Since the spring of 2014, the euro has lost around a quarter of its value, Mario Draghi has finally joined the Big Boy’s League by launching his own, decidedly belated version of QE, and—everywhere but in poor, benighted Greece—the growth of the money supply has been bordering on the explosive. Continue reading
Category Archives: Europe
Athens(es) of the North
In order to give some context to the disparities which so bedevil relations between countries in the Eurozone, one thing we can consider is the tally of net private indebtedness to banks (i.e., the sum of household and private, non-financial corporation loan balances less their deposits). To make these truly comparable, we take into account both the size of the population (ranging from Germany’s 80-odd million to Ireland’s 4 1/2) and also Eurostat’s estimate of median household income. We also take the opportunity to widen out the snapshot so as to include the Eurozone’s Scandinavian fellow-travellers in Sweden and Denmark.
Timeo Danaos (et Romanos)
It is now largely overlooked, but the 19th century had its own precursor to EMU in the shape of the Latin Monetary Union, set up principally to try to solve the hoary problems of silver:gold bimetallism. But, if much of the Union’s history was dogged by the narrow technical issues of how, firstly, to structure its members’ own monetary system and, thereafter, to align it more closely with those of the non-members, there were other features, too, which are still very much germane today.
Unrealistic expectations, short-term politics, and – as ever – too much debt plagued both Greece and Italy in those days, too, with repercussions for the other LMU members as well as for their trading partners in the wider world.
[The following appears as Chapter II in my book ‘Santayana’s Curse’ available on Kindle]
ECB Excesses
With last week’s report of monetary developments in the Eurozone, we again have evidence both of Draghi’s monetary monomania and of the sheer futility of his constant refrain that the ECB is just buying time until member states undertake the ever-promised, but never-delivered ‘structural reforms’ which they all so patently require.
Monday Morning Macro
Though the punditocracy has become much more aware of the sheer scale of China’s equity bubble in recent weeks, it is still arguably the case that reality is running ahead of reportage even as more and more evidence emerges of just how dire things are in the world beyond the brokerage screens.
Mario Draghi – Prime Broker to the Universe
When even the eminent lawyer, Christine Lagarde, interrrupts her incessant calls for more ‘stimulus’ to confess that yes, peut-être, we ought to be on the look out for a bubble or two, you know things have reached a pretty pass.
In truth, the awful effects of monetary overkill on the part of the major central banks seems finally to have reached a critical juncture, with asset markets everywhere spiralling rapidly out of control. We can only shudder to think what will await us if the inflationary spark ever manages to jump the firebreak of bad banks, zombiefied overcapacity, and ruined balance sheets and sets light to the markets for goods and services, too.
Market Mayhem
Between Li Keqiang, Mario Draghi, and the BLS, markets everywhere had a wild ride into the weekend.
Starting east and working west, the upshot of the Chinese ‘Twin Sessions’ was a perseverance with the so-called ‘New Normal’ theme – namely, with the idea that headline, GDP-style growth should be lower in future with the emphasis shifting from brute volume to the encouragement of a shift in the productive structure towards the provision of higher-value added, more technology-rich goods, towards service in place of smokestacks, aall the better to spread the benefits of industrialization to the domestic populace.
Money, Money, Money
As the title of the blog suggests, we pay close attention to developments in money and credit since the twin precepts of our outlook are that ‘the credit cycle IS the business cycle’ and that ‘silver [i.e., money] is the true sinews of the circulation’.
It is all very well for both macro-economists and stock-pickers to look at flows, but unless a weather eye is kept on how they are being financed and what that implies for the future vulnerabilities of the contracting parties, a very important element is being overlooked.
A World In Debt
In his magisterial 1936 work, ‘A World in Debt‘, Freeman Tilden treated the business of contracting a loan with a heavy serving of well-deserved irony, describing how the debtor gradually mutates from a man thankful, at the instant of receiving the funds, for having found such a wise philanthropist as is his lender to one soon becoming a little anxious that the time for renewal is fast approaching. From there, he turns to the comfort of self-justification, undertaking a little mental debt-to-equity conversion in persuading himself that his soon-to-be disappointed creditor was, after all, in the way of a partner in their joint undertaking and so consciously accepted a share of the associated risks.
One Leg to Stand on
Here’s a question for all the cheering QEuro fans out there. If you came across a country where both real and nominal money supply were growing at rates in the low teens – something its people had not experienced for almost a decade and close to the fastest seen in the last four – would you consider it to be a victim of ‘deflation’? If not, what help do you suppose an expansionary central bank would be to it?