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The political economy of the military conflict in Ukraine

The political economy of the military conflict in Ukraine

The geopolitical situation regarding the conflict in Ukraine has escalated considerably due to the downing of a passenger jet from the Netherlands to Malaysia. Given the visceral and gruesome nature of the events now unfolding, domestic political opinion throughout the West is now a major force in this conflict. However, given the political economy in Russia and the United States in particular, the potential for de-escalation is small. The potential for the conflict to now have wide-reaching economic impacts has grown. In the analysis below I explain how the political economy in the U.S. favours President Obama taking an increasingly hawkish position and how the political economy in Russia favours President Putin also maintaining an aggressive stance regarding Ukraine. In addition, the airline massacre also means that the EU will be galvanized into supporting tougher sanctions against Russia, with the potential of a tit-for-tat response.

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Links: 2014-07-21

Links: 2014-07-21

News links for 21 Jul 2014

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Exogenous shocks

Exogenous shocks

As I write this, Twitter is going berserk with news of Malaysian Airlines Flight 17 from Amsterdam to Kuala Lumpur with 280 passengers and 15 crew having gone down in Ukrainian airspace. There is video and photo footage of the wreckage. And my heart goes out to friends and family of those onboard because they are learning about the tragedy […]

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Links: 2014-07-17

Links: 2014-07-17

How Russian Hackers Stole the Nasdaq – Businessweek Here’s why your Comcast rep is yelling at you | The Verge Popular Bitcoin Mining Pool Promises To Restrict Its Compute Power To Prevent Feared Fiasco | TechCrunch Netflix to FCC: reclassify Comcast and Verizon so they can’t choke the internet As more cheap Android handsets flood the market, Google Play app […]

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More on how loss socialization actually happens

More on how loss socialization actually happens

Michael Pettis has a good piece on debt and credit that I ran on the blog this morning. His thoughts on loss socialization are important not just in the context of China but also of other markets like Europe, the US, Canada and Australia where private debt levels have increased markedly. Some of this has resulted in phantom growth which […]

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Bad debt cannot simply be ‘socialized’

Bad debt cannot simply be ‘socialized’

Burgeoning debt was not an unlucky accident. It is fundamental to the way the growth model works, and we have arrived at the stage, probably described most imaginatively by Hyman Minsky in his work on balance sheets, in which the system requires an acceleration in credit growth simply to maintain existing levels of economic activity. China’s debt problems, in other words, cannot be resolved administratively, by fixing the shadow banking system, by imposing discipline on borrowers, or indeed by eliminating financial repression (much of which, by the way, has already been squeezed out of the system by lower nominal GDP growth). Without a massive transfer of wealth from the state sector to the household sector it will be impossible, I would argue, for GDP growth rates of anything above 3-4% – and perhaps even less – to occur without a further unsustainable increase in debt, whether that increase occurs inside or outside the formal banking system and whether or not discipline has been imposed on borrowers.

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Why the European sovereign debt crisis is not over

Why the European sovereign debt crisis is not over

Earlier today, I had an interesting back and forth on Twitter with Edward Hugh, Claus Vistesen and Matthew Lynn about Europe and the ECB. I think we all believe there is more pain to come for Europe and likely there will be writedowns. But I think a lot of the problem has to do with the flawed institutional architecture and […]

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Links: 2014-07-15

Links: 2014-07-15

Miami, the great world city, is drowning while the powers that be look away | World news | The Observer UK wages can’t rise unless we solve the productivity puzzle | Business | theguardian.com The Good, the Bad and the Ugly | Capital City | IFRe A Day in the Life of a Chinese Worker in Iraq – Jean-Claude Juncker […]

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How economics deals with an overindebted private sector

How economics deals with an overindebted private sector

Happy post-World Cup to you all. I missed my Friday catch-all post because I was out sick. So I am going to play catch-up today with a few thoughts on various topics. The BIS Let’s start with the BIS. In general, I defend the BIS view because the BIS is rightly focused on the dangers of over-indebtedness. Gavyn Davies has […]

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Links: 2014-07-14

Links: 2014-07-14

Thirty links today instead of twenty The Password Is Finally Dying. Here’s Mine – WSJ Bank for International Settlements fears fresh Lehman crisis from worldwide debt surge – Telegraph Euro-Zone Industrial Production Slumped in May – WSJ A farewell to trust: Obama’s Germany syndrome – FT.com Bruised and grumbling, foreign banks bend to US rules | Capital City | IFRe […]

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The Fed is already creating the next bubble

The Fed is already creating the next bubble

Last week, I wrote a fairly comprehensive piece laying out some of the macro issues around the Fed and other central banks’ ultra-easy monetary policy. The gist of that piece was that, due to the political economy, monetary policy is now seen by policy makers as a good way to ‘steer’ the cyclical economy through peaks and troughs. Fiscal policy, […]

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Links: 2014-07-09

Links: 2014-07-09

Today’s links will have a double allocation since I was unable to post yesterday. Block 1 Halifax: UK house prices show little sign of slowing down – Telegraph Chinese Buyers Scooped Up $22 Billion Worth of U.S. Homes In the Last Year – China Real Time Report – WSJ Juncker says age of austerity not over – budget discipline needed […]

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