Post Tagged with: "Politics"

Variable geometry bites back: Schäuble’s motives

Success of the German-inspired solution for the latest Greek crisis is far from assured. If it fails, the Eurozone may be changed forever. This column argues that the failure would lead to an outcome that has been favoured for decades by Germany’s Finance Minister, Wolfgang Schäuble. Perhaps the package the Eurozone agreed is just a backdoor way of getting to the ‘variable geometry’ and monetary unification for the core that the Maastricht criteria had failed to achieve.

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A Return to Fundamentals?

A Return to Fundamentals?

Overall, I don’t see any clear signs that the risk on, risk off mentality, which has ruled since 2008, is finally coming to an end. Yes, correlations have begun to recede a little bit here and there; however, if it is indeed a sign of bigger things to come, it is still very early days.

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Morality in the Greek Crisis

Morality in the Greek Crisis

I know I keep saying that economics is not a morality play. But when it comes to Greece, I can find no other satisfactory explanation for what is going on. I’ve reminded everyone before about Irving Fisher’s famous observation: “The more the debtors pay, the more they owe”. In 2012, Michael Hudson developed this idea further. “Debts that can’t be paid, won’t be”, he said.

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Will the AIIB ever matter?

By Michael Pettis When Isaac, an editor at Foreign Policy, sent me an email two weeks ago asking if I could write a piece on the new Asian Infrastructure Investment Bank (AIIB), I quickly wrote back promising 1,200 words within a few days. I thought it would be pretty easy to come up with the points I wanted to make, […]

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Is Greece’s Debt Odious?

There is a legal concept called “odious debts.” It can be traced back more than a century. The US helped create a precedent for it by denying Cuba’s responsibility for the debt incurred under Spanish colonial rule. The concept took on added significance in the post-colonial era more broadly. The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired.

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Is Finland’s Economy Suffering From Secular Stagnation?

Is Finland’s Economy Suffering From Secular Stagnation?

Finnish society, like many other European ones, is in the throes of a major transition. More debate needs to be held on what to do to facilitate the transition, and in the meantime deficit spending to make investments in future productivity improvements seems not to be a bad idea. Running deficits in order not to change, in contrast, would be.

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AIIB Prelude to SDR Decision

AIIB Prelude to SDR Decision

In what can only be seen an unexpected Chinese success, several US allies have agreed to participate in China and India’s Asian Infrastructure Investment Bank. The frustration with the US on this issue is palpable. There is another issue at stake that head of China’s central bank Zhou Xiaochuan made clear at a forum yesterday. On a panel with the IMF’s Lagarde, Zhou pushed for the yuan to be included as a reserve asset and in the SDR basket.

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Wolfgang Schaeuble the Salesman

Wolfgang Schaeuble the Salesman

When the Greek bailout extension deal got done, I mentioned that in the press conference that followed, German Finance Minister Wolfgang Schäuble made it clear he was looking to ‘sell’ the deal to the German parliament. And while he has been successful in doing so, recent evidence suggests that indeed he did have to work to make the deal viable. For me, this highlights the political constraints we are working under and reinforces my view that writedowns are not politically viable in Germany.

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When do we decide that Europe must restructure much of its debt?

When do we decide that Europe must restructure much of its debt?

By Michael Pettis It is hard to watch the Greek drama unfold without a sense of foreboding. If it is possible for the Greek economy partially to revive in spite of its tremendous debt burden, with a lot of hard work and even more good luck we can posit scenarios that don’t involve a painful social and political breakdown, but […]

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How to look at the Greece bailout deal

Yesterday, Greece received an agreement in principal to extend its existing bailout program for another four months from the institutions administering that program. I believe this deal is a good basis for further work down the line. But Greece has a lot of work ahead of it, if it is to move to a new program. Moreover, Syriza will have to sell this deal as a bridge to the sustainable economic outcome it sold to its electorate in the January elections. At the same time, the Germans and the Finns at a minimum will have to sell this deal to their parliaments for it to work. Some thoughts below

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Yanis Varoufakis on fiscal waterboarding and Ponzi austerity

Yanis Varoufakis had a long interview on RT’s Boom Bust yesterday going into detail behind his political candidacy and what he expects SYRIZA to do regarding the unsustainable debt burden that the Greek government now has. Overall, despite his problems with the eurozone’s institutional structure, Yanis believes Greece leaving the eurozone would be a catastrophe for the simple fact that it does not have a currency and any attempt to leave would be seen as a prelude to a massive devaluation, inviting capital flight on a grand scale. This would be a catastrophe for the Greek banking system and wider economy.

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The German view of the Euro crisis

This is an abbreviated version of a post first published at Credit Writedowns Pro on 15 Oct. The Germans got into the eurozone out of a desire to increase European integration and to strengthen Europe as an economic area that rivalled the United States. Yet, now we are in a period where the Germans are being blamed for everything that’s […]

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