on 29 Oct 13 - No Cached
  • This narrative ignores one critical fact: Every irresponsible borrower is enabled by an irresponsible lender.
  • “Following the introduction of the euro,” he said, “a large amount of capital flowed into the countries which are now at the center of the crisis, such as Greece, Ireland, Portugal, Spain, and Cyprus.” What he didn’t say was how much of that capital flowed from Germany. In the second quarter of 2010, German banks had more assets in Greece than banks from any other country except France. They had more assets in Ireland than banks from any other country except the U.K. And they had more assets in Spain than banks from any other country, period.
  • Before the euro, when Germans saved, their current account balance rose, and with it, the value of the deutsche mark. After 2002 you could save in euros in Dortmund, and without currency risk your bank would invest in euros abroad
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The iEconomy - Nissan's Move to U.S. Offers Lessons for Tech Industry - NYTimes.com - 0 views

www.nytimes.com/...lessons-for-tech-industry.html
shared by Gene Ellis on 20 Sep 13 - No Cached
  • Along with many economists, Mr. Summers argued that an overly aggressive trade stance could hurt manufacturing — by, for instance, pushing up the price of imported steel used by carmakers — and over time, drive companies away.
  • “People will pay more for the product because it’s produced in a place that can’t make it at the lowest cost,” he said. “It burdens exporters because they pay more for their inputs. And it removes the spur of competition.”
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Germany's strange parallel universe - FT.com - 0 views

www.ft.com/...89-11e3-8905-00144feab7de.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Germany experienced a mild recession in 2003; today’s vulnerable countries are suffering depressions.
  • today’s vulnerable countries are pursuing adjustment in a period of chronically weak demand.
  • They have to improve their competitiveness. But the only one in which nominal wages have fallen substantially is Greece. Elsewhere, it is rising productivity that has improved competitiveness. But that is the other side of the coin from the unemployment.
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  • All these countries are going to end up with gross public debt at more than 100 per cent of GDP. This will be hard to manage.
  • Meanwhile, Germany is redirecting its surpluses outside the eurozone.
  • But better insurance mechanisms for sovereigns and banks are needed in the long run. Yet all this will be academic if the eurozone does not allow its members to return to economic health over a reasonable time period.
  • Ongoing fiscal transfers seem neither desirable nor feasible.
  • But it also will not work, for two reasons: first, the eurozone is far too big to achieve export-led growth, as Germany has done; and, second, the currency is likely to appreciate still further, thereby squeezing the less competitive economies all over again.
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The iEconomy - Nissan's Move to U.S. Offers Lessons for Tech Industry - NYTimes.com - 0 views

www.nytimes.com/...lessons-for-tech-industry.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • The federal government would give Foxconn tax breaks, subsidized loans and special access through customs and lower tariffs for imported parts if it started assembling Apple products in Brazil, where Foxconn was already producing electronics for Dell, Sony and Hewlett-Packard.
  • Apple products remain expensive; the latest iPad, for instance, costs about $760 in Brazil, compared with $499 in the United States. But because those devices are made in Brazil and lower tariffs are charged on parts used to assemble them, Foxconn and Apple are pocketing larger shares of the profits, analysts say, offsetting the increased costs of building outside China.
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The iEconomy - Nissan's Move to U.S. Offers Lessons for Tech Industry - NYTimes.com - 0 views

www.nytimes.com/...lessons-for-tech-industry.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • To train its new American engineers, Nissan flew workers to its Zama factory in eastern Japan. There the Nissan officials, assisted by English-speaking Japanese workers called “communication helpers,” imparted the intricacies of the company’s production techniques to the Americans.
  • Early on, Nissan guarded against quality concerns by not relying on parts from American suppliers. Most components were either shipped from Japan or produced by Japanese companies that set up operations nearby.
  • Gradually, American parts makers were allowed to bid on supply contracts. Even that came amid arm-twisting by Congress, which passed a law in 1992 requiring auto makers to inform consumers of the percentage of parts in United States-made cars that came from North America, Asia or elsewhere.
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  • But no place has benefited to the extent of Tennessee, which counts more than 60,000 jobs related to automobile and parts production.
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The iEconomy - Nissan's Move to U.S. Offers Lessons for Tech Industry - NYTimes.com - 0 views

www.nytimes.com/...lessons-for-tech-industry.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Since its first pickup truck rolled off the line here on June 16, 1983, Nissan has produced more than seven million vehicles in the United States. It now employs 15,000 people in this country. It makes more than a half-million cars, trucks and S.U.V.’s a year, with the plant in Smyrna building six models, including the soon-to-be-produced, all-electric Nissan Leaf.
  • Could the Japanese car companies achieve the same quality using American workers?
  • including currency fluctuations that made exporting more expensive. The final push came from American anger as imports grabbed one-fourth of the United States market.
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  • “The pressure put on the Japanese was absolutely critical for them to agree to export restraints,”
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The iEconomy - Nissan's Move to U.S. Offers Lessons for Tech Industry - NYTimes.com - 0 views

www.nytimes.com/...lessons-for-tech-industry.html nissan u s offers lessons tech
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Japanese and other foreign companies account for more than 40 percent of cars built in the United States, employing about 95,000 people directly and hundreds of thousands more among parts suppliers.
  • The United States gained these jobs through a combination of public and Congressional pressure on Japan, “voluntary” quotas on car exports from Japan and incentives like tax breaks that encouraged Japanese automakers to build factories in America.
  • The government could also encourage domestic production of technologies, including display manufacturing and advanced semiconductor fabrication, that would nurture new industries. “Instead, we let those jobs go to Asia, and then the supply chains follow, and then R&D follows, and soon it makes sense to build everything overseas,” he said. “If Apple or Congress wanted to make the valuable parts of the iPhone in America, it wouldn’t be hard.”
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  • Last year, Brazilian politicians used subsidies and the threat of continued high tariffs on imports to persuade Foxconn — which makes smartphones and computers in Asia for dozens of technology companies — to start producing iPhones, iPads and other devices in a factory north of São Paulo.
  • “Closing our border is a 20th-century thought, and it will only weaken the economy over the long term,”
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My grovelling apology to Herr Schäuble - Telegraph Blogs - 0 views

blogs.telegraph.co.uk/...lling-apology-to-herr-schauble
shared by Gene Ellis on 30 Sep 13 - No Cached
  • It was unconscionable of me to say that Germany has locked in a semi-permanent trade advantage over Club Med, or for saying that the trying to close this gap by imposing deflation on the South is impossible because this will play havoc with debt dynamics.
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Eurozone crisis: can the centre hold? | Nouriel Roubini | Business | theguardian.com - 0 views

www.theguardian.com/...eurozone-crisis-euro-european
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.
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  • 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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Soros: German elections mean euro crisis over, but EU might not survive - The Tell - Ma... - 0 views

blogs.marketwatch.com/...-over-but-eu-might-not-survive
shared by Gene Ellis on 29 Oct 13 - No Cached
  • The euro crisis has already transformed the European Union into something radically different from what was originally intended. The EU was meant to be a voluntary association of sovereign and equal states that surrendered part of their sovereignty for the common good. It has turned into a relationship between creditors and debtors that is by its nature compulsory and unequal. When a debtor country gets into difficulties the creditor countries gain the upper hand.
  • Only the creditors are in a position to prevent this outcome but they do not seem to show any inclination to do so.
  • In the end, it’s up to Germany to take the initiative to provide a fix, said Soros, who has advocated some form of joint debt liability, or euro bonds.
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