According to the official version, Columbia University economist and well-known growth theorist Xavi Sala i Martin is in Beijing to give a paper at a meeting sponsored by the IMF. But my confidential sources (OK: I mean the newspaper ‘Sport’) here in Barcelona have another reading: the IMF meeting is a cover. Xavi – who is President of the Economic Commission of FC Barcelona (and a well known cul?) – is there to act as intermediary for Bar?a President Joan Laporta. His mission: sort out the details of the Beijing 2008 sponsorship for Bar?a shirts next season. If they get this the rumours say, then it’s next stop Thierry Henry.
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Author Archives: Edward Hugh
Human Capital And Trade Deficits
Michael Mandel had an interesting take on the US trade deficit in Business Week earlier this month (btw: he also has a weblog).
His opinion is that the US trade deficit isn’t as big a deal as people often think. One of the reasons: that the ongoing import of human capital into the US (which of course isn’t measured in the trading accounts ledger) more than compensates for the deficit:
“But get with the 21st century, folks. The trade in goods and services represents only one part of America’s connection with the rest of the world. What’s equally important — and what the trade numbers miss completely — is the incredible flow of people into the country. Each year, the U.S. receives about 700,000 legal immigrants, as well as a host of temporary skilled workers and undocumented immigrants.
Now I wouldn’t go down the same road as Mandel with the deficit question per se, but he obviously raises an interesting point here – and one, of course, that immediately strikes a chord with me.
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The Euro And The Vote
The euro reached its lowest level against the dollar in seven months last week dropping from a valueof $1.311 a month ago to $1.255 on Friday. This was the lowest level since last October. Undoubtedly there are a confluence of factors at work here: yesterday’s French growth numbers, longer term stagnant growth in Germany and Italy, Sunday’s elections in the Federal Republic, the up and coming referendum in France, rumourology about forthcoming ECB rate cuts etc.
This downward pressure will in reality be welcomed in many quarters, since it could give some useful relief to hard pressed exporters, and it may help those (eg Spain) with serious balance of payments problems by offering some kind of corrective impetus.
But all of this only draws attention to one underlying fundamental of the situation: there has never been a ‘strong euro story’, it has always been a ‘weak dollar’ one. And it is here that things get really complicated, since it begs the question of whether the US is able and ready to live once more with a ‘strong dollar’, and if it isn’t then this immediately poses the question as to what exactly the repercussions will be?
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Uzbekistan Update IV
Karimov has unsurprisingly rejected calls for an independent international investigation into events in Andijan. This article on Mosnews gives some analysis and background.
Kosovo’s ‘Glowing Progress’
In the light of what went on around yesterday’s post, I find the following report incredible:
“Kosovo’s U.N. governor will tell the U.N. Security Council next week the disputed province has made major progress on security and minority rights, in a report that could mark the beginning of the end of the province’s uncertain status.
In the report, seen by Reuters ahead of its presentation in New York on May 27, Kosovo’s U.N. governor Soren Jessen-Petersen, a Danish diplomat, details “significant progress” over the past three months on all eight “benchmarks.”
These are democracy standards set by the West as a condition for opening talks on whether the protectorate ultimately becomes independent, as its 90 percent Albanian majority demands, or remains nominally part of Serbia, as Belgrade insists.
Now either the Independent report about the absence of security of minority rights was false (in which case the article was even more absurd) or – more probably – the UN governor, not having read the Independent’s account of the state of things, is giving the clean bill of health in order to move things on, since the staus quo obviously cannot continue indefinitely.
Perhaps the key is to be found here: “The United States and
European Union want the talks to start in the autumn, to head off any risk of fresh violence from Albanians impatient to close the final chapter in the bloody collapse of Yugoslavia which led to war in Kosovo in 1998-99.”
This may be, and pragmatism does dictate that something should be done, but should we really be fooling ourselves that ‘major progress has been made’ if it in fact hasn’t.
Mounting Tensions in Iraq
This is becoming more and more preoccupying:
Thousands of Shiites, many waving Islam’s holy book over their heads, protested the U.S. presence in
Iraq on Friday after the detention of several supporters of a radical cleric, while Sunnis shut down places of worship elsewhere in a show of anger over alleged sectarian violence against the minority.
Again, this is crying out for a much longer post.
French Economic Slowdown Puts More Pressure on May 29
French economic growth slowed more than expected in the first quarter and this is bound to have a negative impact on yesterdays ‘big push’ to win support for the ‘yes’ in the European constitution referendum. Gross domestic product in what is Europe’s third-largest economy grew January -March by only 0.2%. This compares with the October-December period, when it expanded by a revised 0.7%.
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German President Criticises UK ‘Stereotypes’
After the sorry incident of the Independent ‘racism scare’ yesterday, I really have to say I can sympathise with Germans who are getting tired of being treated as if they were all ‘Hitlers Children’.
“Germany’s federal president Horst K?hler called on the British people on Thursday to drop their “stereotypical” and “negative” views of Germany, in comments that look likely to revive debate on problems in British/German relations”….”Germans have a bigger affinity to Britain than the other way round,” he said. In unusually outspoken comments, he added: “I fear that German stereotypes in Britain are largely negative. Britain should take a more open view of Germany.” He criticised British schools for focusing only on the Nazi period when they taught German history..
Sometime I would write a longer post on all this. I am not sure that all German stereotypes in the UK are as negative as K?hler fears. Unless things have changed a lot recently there was always a tremendous regard for German craftsmanship, and efficiency. In the 70′s and 80′s the German model of social compact was extensively admired: Ralph Dahrendorf was brought in to head the LSE, for example.
This is why I was so jumpy about one commentator confusing the Telegraph with the Independent yesterday. I think maybe there were two schools of attitudes: those more on the right – like the Spectator and the Telegraph, who keep harping on about the nazi past, and those like the guardian, independent, economist, who have certainly all at one time or another been admirers of the ‘social economy’. That was why I was so shocked by the Independent yesterday. But then again there is the anglo-phobia to be found in continental Europe (although this is more likely to be found in France than in Germany). As I said, maybe one day a longer post…
Meantime the IMF’s Rodrigo Rato
Former government colleague of Jos? Maria Aznar, and now International Monetary Fund managing director, Rodrigo Rato has also been voicing opinions today.
In an interview given to the Spanish magazine Expansion, he says:
A 48-hour limit would push the eurozone in ‘the opposite direction’ from the rest of the world. ‘It is sending the wrong message…. ‘I don’t know what social model they are defending by stopping people doing more’…. ‘There is not an alternative to the US as the engine for growth’
He also reiterated his view that the European Central Bank should be ready to cut interest rates if signs of ‘greater weakness’ emerge. The ECB has ruled out such a reduction.
It seems that outside the ECB there is a growing consensus that we might see a rate cut before year’s end.
Meanwhile the bond markets continue to price in a cut
The 10-year bund yield reached 3.27 percent two days ago, the lowest ever for Germany’s benchmark. Yields, which move inversely to prices, fell amid evidence European economic growth is faltering.
Chavez On Aznar
I recently posted on Afoe about the frivolous ways in which people tend to throw around the N*Z* word these days. Latest on the list is Venezuela’s Hugo Chavez:
Venezuelan President Hugo Chavez called former Spanish Premier Jose Maria Aznar a “fascist,” saying Aznar once told him to forget about the poor nations of the world. Chavez recalled late Thursday that Aznar had urged him to get on “the train of the future” and distance himself from Cuba’s Fidel Castro.
Chavez, who met Thursday with Spanish Labour and Social Affairs Minister Jesus Caldera, said he once asked Aznar what he thought of the situation of poor African countries and Haiti. “He told me, ‘Forget about them, those nations missed the train of history. They are condemned to disappear.’” recalled Chavez, saying such ideas remind one of Adolf Hitler. “He is a true fascist. That is the thinking of this gentleman who continues attacking us over there,” said Chavez, who also called Aznar an “imbecile.”
Obviously I am not privy to what Aznar may or may not have said, once upon a time to Chavez. What I do know – despite the fact I have very little respect for Aznar – is that he is no fascist. Neither for that matter is Chavez. Indeed the clip Spanish TV showed of Aznar criticising Chavez publicly was a model of reasonableness.
What is far less clear is what Caldera is doing in Venezuela, and why Zapatero has occupied his time selling arms to Chavez.