What’s Up Doc?

According to Wikipedia, Kabuki is a classical Japanese dance-drama known for the stylization of its plot and for the elaborate make-up worn by the key performers. This definition also seems to fit the drama in an unknown number of acts currently being acted out on the European stage by some of the continent’s leading central bank players perfectly.

It all started last Thursday when, as surely everyone but my blind and deaf uncle must now know, Mario Draghi made what is widely though to have been an important speech. We will do whatever it takes, as long as it is in the mandate, he is reported as saying. And since stopping anything which could be life-threatening to the Euro dead in its tracks forms part of the bank’s mandate under any conceivable interpretation, the ECB now have the widest possible brief within which to circumscribe their actions. The only limitation is that it should be enough, just enough, and no more. As Mario Draghi said, “believe me, it will be enough”.
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There is no pony.

Leaving aside scepticism about the Euro for a moment, and turning to the European Union, Nosemonkey argues that the idea of “auditing the costs of EU law” is silly. Well, it’s a Cameron policy proposal…but enough snark.

British Eurosceptics tend to like estimates of the “costs of regulation” a lot. But there is a big problem with this argument. Specifically, if the British public love economic libertarianism so much, why don’t they vote for it?

Getting rid of the costs of regulation by leaving the EU only makes sense if, as well as completely re-orienting foreign and trade policy, we also completely revolutionise our internal policies in a whole range of fields. The libertarian claim for Euroscepticism is that we’d have the utopia, if it wasn’t for those pesky kids, or rather, foreigners. But there is no evidence that the UK electorate would vote for this implied, but never stated, political programme. The Libertarian Alliance is not a big force in British politics, to say the least.

Further, where’s the evidence that the UK has become a more regulated economy since 1973? Europe didn’t seem to slow down Thatcher much. Big Bang, privatisation, the campaign against the unions, various macroeconomic nostrums, we got them all.

Eurosceptics should be honest, and say that they intend to leave and then pass a massive program of economic Texanisation. Or else, they should sit down and shut up – at least as far as bignum forecasts of regulatory savings go. They can’t deliver them, because the British won’t vote for them.

Meanwhile, perhaps the Euro has too many friends and the European Union too few.

No unsecured funding please, we’re French

The IMF Article IV report for the UK is as one would expect an interesting and data-packed read. But its messages were well-flagged in the concluding statement after the actual visit, and as the BBC’s Stephanie Flanders notes, the weight of its messages come more from the source than the content, which accords closely with the many critics of the Coalition austerity. So one has to look elsewhere for eye-openers in the report, to which we submit the above figure in Box 1, which shows US money market funding exposures to European banking systems. Note their almost complete disengagement from France over 8 months in 2011, a much sharper withdrawal than any other country (they were already out of the high debt countries before then) and on a scale that looks like Lehman proportions.

How was this done without a huge recession in France? Mostly by overseas asset dumps by French banks, but still, this looks like an impressive feat of balance sheet management given its scale. “Headwinds” is a popular phrase, but here there are in real life. Nicolas Sarkozy might wonder about his electoral outcomes had the country bank’s not been navigating these headwinds last year.

It’s sunk costs all the way down

Important Wall Street Journal article reporting that the ECB has changed its position on whether senior unsecured bondholders in insolvent banks can be bailed in:

The ECB’s new stance can also be explained by the different scenarios, including the existence of a bank-restructuring framework for Spain that didn’t exist for Ireland, and the fact that the Irish government, unlike Spain’s, guaranteed much of its banks’ debts.

But a chief reason [finance] ministers decided not to make more privileged bondholders take losses was the Irish precedent, two people said. Dublin has had to pump more than €60 billion, equivalent to around 40% of its annual gross domestic product, into several struggling lenders, forcing it to request a €67.5 billion bailout from other European countries and the International Monetary Fund in 2010.

Forcing senior creditors to take losses in Spain would have raised more questions in Ireland about why taxpayers were forced by the EU to take on the huge burden of repaying high-ranked bondholders.

So: Ireland’s critical error was to protect legacy bondholders who were completely stuck (the money was long since lent), but now that Ireland made that error, we can’t let Spain come up with a better policy because then there would be questions about Ireland.

Portugal – Please Switch The Lights Off When You Leave!

The recent decision by the Portuguese constitutional court to unwind public sector salary cuts included by the government in its austerity measures has once more given rise to speculation the country may not meet it’s 4.5% deficit target for 2012. The court – which ruled the non-payment of the two traditional Christmas and Summer salary payments for the years through 2014 was unconstitutional took the view that since the measure did not also apply to the private sector, it was discriminatory. Whatever view we may take on how the Portuguese Constitution defines “discrimination” the important detail to note is that the decision will not apply to 2012, and will hence only have the impact of forcing the government to find additional adjustments for 2013 and 2014, or at least a new formulation which allows them to constitutionally cut public sector pay.

Nonetheless, despite the fact it will not affect this years fiscal effort the coincidence of the timing of the court decision with the appearance of a report from the parliamentary commission responsible for monitoring the execution of this years budget only served to heighten nervousness about the possibility that, with unemployment rising more sharply than anticipated and the economic recession still accelerating, this year’s deficit numbers may not add up as planned. Continue reading

Online shopping allows you price comparison options and more. Amazon (AMZN) was ranked number one in Amazon’s first-half earnings report and is the third-most-visited website in the U.S. Google (GOOG) also ranks high on the U.S. list. Google is the world’s second-largest search engine.

When shopping online, you get an improved experience and tons of offers (visit this page for more information). “Online shopping is easier than ever. You can find a product anywhere you want, from any retailer. On Google search results, you can choose from hundreds of retail sites and find exactly the right item that matches your needs. And if you’re looking for the right product or service, you can buy it from Amazon and pick it up within minutes from your door,” said Amazon.

While some of these firms offer free shipping, the average household spends $180 a year on shipping. The next highest cost of shipping is from USPS, which costs $2.43 a pound.

If you find some low-priced shipping options that are effective for your budget and you’re ready to cut out the middleman, here are five brands and retailers that’ll keep your shipping costs low.


Overstock’s service, which provides customers with free shipping on everything, from apparel to appliances, is a popular option. But their flat-rate service is cheaper than traditional shipping, especially if you’re already buying large items. Just ship to their warehouse in the U.S., pay for $35 in return shipping (free for orders over $35), and you’ll get free shipping on all items. You can also order in larger quantities using Overstock’s coupon code: “dynamic.” 2. Amazon Echo Amazon’s Echo is a smart home speaker that you can use to do things like order pizzas and send email. The Echo, which runs on Amazon’s cloud-based Alexa platform, can also provide you with updates on what’s going on in your house (read: answers to your questions). If you have an Echo, you can pay $130 for a 2-year Prime membership, which grants you free two-day shipping on most items and free streaming music on Amazon Prime Music. 3. ShoeBox This is the best shoes retailer on the web, if not all time. They ship to almost anywhere in the world, and they offer free shipping on most orders. And that price? It’s right here on their homepage.

Whom The Gods Would Destroy

The Times They Are A Changin, as the old song goes. Neither in jest nor in total earnest was a truer word ever said in terms of the 2 year old Euro Debt Crisis. The to-ing and frow-ing we have seen over the last few days as commitment to decisions taken at the recent summit started to wobble only serve to underline how hard it is at times to change. These days I have no central “Euro” scenario. Only tail scenarios exist, under which the debt crisis veers in either one direction or the other according to the decisions taken or the absence of them. Naturally this makes the eventual outcome very hard to foresee, which is why the financial markets are having such a hard time of it, and why we see so much volatility.

In the case of the full banking, political and fiscal union scenario the efficient causes which could make it happen are obvious: just keep the various participants looking down into the abyss often enough and long enough. In the case of complete breakup things are rather different, since it is hard to concretise what would actually bring it about, although the risk is evident, and indeed in many ways it seem a more probable end point than the other one.

After thinking about this for some time, the conclusion I have reached is that it is towards political risk, and the progressive destabilizing of Europe’s democratic systems, that we need to look, which is what makes recent events in Romania look like something rather more than a mere historical footnote. Continue reading

ECB board member: Euro-bashing is Anglophone overload

Germany’s man at the ECB, Jörg Asmussen, in a speech about monetary policy communication today:

For the euro area and the ECB, the situation is even more peculiar, because the influential “commentariat” comes predominantly from outside the euro area. The big English-language newspapers, the news agencies and wire services that shape opinions in the economic and financial sphere on the Continent are all writing from outside the euro area. There is, of course, nothing wrong with friendly outside advice. And I certainly do not wish to come across as whining and complaining.

But it simply remains a fact: the analysis, discourse and policy prescriptions that are propagated come from the outside. Maybe inevitably, they come with a certain disinterested detachment. As if the outside “spectators” are not affected by what is happening.

And they come with a dangerously narrow and exclusive perspective on the economics of the monetary union. But if the profound political commitment of Eurozone countries to the historical project of “ever closer union” is neglected, the assessment remains superficial and partial. And the suggested policy responses may be biased or naïve.

Why does it matter? Because the discourse influences some of the most important financial markets for the Eurozone. If expectations that have been built up are not fulfilled, if alleged certainties do not materialise, if actions from politicians or central bankers are not forthcoming as anticipated by the “market consensus”, the reaction can be grave: volatility, contagion, all the way to complete market dysfunction. The systemic impact can be major, driving financial institutions, as well as sovereign borrowers into real difficulties.

It doesn’t take much extrapolation of what he says to envisage that at least in the ECB’s mind, there is a SPECTRE-like entity of cackling pundits consisting of Paul Krugman, Martin Wolf, Simon Johnson and others, though who exactly has the white cat sitting in their lap as they press “Publish” is not specified. More substantively. there is a strange symmetry between this view and the pre-crisis gloating of the European Commission that the single currency’s American critics had been all wrong.

And Then There Were Six – Is Slovenia Next?

Slovenia is in the news. According to press reports (and here) solving the problems which have accumulated in the country’s banking system may well mean the country is next in line for some sort of EU bailout assistance. Speculation was fueled last week when ECB Governing Council member and Bank of Slovenia Governor Marco Kranjec said that the country may well eventually need assistance, even if for the moment it will not be necessary. Sounds a lot like the other denials we have heard just before the “happy event”.

“We do not exclude anything … but for now this is an entirely hypothetical question,” he told his conference audience,”Conditions (in the Slovenian banking sector) are going in the bad direction, but for now I do not see a reason that Slovenia would need to ask for (international) help.” He also made the point that “Yields on our (Slovenian) debt are very high but poor availability of (financial) resources is even more worrying,” Continue reading