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Gene Ellis

The Excel Depression - NYTimes.com - 0 views

www.nytimes.com/...gman-the-excel-depression.html

shared by Gene Ellis on 19 Apr 13 - No Cached
  • As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth.
  • and the mystery of the irreproducible results was solved. First, they omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error.
  • Over time, another problem emerged: Other researchers, using seemingly comparable data on debt and growth, couldn’t replicate the Reinhart-Rogoff results.
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  • For three years, the turn to austerity has been presented not as a choice but as a necessity.
Gene Ellis

The euro crisis: The non-puzzle of peripheral pain | The Economist - 0 views

www.economist.com/...euro-crisis-0

shared by Gene Ellis on 18 Apr 13 - No Cached
  • Mystery mostly solved, then; the rich periphery's riches relative to Germany were largely a short-run phenomenon driven by a dramatic short-run divergence in house price trends.
  • Investors who bet that productivity growth would be much faster in the south were wrong.* All the prices and wages set on the basis of the expectation of faster productivity growth were correspondingly wrong and needed to adjust. Real effective exchange rates were badly out of alignment.
  • Two things began happening in the euro zone in 2007. Growth in the number of euros spent every year began slowing, and the distribution of euro spending within the euro area began shifting back northward.
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  • The picture is one in which there are many fewer euros floating around the euro area than markets expected a half decade ago, and the distribution of those euros is moving northward.
  • It seems reasonable to argue that the distributional shift needed to occur, given the actual productivity performance.  The overall slowdown in euro spending growth, however, looks like an unnecessary and painful complication to adjustment.
  • This has all been the result of the commitment to keep just one euro. But that commitment is painful, and the alternative—more than one euro—is looking more attractive.
  • Where prices were rigid, as in goods and labour markets, fewer euros meant slow disinflation but rapid contraction in output and a big rise in unemployment.
  • If there had been no single currency, the northward capital flight would have depreciated peripheral currencies. Had the periphery borrowed in its own currency, that would have imposed losses on its foreign creditors while also boosting its export industry. Had peripheral economies instead borrowed in dollars or deutschmarks their debt burdens would have ballooned with depreciation, potentially pushing banks and sovereigns into default—but the depreciation boost to competitiveness would have remained. Either way, the depreciation of the currency would effectively shrink the value of wealth in the periphery.
  • Since 2010, Spanish home prices have dropped over 20%, while German home prices are up a smidge.
  • Where prices were more flexible, as in asset markets, price adjustment was quick. Over the past two years, Spanish equities have fallen 24%, while German equities are up 8%.
  • The northward euro shift had two nasty effects, then: it shrank asset values while also (via wage rigidity) creating substantial unemployment.
  • This threatened to accelerate into a full-scale run and collapse until the ECB intervened.
  • as markets observed the periphery's reduced ability to pay off its debts, they moved their euros northward even faster
  • For the periphery to raise its external surplus (necessary in order to service its large and growing debts) it must rely much more on import compression than on export growth.
Gene Ellis

Efforts to Revive the Economy Lead to Worries of a Bubble - NYTimes.com - 0 views

dealbook.nytimes.com/...my-lead-to-worries-of-a-bubble

shared by Gene Ellis on 18 Apr 13 - No Cached
  • The Federal Reserve is well into its third round of “quantitative easing,” in which it buys longer-term assets to bring down long-term lending rates.
  • In March, a smaller percentage of working-age people were actually working than at any other time since 1979.
  • In March, a smaller percentage of working-age people were actually working than at any other time since 1979.
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  • Ben S. Bernanke and company would also like to kindle inflation expectations, spurring people to buy and companies to invest today instead of waiting until tomorrow. Supposedly, all of this will drive a self-sustaining economic recovery.
  • Instead, the Fed has kindled speculation.
  • Investors are desperate for yield and are paying up for riskier assets.
  • There are more reliable measures of stock market value, and they look frothy. One gauge, the price of stocks based on the past decade of earnings, is named after the Yale economist Robert J. Shiller. Using that, stocks are too expensive by 65 percent.
  • Alternatively, many investors look at something called the Q, devised by the economist James Tobin, which compares stock prices with corporate net worth. The nonfinancial companies are overpriced by 57 percent.
  • Last month, investors were paying more for such loans than at any time in the last five years. They are snapping up billions of dollars in securities made up of subprime auto loans.
Gene Ellis

New-Car Sales Fall 10.2% in Europe, Continuing Slump - NYTimes.com - 0 views

www.nytimes.com/...to-market-slump-continues.html

shared by Gene Ellis on 18 Apr 13 - No Cached
  • New vehicle registrations in the European Union fell 10.2 percent from a year ago, the European Automobile Manufacturers’ Association reported from Brussels,
  • Across Europe, more than 26 million men and women are unemployed, according to official data,
  • the overall economy is expected to contract in 2013 for a second straight year.
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  • “We expect the French, Italian and Spanish markets to continue their decline over the rest of the year in the absence of any major government intervention to encourage vehicle buying or replacement,” he said.
  • The data released on Wednesday showed that sales in Germany, the largest economy in the European Union, fell 17.1 percent.
Gene Ellis

The Collateral Damage of Europe's Rescue by Hans-Werner Sinn - Project Syndicate - 0 views

www.project-syndicate.org/...cue-policy-by-hans-werner-sinn

shared by Gene Ellis on 10 Apr 13 - No Cached
  • According to a study by Goldman Sachs, France would have to depreciate by around 20% relative to the eurozone average, and by about 35% vis-à-vis Germany, to restore external-debt sustainability.
  • In order to stop these securities’ downward slide – and thus to save itself – the ECB bought these government bonds and announced that, if need be, it would do so in unlimited amounts.
  • In short, Europe’s rescue policy is making the eurozone’s most serious problem – the troubled countries’ profound loss of competitiveness – even more difficult to solve.CommentsView/Create comment on this paragraph
Gene Ellis

Suezmax - Wikipedia, the free encyclopedia - 0 views

en.wikipedia.org/Suezmax

shared by Gene Ellis on 10 Apr 13 - No Cached
  • The current channel depth of the canal allows for a maximum of 20.1 m (66 ft) of draft,[1] meaning a few fully laden supertankers are too deep to fit through, and either have to unload part of their cargo to other ships ("transhipment") or to a pipeline terminal before passing through, or alternatively avoid the Suez Canal and travel around Cape Agulhas instead. The canal was deepened in 2009 from 18 to 20 m (60 to 66 ft).
  • The term "Chinamax" refers to vessels able to use a number of harbours while fully laden. "Capesize" refers to bulk carriers too big to pass through the Suez Canal - and needing to go around the Cape of Good Hope - but recent dredging means many Capesize vessels can use the canal.
Gene Ellis

Container ship - Wikipedia, the free encyclopedia - 0 views

en.wikipedia.org/...Container_ship

container ship

shared by Gene Ellis on 10 Apr 13 - Cached
  • Container vessels eliminate the individual hatches, holds and dividers of the traditional general cargo vessels. The hull of a typical container ship is a huge warehouse divided into cells by vertical guide rails.
  • Today, approximately 90% of non-bulk cargo worldwide is transported by container, and modern container ships can carry up to 16,020 twenty-foot equivalent units (TEU) (CMA CGM Marco Polo). As a class, container ships now rival crude oil tankers and bulk carriers as the largest commercial vessels on the ocean.
  • This system of tracking has been so exact that a two week voyage can be timed for arrival with an accuracy of under fifteen minutes. It has resulted in such revolutions as on time guaranteed delivery and just in time manufacturing.
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  • Today's largest container ships measure almost 400 metres (1,300 ft) in length.[14] They carry loads equal to the cargo-carrying capacity of sixteen to seventeen pre-WWII freighter ships.
Gene Ellis

U.S. Ports Seek to Lure Big Ships After Panama Canal Expands - NYTimes.com - 0 views

www.nytimes.com/...fter-panama-canal-expands.html

panamax

shared by Gene Ellis on 10 Apr 13 - No Cached
  • The big ships — known as “Post-Panamax” and even “Super-Post-Panamax” — are already in heavy use worldwide, making up 16 percent of the container fleet but accounting for 45 percent of its capacity, according to a July report by the Army Corps of Engineers.
  • The Port of Virginia, in Norfolk, is ready to receive the big ships today. And New York is also prepared, thanks to a massive dredging project that began 13 years ago.
  • But nearly every port in the game still faces major challenges and expenses —
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  • Baltimore, which already has a 50-foot channel, has a bottleneck on the land side: the Howard Street tunnel, through which trains have to pass to reach the port, and which is too small to accommodate the double-stacked container cars that are increasingly the standard for rail shipping. The rail line CSX has announced a workaround that could cost hundreds of millions, involving a new yard beyond the tunnel filled with containers brought by truck; the port will load the trains with a single container to get through the tunnel, and the trains can be completed at the yard.
  • The big ships will also come via places beyond Panama: many are expected to come from Southeast Asia through the Suez Canal, and from South America’s eastern ports.
Gene Ellis

George Soros: how to save the EU from the euro crisis - the speech in full | Business |... - 0 views

www.guardian.co.uk/...ave-eu-from-euro-crisis-speech

shared by Gene Ellis on 09 Apr 13 - No Cached
  • The crisis has also transformed the European Union into something radically different from what was originally intended. The EU was meant to be a voluntary association of equal states but the crisis has turned it into a hierarchy with Germany and other creditors in charge and the heavily indebted countries relegated to second-class status. While in theory Germany cannot dictate policy, in practice no policy can be proposed without obtaining Germany's permission first.
  • Italy now has a majority opposed to the euro and the trend is likely to grow. There is now a real danger that the euro crisis may end up destroying the European Union.
  • The answer to the first question is extremely complicated because the euro crisis is extremely complex. It has both a political and a financial dimension. And the financial dimension can be divided into at least three components: a sovereign debt crisis and a banking crisis, as well as divergences in competitiveness
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  • The crisis is almost entirely self-inflicted. It has the quality of a nightmare.
  • My interpretation of the euro crisis is very different from the views prevailing in Germany. I hope that by offering you a different perspective I may get you to reconsider your position before more damage is done. That is my goal in coming here.
  • I regarded the European Union as the embodiment of an open society – a voluntary association of equal states who surrendered part of their sovereignty for the common good.
  • The process of integration was spearheaded by a small group of far sighted statesmen who recognised that perfection was unattainable and practiced what Karl Popper called piecemeal social engineering. They set themselves limited objectives and firm timelines and then mobilised the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step.
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Excellent point!
  • Unfortunately, the Maastricht treaty was fundamentally flawed. The architects of the euro recognised that it was an incomplete construct: a currency union without a political union. The architects had reason to believe, however, that when the need arose, the political will to take the next step forward could be mobilized. After all, that was how the process of integration had worked until then.
  • For instance, the Maastricht Treaty took it for granted that only the public sector could produce chronic deficits because the private sector would always correct its own excesses. The financial crisis of 2007-8 proved that wrong.
  • When the Soviet empire started to disintegrate, Germany's leaders realized that reunification was possible only in the context of a more united Europe and they were prepared to make considerable sacrifices to achieve it. When it came to bargaining, they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement.
  • The financial crisis also revealed a near fatal defect in the construction of the euro: by creating an independent central bank, member countries became indebted in a currency they did not control. This exposed them to the risk of default.
  • Developed countries have no reason to default; they can always print money. Their currency may depreciate in value, but the risk of default is practically nonexistent. By contrast, less developed countries that have to borrow in a foreign currency run the risk of default. To make matters worse, financial markets can actually drive such countries into default through bear raids. The risk of default relegated some member countries to the status of a third world country that became over-indebted in a foreign currency. 
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Again, another excellent point!
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Not quite... Maggie Thatcher, a Conservative; and Gordon Brown, of Labour, both recognized this possible loss of sovereignty (and economic policy weapons they might use to keep the UK afloat), and refused to join the euro.
  • The emphasis placed on sovereign credit revealed the hitherto ignored feature of the euro, namely that by creating an independent central bank the euro member countries signed away part of their sovereign status.
  • Only at the end of 2009, when the extent of the Greek deficit was revealed, did the financial markets realize that a member country could actually default. But then the markets raised the risk premiums on the weaker countries with a vengeance.
  • Then the IMF and the international banking authorities saved the international banking system by lending just enough money to the heavily indebted countries to enable them to avoid default but at the cost of pushing them into a lasting depression. Latin America suffered a lost decade.
  • In effect, however, the euro had turned their government bonds into bonds of third world countries that carry the risk of default.
  • In retrospect, that was the root cause of the euro crisis.
  • The burden of responsibility falls mainly on Germany. The Bundesbank helped design the blueprint for the euro whose defects put Germany into the driver's seat.
  • he fact that Greece blatantly broke the rules has helped to support this attitude. But other countries like Spain and Ireland had played by the rules;
  • the misfortunes of the heavily indebted countries are largely caused by the rules that govern the euro.
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Well, yes, but this is an extremely big point.  If, instead of convergence, we continue to see growth patterns growing apart, what then?
  • Germany did not seek the dominant position into which it has been thrust and it is unwilling to accept the obligations and liabilities that go with it.
  • Austerity doesn't work.
  • As soon as the pressure from the financial markets abated, Germany started to whittle down the promises it had made at the height of the crisis.
  • What happened in Cyprus undermined the business model of European banks, which relies heavily on deposits. Until now the authorities went out of their way to protect depositors
  • Banks will have to pay risk premiums that will fall more heavily on weaker banks and the banks of weaker countries. The insidious link between the cost of sovereign debt and bank debt will be reinforced.
  • In this context the German word "Schuld" plays a key role. As you know it means both debt and responsibility or guilt.
  • If countries that abide by the fiscal compact were allowed to convert their entire existing stock of government debt into eurobonds, the positive impact would be little short of the miraculous.
  • Only the divergences in competitiveness would remain unresolved.
  • Germany is opposed to eurobonds on the grounds that once they are introduced there can be no assurance that the so-called periphery countries would not break the rules once again. I believe these fears are misplaced.
  • Losing the privilege of issuing eurobonds and having to pay stiff risk premiums would be a powerful inducement to stay in compliance.
  • There are also widespread fears that eurobonds would ruin Germany's credit rating. eurobonds are often compared with the Marshall Plan.
  • It is up to Germany to decide whether it is willing to authorise eurobonds or not. But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds. In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting the others introduce them.
  • Individual countries would still need to undertake structural reforms. Those that fail to do so would turn into permanent pockets of poverty and dependency similar to the ones that persist in many rich countries.
  • They would survive on limited support from European Structural Funds and remittances
  • Second, the European Union also needs a banking union and eventually a political union.
  • If Germany left, the euro would depreciate. The debtor countries would regain their competitiveness. Their debt would diminish in real terms and, if they issued eurobonds, the threat of default would disappear. 
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