We detect a theme. It may be that with financial markets becalmed a new subject is needed. Perhaps it reflects the way Piketty has become an instant bookshop-to-shelf classic, but something has investment strategists reaching for insight from an eighth century theologian.
“And those people should not be listened to who keep saying the voice of the people is the voice of God, since the riotousness of the crowd is very close to madness.” — Alcuin to Charlemagne, 798 A.D. Read more
Something funny happened to the eurozone over summer. Things… began to look better.
Of course, there are plenty of difficulties lying in wait. As the FT’s Peter Spiegel and Alex Barker write, once a new German government is in place after this weekend’s election, fraught negotiations about Greece, Portugal, Ireland and the banking union will quickly return to the fore. Read more
Eye-catching charts, for a type of risk that should catch investor eyes:
Governments across Europe can breathe a deep sigh of relief. Even the unlucky few who can’t convince Ms. Merkel to carry their standard on the campaign trail may not be brutalised at the polls by vengeful electorates beaten down by austerity.
Why? Read more
OK, beyond the Nero jokes… we’re still very confused by this big movement to suppress political risk, or volatility, in the eurozone. Betting on “technocrats” to solve the debt crisis, as it’s called.
Nomura analysts touched on this familiar theme on Wednesday: Read more
I guess you guys have to be creative here.
Spot the odd one out: Read more
That’s one (very Acropolis Now) view from Greece, recently. (Photo via GreekSky). Read more
The US announcement on Monday that it was pursuing “targeted sanctions” against Syria heralds a likely shift by western governments towards increasing pressure on Damascus, the FT reports. Although imposing sanctions on leading Syrian officials might have limited practical effect, it marks a big change in the US stance towards Bashar al-Assad, Syria’s president, and is the latest shift in tortured relations with Damascus. The Bush administration classified Syria as an associate member of the “axis of evil” and withdrew its ambassador after the 2005 assassination of Rafiq Hariri, the former prime minister of Lebanon who had crossed swords with Mr Assad. Ties were further tested in 2007 after Israel bombed a hidden Syrian nuclear reactor that western intelligence agencies said was intended as part of a weapons programme.
We saw some ‘political risk’ last weekend — when Finnish voters elected a number of politicians from the euro-skeptic True Finns party into office. It is feared that any resulting political coalition with the True Finns included could threaten to throw the eurozone’s bailout plans out of whack.
So don’t expect political risk to go away. Read more
Here’s a year-old quote from the Inner Workings blog of the Asia Times:
Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China’s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee … There is some speculation that China’s action has to do with the recent deterioration of US-Chinese relations over arm sales to Taiwan and other issues. That would be an unusual action for the Chinese to take–Beijing does not mix investment and strategic policy–and would be hard to substantiate in any event.
Coming soon — Michael Lewis, of Liar’s Poker fame, does Ireland in the March edition of Vanity Fair. Click on the link for a Q&A preview:
One thing we didn’t bring up in our previous post about House Republicans’ backpedaling on their deficit-reduction pledge is the ongoing meme that they might refuse to raise the debt ceiling.
We’re not exactly sure how serious a problem this is, as it seems a number of Republicans have come out and said that doing so would be irresponsible (they’re right). Others, like Paul Ryan (in this Reuters article) say that raising the debt ceiling shouldn’t be done without extracting concessions from Democrats on spending. Read more
Here’s a novel solution to the problem of excessive public debt: democracy.
Presenting the idea of vote-sharing bonds, via Hans Gerbach of the ETH in Zurich. Read more
Tip of the hat to The Browser for this — a paper on Chinese international trade and internal politics that’s both weird and timely.
Here’s the abstract, penned by two University of Goettingen economists (emphasis ours): Read more
Irish bank bail-out outrage du jour comes courtesy of Guido Fawkes.
The British political blogger has unearthed a purported copy of Anglo Irish’s foreign bondholders as of October 15 — quite a feat given Ireland’s finance minister Brian Lenihan once said he was unable to do the same. Read more
Morgan Stanley economists always have such interestingly contrarian views on the inflation-deflation debate. For example – Joachim Fels’ unfashionably inflationista analysis of central bank credibility.
And now — the deflation-fighting case for Logan’s Run. Read more
With congressional elections approaching and the middling pace of economic recovery, it’s reasonable to expect the political temperament in the US will worsen before it improves.
On Tuesday the Center for Responsive Politics, which tracks donations to political campaigns, revealed the following chart, which shows how the money given by the financial sector is allocated between Republicans and Democrats: Read more
Reuters on Thursday published snippets of the discussions taking place at its Global Energy Summit, including some forthright commentary from the heads of various commodity exchanges.
The subject? Government and regulators v evil speculators. For instance: Read more
Ken Clarke, shadow business secretary, warned that Britain faces economic “disaster” if voters continue their flirtation with Nick Clegg, the FT reported. The pound will “wobble”, the markets could take fright and the IMF could be forced to intervene if the Lib Dem advance leads to a hung parliament, Clarke argued in an FT op-ed.
Here’s a fun — and highly timely — bit of political science to ponder, just as legislators in the US and UK are limbering up for a big push on financial regulation, and markets wonder just how far they will go.
A new academic paper argues that booms and busts historically give political power to the parties and policies of the Left: Read more
David Cameron has signalled his confidence of winning the general election expected to be called next week, issuing a clear rallying call to Conservatives shaken by opinion polls pointing to a hung parliament. “This is going to be the first time in 23 years that the Conservative party goes into a general election with a seven to 10-point lead. We’ve come a long way,” the Tory leader said in an interview with the FT.
The Conservatives on Monday set the economic platform they will take to the election, pledging to cut national insurance by £5.6bn, reduce the deficit faster than Labour and find £6bn of new efficiency savings. The proposal is partly to reverse the one percentage point rise in national insurance due to take effect next year and is designed to benefit employees earning up to £45,400, as well as employers.
Britain’s would-be chancellors declared open season on bankers on Monday night, in a a televised pre-election debate that saw the three contenders for Number 11 pour scorn on alleged greed in the sector. George Osborne, shadow chancellor, singled out Barclays bosses for “not understanding what the rest of the country is going through” while Vince Cable, Liberal Democrat treasury spokesman, decried critics of the new 50p top rate of income tax as “pin-striped Scargills.”
America’s fixation on the “China problem” is now boiling over. From Google to the renminbi, China is being blamed for all that ails the US. Unfortunately, this reflects a potentially lethal combination of political scapegoating and bad economics, Morgan Stanley’s Stephen Roach writes in the FT.