Noted For Your President’s Day Mulling

Here is what is happening around the net. These are what I have read over the weekend. Perhaps you will find them interesting too.

  1.  Germany’s economic policy is hurting Europe, the world, and itself – The German Marshall Fund has said that 40% of bridges in Germany are in “critical condition”. The Cologne Institute for Economic Research, another think-tank, reckons that the capital stock of German machines has not risen in real terms since 2008. Markus Kerber, director of the German Federation of Industries, a trade association, says that a “long-term investment-offensive is needed” to sustain growth.
  2. Crude Oil Bears Betting on Supply Glut Miss Market Rally – “U.S. production hasn’t started to decline yet, but it is probably going to go flat in June, maybe as early as May,” James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, said by phone Feb. 13. “We’ll have a decline in production in the second half.”
  3. Greece’s Excess Burden – Or to turn this around, to achieve the extra three points of surplus the troika is demanding, Greece would actually have to find more than 6 points of GDP in spending cuts or tax hikes. And note that the multiplier is almost surely greater than one; this means that the fall in government spending would induce a fall in private spending too, which is an additional excess burden from the austerity.
  4. Japan Hobbles Out of Recession With Growth Below Estimates – The softness of the rebound shows Prime Minister Shinzo Abe’s challenge to revive the world’s third-largest economy from two decades of stagnation. Wage rises and increased consumer spending are likely to be pivotal this year to spur activity beyond exports, where the lower yen has contributed to surging profits at companies like Toyota Motor Corp.
  5. G20 reversal means Raghuram Rajan is last man standing in wild west-style currency war – What will the Fed do then? They can delay rate hikes but that will only cause cause more turmoil and confusion. Rajan’s argument has been that such unconventional monetary policies (UMP) are difficult to exit. They don’t create sustainable demand and create a wealth effect which then reverses when the policy is reversed. In a speech at the Institute of Monetary and Economic Studies, Bank of Japan in May 28, 2014, Rajan put forward two main reasons why exit from UMPs is difficult.
  6. Australian economy ‘sliding down the precipice’, says JP Morgan – Rigid labour markets. “Australia now has, on key measures, more rigid labour markets than many competitors and punishingly high penalty rates.” Also, “Australia’s minimum wage is double that  in the US”.
  7. China FDI jumps in January – Earlier data showed FDI in China rose just 1.7 per cent in 2014, the slackest pace since 2012 and underscoring a cooling economy which is spurring more Chinese firms to plough money into assets overseas in a trend that is soon set to overtake inbound investment.
  8. The Taper Tantrum –  have since admitted that Abe and Kuroda showed that inflation expectations can be changed by a radical shift in monetary policy can be achieved, and fallen back to the claim that extraordinary events such as a radically new solid parliamentary majority and a very determined head of government are required (because independent central banks are independent because of laws which can be changed).
  9. Weimar on the Aegean – In any case, European creditors should realize that flexibility — giving Greece a chance to recover — is in their own interests. They may not like the new leftist government, but it’s a duly elected government whose leaders are, from everything I’ve heard, sincerely committed to democratic ideals. Europe could do a lot worse — and if the creditors are vengeful, it will.
  10. Yanis Varoufakis: No Time for Games in Europe – How do we know that our modest policy agenda, which constitutes our red line, is right in Kant’s terms? We know by looking into the eyes of the hungry in the streets of our cities or contemplating our stressed middle class, or considering the interests of hard-working people in every European village and city within our monetary union. After all, Europe will only regain its soul when it regains the people’s trust by putting their interests center-stage.
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