Washington Post (September 17)
A “bank run” mentality has resurfaced in Europe. With trust waning, the short term depends on the European Central Bank (ECB), which has stepped in as the lender of last resort. In the long term, “true stabilization is going to mean rewriting the premises of European unity, and the social contract itself.” This process “will take many years to strike a new balance — to organize what amounts to a managed bankruptcy for the eurozone and the beginnings of a recapitalization.”
Institutional Investor (September 15)
“The rise in government debt and consequent decline in sovereign creditworthiness…stand out as the biggest and most pernicious legacies of the financial crisis.” Political uncertainty ranks nearly as high. “European leaders careen from one crisis summit to the next” and U.S. politicians pursued a “similarly shaky direction” over the debt ceiling. “As a result, market participants are losing confidence that politicians can strike the right balance and contain debt without killing growth.”
Tags: EU, Politicians, Sovereign debt, U.S., Uncertainty
The Independent (September 14)
In Britain, the Boundary Commission has proposed cutting the number of members of parliament (MPs) by 50. The Independent believes “fewer MPs is a good thing.” If approved, the plan to move from 650 MPs to 600 would provide annual cost savings of approximately £12 million “a saving worth making in an age of austerity not expected to be over by the time the measures take effect in 2015.”
In Britain, the Boundary Commission has proposed cutting the number of members of parliament (MPs) by 50. The Independent believes “fewer MPs is a good thing.” If approved, the plan to move from 650 MPs to 600 would provide annual cost savings of approximately £12 million “a saving worth making in an age of austerity not expected to be over by the time the measures take effect in 2015.”
Tags: Boundary Commission, MPs, Parliament, UK
Bloomberg (September 14)
“European banks are losing deposits as savers and money funds spooked by the region’s debt crisis search for havens, a trend that could worsen economic and financial conditions.” Deposits dropped 40% at Irish banks during the past 18 months, but the trend is affecting Greek, German, French, UK and Spanish banks as well. In turn, banks are showing a clear preference for the perceived safety of the Federal Reserve over the European Central Bank. “The cash that foreign banks keep at the U.S. Federal Reserve has more than doubled to $979 billion at the end of August from $443 billion at the end of February.”
“European banks are losing deposits as savers and money funds spooked by the region’s debt crisis search for havens, a trend that could worsen economic and financial conditions.” Deposits dropped 40% at Irish banks during the past 18 months, but the trend is affecting Greek, German, French, UK and Spanish banks as well. In turn, banks are showing a clear preference for the perceived safety of the Federal Reserve over the European Central Bank. “The cash that foreign banks keep at the U.S. Federal Reserve has more than doubled to $979 billion at the end of August from $443 billion at the end of February.”
The New York Times (September 12)
Nobel Prize winning economist Paul Krugman believes “the euro is now at risk of collapse.” He warns that “we’re not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer.” To avoid “an impeccable disaster,” Krugman believes the European Central Bank (ECB) must “lend freely and cut rates.” In addition, the ECB should be “buying up Spanish and Italian debt — that is, doing what these countries would be doing for themselves if they still had their own currencies.”
The Wall Street Journal (September 11)
Remembrance ceremonies were held around the United States to honor those who fell 10 years ago. “For such loss, the 9/11 ceremonies yesterday lifted the national spirit. It wasn’t easy.” September 11 remains a day of great pain and profound loss, but “10 years have washed away the worst of that morning and kept the best, an indomitable national spirit.”
The Economist (September 10)
“More quickly than almost anyone predicted, e-books are emerging as a serious alternative to the paper kind.” This may be better for readers than publishers, who must now overcome hurdles similar to those that have challenged the music and film industries.
The Washington Post (September 8)
“The slaughter in Syria goes on.” The Post is convinced it won’t end until Bashar al-Assad’s regime comes to an end. The EU’s boycott of oil from Syria is one promising development. “Syria is vulnerable to an economic squeeze. The more that Western governments can apply it, the greater the chance of saving lives.”
The New Yorker (September 6)
Is China going the way of Japan? Similar bubbles and certain excesses seem to indicate China may be headed for a fall. Chinese real-estate tycoon Huang Nubo unveiled plans “to buy seventy-five thousand acres of Iceland.” The “weirdness” of this recalls similar weirdness during the height of the bubble, such as a 1989 plan by the head of Nomura Securities to make California a joint yen/dollar currency zone. That was three years after “the value of the nation’s real estate doubled in a single year.” It doubled again in 1987, making Japan “the world’s largest creditor, holding thirty percent of U.S. debt, and … home to the world’s ten largest banks, with a stock exchange bigger than Wall Street.” By 1993, it was all over. Does China’s “Iceland moment” signal the end of their bubble? Or “Will it be simply a quirky milestone on the continued ascent?”
Tags: Bubble, California, China, Iceland, Japan
Financial Times (September 6)
The U.S. is not “going the way of Japan,” according to Paul Sheard global chief economist at Nomura. There are similarities, both nations had massive asset bubbles, but “a series of policy errors” led to Japan’s lost decades. “Inflation and deflation are, at the end of the day, policy choices. US policymakers, by and large, have learnt the lessons from the policy mistakes of Japan and have applied them, so far reasonably successfully.”
