Τετάρτη, Δεκεμβρίου 07, 2011
Παρασκευή, Δεκεμβρίου 02, 2011
Killing the Euro
By PAUL KRUGMAN
Can the euro be saved? Not long ago we were told that the worst possible outcome was a Greek default. Now a much wider disaster seems all too likely.
True, market pressure lifted a bit on Wednesday after central banks made a splashy announcement about expanded credit lines (which will, in fact, make hardly any real difference). But even optimists now see Europe as headed for recession, while pessimists warn that the euro may become the epicenter of another global financial crisis.
How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!
But the truth is nearly the opposite. Although Europe’s leaders continue to insist that the problem is too much spending in debtor nations, the real problem is too little spending in Europe as a whole. And their efforts to fix matters by demanding ever harsher austerity have played a major role in making the situation worse.
The story so far: In the years leading up to the 2008 crisis, Europe, like America, had a runaway banking system and a rapid buildup of debt. In Europe’s case, however, much of the lending was across borders, as funds from Germany flowed into southern Europe. This lending was perceived as low risk. Hey, the recipients were all on the euro, so what could go wrong?
For the most part, by the way, this lending went to the private sector, not to governments. Only Greece ran large budget deficits during the good years; Spain actually had a surplus on the eve of the crisis.
Then the bubble burst. Private spending in the debtor nations fell sharply. And the question European leaders should have been asking was how to keep those spending cuts from causing a Europe-wide downturn.
Instead, however, they responded to the inevitable, recession-driven rise in deficits by demanding that all governments — not just those of the debtor nations — slash spending and raise taxes. Warnings that this would deepen the slump were waved away. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, then the president of the European Central Bank. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.”
But the confidence fairy was a no-show.Krugman: Killing the Euro
Τρίτη, Νοεμβρίου 29, 2011
read,see
Send in the Clouds
Like pretty much everyone in Ecuador, Roque Sevilla drives fast. I hurtle with him from the capital of Quito down two and a half hours of gut-stirring switchbacks, losing elevation with every turn. The sugar-cane and cattle farmsteads tumbling past on either side dwindle steadily, while the surrounding forests gain in age and power.
Sevilla talks the whole way. Slender, mustached and hugely energetic, he recites the names of tree species, describes different hummingbirds and tells stories about the foundations of Ecuador’s conservation movement. “I have been in Europe, Africa, Asia and North America,” he says, “but Ecuador — and I don’t say this only because it is my home — is truly special.”
Sevilla should know. He is a former mayor of Quito and a member of the National Council of the World Wildlife Fund. He also runs the country’s largest tourism company
At a fork in the road, signs present us with a typically Ecuadorean choice: Paraiso (Paradise) on the left and La Delicia (the Delight) on the right. Sevilla goes right. The air thickens; the road turns to clay and gets wet. Unbroken walls of trees scroll past. Finally we come over a last rib of the cordillera and drop into the white.
White, white, white — at first that’s all I can see, not the jungly hills I’ve imagined, or the bright flashes of equatorial birds — nothing more than streaming curtains of cloud creeping up valleys, folding over ridges, veiling the world.
Only in shreds and glimpses do I begin to see trees. They pass us in ghostly walls, so close together and so diverse in species that the eye hardly knows how to parse them into individuals. Dozens of plants hang from, cling to or wrap every one of them — vines, mosses, ferns, bromeliads, orchids as tiny as my fingernail and orchids as big as my forearm.
This is Mashpi Rainforest Biodiversity Reserve, a recently formed private concession on the western slopes of the Andes, a last piece of Ecuadorean cloud forest at the southern end of what ecologists call the Chocó-Darién biogeographic region. In May, the Municipality of Quito declared 45,500 acres of this forest a “natural protected area”; that reserve envelops the heart of Mashpi, 2,891 acres that belong to Roque Sevilla.
Δευτέρα, Νοεμβρίου 28, 2011
Παρασκευή, Νοεμβρίου 18, 2011
Τετάρτη, Νοεμβρίου 16, 2011
Τρίτη, Νοεμβρίου 15, 2011
Δευτέρα, Νοεμβρίου 14, 2011
bye bye eurozone
Let The Economist have the last word. This is from an article by Ryan Avent in the current issue titled “Finito?”:
“I have been examining and re-examining the situation, trying to find the potential happy ending. It isn’t there. The euro zone is in a death spiral. Markets are abandoning the periphery, including Italy, which is the world’s eighth largest economy and third largest bond market. This is triggering margin calls and leading banks to pull credit from the European market. This, in turn, is damaging the European economy, which is already being squeezed by the austerity programmes adopted in every large euro-zone economy. A weakening economy will damage revenues, undermining efforts at fiscal consolidation, further driving away investors and potentially triggering more austerity. The cycle will continue until something breaks. Eventually, one economy or another will face a true bank run and severe capital flight and will be forced to adopt capital controls. At that point, it will effectively be out of the euro area. What happens next isn’t clear, but it’s unlikely to be pretty.” (“Finito?, The Economist)
Παρασκευή, Νοεμβρίου 11, 2011
Bunga Banka
Legends of the Fail
By PAUL KRUGMAN
This is the way the euro ends — not with a bang but with bunga bunga. Not long ago, European leaders were insisting that Greece could and should stay on the euro while paying its debts in full. Now, with Italy falling off a cliff, it’s hard to see how the euro can survive at all.
But what’s the meaning of the eurodebacle? As always happens when disaster strikes, there’s a rush by ideologues to claim that the disaster vindicates their views. So it’s time to start debunking.
First things first: The attempt to create a common European currency was one of those ideas that cut across the usual ideological lines. It was cheered on by American right-wingers, who saw it as the next best thing to a revived gold standard, and by Britain’s left, which saw it as a big step toward a social-democratic Europe. But it was opposed by British conservatives, who also saw it as a step toward a social-democratic Europe. And it was questioned by American liberals, who worried — rightly, I’d say (but then I would, wouldn’t I?) — about what would happen if countries couldn’t use monetary and fiscal policy to fight recessions.
So now that the euro project is on the rocks, what lessons should we draw?
I’ve been hearing two claims, both false: that Europe’s woes reflect the failure of welfare states in general, and that Europe’s crisis makes the case for immediate fiscal austerity in the United States.Krugman: Eurodebacle
una fatsa una crisi
The Crisis Worsens
Economic Mismanagement in Europe
Some of us have been warning for months about the crisis scenario that is accelerating today in Europe. In particular I have noted that the European authorities were pushing Italy down a dangerous path, similarly to what they did to Greece. The formula is deadly: force budget tightening on an economy that is already shrinking or on the edge of recession. This shrinks the economy further, causing government revenue to fall and making further tightening necessary to meet the target budget deficit. The government’s borrowing costs rise because markets see where this is going. This makes it even more difficult to meet the targets, and the whole mess can spiral out of control.
Today financial markets reacted violently to this process in Italy, with yields on both 10-year and 2-year Italian government bonds soaring past 7 percent. Let’s do the math.
Πέμπτη, Νοεμβρίου 10, 2011
Δευτέρα, Νοεμβρίου 07, 2011
Mercozy suck
Wall Street Journal Lays It Down: "Merkel And Sarkozy Have Lost Credibility"
The United States fought a bloody civil war in the nineteenth century to stop states seceding from the union. Yet the German and French leaders have decided the euro zone will be a voluntary union, not because of an attachment to the principle of national self-determination but to protect the principle that euro-zone countries should not become liable for each other's debts. The significance of Ms. Merkel and Mr. Sarkozy's Cannes declaration is immense. At a stroke, they have introduced foreign-exchange risk into a sovereign-debt market still grappling with the realization that euro-zone government bonds contain unexpected credit risk. Worse, throughout the crisis, the two leaders said they will do whatever it takes to save the euro. Yet the assurances they've given haven't been worth the paper they were written on: First, there were to be no sovereign defaults; then the first Greek haircut was a "unique situation;" the second Greek haircut followed 12 weeks later; now euro-zone exits are possible. No wonder the markets won't lend and China won't invest in Europe's bailout funds. Nothing these leaders say any longer carries any credibility.
Σάββατο, Νοεμβρίου 05, 2011
Παρασκευή, Νοεμβρίου 04, 2011
winter is coming
No one knows why they do it. Yet each fall, thousands of starlings dance in the twilight above Gretna, Scotland. The birds gather in magical shape-shifting flocks called murmurations, having migrated in the millions from Russia and Scandinavia to escape winter’s bite. Scientists aren’t sure how they do it, either. Even complex algorithmic models haven’t yet explained the starlings’ acrobatics, which rely on the tiny bird’s quicksilver reaction time of under 100 milliseconds to avoid aerial collisions—and predators—in the giant flock. Despite their show of force in the dusky sky, starlings have declined significantly in the UK in recent years, perhaps because of a drop in nesting sites. The birds still roost in several of Britain’s rural pastures, however, settling down to sleep (and chatter) after the evening’s ballet.
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