Yesterday I read somewhere that Newt Gingrich -- the latest insurgent in the Republican presidential race, and current challenger of Mitt Romney -, who is a historian, wrote his Ph.D. thesis in 1971 about ‘Belgian education policy in the Congo: 1945-1960‘.
I thought that was pretty amusing for a former Speaker of the House, author of the 1994 ‘Republican Revolution’, and possible Republican presidential nominee, so I wanted to look it up and blog something about it.
But lo and behold, someone was there first. Robert Paul Wolff at the blog The Philosopher’s Stone read Newt Gingrich’s Ph.D. thesis, so enjoy his review:
Wikipedia informed me that Gingrich did his graduate work in the Tulane history department; the Tulane website took me to the university’s library catalogue; the Duke University Reference Librarian talked me through the download process over the phone [never easy for old guys like me], and there it was: “Belgian Education Policy in the Congo: 1945-1960 A Dissertation Submitted on the Sixth Day of May, 1971 to the Department of History of the Graduate School of Tulane University in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy by Newton Leroy Gingrich.” Two hundred eighty-three pages of text, typed and double-spaced in standard dissertation format, five pages of tables, five pages of “selected bibliography” and a one-page biographical sketch of the author indicating that he was awarded a B.A. by Emory University.
Why on earth Belgian educational policy in the Congo? Newt was studying Modern European History, to be sure, but the topic seems rather obscure. The dissertation lacks the typical page of acknowledgements that might offer a clue, but a bit more surfing of the web reveals that the dissertation director, Professor Pierre Henri Laurent, whose name appears on the signature page, was the son of “an eminent Belgian historian, who died during the Resistance; his mother was a distinguished teacher and linguist. Pierre and his older sister were brought as children to the United States by their mother when the Second World War broke out.” Mystery solved.
The dissertation is written in a pedantic, serviceable prose, giving no evidence of the Newt that was to emerge as a fully formed Toad. Although the dissertation is written entirely in English, the footnotes give evidence that Gingrich had a quite adequate command of written French. [The only word in the entire dissertation not in English or French is misspelled -- Weltanschauung with only one "u" -- page 205, line 2] Gingrich relies heavily on secondary sources, with especial attention to the work of Ruth Slade and Roger Anstey. However, he has clearly made extensive use of Belgian public documents, including reports of Parliamentary debates. There is no evidence in the text that he traveled either to Belgium or to the Congo, and he seems not to have interviewed any of the principal actors, Belgian or Congolese, even though the dissertation was written only a handful of years after the departure of the Belgians from the Congo.
The structure of the dissertation is straightforward: an Introduction, three chapters on the political and historical background of Belgium’s colonization of the Congo, nine chapters on various aspects of the educational institutions introduced by the Belgians into the Congo — religious education, secular education for the Congolese, secular education for Belgians living in the Congo, education for women, agricultural education, technical education, higher education for the Congolese, etc. — and a Conclusion.
The political or ideological orientation of the dissertation, if I may put it this way, is roughly that of a Cold War member of the Council on Foreign Relations. Colonization is seen almost entirely from the perspective of the colonial power, not from that of the indigenous population. The rule of King Leopold II, who literally owned the colony as his private property until, at his death, he willed it to Belgium, is widely understood to have been the most horrifyingly brutal colonial regime in Africa. Gingrich acknowledges this fact once in the dissertation. Speaking of the financial pressures placed by the Congo on King Leopold’s coffers, Gingrich reports that a “state official told a missionary in 1899 that each time a corporal ‘goes out to get rubber he is given cartridges. He must return all those that are not used; and for every one used he must bring back a right hand.’” [p. 15]
But with this sole exception, Gingrich’s picture of the Belgian colonial administration is reasonably favorable. As I read his account of the struggles by dedicated Belgian colonial administrators to provide some measure of formal education to the Congolese, in the face of a generally uninterested and neglectful government in Brussels, I was reminded of nothing so much as the writings of John Stuart Mill on India, and the responsibility of cultivated, enlightened Englishmen to bear the heavy burden of stewardship until the non-European peoples are ready for self-rule.
Although he makes no effort at all to consult the colonized and give voice to their view of the Belgian rule, Gingrich does at one point, rather surprisingly, quote Father Placide Tempels quite favorably and at some length. [pages 100-101.] Tempels was a missionary priest who wrote an important book called Bantu Philosophy. It is the first acknowledgement by a European author that the indigenous peoples of Africa have complex, philosophically sophisticated conceptions of the world and their place in it. I confess that I was surprised and impressed to see Tempels put in an appearance in Gingrich’s dissertation. I was a good deal less pleased by Gingrich’s reliance on the always questionable Colin Turnbull.
Yesterday and today, lots of ‘authoritative’ newspapers and journals once more published gloomy articles about the coming end of the eurozone, largely due to the perceived inaction of leading (German and other northern European, notably Dutch) politicians. Particularly their refusal to set up the ECB as lender of last resort and/or let it buy state bonds on large scale and/or let it issue eurobonds, and their continued insistence on austerity and budget cuts as the only “solution”, now leading such esteemed organizations as the OECD to condemn their inaction. France is threatened with a credit rating downgrade, as a matter of fact the entire eurozone is threatened with a downgrade, the stability fund doesn’t have nearly enough funds, and… oh well.
I’m getting kinda tired writing about this so maybe I’ll quit doing it, but here goes once more (my bet is on the end of the eurozone before New Year’s Day, by the way)…
Bloomberg (‘The Euro Area Is Coming To An End’, written by the former chief economist of the IMF):
Investors sent Europe’s politicians a painful message last week when Germany had a seriously disappointing government bond auction. It was unable to sell more than a third of the benchmark 10-year bonds it had sought to auction off on Nov. 23, and interest rates on 30-year German debt rose from 2.61 percent to 2.83 percent. The message? Germany is no longer a safe haven.
Since the global financial crisis of 2008, investors have focused on credit risk and rewarded Germany with low interest rates for its perceived frugality. But now markets will focus on currency risk. Inflation will accelerate and the euro may break up in a way that calls into question all euro-denominated obligations. This is the beginning of the end for the euro zone.
Germany is the only country in Europe that can act to save the eurozone and the wider European Union from “a crisis of apocalyptic proportions”, the Polish foreign minister warned on Monday in a passionate call for more drastic action to prevent the collapse of the European monetary union.
The OECD’s comments came as the organisation slashed its half-yearly forecasts for growth in the world’s richest countries, warning that economic activity in Europe would grind to a near-halt.
Yet their calls were met by a stubborn insistence in Berlin that only EU treaty change to forge a “stability union” in the eurozone would revive confidence in the markets.
Wolfgang Schäuble, German finance minister, rejected calls for the European Central Bank to act as a “lender of last resort” in the eurozone, and for the introduction of jointly guaranteed eurozone bonds to relieve the pressure on the most debt-strapped members of the common currency such as Greece and Italy.
De eurocrisis is in een eindfase gekomen, in beleggerstermen: het eindspel. De ontwikkelingen gaan nu razendsnel, en de tijd dat de sterke eurolanden de zwakke konden redden, is voorbij. Volgens veel economen is het een kwestie van weken, misschien van dagen, en dan moet er iets op tafel liggen om het uiteenvallen van de euro te voorkomen.
Over negen dagen houden de Europese leiders nog maar eens een ‘top der toppen’. Er was er al een op 21 juli, op 23 oktober en op 26 oktober. Maar nu leeft meer dan ooit het gevoel dat het erop of eronder is. De reeds geplande Brusselse top van vrijdag 9 december is inmiddels uitgebreid met een werkdiner op de avond ervoor. Er is immers veel te bespreken.
Columns in de Financial Times en commentaren in The Economist waarschuwen inmiddels dat de euro snel verleden tijd kan zijn. Jean Pisani-Ferry, directeur van de gerenommeerde Brusselse denktank Bruegel, stelt onderkoeld dat er ‘een nieuwe situatie in Europa’ is ontstaan. Met iets meer gevoel voor dramatiek schrijft de Vlaamse econoom Paul De Grauwe: ‘De euro heeft nog enkele weken om zichzelf te redden, terwijl verschillende instituties zich al voorbereiden op de klap.’
Wat de situatie nu zo wezenlijk anders maakt dan enkele weken geleden? Verreweg het belangrijkste signaal is dat zelfs Duitsland meer moeite heeft om zijn staatsleningen in de markt kwijt te raken. En opvallend, direct na de half mislukte emissie van vorige week verloor de euro in een tel 0,72 eurocent in waarde. Voor centrale bankiers een serieuze aanwijzing dat de munt zelf het volgende doelwit zal zijn.
Het is bijna tragisch dat de ministers van financiën vanavond alweer naar Brussel moeten afreizen om over het noodfonds te praten. Nog altijd zijn de afspraken van 21 juli (uitbreiding van noodinstrumentarium) niet in werking getreden, en nu zwoegen ze op de deal van 26 oktober (vergroting slagkracht). Het fonds heeft nog ongeveer € 250 mrd beschikbaar, maar niemand gelooft meer dat daar € 1000 mrd van te maken is, zoals een maand geleden werd beloofd.
Inmiddels is duidelijk dat het beleggers helemaal niet meer uitmaakt dat de betrouwbare technocraat Mario Monti als premier is aangetreden. Net zomin als zijn bezuinigingsplannen nog indruk maken. Het is de les van twee jaar eurocrisis: paniek en wantrouwen slaan niet met enkele ferme politieke daden om in volledig vertrouwen. Voor België dreigt hetzelfde lot. Verrassend genoeg reageerden beleggers maandag positief op het nieuws dat er na anderhalf jaar eindelijk een regering komt. Maar de aanstaande premier Elio Di Rupo kan de snel opgelopen rentelasten voor België waarschijnlijk niet zomaar ongedaan maken. Ook hij zal ervaren dat eenmaal afgehaakte beleggers niet snel tevreden zijn.
De euro is een misgeboorte en had beter niet ingevoerd kunnen worden. Dat zegt oud-AFM-topman Hans Hoogervorst in een aflevering van het geschiedenisprogramma Andere Tijden, die op 11 december wordt uitgezonden.
Hoogervorst zegt daarin: ‘De enorme problemen die we nu hebben op de kapitaalmarkten en de enorme risico’s die worden gelopen, als we dat tevoren hadden geweten, dan denk ik niet dat iemand bij zijn volle verstand eraan was begonnen.’
Volgens Hoogervorst kan de munt ‘wel als mislukt’ kan worden beschouwd.
Gisteren bezochten tientallen boswachters de Tweede Kamer om hun zorgen te uiten over de kabinetsplannen omtrent natuur, en meer specifiek het “akkoord” dat staatssecretaris Henk Bleker met de provincies heeft gesloten over het de komende tien jaren te voeren natuurbeleid.
In deze reportage wordt een valse balans gecreëerd door de boodschap van de boswachters recht tegenover die van staatssecretaris Bleker te plaatsen, zonder een poging te doen te achterhalen of de bezwaren van natuurorganisaties en boswachters enige grond hebben. Er komt een beeld naar voren van twee kibbelende partijen en er wordt geen moeite gedaan aan waarheidsvinding te doen.
Het wordt aan de kijker overgelaten om te gissen of de boswachters al dan niet een punt hebben, door niet de notitie van het Planbureau voor de Leefomgeving te benoemen, waarin wordt geschetst wat er plaats zal vinden mocht het akkoord worden uitgevoerd. Kortom, de NOS verzaakt aan nieuwsgaring te doen door geen duiding van de inhoud van de kabinetsvoornemens te geven. Bovendien wordt er geen inhoudelijke vraag aan de staatssecretaris gesteld, en krijgt hij volop de ruimte het kabinetsstandpunt te uiten en de boswachters gerust te stellen zonder te hoeven vrezen voor een kritische vraag van de journalist.
Daarom nu de feiten, die achterwege blijven in de reportage:
In de notitie van het Planbureau voor de Leefomgeving (een onafhankelijk adviserend overheidsorgaan), zoals weergeven in de Volkskrant van 18 november jl., staat dat Blekers provincieakkoord zal zorgen voor het meer en sneller uitsterven van planten- en diersoorten, het de biodiversiteit zal verminderen, het niet voldoet aan Europese verplichtingen, en het financiële sancties voor het niet voldoen aan deze verplichtingen zal verhalen op de provincies.
Al met al zal het zorgen voor onherstelbare schade aan de natuur. Daar had de NOS wel aandacht aan mogen besteden.
De kwaliteit van de natuur neemt fors af door het huidige kabinetsbeleid. Meer planten- en diersoorten zullen uitsterven. Ook de biodiversiteit zal verminderen. Dat staat in een notitie van het Planbureau voor de Leefomgeving (PBL), die in het bezit is van de Volkskrant.
Het planbureau waarschuwt voor onherstelbare schade als het voorgenomen natuurbeleid wordt doorgezet. Het Rijk heeft in september met de provincies een akkoord bereikt dat loopt tot 2021. Volgens staatssecretaris Henk Bleker (Natuur) voldoet zijn beleid aan de Europese verplichtingen.
Aan die eisen wordt echter niet voldaan, waarschuwt het planbureau. ‘Met dit akkoord wordt ook na 2021 het treffen van passende maatregelen moeilijker’, schrijft het PBL in de notitie, die binnenkort door de staatssecretaris naar de Kamer wordt gestuurd. Bleker zei in september, bij de presentatie van het akkoord, dat eventuele financiële sancties voor het niet halen van Europese richtlijnen op de provincies worden verhaald.
Het netwerk van natuurgebieden, de ecologische hoofdstructuur (EHS) wordt veel kleiner: 600 duizend hectare in plaats van de eerder beoogde 728 duizend. Dat gaat volgens het PBL ten koste van de biodiversiteit. Nederland voldoet al niet aan de zogeheten habitatrichtlijn. Die verplicht om verslechtering van beschermd natuurgebied tegen te gaan.
Maatregelen uit het verleden hebben niet verhinderd dat planten- en diersoorten verdwenen, meldt het PBL; het uitsterven werd wel verminderd. Door het nieuwe beleid zullen volgens de onderzoekers meer soorten sneller verdwijnen. Het PBL benadrukt in de notitie dat Nederland aan ‘harde’ internationale verplichtingen moet voldoen. ‘Nu al is Nederland verplicht maatregelen te nemen om verslechtering tegen te gaan.
Meer over de dappere pogingen van de EU, lagere overheden, het maatschappelijk middenveld en bestuursorganen om het vernietigende natuurbeleid van het jolige populaire CDA-boertje Bleker tegen te gaan:
Always wanted to experience the blending of the senses, like famous synesthesiasts Vlladimir Nabokov, Kandinsky, Pharell Williams and Richard D. James before you? If you don’t have the natural predisposition (or diathesis) you could venture into the world of psychedelics, but if mind-altering substances are not your cup of tea this new device provides the solution. It’s the Synesthesia Mask, developed by Team Syneseizure. It allows you to feel images captured on a webcam in realtime.
Minister De Jager (r) measuring up the size of the ECB’s new role.
And now Merkel is alone. Even the Dutch government (along with the Finnish) now grudgingly supports a bigger role for the ECB in solving the debt crisis (if any solution other than a grand eurozone conflagration is still at hand). They call it a ’last resort’, but you don’t put messages like this out in the open if you’re not seriously considering it – or even have already committed to it. Of course, this role can vary from buying up state bonds in larger amounts to introducing the much-called for eurobonds.
My bet is on the 60 percent option: creating eurobonds covering a maximum of 60 percent GDP. Beyond that it’s lousy national bonds for profligate nations. Combine this with a stringent system of fiscal discipline (also advocated by the Dutch government for a while now) and maybe some solution is there. Although a system totally consisting of eurobonds might be better (but has its own drawbacks, such as added costs for taxpayers in some countries).
Jan Kees de Jager, the Dutch finance minister, endorsed a more active role for the European Central Bank “as a last resort” to contain the eurozone debt crisis ahead of a meeting in Berlin with his counterparts from Germany and Finland.
In a hearing of the Dutch parliament’s finance committee, Mr de Jager said that the other firewall measures seem to be failing, with European countries unwilling to contribute more funds themselves to the European Financial Stability Fund, and private investors uninterested in the plan agreed to by European leaders on October 26 of leveraging the fund up to an effective capacity of €1,000bn.
If neither of those measures succeed, leaving ECB intervention the only plausible course, then “in the end, something has to happen”, Mr de Jager said.
On Wednesday, the Finnish finance minister, Jutta Urpilainen, also moderated her stance, saying, “If all else fails, we have to reflect on the role of the ECB.”
The Netherlands and Finland have until now hewed close to Germany’s position of opposing major intervention by the ECB as part of a firewall against the spreading eurozone debt crisis but appear to be taking a more pragmatic line.
The Dutch share German scepticism that any ECB firewall would merely “fight the symptoms” of the debt crisis, and say that the top priority is creating a strict Europe-wide budget authority to force Greece, Italy, Spain and other at-risk eurozone countries to cut their deficits and implement economic reforms.
But as the urgency mounts, many voices in the Dutch economics and business community are pressing the government to take a more assertive tack.
On Sunday, a group of four top Dutch economists wrote to Mark Rutte, prime minister, urging him to press European leaders to commit to contributing more directly to the EFSF and to supporting an ECB role. The group included Lex Hoogduin, who stepped down this year as the number two official at the Dutch central bank.
“I hope the Dutch authorities, who are very close in their philosophy to Germany, can convince the Germans that there is a role for the ECB,” Mr Hoogduin told the Financial Times. He said markets had lost faith that European leaders will come up with the funds to support southern European countries, even if those countries do comply with budget-cutting and governance reforms.
Get your straps on for some good ol’ big room techno. Check out this blazing techno track by Mark E, featuring some nice electro, disco and acid influences. Was a favorite track of Sven Väth in his Cocoon sets of this season and really became a lethal peak moment when mixed with this crazy Japanese guy’s “C2M”.
Check out the Dance Department ADE special for more Cocoon goodness. And while you’re at it, also enjoy the latest installment, with De Man Zonder Schaduw (The Man With No Shadow).
One of the most worrying articles I’ve read so far on the ongoing European debt crisis. The Economistis seriously discussing the prospect of imminent bank runs in the eurozone. In fact, in one country, Latvia, this has already happened with a mid-sized bank. That’s the first time I read something about this most scary of economic malfunctions (although Paul Krugman was there first, I’m informed).
With the debt crisis spreading and deepening further to the core of the eurozone – France and Austria are defending their triple-A ratings, Belgium, the Netherlands and now Germany are having bonds issues – and politicians unable (and unwilling) to do something about it, banks are more and more exposed to great financial risks. These stem from the drying up of funds to these financial institutions, which could ultimately lead to one or more of them going down. One of the most worrying signs of this is corporate institutions withdrawing their money from banks. And that’s exactly what’s happening now in Italy, Spain, France and Belgium.
I believe articles like these are called “bearish” in the financial world. Still frightening nonetheless.
- Edit: CNBC is on it as well, referring to the same Economist article. Their message: hoping that customers don’t notice that every other source of bank funding is depleting is not a wise strategy.
ONE can almost hear the gates clanging: one after the other the sources of funding for Europe’s banks are being shut. It is a result of the highly visible run on Europe’s government bond markets, which today reached the heart of the euro zone: an auction of new German bonds failed to generate enough demand for the full amount, causing a drop in bond prices (and prompting the Bundesbank to buy 39% of the bonds offered, according to Reuters).
Now another run—more hidden, but potentially more dangerous—is taking place: on the continents’ banks. People are not yet queuing up in front of bank branches (except in Latvia’s capital Riga where savers today were trying to withdraw money from Krajbanka, a mid-sized bank, pictured). But billions of euros are flooding out of Europe’s banking system through bond and money markets.
At best, the result may be a credit crunch that leaves businesses unable to get loans and invest. At worst, some banks may fail—and trigger real bank runs in countries whose shaky public finances have left them ill equipped to prop up their financial institutions.
To make loans, banks need funding. For this, they mainly tap into three sources: long-term bonds, deposits from consumers, and short-term loans from money markets as well as other banks. Bond issues and short-term funding have been seizing up as the panic over government bonds has spread to banks (which themselves are large holders of government bonds). This blockage has been made worse by tighter capital regulations that are encouraging banks to cut lending (instead of raising capital).
Markets for bank bonds were the first to freeze. In the third quarter bonds issues by European banks only reached 15% of the amount they raised over the same period in the past two years, reckon analysts at Citi Group. It is unlikely that European banks have sold many more bonds since.
Short-term funding markets were next to dry up. Hardest hit were European banks that need dollars to finance world trade (more than one third of which is funded by European banks, according to Barclays). American money market funds, in particular, have pulled back from Europe. Loans to French banks have plunged 69% since the end of May and nearly 20% over the past month alone, according to Fitch, a ratings agency. Over the past six months, it reckons, American money market funds have pulled 42% of their money out of European banks. European money market funds, too, continue to reduce their exposure to France, Italy and Spain, according to the latest numbers from Fitch.
Interbank markets, in which banks lend to one another, are now also showing signs of severe strain. Banks based in London are paying the highest rate on three month loans since 2009 (compared with a risk-free rate). Banks are also depositing cash with the ECB for a paltry, but risk-free rate instead of making loans.
That leaves retail and commercial deposits, and even these may have begun to slip away. “We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium,” an anlayst at Citi Group wrote in a recent report. “This is a worrying development.”
With funding ever harder to come by, banks are resorting to the financial industry’s equivalent of a pawn broker: parking assets on repo markets or at the central bank to get cash. “We have no alternative to deposits and the ECB,” says a senior executive at one European bank.
So far the liquidity of the European Central Bank (ECB) has kept the system alive. Only one large European bank, Dexia, has collapsed because of a funding shortage. Yet what happens if banks run out of collateral to borrow against? Some already seem to scrape the barrel. The boss of UniCredit, an Italian bank, has reportedly asked the ECB to accept a broader range of collateral. And an increasing number of banks are said to conduct what is known as “liquidity swaps”: banks borrow an asset that the ECB accepts as collateral from an insurer or a hedge fund in return for an ineligible asset—plus, of course, a hefty fee.
The risk of all this is two-fold. For one, banks could stop supplying credit. To some extent, this is already happening. Earlier this week Austria’s central bank instructed the country’s banks to limit cross-border lending. And some European banks are not just selling foreign assets to meet capital requirements, but have withdrawn entirely from some markets, such as trade finance and aircraft leasing.
Secondly and more dangerously, as banks are pushed ever closer to their funding limits, one or more may fail—sparking a wider panic. Most bankers think that the ECB would not allow a large bank to fail. But the collapse of Dexia in October after it ran out of cash suggests that the ECB may not provide unlimited liquidity. The falling domino could also be a “shadow” bank that cannot borrow from the ECB.
The European Commission chief said Monday he wants to introduce eurobonds issued jointly by the 17 euro nations as an effective way to tackle the financial crisis, an idea that puts him on a collision course with German Chancellor Angela Merkel.
Jose Manuel Barroso said a eurobonds plan makes sense if linked to fiscal rigor among the member states sufficiently stringent to make it impossible for profligate nations to live on the back of budget-conscious countries.
- Original post: As blogged about for a while nowhere, everyone except for liberal and conservative policy-makers in northern Europe by now knows what the solution for the eurozone debt crisis is. That is for the ECB to start acting as lender of last resort – like every other central bank in the world, f.e. in the US, Japan, the UK, China, etc. – and start issuing euro bonds or buying sovereign debt in larger amounts.
But the German ruling coalition of conservatives and liberals, supported in this by their peers in the Netherlands, will not do it. Because in their heads, the only solution that can be is austerity and budget cuts.
It hasn’t worked so far, and it doesn’t work now. The debt crisis has spread to the eurozone core, with Austria now defending its triple-A status. We’re currently waiting for the biggest economy yet to get into trouble (France). Meanwhile, the solution is at hand, with American and European economists, policy analysts, journalists and bloggers all calling for it. Let the ECB take up its proper role as central bank.
Does it suck? Of course it sucks. Some inflation may occur. You’re creating moral hazard for profligate economies (the Club Med ones) to go on spending sprees, paid for by their northern neighbours. But it beats breaking up the eurozone and let huge economies go default, doesn’t it?! Moreover, this crisis is not entirely the fault of the south. The entire EMU has failed to create a political and economic system coherent enough to facilitate a single currency. Southern bonds were judged way too safe by central banks and regulators throughout the Union (including the ECB). So, Germany and the rest of the north are as much to fault as the south. And now, they have to face their responsibilities and move towards closer integration.
But no. Austerity and budget cuts that nobody believes in. Watching the eurozone right now is like watching the end-of-the-world scene in Lars on Trier’s Melancholia: you know it’s inevitable, you know it’s going to happen, and it will be massive. Oh well. Better than inflation I guess.
The key part, which he said with some anger rising in his voice, was this:
“Because after the error of the Bundesbank, they consider central banks purchasing sovereign debt outright to be like swearing in church. It’s just not done. This has been in fact to a certain extent embedded in the treaty which forbids the ECB from lending directly to governments or buying stuff in the primary market. But there is no restriction at all on them buying any amount of sovereign debt at any time in the secondary market, so they can do it.”
“This crisis is the result of the failure to provide the minimal institutional underpinning for a monetary union in the euro area and also a result of the ECB unfortunately being the heir of the Bundesbank and therefore not understanding and rejecting the role of central bank as lenders’ last resort to sovereigns. They certainly are a central bank. They just are a central bank that prefers to fight with both hands behind their back. If they just let go of one hand, that would be enough.”
It’s not just that the ECB could immediately push Italian yields down to 4% if it wanted to… it’s that this role that the ECB is being asked to play is not even extraordinary by modern economic standards. Every other major economy in the world: Japan, the UK, the US, China, etc. has a central bank that funds the government. Only Europe doesn’t have that, and that’s why, with debt-to-GDP ratios high around the world (Japan has a 200% debt-to-GDP remember), it’s just Europe that’s in crisis.
But there is this problem with the ECB being the descendant of the Bundesbank, and, well, the Germans are really not into anything that looks like debt monetization.
That’s why the Germans will look for any explanation of the current crisis other than the obvious one. As Bundesbank chief Jens Wiedmann said this weekend, Italy has a political problem, and Greece has a debt problem. That both Italy and Greece (and Portugal and Cyprus and Ireland) could have problems relating to something more fundamental to their monetary structure either completely eludes Wiedmann, or he’s just not allowed to admit it due to German ideology.
Now granted, there is a defense of the ECB, which Edward Harrison makes brilliantly in a post today. Unlike, say, when the Fed or the Bank of England do QE, ECB bond buying is a fiscal operation that would be creating winners and losers and also fostering moral hazard. After all, why not spend like crazy to get ahead of your peers, if the ECB is holding your debt at a certain level. That does make the question tricky.
But the bottom line remains: There’s no chance of anything that’s been planned so far working out, since the only solution (more fiscal austerity) only makes the underlying debt dynamic worse.
So the question is: Will the ECB wait too long and blow it?
The problem for the market is whether to take these comments at face value or to see them as part of a general tactic of trying to force other leaders into line or believing that the comments will be reversed if the alternative to an aggressive ECB is the collapse of the Euro. If you don’t think Merkel’s tone will change then our investment advice is to dig a hole in the ground and hide. It’s difficult to see any other scenario than widescale Sovereign defaults without an aggressive ECB. Indeed it doesn’t seem we’re alone on this anymore. An Irish Times story overnight said that Sarkozy told his deputies yesterday that the euro would not survive unless the ECB decisively entered the fray.
[When] the UK government, for example, is perceived to have borrowed too much, the Bank of England can buy some of its debt and turn it into money. This is, in fact, the Bank of England is doing, to the tune of £275bn, through quantitative easing (though it hasn’t gone the whole hog – which it could do if the UK were ever in a seriously deflationary recession – of cancelling the debt).Of course, this so-called monetisation can debase the currency and spark inflation.
But here’s the thing. Although devaluation of the currency and inflation would generate losses for creditors, those losses are typically a fraction of losses that would arise from a default by government or – as Greece is trying to do – from a request to creditors to voluntarily forgo an element of what they’re owed.
Also, inflation and devaluation are worst for overseas creditors. If you are resident in the UK, and you have substantial liabilities and outgoings in sterling, a bit of inflation will help you service what you owe at the same time as eroding the real value of your assets (or in this case, the real value of your loans to Her Majesty’s Government).
[Surely], you may say, the eurozone has a central bank: the European Central Bank. What is to stop it buying up Italian government debt or Spanish government debt in substantially bigger amounts than it is currently doing?
To be clear, right now the ECB is purchasing modest amounts of Italian and Spanish government debt, for example, in an attempt to keep the respective interest rates they’re charged at a bit less than the penal and prohibitive 7%.
But the ECB is prevented both by its own constitution and by the passionately held views of the Bundesbank – the German central bank and the ECB’s most influential shareholder – from purchasing substantially more than that.
Although many economists believe the Germans are wrong-headed in refusing to countenance substantial purchases of government debt by the ECB, there is some logic to the prohibition.
Brad Plumer did an excellent post earlier this week calling bullshit on ECB claims that it would be illegal for them to step up to the plate and provide relief in the European debt crisis. In a speech delivered early this morning in Frankfurt, ECB Chief Mario Draghi took another stab at explaining himself. His view is that if the ECB stepped in to offer relief, that might undermine its credibility as an inflation-fighter over the long term. “Losing credibility can happen quickly,” he warned, “and history shows that regaining it has huge economic and social costs.”
I’m running out of analogies to explain how frustrating I find this logic. So let’s just be frank. What is it that Draghi thinks is happening now? Is Ireland enjoying a walk in the park? Have the past 12 months been party time for Greece and Spain and Portugal? Another year of this kind of suffering is baked into the cake for those four countries. If Italy tips into a Spain-esque depression, wouldn’t that have huge economic and social costs? Aren’t there costs to prolonging the Spanish depression? Or think about plucky little Ireland and Estonia, winning praise from bureaucrats everywhere for their imposition of internal devaluation, aren’t they going to smacked with a sledgehammer if things go to shit? And what about France?
Now I don’t want to be alarmist, but let’s talk a bit about credibility. Suppose there’s a prolonged, continent-wide depression. Suppose the European Union and its institutions lose all credibility as a force for human welfare. Suppose the mainstream political parties in every European country lose all credibility as vehicles for popular aspiration. How does that story end? Don’t we already know? Didn’t we build these institutions for a reason? I think they were built for a reason. A reason that had something to do with huge economic and social costs. But it wasn’t fear of the Harmonized Index of Consumer Prices increasing at a four percent annual rate.
I bet if you would hold a similar poll in the Netherlands, you’d find that Telegraaf readers and SBS6 watchers were less informed (or misinformed!) than those who don’t watch any news at all. And that’s what right-wing parties prey on.
A new survey of New Jersey voters comes to a provocative conclusion: Fox News viewers tend to be less informed about current events than those who don’t watch any news at all.
Fairleigh Dickinson University recently questioned 612 adults in New Jersey about how they get their news, offering as options traditional outlets like newspapers and local and national television news, or blogs, websites and even Comedy Central‘s “The Daily Show.”
They then asked a series of factual questions about the major events of the last year, from the “Arab Spring” to the Republican race for president.
For example, respondents were first asked whether, to the best of their knowledge, opposition groups in Egypt had been successful in bringing down the Mubarak regime.
Among NPR listeners, 68% correctly said they had been; only 49% of Fox News viewers answered correctly. In fact, the survey found, Fox viewers were 18 percentage points less likely to answer correctly than those who watched no news at all.
“The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all,” said Dan Cassino, a political science professor at Fairleigh Dickinson.
Those who watched Sunday public affairs shows tended to be the best informed on current events, the survey found. Readers of national newspapers also were more likely to respond correctly.
And it seems Jon Stewart may be more reliable than cable news anchors. On Occupy Wall Street, the survey found viewers of “The Daily Show” were 12 percentage points more likely to say protesters were predominantly Democratic. MSNBC viewers were the most likely to say the protesters were mainly Republicans.
“Jon Stewart has not spent a lot of time on some of these issues. But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other sources,” Cassino said.
The overall survey, conducted from Oct. 17 to 23, had a margin of error of 3.5 percentage points. Because of the smaller sample size among those who selected a specific news source, the margin of error would be much higher.
And so the police officer at UC Davis who casually sprayed pepper spray in the face of unarmed, non-violent, sitting protesters, Lt. John Pike, is turned into an Internet meme. So at least this episode of American police state violence is turning into something amusing.
Here’s the original video (watch out, it’s sickening):
Meet Lt. John Pike casually violating people’s civil rights in everyday situations:
Check out this excellent remix by Jamie XX, member of The xx, of Radiohead’s ‘Bloom’. Released this morning together with remixes of The King of Limbs tracks by Nathan Fake and Anstam, it complements the earlier remix album TKOL RMX 1234567which featured remixes of Radiohead tracks by Modeselektor, Caribou, SBTRKT and Four Tet.
A thumping bass, delightful chimes, a housy groove, and Thom Yorke’s vocals all make for a great start of the week.
Check dit ge-ni-a-le filmpje van de free multi-bunker rave in Lopik vorig weekend, in een oud munitiedepot. Nice! Zijn nog meer vette filmpjes van te vinden op YouTube (zoals deze) maar dit lijkt de beste compilatie.
De muziek -- old school, acid en tekno met een hoog bpm -- is wel een verademing met al die diepsaaie house die elders veelal de boventoon voert. Enjoy, leuk om je weekend mee te beginnen:
An absolutely beautiful short film by a German photographer duo about the landscapes and people of Afghanistan, which I’m sure is a country of stunning beauty, inhabited by proud people. When it isn’t ravaged by war, civil strife and violence, of course.
If you got five minutes, watch this:
As each of us has his own impression of Afghanistan that is predominantly marked with pictures of foreign forces, explosions and terror, we were privileged to have access to capture daily life and portrait some people of Afghanistan.
We hope the pictures you know will merge with the pictures you see and will enrich your view on the country in the Hindu Kush.
The best book I read so far about pre-war 1960s Afghanistan is the obscure Dutch hippie novel De trancekaravaanby Peter ten Hoopen. If you’re interested in how the CIA is partly responsible for screwing up what once was a relatively succesful and prospering country, read this piece by Alfred McCoy on Salon on Afghanistan’s thirty-year drug wars.