Chart Wars

A new kind of battle is going on out there at the moment. In what must surely be a new twist to the old dialectic of blow against blow argument, a combination of the internet age and sophistocated data management software is adding an additional and striking dimension to the current crisis debate, let’s call it the birth of the “charts war”. I think you could safely say Paul Krugman kicked off the latest round off, with this simple blog image post.

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Estonia’s Economy “Only” Contracts By 9.4% in Q4 2009

Hard on the heals of yesterday’s Latvian GDP numbers we now have news that Estonia’s economy shrank at the slowest annual pace in a year at the end of 2009 as a modest recovery in exports and one-time stock-building helped offset the impact of the continuing decline in consumer spending. In fact gross domestic product fell 9.4 percent, which compares with a 15.6 percent drop in the third quarter, and a 16.1 percent decline in the second one. So the recession is evidently easing.

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Latvia’s Economy Contracts Almost 18 Percent in Q4 2009

Well, as we say in English, it never rains but it pours. Latvia, which has had the deepest recession of all 27 European Union member states, contracted by nearly 18 per cent in the fourth quarter of 2009. ‘Compared to the same period of 2008, gross domestic product (GDP) value has decreased by 17.7 per cent,’ according to the national statistics office statement.

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Wehrkunde guest list bingo

It’s Wehrkunde time! The annual festival of military-industrial thinkery, held in Munich for NATO bigwigs of all kinds, is coming around again. Laura Rozen notes that a surprising number of John McCain’s campaign foreign-policy team are coming in the US delegation; that would be the team that included some of the least diplomatic people in the history of diplomacy. There’s Scheunemann, a Kagan or two, and Ross Douthat. Fortunately, there are also quite a lot of sane people; apparently the final list will be considerably less heavy on the kool-aid.

Does this imply that they’re regaining influence? I doubt it; whatever the talk about a “reset” of transatlantic politics, this just looks like it’s not very high priority. Shindiggery is one way of managing troublesome senators, after all. And Europe isn’t really a problem; even the spike in tension with Russia has eased off. Not only has the first NATO-Russia meeting since Georgia gone off well, it even came up with something constructive.

However, some Europeans have succeeded in getting the Americans’ attention, between some rather enterprising protestors and some rather impressively hopeless Belgian security guards. (It took them 40 minutes to respond to a report of people hanging around the nuclear bombs, after they left the gate open to stop it freezing shut.)

The last man in East Germany

What must it have been like to be a Stasi case officer in the autumn of 1989? What did they do? The answer, in this fascinating piece in Der Spiegel, was that they kept going to the office. In fact, they kept on going about their spooky business – questioning detainees, trying to recruit informers – until the evil day when the mob stormed their headquarters in the Normannenstraße. This weird transition is captured in the testimony of the last prisoners left in the MfS detention centre.

Take the case of Manfred Haferburg. Haferburg, a reactor engineer from Greifswald who was a shift supervisor on East Germany’s only nuclear power station, was arrested in May, 1989 trying to flee the DDR via Czechoslovakia. His Slovakian girlfriend was in the next compartment on the train and got away. He, however, was extradited back to East Germany and dumped in a secret prison. It was within the Hohenschönhausen detention centre in Berlin, but the prisoners were deliberately kept in ignorance of where they were. The lights were switched on and off at 15 minute intervals, 24 hours a day. One day, in November, he was dragged from his cell, punched in the guts, and thrown into a van. He expected to be shot, but eventually he was left on a street corner to ask passers-by where he was.

There is a classic Berlin joke about the drunk who gets lost and asks a policeman where he is. The cop tells him he’s on Leipzigerstraße, Berlin-Mitte. Spare me all the details, he says – can you just tell me which country? In fact, he was in the Köpenick district of Berlin, but the first passer-by he asked of course gave him the street name, and he had to press them to find out he was in Berlin, thus playing out the joke for real.

Round about the same time, another prisoner suddenly received a TV set in his cell. Uwe Hädrich had been arrested for attempting to emigrate on the 13th of September, 1989. The TV could only be tuned from outside the cell, so he could only watch official TV; of course, the famous press conference with Günther Schabowski was very official indeed. But that didn’t affect the charges against him. The wall gone and the borders open, he remained detained, accused of espionage and illegally crossing the border, subject to constant interrogation and solitary confinement. (Hädrich was an executive with the DDR’s consumer goods system, and therefore presumably a show-trial candidate.) Eventually, on the 7th of December, the new Modrow government announced that there were no political prisoners in East Germany.

Except for Herr Hädrich, of course. He was suddenly released that afternoon, as if he’d been forgotten about in all the excitement and only now remembered. According to the files, he was the last political prisoner. He went home; back in jail, the Minister of Security himself, General Erich Mielke, had just been booked in and assigned the very cell Hädrich had left.

But the revolution, the emptying of the jails, and the mere arrest of its chief didn’t stop normal operations at the Stasi. At precisely eight o’clock the next morning, a Stasi case officer called on Hädrich to ask him questions about whether he had contacted the Federal German embassy in Hungary. Every day, the case officer arrived to quiz Hädrich, and presumably wrote up his findings back at the office.

Hädrich’s family had begun to go shopping in West Berlin. But Hädrich didn’t dare cross the line, still less refuse to speak to the case officer. The further questioning carried on deep into December, after citizens’ committees had moved into some of the regional Stasi directorates to stop them destroying the files, while Hohenschönhausen itself filled up with disgraced communists. The East German PTT was renting mobile phones to journalists, devices they had to borrow from Deutsche Telekom’s Berlin operation, and whose very existence in East Germany would have been unimaginably illegal a few weeks before. Every day up to and including the 22nd, the Stasi man made his clockwork appearance and Hädrich answered the questions.

There is something grimly theatrical about this setting. In a sense, Hädrich and his interrogator were the last men still living in East Germany.

Finally, four days after the sack of the Stasi headquarters, he moved to southern Germany and never came back. Well, he did come back once, wishing to speak to the diligent case officer. It turned out that the last spook was now running a souvenir stand on the Alexanderplatz. Hädrich couldn’t speak to him.

Greece Gets The Green Light, But Will It All Work?

Well, as reported over the weekend on this blog, the EU Commission did in fact demand “more sacrifices” from the Greek people, and in the end Prime Minister Papandreou had to make a last minute TV appearance to explain to his incredulous listeners that the time had come “to take brave decisions here in Greece just as other countries in Europe have also taken….We all have a debt and duty towards our homeland to work together at this difficult time to protect our economy.” I thought that that time had come last November, but evidently I was precipitate in my judgement, but now it has finally arrived, although I ould note that hope does spring eternal, and that even now not everyone is 100% convinced. Continue reading

So where is Hungary?

Response to Edward Hugh

The financial crisis has re-shaped the regions and countries in financial terms. New country groups emerge in analyses and decisions by the investors receiving specific interest or countries far from one another are compared. It is honourable that Hungary enjoys distinguished attention especially because international institutions, investment houses or even rating agencies more often than not appreciate that Hungary has been capable of a huge fiscal consolidation in the most difficult times of the crisis. Edward Hugh’s article ‘Hungary Isn’t Another Greece……Now Is It?’ is all the more striking. Continue reading

Spain’s Incredible Consumer Confidence Index

According to Spain’s Instituto de Crédito Oficial (ICO) the ICC-ICO (consumer confidence index) went up in January by 6.1 points from its December value and is now at its highest level since August 2009. This confidence improvement is largely due to a significant rise in the Expectations Indicator (+5.7 points) and to a smaller one in the Current Economic Conditions one (+2.3 points).

As can be seen from the chart below, confidence while up, is not exceptional by historic standards, which is hardly surprising given the deep recession which Spain is in.

What is really striking – nay astonishing – is that when you come to look at the breakdown of the index into its components (see chart below) you find that the bulk of the work is being done by the expectations indicator, which at 108.5 is now showing its second highest reading ever, and only just below the all time series high of 109.7 which was hit back in the heady days of January 2005! (The indicator series only goes back to September 2004).

This is not only incredible, it is extraordinarily hard to understand. Even those who doubt that the situation is quite as bleak as people like me argue it is must surely admit that Spain now faces a difficult and testing time. My contention is not that there is anything wrong with this finding, but rather that this is how Spanish people actually think at the present time. They have no idea of the actual economic reality, or of what the future has in store for them. They are virtually being kept in the dark. This is the worrying part, and I fear that all this may well now end badly, very very badly.

Is the capital account a Trojan horse?

From the European Commission assessment and recommendations for Greece’s stability and growth plan —

Over the last several years, the external accounts of the Greek economy have deteriorated significantly, with the high and persistent external imbalances mirroring to a large extent, the marked deterioration of the country’s fiscal position. The net international position has markedly worsened since 2004. The negative net international investment position already exceeds 115% of GDP in 2009. Consequently, the government sector is not only absorbing the main part of the available external financing, but also crowding out private-sector access to financing (p19).

That’s one way to look at it.  The government has done all the borrowing from abroad in recent years.  The other way is to ask: what if that same public borrowing had to be done domestically?   Then you’re into the simple Keynesian mechanics whereby the only way to achieve domestic lending to the government is to compress economic activity so much that the private sector becomes a net saver.  Current account correction through expenditure reduction.  That’s Ireland.  And note: even on the revised figures, Greece will have had an extremely mild recession in 2009 and 2010 by global standards.  Yes there are structural problems.  This highlights one key thing.  The hawks who compare Greece to, say, Ireland, present the matter as coming down to the willingness to take on the public sector.  But it’s also about the willingness to pull the rug from under your GDP.  You’re only crowding out your private sector when there’s a private sector generating enough activity to be crowded out.

Global Manufacturing Continued Its Expansion In January

The global manufacturing expansion continued to gather momentum in January. Coming in at 56.1, up from 54.6 in December, the JPMorgan Global Manufacturing Purchasing Managers’ Index registered its highest reading for five and a half years. The latest improvement in overall operating performance reflected accelerated growth of production and new orders, while there was a slight gain in staffing levels for the first time since March 2008.

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