Amartya Sen über den Zustand der Volkswirtschaftslehre und den Zugang zur Wissenschaft Ökonomie

(Interviewer) Wie sollte neues ökonomisches Denken aussehen?
(Amartya Sen) Wir brauchen einen breiteren, ganzheitlicheren Blick. Wir müssen die gesamte Bandbreite der menschlichen Bedürfnisse sehen, die für Wohlstand notwendig sind. Ich wünsche mir ein ökonomisches Denken, das der menschlichen Freiheit größere Aufmerksamkeit schenkt. Ich meine nicht nur formale Rechte, sondern echte Freiheit - dass jeder Einzelne bestimmen kann, was er für ein Leben führt und was er erreicht. Die grundlegende Frage, die sich Ökonomen stellen sollten, ist: Was können wir tun, um eine anständige Gesellschaft zu haben, in der die Menschen weit mehr Freiheit haben, ein Leben zu führen, auf das sie stolz und glücklich sind. Und wir müssen uns fragen, welche Hilfe der Staat leisten kann, damit es diese substanzielle Freiheit gibt.
Sie beziehen sich immer wieder auf alte Denker wie etwa Smith, Keynes und andere. In der modernen Ökonomie spielt die Ideengeschichte aber keine große Rolle mehr…Das ist leider so. Unsere Disziplin hat die Ideengeschichte in den letzten Jahrzehnten sehr vernachlässigt. Das war einer unserer größten Fehler.
Gibt es Hoffnung, dass dieser Trend umgekehrt werden kann?Ja, ich bin da recht optimistisch. Es findet ein Umdenken statt. Besonders freut mich, dass der Anstoß von den Studenten kommt - deren Interesse an der Ideengeschichte steigt. Letztes Jahr haben meine Frau Emma Rothschild und ich in Harvard ein Seminar zu Adam Smith's Philosophie und Wirtschaftspolitik angeboten. Das ist auf großes Interesse gestoßen, wir haben einige der besten Studenten angelockt.
Ist der starke Fokus, den moderne Ökonomen auf Mathematik legen, die Kehrseite der Vernachlässigung der Ideengeschichte?Nein. Es besteht kein Konflikt zwischen der Mathematik und anderen Methoden. Unser Fach ist seit jeher eng mit der Mathematik verbunden. Dafür müssen wir uns nicht schämen. Wir dürfen uns nur nicht ausschließlich auf mathematische VWL konzentrieren und Erkenntnisse vernachlässigen, für die andere Arten der Argumentation nötig sind. Der Konflikt herrscht zwischen einem ganzheitlichen, breiten, umfangreichen Blick im Gegensatz zu einem engen Blick - ob der nun mathematisch ist oder nicht.
Quelle: Handelsblatt

IWF vollzieht Kehrtwende in Sachen kontraktive Fiskalpolitik

Der Internationale Währungsfonds (IWF) wird seit vielen Jahren immer wieder massiv wegen seiner harten Sparauflagen kritisiert, die er zur Bedingung für Milliardenkredite an überschuldete Länder macht. Von „Kaputtsparen“ ist dabei häufig die Rede. Auch in der europäischen Schuldenkrise drängte der IWF bisher auf scharfe Einsparungen nicht zuletzt bei Sozial-, Pensions- und Gesundheitsausgaben.
Doch in seinem jüngsten globalen Wirtschaftsausblick, den der Fonds vor wenigen Tagen in Tokio präsentierte, vollzieht Chefökonom Olivier Blanchard eine Kehrtwende. Versteckt in einer Fact-Box kommt der IWF in dem Bericht (Seite 41 bis 43, Anm.) zum Schluss, dass übermäßiges Sparen das erklärte Ziel, die Schulden in einem überschaubaren Zeitraum zu verringern, verfehlt. Das kommt einem indirekten Schuldeingeständnis gleich. Die „Financial Times“ spricht in einem Kommentar von einem „Akt des Aufstands“, mehrere Finanzexperten sprachen am Wochenende von dem wichtigsten makroökonomischen Ereignis dieses Jahres.
Konkret bezieht sich der IWF auf eine Studie, die zeigt, dass der Einfluss der Steuerpolitik auf das Wachstum viel höher ist als bisher angenommen - und als sie der IWF zur Basis für seine Sparauflagen machte. Demnach ging der Fonds in der Regel von einem fiskalpolitischen Multiplikator von 0,5 aus. Das bedeutet, dass die Wirtschaft für jeden Euro an öffentlichen Ausgaben weniger um 0,50 Cent schrumpft. Laut der aktuellen Studie liegt dieser Effekt aber deutlich höher - bei 0,9 bis 1,7.

Quelle: orf.at

Fed's Beige Book: Economic Activity, consumer spending and real estate

From the Fed's Beige Book:

Reports from the twelve Federal Reserve Districts indicated that economic activity generally expanded modestly since the last report.

Consumer spending was generally reported to be flat to up slightly since the last report. A number of Districts characterized retail sales as expanding at a modest pace (...)Residential real estate showed widespread improvement since the last report. All twelve Districts reported that existing home sales strengthened, in some cases substantially. Selling prices were steady or rising. Boston, Atlanta, Minneapolis, Dallas and San Francisco noted declining or tight inventories, which have put upward pressure on prices. Modest price increases were reported in the New York, Richmond, Chicago, and Kansas City Districts. New York and Richmond reported relatively strong demand at the high and low ends of the market, whereas Philadelphia and Kansas City noted relative strength for mid-range homes; Boston indicated a shift in the mix toward lower or medium priced homes. New home construction and sales were more mixed but still mostly improved: increased construction and/or new home sales were reported in the Atlanta, Chicago, St. Louis, Kansas City, Dallas and San Francisco Districts. Multi-family construction, in particular, was described as robust in the Boston, New York, Atlanta, Chicago, and Dallas Districts. Residential rental markets continued to be characterized as strong, even in the New York and Atlanta Districts where rents increased somewhat less strongly than in recent months. Commercial real estate markets were mixed since the last report. Office markets showed signs of softening in the northeastern Districts--Boston, New York and Philadelphia--with New York remarking on substantial new supply coming on the market in early 2013. In contrast, Atlanta, Minneapolis and San Francisco noted some improvement, while most other Districts reported stable or mixed market conditions. Industrial markets showed some strength in the New York, Philadelphia, Cleveland and Atlanta Districts, while conditions were described as sluggish in Richmond and mixed in St. Louis. Atlanta noted weakness in the market for retail space. Commercial construction activity was also mixed: Atlanta, Minneapolis and Kansas City reported some improvement in non-residential construction activity, while Richmond and Dallas noted that activity was sluggish.

 Source: Fed

Credit booms and financial crises

A new piece by Moritz Schularick and Alan Taylor is available at vox. The article compares the severity of financial crises:

The central part played by credit in the deep downturn and weak recovery fits a recurring historical pattern. Financial crises correlate with more painful recessions. This column takes a close look at 14 advanced economies over the past 140 years and shows that larger credit booms during expansions have been systematically associated with more severe and prolonged slumps. In short, credit bites back. Measured against the historical benchmark, the recent US recovery has been far better than could have been expected.

via Paul Krugman

Where's the labour market recovery in Europe?

The unemployment rate in the euro area reached the highest on record as the festering debt crisis pushed the economy toward a recession, prompting companies to cut jobs.
Unemployment in the economy of the 17 nations using the euro was 11.4 percent in August, the same as in June and July after those months’ figures were revised higher, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995 and in line with median of 30 economists’ forecasts in a Bloomberg News survey.

Source: Bloomberg

How big is Quantitative Easing in the US going to be?

• ... We now view the Fed as following a looser version of the “threshold rule” championed by Chicago Fed President Charles Evans.
• What are the thresholds? We read the committee as signaling that the federal funds rate will not rise until the unemployment rate has fallen to the 6½%-7% range. The corresponding threshold for the end of QE3 may be in the 7%-7½% range.
•These implicit commitments are undoubtedly subject to an inflation ceiling ... may be a year-on-year core PCE reading of 2½%-2¾%.
(...) Under the committee’s economic forecasts, we estimate that the funds rate would stay near zero until mid-2015, while QE3 would run through mid-2014 and total $1.2trn.
• Under our own economic forecasts, we estimate that the funds rate would stay near zero until mid-2016, while QE3 would run through mid-2015 and total just under $2trn.

Read more at http://www.calculatedriskblog.com/2012/09/goldman-estimate-qe3-could-be-12-to-20.html#zvhz8YKwbMvUUSAY.99

Is a Grexit becoming more or less likely?

The probability of a Greek exit from the euro has not receded in the wake of the ECB announcement; on the contrary, it's now more likely because it's "more manageable"

Troika leaders (from the ECB, IMF, and the EU) probably don't think a Greek exit is as big a deal as they thought it was before the ECB announced its new plan

A Greek exit would still cause capital flight from Italy and Spain but would be necessarily accompanied by massive global central bank intervention. (...)

 Nevertheless, Grexit is not certain and its potential timing is highly uncertain. The risk of Grexit in the next couple of months probably has receded, with deadlines being pushed off. Policymakers may be unwilling to trigger Grexit in the run-up to the US elections, and while Middle East tensions are so high.

Read more: http://www.businessinsider.com/citi-greek-exit-from-euro-more-likely-2012-9#ixzz271glbVfT
Read more: http://www.businessinsider.com/citi-greek-exit-from-euro-more-likely-2012-9#ixzz271gVqLrO

German Constitutional Court offers Merkel a day of hope and happiness

KARLSRUHE, Germany – Germany’s Federal Constitutional Court on Wednesday gave Chancellor Angela Merkel a significant victory in her bid to master the debt crisis that has buffeted the continent for years and endangered its common currency, granting approval to one of the key pillars of her strategy.
With the ruling, the 17 countries of the euro zone will be able to move ahead with the establishment of the European Stability Mechanism, something like a continental version of the International Monetary Fund. The mechanism will handle bailouts and work in tandem with the European Central Bank to buy the bonds of countries such as Italy and Spain that are straining under high interest rates.
The court ruled that Germany could proceed with its contribution to the mechanism but set certain conditions, including a requirement for parliamentary approval of any increase in the agreed German contribution of 190 billion euros, or about $240 billion.

Source: NYT

Nate Silver: Obama's odds of getting reelected have improved

The most impressive thing that our model did in 2008, in my view, was not in “calling” all but one of the states right on Election Day. There was very little doubt about who was favored in perhaps 46 or 47 of these states. The other three or four were tossups — and whether you guessed the winner right had as much to do with luck as skill.
Rather, it was what the model did in September of that year, when it detected very, very quickly after the collapse of Lehman Brothers that John McCain’s goose was cooked, with Barack Obama’s projected probability of winning the Electoral College increasing by about 25 percent in a period of just 48 hours.
We’re not seeing anything quite that dramatic in the polls right now. Nevertheless, the polling movement that we have seen over the past three days represents the most substantial shift that we’ve seen in the race all year, with the polls moving toward Mr. Obama since his convention.
How far will Mr. Obama’s numbers rise, and how long will his bounce last? We don’t know that, of course. But the range of possible outcomes reads pretty favorably for him.

Source: NYTimes

Global debt clock

Source: The Economist

The ECB's bond buying programme

Mario Draghi has made his leaked proposal official: the European Central Bank will buy unlimited amounts of troubled euro zone debt on the open markets in an effort to push down sovereign borrowing costs. The NYT’s Jack Ewing and Steven Erlanger write that the plan puts the ECB’s “unlimited financial clout behind an effort to protect Spain and Italy from financial collapse” and “effectively spreads responsibility for repaying national debts to the euro zone countries”.
The plan, called “Outright Monetary Transactions” (OMT), will purchase bonds maturing in the next three years, after countries have made a request to the euro zone’s bailout fund and fully agreed to its conditions. If countries renege on their promises in areas like banking reform or fiscal policy overhauls, the ECB will terminate the bond purchases. Importantly, the ECB will not have seniority over private bondholders.

Source: blogs. reuters

Going back to the roots of the current crisis: Don't expect a recovery soon

To understand the effects of an economic crisis, you have to go back to its roots. A new study by Alan Taylor draws attention back to the causes of the 2008 financial crisis. Through a series of tests run on a sample of 14 advanced economies between 1870 and 2008, Mr Taylor establishes a link between the growth of private sector credit and the likelihood of financial crisis. The link between crisis and credit is stronger than between crises and growth in the broad money supply, the current account deficit, or an increase in public debt.Over the 138-year timeframe Mr Taylor finds crisis preceded by the development of excess credit, as in Ireland and Spain today, are more common than crisis underpinned by excessive government borrowing, like in Greece. Fiscal strains in themselves do not tend to result in financial crisis.When the boom period of credit expansion is coupled with growth in public-sector borrowing, however, the subsequent negative impact on the economy will be worse. Why? When a crash occurs, governments will not have the fiscal capacity to buffer the crisis due to their already stretched borrowing levels. Instead, they become forced to retrench and adopt austerity measures—which tend to drag on growth further, prolonging recession. (...) Financial crisis recession will tend to result in a longer-term recessionary drag than a “normal” business cycle recession. When a regular recession is preceded by excess credit growth, Mr Taylor finds there tends to be a mild drag on GDP of 50 to 75 bps. (...) But a financial crisis recession tends to bring about a larger drag on the economy, of 100 to 150 bps. Add in a high level of public debt-to-GDP, near to 100%, and growth tends to drop by 400 bps.

Source: Economist

Draghi hints at short term bond buying

The president of the European Central Bank dropped more hints about how the bank could support struggling countries, suggesting the bank was free to buy government bonds maturing in three years or less.
The comments by Mario Draghi in a closed hearing at the European Parliament on Monday came ahead of the ECB's monthly policy meeting Thursday....Mr. Draghi indicated Monday that the ECB would be open to buying bonds with a maturity of two to three years, stressing that such purchases wouldn't break European Union treaties, according to several lawmakers present at the hearing.

Source: WSJ

NY Fed: Short selling bans do not work

In September 2008, at a time of intense market stress, the United States and a number of other countries banned the short-selling of financial stocks. The bans were imposed because regulators
feared that short-selling could drive the prices of those stocks to artificially low levels. Yet much remains to be understood about the effectiveness of such bans in stabilizing equity market prices.
And reexamination of this issue is particularly important in light of the latest wave of bans in Europe, including the restrictions imposed by Spain and Italy in July.
Recent research on the 2008 bans allows us to assess the costs and benefits of short-selling restrictions. The preponderance of evidence suggests that the bans did little to slow the decline in the prices of financial stocks. In addition, the bans produced adverse side effects: Trading costs in equity and options markets increased, and stock and options prices uncoupled.
No blanket short-selling ban was in effect during August 2011, when Standard and Poor’s announced its downgrade of the U.S. bond rating. Our look at the sharp fall in U.S. equity prices following the announcement uncovers no evidence that the price decline was the result of short-selling. Indeed, stocks with large increases in short interest earned higher, not lower, returns during the first half of August 2011. Moreover, stocks that had triggered circuit-breaker restrictions and therefore could not be shorted on the day the downgrade was announced actually had lower returns than the stocks that were eligible for shorting.
Taken as a whole, our research challenges the notion that banning short sales during market downturns limits share price declines. If anything, the bans seem to have the unwanted effects of raising trading costs, lowering market liquidity, and preventing short-sellers from rooting out cases of fraud and earnings manipulation. Thus, while short-sellers may bear bad news about companies’ prospects, they do not appear to be driving price declines in markets.

Source: NYFed

Zur zukünftigen Rolle der EZB in puncto Bankenaufsicht

Die Europäische Zentralbank fordert in der entstehenden europäischen Bankenaufsicht eine starke Rolle für sich. Die EZB müsse alle Instrumente erhalten, die notwendig seien, um die Aufgaben einer Bankenaufsicht effektiv auszuführen, sagte der deutsche EZB-Direktor Jörg Asmussen laut Redetext am Montag in Hamburg. Dafür seien der Zugang zu allen notwendigen Informationen, Eingriffsrechte sowie das Recht erforderlich, nicht lebensfähige Banken zu schließen. Ohne diese Mindestausstattung werde die EZB keine Verantwortung übernehmen, da das Risiko für ihren Ruf zu groß wäre.
Damit beschreibt die EZB erstmals öffentlich ihre künftige Rolle in der Bankenaufsicht. Zugleich zeichnet sich nun ein Konflikt mit der Bundesbank ab, die eine geringere Rolle empfiehlt. Die Bundesbank warnt vor Zielkonflikten zwischen der Bankenaufsicht und der Sicherung der Preisniveaustabilität. Die EZB solle zwar an der Bankenaufsicht beteiligt werden, sagte Bundesbankvorstand Andreas Dombret, dabei aber keine „finale Verantwortung tragen“. Aufsichtsbefugnisse implizierten Interventionsrechte, die wiederum der direkten demokratischen Legitimation bedürften, fügte Dombret hinzu. Hätte die Zentralbank die hoheitliche finale Verantwortung, müsse ihre Unabhängigkeit eingeschränkt werden. Deshalb solle die finale Verantwortung nicht der EZB, sondern einer anderen Behörde übertragen werden.

Quelle: FAZ

Congressional Budget Office: Full US recovery in 2018

On the subject of eventual full recovery, the CBO regularly estimates the "potential GDP" of the U.S. economy: that is, what the U.S. economy would produce if unemployment was down to a steady-state level of about 5.5% and steady growth was occurring. During recessions, of course, the economy produces below its potential GDP. During booms (like the end of the dot-com period in the early 2000s and the top of the housing price bubble in about 2005-2006), it's possible for an economy to produce more than its potential GDP, but only for a short-term and unsustainable period. Here's the CBO graph comparing actual and potential GDP since 2000. The shallowness of how much the recession in 2001 caused actual GDP to fall below potential, compared to the depth and length of how much actual GDP has fallen below potential in the aftermath of the Great Recession, is especially striking.  

Source: conversable economist

Samaras and Merkel in Berlin

Merkel said at a press conference that

“(Germany) expect(s) Greece to deliver all that has been promised,” Merkel declared. In remarks that were unusually sharp for a joint news conference, she stressed that Berlin has heard words in the past but now expects deeds.
The tough talk contrasted sharply with the head of state honours and diplomatic smiles with which Samaras was received on his first official visit, complete with red carpet and band.
Merkel said that Samaras’ visit is a sign of the “very close ties” between the two countries, only to add later that each side had lost credibility in the eyes of the other and that trust must be regained.
“Our aim is for Greece to remain in the eurozone, despite all the problems that exist,” Merkel said, noting that the euro is more than a currency, that it is the embodiment of European unification.
Moreover, Merkel noted the tremendous sacrifices that the Greek people have made over the last years, underlining that the weaker classes have borne the brunt of austerity and that those who profited during previous years of prosperity have not done their part.
The remark was a thinly veiled barb against the handling of austerity measures by successive Greek governments, which have done nothing to combat rampant tax evasion among the higher income brackets, opting instead for repeated horizontal wage and pension cuts....For his part, Samaras pledged that his government will pursue reforms on a strict timetable and that he is determined to “bring results”.
“I am certain that the troika report will signal that the new coalition government will deliver,” he said.
“We are eliminating two deficits at once – the country’s budget deficit and the credibility deficit,” he said.
But the prime minister underlined that “a revival of the economy and growth is of crucial importance to meet our obligations soon”.

Source: Athennews

Republikaner ziehen Rückkehr zum Goldstandard in Erwägung

Die Republikaner debattieren eine Rückkehr der Vereinigten Staaten zum Goldstandard. Sie wollen eine Kommission einsetzten (sic!), die prüft, ob eine Rückkehr zu einer festen Parität des Dollar zum Gold praktikabel ist. Das geht aus dem Entwurf des Wahlprogramms hervor, das kommende Woche auf dem Parteitag in Tampa, Florida, beschlossen werden soll. (...) Die Kommission soll nur Vorschläge unterbreiten. Drei Jahrzehnte nach der Lösung des Dollar vom Gold im Jahr 1971 kehrt damit die Idee des Goldstandards wieder in die breite politische Diskussion zurück. (...)
Die Aufnahme in das Wahlprogramm signalisiert die Besorgnis vieler Republikaner über Inflationsrisiken und den Dollar-Kurs; sie macht sich angesichts der andauernden Nullzinspolitik der Fed und ihrer Ankäufe von Staatsanleihen breit.

Quelle: FAZ

US fiscal tightening expected in 2013

As a follow-up post to yesterday's take on the fiscal cliff in the US, let me quote an article in 'The Economist:

Here's the real threat. Even if the Bush tax cuts are extended and the sequester delayed, a huge amount of fiscal drag remains in place. They include the expiration of the payroll tax cut, the expiration of extended unemployment insurance benefits, imposition of a new 3.8% Medicare investment tax on the wealthy, and the bite to discretionary spending embedded in the Budget Control Act and prior continuing resolutions. ISI Group projects $220 billion of fiscal tightening in 2013, or 1.4% of GDP. JPMorgan, noting that many Recovery Act programmes are rolling off at the same time, puts the hit at a slightly higher $266 billion, or 1.7% of GDP. The IMF reckons fiscal policy will tighten more in America next year than in Spain, Italy or Portugal. Though smaller than the full fiscal cliff, the fiscal clifflet still poses a significant headwind to the economy. If enough other bad stuff is going on, it could push the economy back into recession.

Source: The Economist

Deutschsprachige Ökonomen wollen sich einem Ethikkodex unterwerfen

Die führenden Ökonomen im deutschsprachigen Raum wollen einen Ethikkodex beschließen, um durch Transparenzregeln mögliche Interessenkonflikte aufzudecken und die Objektivität der Wissenschaft zu sichern. Das ist eine Kernforderung eines neuen „Kodex des guten wissenschaftlichen Verhaltens für Ökonomen", über den die rund 3800 Mitglieder des Vereins für Socialpolitik (VfS) bis zum 5. September vor ihrer Jahrestagung in Göttingen abstimmen. Künftig sollen Wirtschaftswissenschaftler, wenn sie Studien veröffentlichen, „alle in Anspruch genommenen Finanzierungsquellen, Infrastruktureinrichtungen und sonstigen externen Unterstützungen in Form einer Fußnote oder einer ausführlichen Dokumentation auf der Webseite des Autors" angeben, heißt es im Kodex-Entwurf, der dieser Zeitung vorliegt. (...)
Die deutschsprachige Ökonomenzunft folgt damit dem Beispiel der American Economic Association, die sich Anfang des Jahres einen Ethikkodex gegeben hat . Hintergrund waren schwere Vorwürfe - etwa in dem Film „Inside Job" über die Finanzkrise -, dass namhafte Professoren sehr hohe Honorare von Banken, Unternehmen oder Wirtschaftsverbänden erhalten hatten und zugleich die Gesetzgeber in Regulierungsfragen beraten oder sich öffentlich dazu geäußert hatten.

Quelle: FAZ

The US economy and the 'fiscal cliff'

The U.S. economy will probably tip into recession next year if lawmakers can’t break an impasse over the federal budget, according to a report.
The nonpartisan Congressional Budget Office said today that scheduled tax increases and spending cuts in 2013 would reverse the modest economic recovery. Economic output would shrink next year by 0.5 percent, joblessness would climb to about 9 percent with “economic conditions in 2013 that will probably be considered a recession,” the agency said in a biannual report on the budget and economic outlook.

Source: Bloomberg

The problem of capital flight out of China

Rich folks in China simply want to leave the country. 

That is not even news, to be perfectly clear.  A survey did point out that more than a year ago, and survey after survey is pointing to the same conclusion. 

(...) In case you are not already familiar with Prof. Victor Shih’s theory about capital flight from China, enough capital outflow from China (US$1 trillion or more) would cause huge liquidity problem in Chinese banking system, and the wealthiest 1% of Chinese households would be enough to cause that shift of capital should they decided to leave the country, move the money away, or whatever.  And that shift might be happening already (albeit rather slowly), as manifested in the slow but consistent money outflow away from China since late last year, which, as we said, is already tightening liquidity in the banking system whichnecessitates multiple rounds of liquidity injection in China.

Source: alsosprachanalyst


Why are rich Chinese people moving abroad? 1. They do not really trust the Communist government which could take away their wealth. 2. They are looking for safer, cleaner places where their children can get better education than in China. 3. Many experts and forecasters expect the Chinese economy to experience a 'hard landing': If economic growth plunged, impoverished and furious Chinese people could decide to riot. Better run before all hell is gonna break loose!

The bigger the bank, the higher the probability of a bailout

A new working paper by the Bank of England suggests that

(...) the size of a bank is an important determinant of key public British banking interventions: capital injections, nationalisations, and government funding or central bank liquidity insurance schemes.  In particular, the size of a bank relative to that of the entire banking system increases the probability of an intervention, suggesting that large banks are more likely to receive public sector assistance.

via FTAlphaville

Die Zentralbank, die es niemandem Recht machen kann

Die EZB steht unter Dauerbeschuss: Die geldpolitischen Maßnahmen sind für das eine Lager der Kritiker unzureichend, das andere Lager findet sie überbordend und nicht gerechtfertigt. Spanien, Italien und Frankreich üben auf Draghi und Co. massiven Druck aus; sie wollen, dass die EZB in unbegrenztem Ausmaß Staatsanleihen ihrer Länder aufkauft. 'Monetäre Staatsfinanzierung' schreien da die deutschen Spielverderber! Teufelszeug! Es dürfe nicht angehen, dass fiskalpolitische Probleme mit der Druckerpresse gelöst werden sollen. Sehnlich wünscht sich die Deutsche Bundesbank jene Zeiten zurück, als das 'No Bailout-Prinzip' in Kraft war und die EZB sich gemäß ihrer Statuten primär um die Erhaltung der Preisstabilität im Euroraum kümmerte.

Die EZB kann es im Moment jedenfalls kaum jemanden Recht machen; sie ist einem Dauerfeuer gegensätzlicher politischer Interessen ausgesetzt. Da liegt die Lösung nahe: 40 neue Mitarbeiter sollen kommen. 'Ein Tropfen auf den heißen Stein?' Wie gesagt: Die EZB kann es ohnehin niemandem Recht machen:

Die Europäische Zentralbank bekommt nach einem Bericht der Tageszeitung "Die Welt" zusätzliche Mitarbeiter für ihren Kampf gegen die Euro-Krise. Der Zentralbankrat habe 40 zusätzliche Stellen für das Jahr 2013 genehmigt. Entsprechende Informationen der "Welt"aus Notenbankkreisen wurden von der EZB bestätigt.
EZB-Präsident Mario Draghi habe damit eine Zusage von Anfang Juli eingelöst, die Kapazitäten der Notenbank auszubauen. Zuvor hatten sich die Mitarbeiter der Zentralbank über eine zu hohe Arbeitsbelastung beklagt. In Belegschaftskreisen sei nun allerdings von einem "Tropfen auf den heißen Stein" die Rede.

Quelle: Der Standard 

Is the Euro already dead?

(The euro) (...) no longer meets most of the criteria of a working form of money. There is an important point in that for investors. It is right now — while the currency no longer lives but still staggers on like a zombie — that the euro is wreaking most havoc on the countries of Europe.Of course the euro still looks like a currency. There are notes and coins, and you can still go into a shop in Hamburg, or a café in Naples, and get stuff in return, even if there might be a certain amount of grumbling. There is a central bank, although it doesn’t appear to have much idea what its job is. And there are payment systems and foreign exchange markets that work as if the euro were a viable part of the global capital markets.  

And yet if you think about it a little harder, the euro is not a currency in every sense of the word. A currency is only partly about notes and coins. It is also about being a universally accepted medium of exchange, a store of value over time, and a way of facilitating trade over long distances. That was why money evolved. And the euro doesn’t really meet those criteria any more.

Read the whole piece here: Marketwatch

Global growth forecasts revised downwards

According to FTAlphaville, the economics team of Morgan Stanley has recently downgraded its global growth forecasts - again:

(click to enlarge)

Source: FTAlphaville

One thing is for sure: It's not only Morgan Stanley economists who expect global growth to remain below long-term average.

Europe and the US: Key dates in September and October

Which meetings by decision makers will be watched carefully? Calculated Risk put in the effort of creating a list:

• September 6th, Governing Council meeting of the European Central Bank in Frankfurt with a press conference to follow. ECB President Mario Draghi is expected to discuss how the ECB will help lower Spanish and Italian borrowing costs. 

• September 12th, Germany's Constitutional Court is expected to rule on the new eurozone bailout fund and fiscal treaty. 

• Mid-September: Euro-zone finance ministers' informal meetings in Nicosia 

• October 8th, Finance Ministers meeting in Luxembourg 

• European Council meeting, October 18th and 19th in Brussels. 

And in the US: 

• (Not key) Political conventions: Republicans August 27–30 in Tampa, and Democrats September 3–6 in Charlotte. The election is on November 6th. 

• September 12th and 13th: the Federal Open Market Committee (FOMC) meets. After this meeting the FOMC will release updated Summary of Economic Projections, and Fed Chairman Ben Bernanke will hold a press conference. Major economic releases before the FOMC meeting: August 29th, second estimate of Q2 GDP, and September 7th, the August employment report.

Source: http://www.calculatedriskblog.com/2012/08/europe-and-us-few-misc-dates-in.html#sXiGBSJZLGlWhsBC.99

Unemployment in Eurozone at record high

Unemployment in the euro zone rose to a new high in March, according to figures released Wednesday, which come a few days before crucial elections in France and Greece, and which are likely to intensify calls for an easing of the region’s austerity drive. 

Unemployment in the 17 countries that belong to the euro zone rose to 10.9 percent in March from 10.8 percent in February, according to Eurostat, the European Union’s statistics agency. In March 2011, the rate was 9.9 percent, a number that illustrates the deterioration of the area’s economy during the past year.

Source: NYTimes

Austerity and growth

Source: Martin Wolf

The graph shows that the widespread belief that austerity measures do not bring about negative growth effects is not supported by empirical evidence. In fact, the countries with the most dramatic budget cuts have suffered the biggest fall in economic growth so far. With Spain, Portugal and Italy under severe pressure to continue on the path of restrictive fiscal policy, the bigger picture is likely to get worse rather than better.

April 2012: "The month the confidence fairy died"

Paul Krugman, who has been advocating expansionary monetary and fiscal policy for years, weighs into the austerity debate (again):

This was the month the confidence fairy died. For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets. [...]
The good news is that many influential people are finally admitting that the confidence fairy was a myth.

 Source: NYTimes

We'll see if the confidence fairy evolves into another dead idea of zombie economics.

See also: Time to shift the austerity debate in Europe

Time to shift the austerity debate in Europe

With political allies weakened or ousted, Chancellor Angela Merkel’s seat at the head of the European table has become much less comfortable, as a reckoning with Germany’s insistence on lock-step austerity appears to have begun.

“The formula is not working, and everyone is now talking about whether austerity is the only solution,” said Jordi Vaquer i Fanés, a political scientist and director of the Barcelona Center for International Affairs in Spain. “Does this mean that Merkel has lost completely? No. But it does mean that the very nature of the debate about the euro-zone crisis is changing.”

[...]

From trading floors to polling stations to the streets of cities across Europe, the message appears increasingly to be that countries cannot cut their way to fiscal health. They need growth, too. In recent months, powerful voices have joined the chorus, including those of the managing director of the International Monetary Fund, Christine Lagarde, and Italy’s prime minister, Mario Monti. Treasury Secretary Timothy F. Geithner has called repeatedly for Europe to defer budget cutting in favor of some form of stimulus spending.

Source: Business Insider

There are signs of growing dissatisfaction in Europe over the austerity measures pushed by Germany and other countries to solve the euro-zone debt crisis. But German editorialists bristle on Thursday at calls to stimulate growth and a proposal to let the ECB lend directly to banks in trouble.



Leaders across Europe continued to struggle Thursday with backlash against the largely German-driven austerity measures imposed as a result of the ongoing euro zone debt crisis.

Source: Spiegel

The problem with Spain’s banks

The graph above shows a high correlation of bad loans and unemployment. More experts than ever expect a bailout of Spain’s banks and government to be inevitable.

The problem with weak growth, charted

In the NYT, Teresa Tritch writes about this graph:

(T)he recovery has been a climb toward the rim of the crater left by the Great Recession, not an ascent to new economic heights.

Besides from that quote, the graph pretty much speaks for itself.

The newest US jobs report

Two non-random blog-posts about the latest numbers with regard to the employment situation in the US:

Calculated Risk

Felix Salmon

The bottom line is that despite the fact that the last few months have provided hope when it comes to improvements in the US labor markets, the economic woes in the US are still not over yet. Unemployment remains at a level which is going to spur the political discussion about what the government can do in order to further improve the employment situation. This is obviously going to be an import campaign topic for the upcoming presidential election.

What's the role of an independent central bank in a liquidity trap?

The following quote is from the introduction to a new paper by Paul Culley and Zoltan Poczsar with the title "Does Central Bank Independence Frustrate The Optimal Fiscal-Monetary Policy Mix in a Liquidity Trap?":

The United States and much of the developed world are in a liquidity trap. However, policymakers still have not embraced this diagnosis which is a problem as solutions to a liquidity trap require specific sets of policies. There are policies that will work, and there are policies that will not work. Correct diagnosis is necessary to prescribe the right policy medication.

A liquidity trap is a circumstance in which the private sector is deleveraging in the wake of enduring negative animal spirits caused by the bursting of joint asset price and credit bubbles that leave private sector balance sheets severely damaged. In a liquidity trap the animal spirits of the private sector cannot be revived by a reduction in short-term interest rates because there is no demand for credit. This effectively means that conventional monetary policy does not work in a liquidity trap. (...)

The importance of fiscal expansion and the impotence of conventional monetary policy measures in a liquidity trap have profound implications for the conduct of central banks. This is because in a liquidity trap, the fat tail risk of inflation is replaced by the fat tail risk of deflation. In turn, the fatness of the deflation tail is a function of the government’s willingness and ability to pump-prime, i.e. to borrow and spend.

For central banks, this is a game changer. (...)

In a liquidity trap the central bank’s role changes from one of policing the government to keep it from borrowing too much, to one of helping it to borrow and invest by targeting to keep long-term interest rates low by monetizing debt, with the aim of killing the fat tail risks of deflation and depression.

Go read the whole paper.

Bernanke on the US labor market

We have seen some positive signs on the jobs front recently, including a pickup in monthly payroll gains and a notable decline in the unemployment rate. That is good news. At the same time, some key questions are unresolved. For example, the better jobs numbers seem somewhat out of sync with the overall pace of economic expansion. What explains this apparent discrepancy and what implications does it have for the future course of the labor market and the economy?
...
A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed. Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force. Moreover, we cannot yet be sure that the recent pace of improvement in the labor market will be sustained. Notably, an examination of recent deviations from Okun's law suggests that the recent decline in the unemployment rate may reflect, at least in part, a reversal of the unusually large layoffs that occurred during late 2008 and over 2009. To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.

I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well. We must watch long-term unemployment especially carefully, however. Even if the primary cause of high long-term unemployment is insufficient aggregate demand, if progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further, possibly converting a cyclical problem into a structural one.

If this hypothesis is wrong and structural factors are in fact explaining much of the increase in long-term unemployment, then the scope for countercyclical policies to address this problem will be more limited. Even if that proves to be the case, however, we should not conclude that nothing can be done. If structural factors are the predominant explanation for the increase in long-term unemployment, it will become even more important to take the steps needed to ensure that workers are able to obtain the skills needed to meet the demands of our rapidly changing economy.

Quelle: Federal Reserve Bank

DeLong and Summers on Austerity

The paper by Brad DeLong and Larry Summers that I advertised a couple of days ago, is available now.

Paul Krugman writes about the main arguments of the paper:

The headline point is the argument that austerity when you’re in the liquidity trap may well worsen, not improve, your long-run fiscal position; I’ve been making the same point for a couple of years, but Brad/Larry present some evidence from the birth of Eurosclerosis and the downgrading of US potential output estimates since the crisis began.

They also emphasize the crucial point that even if austerity doesn’t literally worsen the long-run position, it does at best very little to improve that position — yet imposes large current costs. So the cost-benefit analysis is overwhelmingly in favor of stimulus as long as you’re in the liquidity trap.

And what that says, in turn, is that the embrace of austerity by policy and political elites in late 2009 and early 2010 was an almost inconceivably terrible blunder. The result of that embrace was the imposition of huge economic and human costs, with little if any benefit.

DeLong/Summers will be controversial, as it is at the center of the debate about the consequences of fiscal policy in the most recent economic crisis, which is an important topic when it comes to the campaigns of Democrats and Republicans for the United States presidential election.