Willem Buiter: “We will certainly have a panic stage before the debt crisis is resolved” (part 2)

Continuing from part 1 of the Willem Buiter interview with het Financieele Dagblad

Buiter: “The temporary pause in the European debt crisis is as deceptive as the frenzy before the New Year”

The countries of the eurozone will eventually emerge from the sovereign debt crisis — with pain and difficulty

Willem Buiter: “We will certainly have a panic stage before the debt crisis is resolved” (part 1)

The countries of the eurozone will eventually emerge from the sovereign debt crisis — with pain and difficulty. That is what Citigroup chief economist Willem Buiter, on a visit to Amsterdam on Friday during a roadshow, expects. Spain and Italy will get their finances in order and the ECB will jump in when necessary. Deep integration of fiscal policy, according to him, is not necessarily required

Michael Hudson on the erosion of democracy

Michael Hudson was on RT’s Capital Account with Lauren Lyster, speaking about the loss of democracy that has accompanied the global financial crisis. The video is below, but recently Michael also wrote two articles for the Frankfurter Allgemeine Zeitung in which he gives one a more in depth view of his perspective

Buiter: no politically feasible route to sustained growth for many years to come

In the aftermath of the emergence of a “reinforced ‘Stability and Growth Pact’”, Citigroup chief economist Willem Buiter is pessimistic about growth outcomes in the major developed economies because the political economy of the sovereign debt crisis will stymie any pro-growth policy solutions. While Buiter sees giving the ECB a green light to monetise euro area government debt as the genesis of the deal, he anticipates years (or decades) of low growth and he warns that ECB policy support will neither be “open-ended” or “unconditional”. On a positive front, Buiter says it “should allay concerns about disorderly sovereign defaults by Italy or Spain and about euro area break-up.”

Buiter: Europe must act now to avoid a default

Former bank of England central banker and present Citigroup Chief Economist Willem Buiter spoke to Tom Keene this morning on Bloomberg Radio. His view is similar to mine, that Europe must act now to avoid a default. He believes we could have a few months or a few weeks. But time is running out.

Video below

Central banks can go broke

Remember, this is a solvency crisis too, not just a liquidity crisis

Peak Coal and Jeremy Grantham’s Clarion Call on Natural Resources

Coal is one of many natural resources which are in short supply. This article provides one example from India. Jeremy Grantham believes that peak resources is a phenomenon which will pose problems for the global economy in the future. He has written a second consecutive quarterly note on peak resources that this time concentrates on the human suffering

Willem Buiter: The EU must increase the size of its bailout fund

In the last post on the EU, I said that the EFSF is too small. Basically, only the ECB has unlimited liquidity in its arsenal to deal with contagion to Spain and Italy. Willem Buiter agrees and has spoken to Bloomberg about his analysis of the Greek bailout deal. Video below

To repeat, the ECB is not conducting a stealth bailout

Karl Whelan finds that a recent analysis by Hans-Werner Sinn on an alleged ECB bailout is incorrect. Willem Buiter is now out with a commentary on the same issue corroborating Whelan’s view. Below are the bullet points he highlights in his analysis for Citigroup followed by the full article. This is seriously technical stuff, but still very important. I have underlined the key bits because his argument ties in with something I have been banging on about for some time, namely that banks are not reserve constrained in a convertible floating exchange rate credit system

Buiter: Europe will slow and Greece will have a hard restructuring

In the US, you have a weakening recovery, uneven job growth, less accommodative monetary policy, tightening fiscal policy at the federal and local levels, austerity in Europe and tightening in emerging markets coupled with secularly high profit margins and above long-term trend price-earnings ratios. From a global perspective, the only way to counteract these headwinds is through business capital investment or household consumption

Buiter: There are no absolutely safe sovereigns

There are no absolutely safe sovereigns — ‘rates analysis’ has to be done simultaneously with ‘credit analysis’ for all sovereigns, including the G3. There are likely to be several sovereign debt restructurings in the euro area (EA) in the next few years. Liquidity support should not stop this; only permanent bail-outs would. The sovereign debt