Much of the book we use at my current level at the Alliance Française is about expressing opinions, supporting (or opposing) issues, etc. One of the topics was environmentalism, and one of the exercises consisted of discussing with course mates one’s own attitude to environmental questions. One of the questions read:
In your opinion, is there currently a more important struggle than the one for environmental protection? If so, which one?
I claimed that there wasn’t one, yet several of my course mates felt that the struggle against hunger or war in Africa was more pressing. In my opinion, since AGCC will lead to loss of arable land, less access to water, loss of coastal land, etc. issues of hunger and war will only be exacerbated (and the Pentagon, of all places agrees).
New Economic Perspectives hits us with this:
The Washington Post recently reported that Day Care now costs more—in 31 U.S. states—than a college education. In a fit of logic rarely exhibited in today’s journalism, the article explains that since it takes the average family eighteen years to save enough for a child’s college education, that same child now needs to start saving for his or her own children’s Day Care beginning at age eight. The article didn’t mention—I suppose because they thought it was obvious—that this necessity is against America’s child labor laws.
Stratfor discusses the Eurozone crisis, and once more they manage to put more relevant information into a single of their reports than one will find if scouring the MSM for a month:
Media reports to the contrary, Greece’s return to the market does nothing to resolve Greece’s systemic economic deficiencies. Instead, it enables Greece to build up more debt, which will leave it a permanent bailout state for the foreseeable future.
Germany stands increasingly alone as the guardian of the very European order that allowed it to prosper and quelled its historical insecurities about its neighbors.
Nearly six years have gone by, and the European system remains as dysfunctional today as it was then. Great Depression-levels of unemployment have become the norm in Southern Europe, and have begun to creep northward.
Growing numbers of the unemployed and underemployed are fertile ground for political radicalism. Now, hopelessness about the future of Europe is moving into the mainstream. In election after election from France to Hungary, nationalist and Euroskeptic parties continue to gain in popularity to the point that they are becoming entrenched parts of the political system.
They remain a minority, for now. But many of them, in particular the National Front in France, have had to moderate some of the more radical parts of their platforms to break into the political mainstream. As popular discontent against what is seen as the failures of the pro-European mainstream parties grows alongside the economic crisis, so does support for some of the more nationalistic policies espoused by the far right.
National elites have a tendency to deride what they perceive as loud and unrefined fringe groups, and to show considerable surprise when they become a political mainstay.
The thinking has also changed within the German leadership, for whom austerity used to be a quasi-religious mantra and fears of inflation bordered on irrational.
Calls for the European Central Bank to replicate the policies of its overseas counterparts have grown louder. These often overlook the fact that unlike the Federal Reserve and the Bank of England, which have guaranteeing employment as a charter goal, the sole mandate of the European Central Bank is to ensure price stability, much like the German Central Bank on which it was modeled.
I don’t agree with most of the prescriptions since Stratfor still thinks in a commodity-money world, but the analysis is as always spot-on, honest, and won’t reach the majority of the population.
VoxEU offers academica macroeconomic analyses that are a bit more nuanced than the bleating in the MSM. But often this nuance is not very impressive. Currently, there’s write-up of a paper online, titled Watch the indices! Derivatives and the Eurozone sovereign debt crisis. The research question is summarized as
In retrospect, it is striking that the sovereign bond spreads of peripheral Eurozone countries surged while the economic conditions were gradually deteriorating.
In retrospect, however, it is striking that aside from Greece, the sharp rise of peripheral sovereign bond spreads and their volatility is hard to reconcile with the underlying economic fundamentals. Spreads surged suddenly, while the economic conditions were deteriorating gradually.
There are two nice posts up by Ben Strubel at New Economic Perspectives. He addresses commodity speculation. There’s currently quite a bit of discussion about this in Germany because food speculation, for instance, drives up prices and adds volatility.
Strubel is not coming from this direction though – instead he looks at how commodity speculation is sold and shows that the sales pitch is wrong, that commodities by now track other speculation objects like stocks rather closely, and that the returns are subpar. So this sounds like a perfect lose-lose (but then, so do a lot of speculative endeavours to me). This was in the first post.
In reaction to this he’s been attacked by someone who basically claims that he has no idea, that commodities outperform other speculation objects etc. Apart from the fact that Strubel proposes in his reply a kind of trader’s Randi challenge: Strubel invests in non-commodities of his choice, his critic invests in commodities, winner after ten years gets 10k from the other one, he also offers this:
The other question is how will an index perform once there are a large amount of assets tracking that index? History is littered with investing strategies that appeared to work on paper, backtested against data sets, or tracked as a model. Only when actual investments were made have they found out that the effect of making the prescribed trades or investments has erased some or all of the predicted returns. When discussing returns, I prefer real, tradable, investable products rather than paper indexes when at all possible.
This is basically my standard response/question every time I see a Machine Learning/Data Mining paper that claims they can beat the market – so I am glad to see that I am not just paranoid.
Jörg Bibow does a great job under the heading “On the alleged pains of the strong Euro. He discusses the current predicament:
ECB president Mario Draghi recently argued that the strengthening of the euro was partly responsible for the bank’s conspicuous miss of its two-percent price stability norm by an embarrassingly large margin, adding that the euro’s strength was “becoming increasingly relevant” in the ECB’s assessment of price stability.
In truth euro appreciation should attract neither fears nor blame. The euro area’s dangerously low rate of inflation owes primarily to domestic sources. Instead of debating the euro’s external value, it is high time for euro policymakers to concentrate on getting their own house in order. A sober assessment reveals that the supposedly too strong euro is at risk of turning into yet another scapegoat. Covering up euro policymakers’ unenviable record of staggering policy blunders is unwarranted.
Ultimately the single most relevant factor for price stability in an economy as large as the euro area is wage inflation corrected for productivity growth. The outstanding fact is that euro area wage inflation is approaching zero. Unit labor cost and business cost more generally are flat or falling. It is therefore no surprise at all that the ECB is failing on its price stability mandate. Rather, what is surprising is that euro policymakers keep on clobbering wages without remorse, apparently wishing to drive them ever lower. Seemingly justified by some holy calling to please the gods of austerity and competitiveness, euro policymakers keep on digging the hole they are trapped in ever deeper.
So Valls is yet another one who proposes to square the circle:
If one ignores for the moment that there is no empirical evidence at all that companies invest more if they pay lower taxes – quite contrary, at current tax rates in the industrialized world, which have been driven very low, companies save their profits, or use them to buy back shares (driving up the share prices, and therefore CEO compensation) or to speculate.
But even if one takes this assumption at face value. And even if one takes his claim at face value that the French government at different levels can reduce spending without reducing the social services it offers. (which it actually could, if it cut back military spending, for instance, but which it won’t since it plans to cut in health care)
Then what is left is that Valls proposes to increase aggregate demand by at most 30 billion euros, while at the same time guaranteeing a reduction of aggregate demand by 50 billion euros. Unless companies and/or private citizens suddenly go (further) into debt in reaction to reduced tax load, this will lead to economic shrinkage, not growth. Yet I have to read or hear a single journalist question this nonsense.