Flashman Letters
Laziness pays in the blogosphere -- if you wait long enough, someone will write exactly what you want to say, and then all you have to do is link to them.
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May 2014
05/31/2014
05/30/2014
An astonishing record – of complete failure -
http://www.ft.com/intl/cms/s/2/14e323ee-e602-11e3-aeef-00144feabdc0.html#axzz33DMSSBXv
In the 2001 issue of the International Journal of Forecasting, an economist from the International Monetary Fund, Prakash Loungani, published a survey of the accuracy of economic forecasts throughout the 1990s. He reached two conclusions. The first was that forecasts are all much the same. There was little to choose between those produced by the IMF and the World Bank, and those from private sector forecasters. The second conclusion was that the predictive record of economists was terrible. Loungani wrote: “The record of failure to predict recessions is virtually unblemished.”Now Loungani, with a colleague, Hites Ahir, has returned to the topic in the wake of the economic crisis. The record of failure remains impressive. There were 77 countries under consideration, and 49 of them were in recession in 2009. Economists – as reflected in the averages published in a report called Consensus Forecasts – had not called a single one of these recessions by April 2008.
This is extraordinary. Bear in mind that this is not the famous complaint from the Queen that nobody saw the financial crisis coming. The crisis was firmly established when these forecasts were made. The Financial Times had been writing exhaustively about the “credit crunch” since the previous summer. Northern Rock had been nationalised in the UK and Bear Stearns had collapsed in the US. It did not take a genius to see that trouble was on the way for the wider economy.
Posted at 06:30 PM | Permalink | Comments (0)
Profit margins, tax receipts and labor demand curves - I am not sure I agree, but very Interesting throughout. My caveat would not assume the economy recovering. If it recovers then the proposed mechanism probably holds
Marginal head-winds for employment and wages are turning into marginal tail winds as the economy recovers. These same factors posses self-reinforcing properties and are likely to continue to be positive impulses for, real wages, employment levels, tax receipts, and aggregate demand and negative impulses for corporate profit margins and corporate savings. Favor the liabilities of the household and public sector over those of the corporate sector.
Posted at 09:03 AM | Permalink | Comments (0)
05/29/2014
Ricardo Hausmann examines a source of capital accumulation that experts on inequality have overlooked. - Project Syndicate
If we assume that the return on this capital was 4%, this would be equivalent to owning $900 billion in foreign capital. So, if we do the accounting, the US today must owe the rest of the world roughly $12.4 trillion (13.3 minus 0.9). At 4%, this should represent an annual payment of $480 billion. Right?
Wrong – and by a long shot. The US pays nothing in net terms to the rest of the world for its debt. Instead, it earned some $230 billion in 2013. Assuming a 4% yield, this would be equivalent to owning $5.7 trillion in foreign capital. In fact, the difference between what the US “should” be paying if the Piketty calculation was right is about $710 billion in annual income, or $17.7 trillion in capital – the equivalent of its yearly GDP.
The US is not the only exception in this miscalculation, and the gaps are systematic and large, as Federico Sturzenegger and I have shown.
At the opposite extreme are countries such as Chile and China. Chile has borrowed little in net terms for the past 30 years, but pays to the rest of the world as if it had borrowed 100% of its GDP. China has lent to the rest of the world, in net terms, over the last decade, about 30% of its annual GDP but gets pretty much nothing for it. From the point of view of wealth, it is as if those savings did not exist.
What is going on? The simple answer is that things are not made just with capital and labor, as Piketty argues. They are also made with knowhow.
To see the effect of this omission, consider that America’s net borrowing of $13 trillion dramatically understates the extent of gross borrowing, which was more like $25 trillion in gross terms. The US used $13 trillion to cover its deficit and the rest to invest abroad.
This money is mixed with knowhow as foreign direct investment, and the return to both is more like 9%, compared to the 4% or less paid to lenders. In fact, 9% on $12 trillion is more than 4% on $25 trillion, thus explaining the apparent puzzle.
Chile and China put their savings abroad without mixing them with knowhow – they buy stocks and bonds – and as a consequence get just the 4-5% or less that Piketty assumes. By contrast, foreign investors in Chile and China bring in valuable knowhow; hence the gross capital that flows in yields more than the gross savings abroad. This return differential cannot be arbitraged away, because one needs the knowhow to get the higher returns.
Posted at 07:36 PM | Permalink | Comments (0)
They saved the eurozone; they just forgot to save the people - Vox
http://www.vox.com/2014/5/9/5675398/they-saved-the-eurozone-they-just-forgot-to-save-the-people
In stepped Mario Draghi, chief of the European Central Bank, with a speech and a plan. The plan was called Outright Monetary Transactions and the speech said Draghi would do "whatever it takes" to prevent a eurozone government from being forced into default or out of the eurozone.What it meant in practice was that as long as a national government was committed to a fiscal austerity plan — tax hikes plus spending cuts — the ECB would commit to potentially unlimited levels of bond-buying in order to prevent its interest rates from spiking. In one of those magical moments of monetary policy, the existence of the commitment meant Draghi never really had to test it. Speculators stopped betting on default and collapse, governments wrote austerity budgets, and interest rates steadily declined.
The result was that banks that owned eurozone government debt were saved, and so were institutions around the world that relied on the European banking system not collapsing. All in all, a job well done. Meanwhile, politicians got to take credit for keeping their countries in the Eurozone and for falling interest rates while pushing the blame for unpopular austerity policies on Draghi and German Chancellor Angela Merkel.
Nicely done.
People left behind
The only problem is that the downward spiral didn't start with high interest rates, it started with bad economic conditions. When people don't have jobs, they can't pay taxes and that puts pressure on government budgets. But the budgetary consequences of sky-high unemployment are only scratching the surface — the real problem with sky-high unemployment is the widespread human misery.
Posted at 07:54 AM | Permalink | Comments (0)
Follow up on problems in ‘Capital in the 21st Century’ | Money Supply
Let me address the binary question first. In the wealth inequality tables for the top 1 per cent and top 10 per cent in Capital in the 21st Century, there were 142 data points and I found problems with 114 of them. As a problem proportion, it comes in at a rather high 80 per cent.
That overstates the case because the problems we raised were of different magnitude. If you exclude France and Sweden (where the problems are objectively minor), the error rate comes down to 52 per cent. This is still high.
Just to be clear, the error rate results from the difficulty in presenting any long-run US data at all given the problems in the source material and the serious limitations outlined in the British data.
Does it matter?
The main criticism of the FT’s work from The Economist’s Ryan Avent, and the New York Times’ Justin Wolfers and Neil Irwin is that although the FT has found problems with Prof Piketty’s data, it does not really matter.
This is a question of judgment. There is no doubt that the data the FT has questioned relate to just six charts in Prof Piketty’s book, not his theory, nor his numbers on income distribution. Many others have commented on those.
My point is that if someone is claiming to have found a fundamental contradiction of capitalism, predicts the result is a rising share of wealth inequality, and uses apparent recent rises in recent wealth inequality as evidence that his theory is correct, those data lie at the core of the book’s argument.
That overstates the case because the problems we raised were of different magnitude. If you exclude France and Sweden (where the problems are objectively minor), the error rate comes down to 52 per cent. This is still high.
Just to be clear, the error rate results from the difficulty in presenting any long-run US data at all given the problems in the source material and the serious limitations outlined in the British data.
Does it matter?
The main criticism of the FT’s work from The Economist’s Ryan Avent, and the New York Times’ Justin Wolfers and Neil Irwin is that although the FT has found problems with Prof Piketty’s data, it does not really matter.
This is a question of judgment. There is no doubt that the data the FT has questioned relate to just six charts in Prof Piketty’s book, not his theory, nor his numbers on income distribution. Many others have commented on those.
My point is that if someone is claiming to have found a fundamental contradiction of capitalism, predicts the result is a rising share of wealth inequality, and uses apparent recent rises in recent wealth inequality as evidence that his theory is correct, those data lie at the core of the book’s argument.
Posted at 07:51 AM | Permalink | Comments (0)
China is stealing a strategic march on the US - FT.com
Hugh White, professor of strategic studies at Australian National University, has an alternative view. He argues that China’s manoeuvres should come as no surprise. After all, Xi Jinping, its increasingly assured president, has called for a “new model of great power relations”. That means it wants to be treated not as a US subordinate but as an equal, at least in the western Pacific. “These things are inherently zero-sum, so for China to have more power and influence, America must have less,” he writes in The Interpreter, a blog run by Australia’s Lowy Institute. To bring that about means undermining US authority by picking small, but winnable, fights.
This is not an immovable object and an unstoppable force. The game is asymmetric – as indeed are China’s military capabilities. (It cannot match US aircraft carriers but it may be able to sink them with missiles.) To preserve the status quo, the US needs to prevent every one of China’s moves, something it has been unable to do. China needs merely to pick a few small battles that it knows the US has no wish to fight. An air defence identification zone here. An oil rig there. Of course, Mr Obama could draw a red line. But, as he found out in Syria, red lines can be tricky.
Bit by bit, then, Beijing is creating new facts on the ground, or rather in the sea and in the air. With each new incident, it is throwing down the gauntlet. Is it worth fighting for a Vietnamese fishing boat? Thought not. How about a submerged Philippine reef? An uninhabited island? In the short term, such tactics may well prod neighbours to stick together or cling ever closer to US skirts. But if China is changing regional perceptions, and realities, that may not matter. There is talk, for example, of a more united stance by members of the Association of South East Asian Nations. For now it is just that. Talk. Asean is divided between countries that have disputes with China – the Philippines, Indonesia and Vietnam among them – and ones that do not, including Thailand and Cambodia. Concerted action looks a long way off.
This is not an immovable object and an unstoppable force. The game is asymmetric – as indeed are China’s military capabilities. (It cannot match US aircraft carriers but it may be able to sink them with missiles.) To preserve the status quo, the US needs to prevent every one of China’s moves, something it has been unable to do. China needs merely to pick a few small battles that it knows the US has no wish to fight. An air defence identification zone here. An oil rig there. Of course, Mr Obama could draw a red line. But, as he found out in Syria, red lines can be tricky.
Bit by bit, then, Beijing is creating new facts on the ground, or rather in the sea and in the air. With each new incident, it is throwing down the gauntlet. Is it worth fighting for a Vietnamese fishing boat? Thought not. How about a submerged Philippine reef? An uninhabited island? In the short term, such tactics may well prod neighbours to stick together or cling ever closer to US skirts. But if China is changing regional perceptions, and realities, that may not matter. There is talk, for example, of a more united stance by members of the Association of South East Asian Nations. For now it is just that. Talk. Asean is divided between countries that have disputes with China – the Philippines, Indonesia and Vietnam among them – and ones that do not, including Thailand and Cambodia. Concerted action looks a long way off.
Posted at 07:36 AM | Permalink | Comments (0)
The Brawl in Bogota
BY MICHAEL SHIFTER MAY 28, 2014
Four years ago, Colombia -- Washington's closest ally on the continent and a nation that a decade earlier had been widely viewed as on the verge of being a failed state -- bore all the traces of continuing a remarkable transition to a robust democracy. After nearly a decade of battling the country's largest insurgency -- the FARC (Revolutionary Armed Forces of Colombia) -- the tough, take-charge, and polarizing two-term president, Álvaro Uribe, turned over the reins to his defense minister, Juan Manuel Santos.
Surprisingly for many, given his reputation as a hard-liner, Santos's tenor was far more conciliatory than his predecessor's from the moment he was elected in June 2010.
Surprisingly for many, given his reputation as a hard-liner, Santos's tenor was far more conciliatory than his predecessor's from the moment he was elected in June 2010. He promised continuity on key economic and security policies, but was far more inclined to forge consensus among Colombia's diverse political forces. His search for governance and a reform agenda led Santos quickly to form the National Unity coalition of parties, which accounted for about 90 percent of Congress when he assumed office.
While Santos sought to lower the temperature from the confrontational politics that characterized the preceding eight years, he initially had nothing but praise for Uribe's record. The former president's undeniable success in debilitating the country's five-decade insurgency and improving the overall security situation led Santos to call Uribe "Colombia's second-greatest liberator" (behind independence hero Simón Bolívar, of course).
But the mutual goodwill has proved fleeting, and Santos's tenure has been anything but smooth. An unprecedented feud emerged between the two Colombian presidents, chiefly about how best to sustain the country's security gains under Uribe and end the long-standing armed conflict. The extent of the bad blood was sharply revealed in the tumultuous first round of the presidential election on May 25.
Uribe, who in 2010 was barred by the Constitutional Court from running for a third term but was elected to the Senate in March, handpicked his former finance minister, Óscar Iván Zuluaga, to represent his nascent Democratic Center party. Defying the polls and surprising most pundits, Zuluaga topped the field of five candidates, garnering 29 percent of the vote, followed by Santos with 26 percent. The runoff will be held on June 15.
In his victory speech, it was striking that Zuluaga framed the final vote as a fundamental choice between continuity and change -- or, perhaps more directly, a return to Uribe. The key question, however, is why so many voters are attracted to the "change" option when the country is advancing so impressively on many fronts.
Colombia is indeed performing well -- both compared with the rest of Latin America as well as during the Uribe presidency. The economy grew over 5 percent last year, foreign investment is pouring in, inflation is at its lowest point in decades, and levels of poverty and unemployment have been declining. To be sure, serious problems remain: persistent agrarian protests, deficient education and health, and stubbornly high levels of inequality. But the progress is indisputable.
A peace process is also under way -- the centerpiece of the Santos government and the chief issue in his re-election campaign. From the outset, Santos's every move has been calculated to achieve what he hoped would ultimately be his legacy -- a peace accord with the FARC and an end to decades of armed conflict. This highly coveted prize has eluded every Colombian president over the past quarter-century. But when Santos took office, conditions seemed more propitious than ever -- ironically, thanks in large measure to Uribe's effective offensive against the FARC.
Since November 2012, Santos's able negotiating team has reached agreement with the FARC leadership on several key questions, including how to deal with long-standing battles over land and addressing the production and shipment of illicit drugs -- an important source of revenue for the FARC. The remaining issues, however, are particularly tricky and contentious: the FARC's role and participation in Colombian politics and the terms of justice for its past crimes.
The process has moved along, but much slower than the government initially projected. Polls consistently show that while Colombians want to end the nation's terribly costly war -- and would prefer to end it without further bloodshed -- they oppose what they view as impunity for the widely despised FARC. Many remain skeptical about whether the rebels are negotiating in good faith and whether this round of peace talks can succeed where so many previous attempts have failed.
Moreover, there has been a disconnect between talk about the peace process -- which polls show is not even among the top five concerns for most Colombians -- and more quotidian yet pressing issues like health and education. In the campaign, Santos has surprisingly neglected to tout his government's enviable record on economic and social progress or to explain how he plans to build on such accomplishments in a second term. The result has been a campaign dominated -- on both sides -- by an issue that for many Colombians seems distant and is viewed as relatively inconsequential.
For Uribe, the direction Santos has moved since becoming president -- first his rapprochement with Uribe's bête noire, the late Venezuelan President Hugo Chávez, and then the peace process with the FARC -- are acts of personal betrayal. Uribe believed that his successor would faithfully carry his agenda moving forward. As soon as Santos shifted ground, Uribe launched a relentless campaign to discredit him and deny his re-election ambition.
More than anything else, the peace process has infuriated Uribe and sustained his feud with Santos. And so he chose a proxy to bring Santos down. Among Uribe's close associates, Zuluaga was the candidate who had the best chance of beating Santos. Many of Uribe's attacks against his former defense minister have been intemperate and baseless, with warnings about the possible "Castro-Chávezisation" of Colombia. Uribe has also charged -- largely without foundation -- that security gains under his administration have been reversed under Santos.
But Uribe is nothing if not wily and shrewd, a consummate politician. An inveterate Twitter user, he has his finger on the pulse of Colombian public opinion. True, he is a divisive figure, and there is some "Uribe fatigue." But his followers are loyal, passionate, and ready for a restoration behind Zuluaga. As gratuitous as Uribe's attacks have been, they have clearly resonated with broad swaths of the Colombian public.
This widespread wariness about the way the peace process has unfolded help accounts for the election results. Zuluaga -- with Uribe at his side, doggedly pounding away -- has lambasted what he sees as Santos's excessively soft approach in dealing with the rebels. He has insisted that the FARC cease criminal activity before any further negotiations take place and has vowed that, as president, he would suspend the current process.
Santos, who knew the peace process was a huge gamble, lacks Uribe's popular touch. Having served as minister in three administrations, however, Santos may be Colombia's best-prepared president. He commands key policy issues, from security to the economy to the social agenda, and is the scion of a political family (his great uncle was president in the 1930s). Yet despite his pedigree, he has struggled to consolidate his political leadership. His polling numbers are over 60 percent negative. And, as Sunday, May 25's results confirmed, just slightly more than a quarter of all Colombians favor his re-election.
It is doubtful that in the less than three weeks before the second round, the campaign will be elevated. Instead, it is reasonable to expect that what most analysts agree was an unusually dirty campaign will degenerate even further. Colombians are bracing themselves for another round of scandals, mudslinging, accusations, and personal attacks between the Santos and Zuluaga campaigns (with Uribe as the principal political operative of the latter). Meanwhile, both contenders are scurrying to get support from the three other vanquished candidates on the right, left, and center.
The biggest casualty of first-round voting was public confidence in Colombia's politics. As a measure of apathy and disenchantment with the degradation of the electoral process, abstention was at a record high.
Despite significant levels of violence and criminality, Colombia has been known for its comity in the political sphere. Its former presidents have traditionally transcended partisan squabbling. This campaign, however, has been far from ennobling. There were charges, for example, that Zuluaga commissioned a hacker to spy on the peace talks and that drug traffickers had bribed a key Santos campaign advisor. There are bound to be serious, long-term institutional costs for South America's oldest democracy.
Indeed, no matter who wins on June 15, it is likely that the next administration will find governing extremely difficult. Santos would start his second term with scant public enthusiasm and would face a formidable opponent in Uribe and his supporters in the Senate. Zuluaga, on the other hand, would have Uribe at his side, but would need to work with a congressional majority that has supported Santos. Absent reduced tensions and some measure of reconciliation, it is hard to be optimistic that much will be accomplished under either scenario.
Four years ago, Colombia -- Washington's closest ally on the continent and a nation that a decade earlier had been widely viewed as on the verge of being a failed state -- bore all the traces of continuing a remarkable transition to a robust democracy. After nearly a decade of battling the country's largest insurgency -- the FARC (Revolutionary Armed Forces of Colombia) -- the tough, take-charge, and polarizing two-term president, Álvaro Uribe, turned over the reins to his defense minister, Juan Manuel Santos.
Surprisingly for many, given his reputation as a hard-liner, Santos's tenor was far more conciliatory than his predecessor's from the moment he was elected in June 2010.
Surprisingly for many, given his reputation as a hard-liner, Santos's tenor was far more conciliatory than his predecessor's from the moment he was elected in June 2010. He promised continuity on key economic and security policies, but was far more inclined to forge consensus among Colombia's diverse political forces. His search for governance and a reform agenda led Santos quickly to form the National Unity coalition of parties, which accounted for about 90 percent of Congress when he assumed office.
While Santos sought to lower the temperature from the confrontational politics that characterized the preceding eight years, he initially had nothing but praise for Uribe's record. The former president's undeniable success in debilitating the country's five-decade insurgency and improving the overall security situation led Santos to call Uribe "Colombia's second-greatest liberator" (behind independence hero Simón Bolívar, of course).
But the mutual goodwill has proved fleeting, and Santos's tenure has been anything but smooth. An unprecedented feud emerged between the two Colombian presidents, chiefly about how best to sustain the country's security gains under Uribe and end the long-standing armed conflict. The extent of the bad blood was sharply revealed in the tumultuous first round of the presidential election on May 25.
Uribe, who in 2010 was barred by the Constitutional Court from running for a third term but was elected to the Senate in March, handpicked his former finance minister, Óscar Iván Zuluaga, to represent his nascent Democratic Center party. Defying the polls and surprising most pundits, Zuluaga topped the field of five candidates, garnering 29 percent of the vote, followed by Santos with 26 percent. The runoff will be held on June 15.
In his victory speech, it was striking that Zuluaga framed the final vote as a fundamental choice between continuity and change -- or, perhaps more directly, a return to Uribe. The key question, however, is why so many voters are attracted to the "change" option when the country is advancing so impressively on many fronts.
Colombia is indeed performing well -- both compared with the rest of Latin America as well as during the Uribe presidency. The economy grew over 5 percent last year, foreign investment is pouring in, inflation is at its lowest point in decades, and levels of poverty and unemployment have been declining. To be sure, serious problems remain: persistent agrarian protests, deficient education and health, and stubbornly high levels of inequality. But the progress is indisputable.
A peace process is also under way -- the centerpiece of the Santos government and the chief issue in his re-election campaign. From the outset, Santos's every move has been calculated to achieve what he hoped would ultimately be his legacy -- a peace accord with the FARC and an end to decades of armed conflict. This highly coveted prize has eluded every Colombian president over the past quarter-century. But when Santos took office, conditions seemed more propitious than ever -- ironically, thanks in large measure to Uribe's effective offensive against the FARC.
Since November 2012, Santos's able negotiating team has reached agreement with the FARC leadership on several key questions, including how to deal with long-standing battles over land and addressing the production and shipment of illicit drugs -- an important source of revenue for the FARC. The remaining issues, however, are particularly tricky and contentious: the FARC's role and participation in Colombian politics and the terms of justice for its past crimes.
The process has moved along, but much slower than the government initially projected. Polls consistently show that while Colombians want to end the nation's terribly costly war -- and would prefer to end it without further bloodshed -- they oppose what they view as impunity for the widely despised FARC. Many remain skeptical about whether the rebels are negotiating in good faith and whether this round of peace talks can succeed where so many previous attempts have failed.
Moreover, there has been a disconnect between talk about the peace process -- which polls show is not even among the top five concerns for most Colombians -- and more quotidian yet pressing issues like health and education. In the campaign, Santos has surprisingly neglected to tout his government's enviable record on economic and social progress or to explain how he plans to build on such accomplishments in a second term. The result has been a campaign dominated -- on both sides -- by an issue that for many Colombians seems distant and is viewed as relatively inconsequential.
For Uribe, the direction Santos has moved since becoming president -- first his rapprochement with Uribe's bête noire, the late Venezuelan President Hugo Chávez, and then the peace process with the FARC -- are acts of personal betrayal. Uribe believed that his successor would faithfully carry his agenda moving forward. As soon as Santos shifted ground, Uribe launched a relentless campaign to discredit him and deny his re-election ambition.
More than anything else, the peace process has infuriated Uribe and sustained his feud with Santos. And so he chose a proxy to bring Santos down. Among Uribe's close associates, Zuluaga was the candidate who had the best chance of beating Santos. Many of Uribe's attacks against his former defense minister have been intemperate and baseless, with warnings about the possible "Castro-Chávezisation" of Colombia. Uribe has also charged -- largely without foundation -- that security gains under his administration have been reversed under Santos.
But Uribe is nothing if not wily and shrewd, a consummate politician. An inveterate Twitter user, he has his finger on the pulse of Colombian public opinion. True, he is a divisive figure, and there is some "Uribe fatigue." But his followers are loyal, passionate, and ready for a restoration behind Zuluaga. As gratuitous as Uribe's attacks have been, they have clearly resonated with broad swaths of the Colombian public.
This widespread wariness about the way the peace process has unfolded help accounts for the election results. Zuluaga -- with Uribe at his side, doggedly pounding away -- has lambasted what he sees as Santos's excessively soft approach in dealing with the rebels. He has insisted that the FARC cease criminal activity before any further negotiations take place and has vowed that, as president, he would suspend the current process.
Santos, who knew the peace process was a huge gamble, lacks Uribe's popular touch. Having served as minister in three administrations, however, Santos may be Colombia's best-prepared president. He commands key policy issues, from security to the economy to the social agenda, and is the scion of a political family (his great uncle was president in the 1930s). Yet despite his pedigree, he has struggled to consolidate his political leadership. His polling numbers are over 60 percent negative. And, as Sunday, May 25's results confirmed, just slightly more than a quarter of all Colombians favor his re-election.
It is doubtful that in the less than three weeks before the second round, the campaign will be elevated. Instead, it is reasonable to expect that what most analysts agree was an unusually dirty campaign will degenerate even further. Colombians are bracing themselves for another round of scandals, mudslinging, accusations, and personal attacks between the Santos and Zuluaga campaigns (with Uribe as the principal political operative of the latter). Meanwhile, both contenders are scurrying to get support from the three other vanquished candidates on the right, left, and center.
The biggest casualty of first-round voting was public confidence in Colombia's politics. As a measure of apathy and disenchantment with the degradation of the electoral process, abstention was at a record high.
Despite significant levels of violence and criminality, Colombia has been known for its comity in the political sphere. Its former presidents have traditionally transcended partisan squabbling. This campaign, however, has been far from ennobling. There were charges, for example, that Zuluaga commissioned a hacker to spy on the peace talks and that drug traffickers had bribed a key Santos campaign advisor. There are bound to be serious, long-term institutional costs for South America's oldest democracy.
Indeed, no matter who wins on June 15, it is likely that the next administration will find governing extremely difficult. Santos would start his second term with scant public enthusiasm and would face a formidable opponent in Uribe and his supporters in the Senate. Zuluaga, on the other hand, would have Uribe at his side, but would need to work with a congressional majority that has supported Santos. Absent reduced tensions and some measure of reconciliation, it is hard to be optimistic that much will be accomplished under either scenario.
Posted at 07:09 AM | Permalink | Comments (0)
05/28/2014
Britain has already left the EU, but that is least of Europe's problems - Telegraph
Let us not lose sight of what has occurred. The root cause of this social, political and economic disaster is EMU. As Nobel economist Paul Krugman said this week: "Depression-level slumps didn’t happen in Europe before the coming of the euro."
Monetary union first destabilised the South with massive capital flows. Now its contractionary bias blocks recovery.
Oxford Professor Kevin O'Rourke has called for an end to the misery in a remarkable cri de coeur for the International Monetary Fund. What shocks him is that EU officials seem to treat it as a matter of course that unemployment should be stuck at 1930s levels, or that Italian GDP should still be 9pc below peak after half a decade. "These are not minor details, blemishing an otherwise impeccable record, but evidence of a dismal policy failure," he said.
"If economic historians learned anything from the Great Depression, it is that adjustment based on austerity and internal devaluation is dangerous. Britain ran large primary surpluses throughout the 1920s, but its debt-to-GDP ratio rose substantially thanks to the deflationary, low-growth environment."
Prof O'Rourke said he has been waiting five years for Europe's leaders to forge the new instruments needed to make the failed experiment work, but it is by now obvious that Germany will not allow fiscal union or shared banking liabilities, and others will not accept a federal political Europe. It therefore pointless to protract the agony.
"The demise of the euro would be a major crisis, no doubt about it. We shouldn’t wish for it. But if a crisis is inevitable then it is best to get on with it, while centrists and Europhiles are still in charge. If the euro is eventually abandoned, my prediction is that historians 50 years from now will wonder how it ever came to be introduced in the first place," he said.
Monetary union first destabilised the South with massive capital flows. Now its contractionary bias blocks recovery.
Oxford Professor Kevin O'Rourke has called for an end to the misery in a remarkable cri de coeur for the International Monetary Fund. What shocks him is that EU officials seem to treat it as a matter of course that unemployment should be stuck at 1930s levels, or that Italian GDP should still be 9pc below peak after half a decade. "These are not minor details, blemishing an otherwise impeccable record, but evidence of a dismal policy failure," he said.
"If economic historians learned anything from the Great Depression, it is that adjustment based on austerity and internal devaluation is dangerous. Britain ran large primary surpluses throughout the 1920s, but its debt-to-GDP ratio rose substantially thanks to the deflationary, low-growth environment."
Prof O'Rourke said he has been waiting five years for Europe's leaders to forge the new instruments needed to make the failed experiment work, but it is by now obvious that Germany will not allow fiscal union or shared banking liabilities, and others will not accept a federal political Europe. It therefore pointless to protract the agony.
"The demise of the euro would be a major crisis, no doubt about it. We shouldn’t wish for it. But if a crisis is inevitable then it is best to get on with it, while centrists and Europhiles are still in charge. If the euro is eventually abandoned, my prediction is that historians 50 years from now will wonder how it ever came to be introduced in the first place," he said.
Posted at 10:41 PM | Permalink | Comments (0)
How an Order for 10 Submarines Led to Misleading News on the Economy | FiveThirtyEight
ut if we dig into the manufacturing sector data, we see that the U.S. government ordered 10 submarines from General Dynamics in April; that deal was worth nearly $18 billion. Although the whole order doesn’t count in April’s data, enough of it was allotted to skew the month’s headline number.
Durable goods orders don’t make for lively dinner-party conversation, but they have a huge effect on the economy. In April, the total value of new orders, at an annualized rate, was nearly $250 billion. Relative to March, total orders rose 0.8 percent. But remove defense-related orders, and the total orders posted a decline of 0.8 percent. The General Dynamics submarine contract appears in the “defense capital goods” category, which rose 39.3 percent in April and is up 21.1 percent from a year ago.
We shouldn’t count on big-ticket defense orders to juice durable goods every month; defense spending is likely to decline. The Congressional Budget Office projects that defense appropriations, as a fraction of the size of the economy, will continue to fall in the coming decade.
Posted at 01:49 PM | Permalink | Comments (0)