About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

Spain and the IMF: Round the Bend or Out of the Woods?

“Spain has turned the corner”. With this stark statement the IMF opened it’s annual Article IV consultation report for 2014. Naturally the statement rankled, with this author among others, because at first sight it seems to be saying something which on closer reading of the report you find it isn’t. At best it’s misleading, possibly from a PR point of view intentionally so, but then Article IV reports are supposed to be more sober, measured assessments. One Spanish journalist summed up the surprise many felt in the following tweet.

Dear IMF,
You can’t say “Spain has turned the corner” and “the unemployment remains unacceptably high” in the same paper
It’s silly
Yours,
C

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Will Japan Re-enter Deflation in April 2015?

Reading the most recent statements from Bank of Japan Governor Haruhiko Kuroda or Finance Minister Taro Aso you would get the impression that the days of deflation are now well and truly numbered in Japan. Martin Schulz, economist at Fujitsu Research Institute in Tokyo, goes even further. “Deflation is over in Japan,” he told Bloomberg Television First Up’s Angie Lau . Even Japan’s industrial leaders now believe inflation is here to stay: the country’s inflation rate will be 1.5 percent in the spring of 2015, and 1.7 percent in 2017, according to average forecasts in a Bank of Japan survey conducted in March this year. Continue reading

Secular Stagnation Part II – On Bubble Business Bound

“I now suspect that the kind of moderate economic policy regime…… that by and large lets markets work, but in which the government is ready both to rein in excesses and fight slumps – is inherently unstable.”
Paul Krugman – The Instability of Moderation

“Conventional macreconomic theory leaves us in a very serious problem, because we all seem to agree that whereas you can keep the federal funds rate at a low level forever it’s much harder to do extraordinary measures that go beyond that forever. But the underlying problem may be there forever. It’s much more difficult to say, well we only needed deficits during the short period of the crisis if equilibrium interest rates can’t be achieved given the prevailing rate of inflation.”
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The “Hot Labour” Phenomenon

Strong growth. Rising real estate prices. Rapid job creation. Surging immigration. This list sums up the Switzerland of 2014 down to a tee. However, it also sounds like a description of what things were like in Spain in 2007 – shortly before the country’s economy fell off a cliff. What follows is a conversation between financial journalist Detlef Gürtler and economist and crisis expert Edward Hugh about possible parallels and differences between the two booms, and the role of a new phenomenon which Hugh describes as “Hot Labour“.

Hugh argues that this is a new phenomenon, and on the increase as a result of central bank bubble inducing activity. While immigration is a vital tool aiding economies to manage the population ageing process, it is important that economic activities be balanced. Immigration fueling boom/bust cycles is far from innocuous, and harm a country just as much as a sudden stop in capital flows if the immigration is followed by emigration.   
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Mario Draghi’s Ongoing Faustian Pact

Word has it that Mario Draghi is busily working up a new version of his “whatever it takes” methodology. This time the objective is not saving the Eurozone, but maintaining the region’s inflation at or near the ECBs official 2% inflation objective. The first time round the President of the Euro Area’s central bank had it easy, since market participants took him at his word and he effectively needed to do nothing to comply. This time though, as they say, it will be different.

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Greek Re-entry (or Grentry) Not The Game Changer Many Think It Is

There is no doubt that Greece’s recent bond sale was an exciting and even invigorating moment for many people. The WSJ’s Simon Nixon, for example, called it “a symbolically important moment for the euro crisis”. Reuters’ Marius Zaharia suggested the speed of the come back could even be a game-changer for the heavily indebted southern European country. Certainly there can be little doubt that, as Nixon puts it, the turn round in market fortunes was a remarkable achievement, illustrative of just “how far market sentiment toward Southern Europe has changed”. 
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On The Trail Of Italian Debt

Looking for trends and correlations in that landslide of economic data which arrives, day in and day out, on our desks is normally something akin to trying to find a needle in a very large and raggedy haystack. From time to time, however, some things are just to obvious not to be noticed, like the ever rising levels of debt on the EU periphery and the growing demand from political leaders there for some kind of QE type initiative from the European central bank, for example. Sure, there is no obvious causal connecting here – the missing “middle term” linking the two would probably be all that ongoing deflation risk – but the inability of governments to contain their debt levels is a consequence of having low growth and low inflation, as is the wish being ever more insistently expressed by Southern Europe’s political leaders that the ECB were more like the Bank of Japan. Continue reading