One nation overdrawn: Lessons for Europe from America’s history

Eine wichtiges Dokument, das mit vielen „Träumen“ einer EU fiscal union aufräumt (hfk). Siehe ebenso die Spiegel Analyse dazu. 

Date: 26-12-2011
Source: The Economist

IN THE frantic race to save the euro, many Europeans have sought inspiration from the United States, perhaps the most successful monetary union in history. Germany’s council of economic experts has proposed a debt “redemption pact” modelled on the American federal government’s assumption of state debts in 1790. To European federalists, America demonstrates that monetary union cannot survive without fiscal union. And proponents of a European lender of last resort to insulate sovereigns from liquidity crises note how America can still borrow at 2% thanks to a deep and liquid government bond market backstopped by the Federal Reserve.

Look more carefully, however, and the American example is more complicated. Fiscal and currency union did indeed kick-start America’s early economic development. But fiscal and monetary frameworks were so rudimentary that they contributed little to nation-building.

America began life as a fiscal basket-case. The federal and state governments were deeply in arrears on loans taken out to finance their war for independence from Britain; federal debt traded at 50 cents on the dollar, state debt for 20 cents or less. Alexander Hamilton, the first Treasury secretary, considered it vital to America’s economic health to re-establish faith in the national credit. He proposed in 1790 that the federal government assume the states’ war debts and then arrange a new schedule of payments and interest to refinance all of the republic’s unpaid bills. Holders of the restructured bonds would be encouraged to exchange them for capital in a new central bank that would issue a uniform currency to unify the states’ financial systems.

Japan, China Deepen Financial Ties

Date: 26-12-2011
Source: The Wall Street Journal

The Chinese and Japanese governments on Sunday unveiled a broad, innovative package of financial agreements designed to tighten ties between the world’s second- and third-largest economies, moves that could elevate the yuan’s status as an international currency and solve foreign-exchange headaches for Japanese companies doing business in China.

The policies also are aimed at reducing the use of U.S. dollars in trade between the two countries, possibly curbing the American currency’s role in the world’s fastest growing region.

The agreements include a plan for a Japanese government-backed entity to sell yuan-denominated bonds in China, a boost to Beijing’s campaign to deepen its domestic capital markets. Other measures are designed to make it easier for companies to convert the Chinese and Japanese currencies directly into the other, without requiring an intermediate conversion into dollars, the current common practice. About 60% of all Japan-China trade is currently settled in American dollars, according to a Japanese government official who briefed reporters on the agreements.

Year of the Fist

Date: 25-12-2011
Source: Businessweek.

The world has never been richer, healthier, or safer—but that isn’t keeping much of it from a state of revolt

By historical measures, there’s really not all that much to be angry about. Since 1981, the proportion of the developing world living in extreme poverty has fallen from 50 percent to less than 20 percent, according to the United Nations. Infant mortality is down across the board; the number of girls in school is up. Terrorists and tyrants get their comeuppance with toe-tapping regularity. The chances of dying in war have never been lower. In 2011, the 7 billionth person was born into a world that’s richer, healthier, and safer than at any time in history.

None of which kept a sizable portion of the planet from open revolt. The uprisings that rippled from Cairo to California and back again were linked not by a common enemy but by a common emotion. We should have anticipated (though few did) that rage would boil over in the Middle East, a region at once the world’s youngest and its least free. But who envisioned throngs marching down Broadway holding signs that read “Turn Wall Street into Tahrir Square”? What distinguished the anger of the past 12 months was its comprehensiveness, the rate and intensity with which expressions of discontent spread across the planet. The last comparable outburst of people power, in 1989, transformed Europe but stopped at its borders. In 2011, volatility went viral.

A Plea to Policymakers: We Can’t Risk Another Year of Delay

Author: Nouriel Roubini · December 20th, 2011 ·

From the Financial Times:

For the last three years the world’s biggest economies – the US, eurozone and China – have been living up to the infuriating euphemism so beloved of policymakers: “kicking the can down the road”. They have been avoiding the tough decisions that are required to address their fundamental economic, financial and fiscal problems.

The US has postponed its fiscal consolidation and avoided the other structural reforms – investments in infrastructure, education and skills and changes to energy policy – that are required to restore its potential growth rate. The eurozone has been in denial of the fact that some of its member states are insolvent, as well as unable to survive and grow in a monetary union. China has persisted in its weak currency, to support its export and investment-led growth model where savings are too high and consumption too low.

In all cases political constraints – the approaching elections in the US and leadership transition in China at the end of 2012, and the inability of the eurozone’s 17 governments and coalitions to coordinate policies coherently while staggered elections and changes of government take place – have led leaders to avoid the short-term pain and political costs of tough decisions that will yield benefits only over the medium term.

Anständig Wirtschaften

In diesem Sinne wünschen wir Ihnen ein entschleunigtes Weihnachten, Gelassenheit in der zunehmenden Krise.

Ihr Föhrenbergkreis Finanzwirtschaft!

Legende: Papstkritiker und Buchautor Hans Küng. (Keystone)

Hans Küng, der weltbekannte Schweizer Theologe, hat sein Heimatdorf, das luzernische Sursee, für die Präsentation seines neuesten Buches gewählt. „Anständig wirtschaften“ heisst sein Werk, das sich um global gültige Standards für eine gerechte Wirtschaft dreht.

Der 82 Jahre alte Hans Küng lancierte sein neues Buch aus der Provinz. Der vehemente Papstkritiker ist davon überzeugt, dass es möglich ist, an jedem Punkt der Erde global zu denken, auch in Sursee.

In gestochen scharfen Sätzen redete Küng auf dem Dorf in einer Buchhandlung vor seinem Heimpublikum: Schulkollegen, Geschäftsleute, Freunde und Bekannte lauschten seinem Vortrag, der als Thema die Notwendigkeit einer neuen Kultur des Anstandes behandelte.

In der Person von Hans Küng kommen innere und äussere Haltung zusammen. Er sprach in Sursee mit Bodenhaftung, gleichzeitig weltmännisch, im Ton, in Kleidung und Gestus.

Aktueller und notwendiger denn je

„Anständig geschäften“, meinte Küng, „mag vielleicht altertümlich tönen, ist aber als Thema hoch brisant.“ Die jüngste Banken- und Immobilienkrise habe auf eindrückliche und brutale Weise gezeigt, dass global gültige ethische Standards notwendiger seien denn je zuvor.

The Euro’s Almost Happy New Year

Date: 24-12-2011
Source: The Wall Street Journal

Here’s a contrarian thought to start the holidays: What if the euro zone actually survives?

Recent market commentary has been so unremittingly gloomy that it is easy to forget the euro zone has so far sailed through several apparent deadlines —“six weeks to save the euro“, „10 days to save the euro“—without falling apart. Could the single currency yet defy what appears to be the overwhelming consensus and hold together in 2012?

For the first time since the start of the crisis, policymakers may be finally recognizing the scale of the crisis. Certainly, a lot has changed since the disaster of October’s Cannes summit, which ended in disarray after the Greek prime minister announced plans to call a referendum on the country’s austerity program.

First, Greece and Italy now have new technocratic governments—backed by cross-party parliamentary support—committed to implementing both austerity measures to curb deficits as well as growth-enhancing structural reforms. Spain and Belgium also have new reform-minded governments. This means that all the main crisis countries are now taking steps to address the core competitiveness challenges at the heart of the situation.

Second, the euro zone countries have committed to tough new rules designed to ensure future fiscal discipline backed up by near-automatic sanctions for transgressors. Sure, the new rules won’t solve the current crisis and one can debate whether they are the right ones from an economic perspective. But there is no doubt they represent a significant sacrifice of sovereignty and will be harder to break than the old Stability and Growth Pact. Delivering these reforms would be a powerful demonstration of commitment to preserve the single currency.

Banks Struggle With Euro Contingencies

Date: 24-12-2011
Source: The Wall Street Journal

LONDON—As the euro-zone debt crisis intensified in recent months, at least two global banks took steps to install back-up technology systems that could handle trades in old European currencies like drachmas, escudos and lire.

That, the banks quickly found, is not so easy in a financial world that is trying to both exhibit confidence in the ailing euro and—just in case—plan for its possible demise.

Technology managers at the banks contacted Swift, the Belgium-based consortium that manages the network used in financial transactions, said people familiar with the matter. The banks wanted Swift’s technology support and the currency codes that would be necessary to set up the backup systems.

But Swift declined to provide some information for such contingency planning, including whether old codes could be used in the system, said the people familiar with the matter. 

Wir sind auf dem richtigen Weg!

Günther Robol, 24/12

Österreichs Triple A ist also nicht gefährdet und der Ausblick ist stabil (Dank der Schuldenbremse, niedriger Arbeitslosigkeit (ein Bravo den Statistikern!), wettbewerbsfähigem Exportsektor und stark diversifizierter Wirtschaft) da kommt doch Freude auf . Frankreich, wie man hört ist allerding höchst gefährdet. Die „Märkte“ müssen da heute allerdings etwas missverstanden haben!

France 0.17 -2.3% 0.88 -8.7% 1.91 -5.6% 3.01 -2% Austria 1.42 +1.7% 2.47 +2.2% 3.03 +0.2%

Aber Hauptsache – wir sind auf dem richtigen Weg: 

„Sind auf dem richtigen Weg“

ÖVP-Chef Michael Spindelegger sieht in der Bestätigung des Triple-A-Ratings durch die Ratingagentur Moody’s keinen Grund zum Ausruhen: „Da dürfen wir uns keinen Illusionen hingeben. Das uns entgegengebrachte Vertrauen ist gut und zeigt, dass wir auf dem richtigen Weg sind. Aber: Dieses Vertrauen müssen wir uns auch in Zukunft erhalten“, so der Vizekanzler in einer Aussendung. 

Italian Consumer Confidence Plummets

Date: 23-12-2011

Source: The Wall Street Journal

ROME—Italian consumer confidence plummeted in December, reaching its lowest since January 1996, as household sentiment was hit by concerns that the economy is in recession, official data showed Friday.

The consumer confidence index dropped to 91.6 in December from 96.1 in November, national statistics institute Istat said. The November figure was revised down from 96.5.

The December figure was well below expectations as economists polled had forecast on average a confidence index of 95.0

The previous reading was boosted by the new technocrat government of Prime Minister Mario Monti, an Istat official said, adding he was surprised by the strength of the drop.

Lacking a Grand Plan, Europe Limps Ahead

Date: 23-12-2011
Source: The Wall Street Journal

In 2011, European leaders have been unswerving in their commitment to muddling through.

Not for them grand or decisive moves to resolve the euro zone’s twin government and bank financial crises. Instead, they have settled on a series of smaller gestures, over which they have haggled publicly beforehand and often afterward. Some actions may have helped their currency union hobble through the year; others will at best reduce the chances of a future crisis.

„It’s not pretty,“ says Daniel Gros of the Brussels-based Centre for European Policy Studies.

Can the policy makers win ugly? Given it’s the season of goodwill, let us examine what could go right in the next few months.

The first reason policy makers might be more optimistic is that the European Central Bank has adopted a more active stance, even though its rhetorical position hasn’t changed much.