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2016-08-23

Ambrose China risk of "liquidity trap" forcing a shift towards Keynesian fiscal stimulus.

China is at mounting risk of a Japanese-style "liquidity trap" as monetary policy loses traction and the economy approaches credit exhaustion, forcing a shift towards Keynesian fiscal stimulus.

Officials at the Chinese People’s Bank (PBOC) have begun to call for a fundamental change in strategy, warning that interest rate cuts have become an increasingly blunt tool.
They cannot easily stop companies hoarding cash or halt the slide in private investment.
Sheng Songcheng, the PBOC’s head of analysis, set off a storm last month by warning that the economy had “started to show some signs of being caught in a liquidity trap”.

2016-08-19

The Economist: On the essentials, Mr Stiglitz is surely right… the euro seems all but certain to fail

Mr Stiglitz presents the euro story as mostly tragedy: 

“It was created with the best of intentions by visionary leaders whose visions were clouded by an imperfect understanding of what a monetary union entailed.” 

It is a shame that such a dispassionate tone does not permeate the earlier chapters. Mr Stiglitz is at his best when coolly analytical and at his most trying when settling scores. 

Yet on the essentials, he is surely right. 

Without a radical overhaul of its workings, the euro seems all but certain to fail.



2016-08-18

Quantitative easing's failure current orthodoxy that puts a 2 percent inflation target Mark Gilbert

Quantitative easing's failure to quash the threat of deflation is finance's equivalent of the bump in the data that alerted physicists to the possibility of a new boson. 

he mismatch between economic theory and the real-world outcome of zero interest rates poses a direct challenge to the current orthodoxy that puts a 2 percent inflation target at the heart of monetary policy in most of the developed world.

On The Impossibility Of Helicopter Money, And Why The Casino Will Crash Stockman

S&P 500 companies posted Q2 2016 earnings for the latest 12 month period at $86.66 per share. 

So at the August bubble high the market was being valued at a lunatic 25.1X.

David Stockman, August 17, 2016


Stocks and other investments are wildly overvalued
The mispricing of assets across world markets has reached epidemic proportions.

Satyajit Das, MarketWatch Feb 25, 2016

The Stock Market at IntCom


2016-08-15

Greece gained entry to the eurozone by understating the budget deficit for 1999.... But

Andreas Georgiou, former chief of Greece’s statistical agency, and two colleagues are to face trial on criminal charges of undermining the “national interest”

Greece gained entry to the eurozone by understating the budget deficit for 1999, the benchmark year to qualify for admission, then continued to massage the figures, brushing aside repeated warnings from Eurostat about the methodology used by the government’s statistics unit.

FT 14 August 2016


– Vi vet alla nu, och vi visste alla då, att Grekland fuskade med sin statistik berättar Pascal Lamy, WTO-chefen som på nittiotalet var EU-kommissionens ordförande Jacques Delors högra hand.

Källa: Teresa Küchler, SvD 29 februari 2012


Jag erinrar mig då när jag skrattade, på ett SNS-möte, i min lilla värld, fjärran från Bryssel.


Jag är väl inte så mycket skickligare ekonom än dom andra i salen, från Riksbank och Finansdepartement med mera. Dom förstod nog också. 


Men dom teg.


Greklands BNP krympte med 2 procent i fjol. I år och nästa år och väntas BNP minska med 4 respektive 2,6 procent.


Sedan kommer vändningen, i Sardelius diagram.


- Men vad är det som får BNP att vända upp, trots åtstramningarna, vid fast växelkurs, frågade jag från golvet.


Sardelius svarade att det var genom utbudspolitiken, borttagande av onödig byråkrati mm.


Jag skrattade.


- Skrattar Du, sade Sardelius.


Ja, sade jag.


http://englundmacro.blogspot.se/2010/05/sns-pagrotsky-och-greklands.html

In 1999, the Socialist government in Athens established a "Public Debt Management Agency," naming Christoforos Sardelis as its director. 

Deep background about Sardelius

2016-08-14

Stiglitz Canada and the US trade to mutual advantage without any of the trappings of a single currency, single market or free movement, so there is an alternative model.

If the euro is not working, and if, as Stiglitz argues, it is actually making things much worse, then the cross-border infrastructure should be created so that it does work. 

Otherwise, if this is too much integration for Europe to stomach, the euro should be abandoned. 




Mauldin “Calamitous misjudgments” is a good way to describe the way the IMF, along with the EU and ECB, has handled the continent’s sovereign debt crisis




The bias developed because, as Ambrose says, the European elites in the IMF have waged a massive love affair with the euro. 

And like many in love, they simply could not see the flaws in the object of their affection, the common currency of the eurozone. It was at the very foundation of the whole European project in their eyes.

The IMF-EMU love affair led the agency to accept reports and reassurances from eurozone officials at face value, without the same kind of verification they routinely demand from less-developed countries.

Long before the deluge, people within the agency had argued that the euro system was fundamentally flawed and would eventually fall apart. 

Those who said so found themselves overruled and even punished.

2016-08-13

The Economist about Keynes, The Multiplier, IMF and Lucas

In 2013 economists at the IMF rendered their verdict on these austerity programmes: they had done far more economic damage than had been initially predicted, including by the fund itself. 

What had the IMF got wrong when it made its earlier, more sanguine forecasts? 


It had dramatically underestimated the fiscal multiplier. 


The Economist print 13 August 2016