For our latest mission, we brought the movie Ghostbusters to life in the reading room of the main branch of the New York Public Library. The 1984 movie begins with a scene in the very same room, so we figured it was time for the Ghostbusters to make an encore appearance.
A lot of folks are calling out ECB chief Jean-Claude Trichet for his claim that buying European government debt on the secondary market is not the same as quantitative easing.
Yesterday John Hussman called him out, noting that despite plans to “sterilize” the purchases by withdrawing liquidity, there’s still the phenomenon of rotating the ECB’s balance sheet away from healthy debt to toxic debt.
BofA’s Jeffrey Rosenberg (via ZeroHedge) sees the same thing:
We believe undermining the Euros valuation vs. the dollar stands the threat of indirect debt monetization of Greek and other periphery debt. Despite its claims to the contrary, today’s ECB announcement on operational details of its Securities Markets Programme of direct secondary market purchases of sovereign debt suggests the possibility the ECB could end up effectively sterilizing its own sterilization. This occurs as the term deposits used for sterilizing the EUR16.5bn of purchases last week itself are eligible as collateral against ECB repo liquidity. To us that means that the liquidity drain of collecting deposits from banks could be effectively unwound in the scenario whereby the bank used those term deposits as collateral against ECB repo lending, a possibility explicitly permitted in today’s announcement. While we believe such a scenario is highly unlikely, the perception it creates of debt monetization nevertheless is the larger issue to the near term outlook for the Euro, in our view.
The only thing mitigating the likelihood of “reprisals” is the fact that the Germans already know they’re getting screwed.
Remember, they call themselves the “schmucks of Europe” (or at least the famous Bild headline did) because they’re bailing everyone else out.
Join the conversation about this story »
Three people died while 21 are wounded in a recent attack of a suicide car bomber in Kabul, Afghanistan. However, there were others more rushed to private hospitals. A police officer witnessed the explosion and saw an Associated Press correspondent at the site. It was the first major strike since the attack last February 26 that left 16 people dead – six Indians and 10 Afghans. Associated Press reports the presence of a public bus and four utility vehicles that had no markings indicating them as American. The said targets were U.S. vehicles parked around government buildings. Policemen have arrested suspected bombers before but were caught unaware this time. They are alerted to observe a more tightened security and search.
No related posts.
Filed under: Plants/Manufacturing, Honda
Honda may still be dreaming the impossible dream, but it’s not helping the company’s new HondaJet get off the ground. According to Automotive News, the world won’t be seeing the aircraft until 2012. Once upon a time, the Japanese company had planned to take to the skies as soon as this year, but two rounds of delays have pushed that date back by a heady 24 months. The site doesn’t say exactly what caused the setback other than a few component issues.
The HondaJet carries an MSRP of $3.9 million and is slated for production in Greensboro, North Carolina. That is, so long as the company can get its ducks in a row.
[Source: Automotive News – Sub. Req.]
Grounded: HondaJet delayed again due to component delays originally appeared on Autoblog on Tue, 18 May 2010 08:28:00 EST. Please see our terms for use of feeds.
Ahhh. Remember that first day of college? Young. Naive. You think you can change the 
world. Then, your parents start bugging you about choosing a career and so you major in business and leave the world-changing ideas in the past.
But do you have to choose one or the other? Can you get your business degree and then set off to save the world? You can if your professor is Dr. Frank-Martin Belz or Ken Peattie, the co-authors of Sustainability Marketing: A Global Perspective.
Released just 10 months ago, the textbook has already sold 1,500 copies and been adopted by universities in the United States, Canada, UK, Australia, Germany, Switzerland, Austria, Sweden, Austria and more. Sales have been “far more than we expected or the publisher calculated,” said Dr. Belz, Professor at the Technische Universitaet Muenchen.
The Courier Mail reports that Queensland farmers continue to be unhappy about coal seam gas developments on mining land – Surat Basin farmers call for moratorium on coal seam gas mining.
MORE than 500 farmers who attended a protest meeting called for the government to place a moratorium on coal seam gas mining.
Growers lined up one kilometre of farm machinery at a paddock at Cecil Plains west of Toowoomba in a show of strength to demonstrate they are capable of blocking mining company access to their land.
The farmers face up to 40,000 gas wells being drilled across some of the state’s best food-producing land.
Protest organiser Dave Armstrong said famers were gearing up for the fight of their lives. “What other choice do we have?” Mr Armstrong asked. “They have put us in a corner.”
A woman in Brooklyn has accused a local grocery store of slapping a new “sell by” sticker over an expired one in order to unload some old poultry that was past its prime.
She told the The Brooklyn Paper:
I got it home [on May 12], cut off the wrapping and smelled something wrong immediately,” Viljoen told us. “The ‘sell by’ date on the label said May 16. … But the dopes left the original ‘sell by’ sticker underneath it: May 5.”
The store, a Key Foods supermarket, received poor marks in April from state inspectors, but a more recent inspection turned up nothing suspect. That may be why the store manager felt bold enough to tell the Brooklyn Paper that the customer was just a gold digger:
“People try to make money that way,” said Manager Edwin Rodriguez. “It’s absolutely not true. The inspector came in the next day, and everything’s fine.”
“Unfair fowl! Heights Key Food appears to have doctored ‘sell-by’ date on a chicken” [The Brooklyn Paper] (Thanks to Rob!)
While it’s true that there are already few ebook readers for Android (Aldiko), they fundamentally lack the access to Amazon’s ebooks Kindle editions library. Soon it will be possible because Amazon is set to release the long awaited free Kindle for Android app. You can register now to be notified of the release.
The features sound promising. For example, you’ll be able to view the annotations you created on your Kindle, computer, or other Kindle-compatible device. Yes, you’ll be able to read a ebook on multiple devices which is a great news. The bad news is that Kindle newspapers and magazines will not be available on Kindle for Android.
It will work on all devices from Android 1.6 and will required a SD card, probably to store the ebooks. Features include:
Read Kindle books on your Android phone
- Get the best reading experience available on your Android phone. No Kindle required
- Access your Kindle books even if you don’t have your Kindle with you
- Automatically synchronizes your last page read and annotations between devices with Whispersync
- Adjust the text size, add bookmarks, and view the annotations you created on your Kindle, computer, or other Kindle-compatible device
- Read in portrait or landscape mode
- Tap on either side of the screen or flick to turn pages
Shop for books in the Kindle Store optimized for your Android phone
- Buy a book from the Kindle Store optimized for your Android phone and get it auto-delivered wirelessly
- Search and browse more than 500,000 books, including more than 96 of 110 New York Times bestsellers. If you are a non-U.S. customer, book availability may vary
- Find New York Times® Best Sellers and new releases from $9.99
- Get free book samples. Read the beginning of books for free before you decide to buy
- Books you purchase can also be read on a Kindle, computer, or other Kindle-compatible mobile devices
- Kindle newspapers, magazines and blogs are currently not available on Kindle for Android
From a U.S. Central Command press release:
The United States government delivered two Bell 412 EP helicopters to the Government of Pakistan today to assist the Pakistan military in its counterinsurgency efforts.
U.S. Army Brig. Gen. Michael Nagata handed over the helicopters to Brig. Gen. Tippu Karim, 101 Army Aviation commander, during a signing ceremony at Qasim Army Air Base near Rawalpindi, Pakistan.
By sheer coincidence, Karen DeYoung of The Washington Post reports that CIA Director Leon Panetta and Jim Jones, President Obama’s national security adviser, are headed to Pakistan to urge Pakistan’s civilian, military and intelligence leadership to take greater action against extremists in the tribal areas in the wake of the failed Times Square car bomb attempt. National Security Council spokesman Mike Hammer explains to DeYoung, “It is time to redouble our efforts with our allies in Pakistan to close this safe haven and create an environment where we and the Pakistani people can lead safe and productive lives.”
So do with those helicopters as you will…
When Exes Attack: The Travis McCoy Edition…..A blast from the past is about to put a damper on Katy Perry’s wedded bliss with funnyman fiance Russell Brand.
Gym Class Heroes frontman Travis McCoy dated Perry on and off for more than three years before the couple finally called time on their sometimes-stormy romance in April 2009, and the musician still feels a twinge of something — jealously maybe? — when he thinks of how quickly the “I Kissed A Girl” hitmaker bounced back from their split and ended up engaged following a whirlwind romance with Brand.
Now Travis is channeling his heartbreak in the form of mixtape titled Forgetting Katy Perry — a new solo project inspired by Brand’s hit movie Forgetting Sarah Marshall. The 2008 comedy centers around a man struggling to recover from a breakup.
“I think it was inspired by that whole situation. At the end of the day, I think anyone who has been thorough some s**t can relate to (the music). It could have been about my girlfriends before, but I’m (going to) keep it real with you, it was definitely about Katy Perry. I definitely felt a certain way about the whole situation. Having a year and a half to reflect on it, you start questioning everything,” Travis confides in a new interview with Complex.com.
McCoy says he’s no longer in touch with Katy, but he couldn’t help but raise an eyebrow at her rebound love affair with the British comic.
“The timelines… she got engaged so quickly after. I was like, ‘Really?’ I had to sit back and reassess what was really going on. After you have some time to start thinking about it, you start putting things together. It’s been a year and a half. I’m over it,” Travis reflects.
“I’m sure she knows. The mixtape is not airing out any dirty laundry. If anything, it’s me poking fun at myself. If you’ve seen Forgetting Sarah Marshall, that’s my life. I’m that dude.”
Harvard Law School doctoral candidate Lisa Kelly has been named one of the 15 recipients of this year’s Trudeau Foundation scholarships, presented by the Pierre Elliott Trudeau Foundation.
The prestigious doctoral award offers each Trudeau Scholar up to $180,000 to advance his or her research into critical issues such as labor, mental health, conflict resolution, and the environment, by subsidizing tuition fees and living expenses and allowing recipients to travel for research and scholarly networking and knowledge dissemination. The scholarships are among the most coveted awards of their kind in Canada.
A native of Fernie, British Columbia, Kelly will focus her doctoral research on the legal regulation of children and adolescents at home, at school, and in detention.
In addition to receiving financial support, Trudeau Scholars benefit from the expertise and knowledge of Trudeau fellows and mentors, highly accomplished individuals in the Trudeau Foundation community who are leaders in both academic and nonacademic settings. Interaction with nonacademic milieus, including public policy networks and the public at large, is a key component of the Trudeau Scholarship program.
For more information about Kelly and her research, visit the Trudeau Foundation Web site.
Tyler Hamilton has an article in the Toronto Star about a study into the potential of geothermal energy in Canada – Geothermal could meet Canada’s power needs.
Canada could technically meet all its electricity needs and dramatically lower greenhouse-gas emissions if it moved aggressively to develop enhanced geothermal power projects, according to the first comprehensive assessment of the country’s deep geothermal resources.
The study, published online in the Journal of Geophysics and Geoengineering, reports on the potential of using enhanced geothermal systems (EGS) to tap hot temperatures kilometres below the earth’s surface as a way of generating clean electricity.
It found that the most promising Canadian sites are located in parts of British Columbia, Alberta and Saskatchewan at depths ranging from 3.5 to 6.5 kilometres. Drill deeper, however, and the potential extends right across the country – including parts of Ontario.
“At 10 kilometres we can expect EGS temperatures in the 150 to 200 degrees C range across most of Canada, except some areas of the Canadian shield,” wrote Stephen Grasby, a geologist with the Geological Survey of Canada, and co-author Jacek Majorowicz, an Alberta-based geothermal consultant.
“Given the widespread distribution of geothermal energy, and the high energy content, the potential geothermal resource in Canada is significant,” they concluded.
The findings aren’t surprising – I’ve been pounding on this drum for several years now. But it’s encouraging to finally see it expressed in a peer-reviewed journal. Canada, shamefully, is the only country along the so-called Pacific Ring of Fire that has yet to switch on a conventional geothermal power plant.
The irony is that Canada is home to several of the continent’s leading geothermal power developers. Problem is they’re mostly developing in Nevada, California, Nicaragua, Iceland, Chile – everywhere except Canada, where no formal development program exists.
Maybe now the federal and provincial governments will take the issue more seriously.
This new Canadian study comes three years after the release of a groundbreaking U.S. study led by experts at the Massachusetts Institute of Technology. Their research suggested EGS in the United States could realistically supply about 100,000 megawatts of power generation capacity by 2050, assuming the proper policies and R&D investments were committed.
For comparison, 100,000 megawatts – or 100 gigawatts—is roughly 80 per cent of Canada’s current power generation capacity. It’s about one-twelfth of current U.S. capacity. And the MIT-led group predicted it could be built less expensively than building new nuclear plants or investing in carbon capture and storage technologies for coal plants.
Transocean, Ltd., the giant oil contractor that leased its Deepwater Horizon rig to BP, held a “closed-door meeting” with shareholders Friday, “just days after” executives appeared before Congress to explain the company’s role in the massive Gulf of Mexico oil spill. As ThinkProgress noted, the meeting took place at the company’s headquarters in Zug, Switzerland, where Transocean relocated two years ago to avoid paying taxes. Though CEO Steven Newman “ignored questions from reporters,” the company said in a statement that it would distribute $1 billion in dividends to shareholders:
The revelation that Transocean is distributing a $1 billion profit to shareholders as one of its drill sites leaks millions of gallons of oil into the sea is sure to inflame an already smarting debate over offshore drilling and the company’s role.[…]
To put the distribution in perspective, the amount of profit that Transocean plans to pay out in the next year is half of what Exxon ultimately paid for the Exxon Valdez disaster off the Alaska Coast.
It’s also more than double what BP has said they’ve spent on the cleanup to date.
Meanwhile, Transocean has “passionately argued” to limit its financial responsibility for the disaster. The company filed a court request last week to cap its liability under $27 million, a paltry sum considering BP has already spent over $450 million on cleanup, and analysts estimate the effort could ultimately cost up to $8 billion. As Raw Story notes, Transocean has actually made money from the disaster, collecting over $400 million from insurers, leaving it with a profit of $270 million after the costs of the rig are subtracted. As maritime attorney Jeff Seely told NPR, “They are the only people who have been compensated for this tragedy. The decedents [of the 11 workers killed in an explosion on the rig] haven’t been the compensated. The injured people who still are suffering, all the fishermen out in the Gulf that can no longer work haven’t been compensated.”
Reposted from Think Progress.
Article Tags: Habibullo Abdussamatov, YouTube
Russian scientist to alarmists: ‘Sun heats Earth!’
CHICAGO – A new “Little Ice Age” could begin in just four years, predicted Habibullo Abdussamatov, the head of space research at St. Petersburg’s Pulkovo Astronomical Observatory in Russia.
Abdussamatov was speaking yesterday at the Heartland Institute’s Fourth International Conference on Climate Change in Chicago, which began Sunday and ends today.
The Little Ice Age, which occurred after an era known in scientific circles as the Medieval Warm Period, is typically defined as a period of about 200 years, beginning around 1650 and extending through 1850.
In the first of a two-part video WND recorded at the conference, Abdussamatov explained that average annual sun activity has experienced an accelerated decrease since the 1990s. In 2005-2008, he said, the earth reached the maximum of the recent observed global-warming trend.
Source: wnd.com
FOX News just broke the story (with few details) that eight-term Indiana Rep. Mark Souder (R) will announce his resignation today “after it came to light that he was conducting an affair with a female staffer who worked in his district office.”
Multiple senior House sources indicated that the extent of the affair would have landed Souder before the House Ethics Committee.
The news comes just two weeks after Souder won his party’s nomination for re-election.
Stay tuned…
There’s an old O. Henry story, The Gift of the Kisai that recounts a tale of a young man who sells his Kisai Round Trip LED pocketwatch to buy his wife a hairbrush and his wife cuts and sells her hair to buy her husband a pocketwatch chain. The story, a classic in the oeuvre of “how-the-other-half-lives” fiction, is heartbreaking in itself, but fear not: you’ll never have to go through those privations. There are plenty of $72 LED pocket watches to go around and their affordable for even those in relationships bathed in irony and penury.
This new Tokyoflash watch charges via USB and clips to your bag or pants. You’ll also notice the maddening fact that to check the time you have to press a button and the time is told in Tokyoflash’s inimitable WTF fashion. Some specs, in case you’re curious:
Displays the time
USB rechargeable*
LED animation mode
Stainless steel case and key ring included
Case dimensions: 41 mm x 50 mm x 11 mm
Weight: 58 grams
Water resistance: 3ATM
Japanese and English instructions
One year warranty
Battery: LIR2032 standard rechargeable and replaceable watch battery
Pocket watch, key ring, USB cable and spare USB cap included.
* Charging time 3.5 hours. Each charge should last approximately 1 month. Battery lifetime will vary depending on use but is estimated at approximately 300 charges.
There’s a cause all politicians claim to love: ending bailouts. A recent amendment by Barbara Boxer (D-CA) made this clear, passing 96-to-1. It sought to end bailouts, no matter what. Of course, as Michael Kinsley pointed out in a recent piece, short of a constitutional amendment, that’s impossible. But should bailouts be avoided at all costs, as Congress appears to be calling for?
Brookings Institution economic policy scholars Martin Neil Baily and Douglas J. Elliott say no. In an article, they assert that “bailouts are necessary to avoid the risk of a depression.” For that reason, they oppose any attempts to tie the government’s hands with inflexible rules that would prevent Washington from saving the economy, if necessary. They go on to say that the tools need to be in place for the government to act quickly when bad things happen.
On one hand, they’re right. Because it’s impossible for us to ever predict precisely what the world will look like in the future, we can never be certain that a bailout won’t be better than the alternative. As ugly as the bailouts of 2008 were, 25% unemployment would surely have been worse. So any move to completely eliminate the government’s ability to perform bailouts is likely ill-advised.
On the other hand, you don’t want to make the prospect of bailouts too easy. Firms need to fear bankruptcy. Just because bailout is possible doesn’t meant that it should be expected. While the financial panic that gripped the markets in 2008 was awful, in a sense, it was also wonderful because it showed their fear of failure. Firms worked very hard to keep the economy afloat, never assuming a bailout would occur. This is made abundantly clear if you read accounts (like former Treasury Secretary Hank Paulson’s “On the Brink”) about the big banks working together to try to figure out a way to save some of the firms that were collapsing during the crisis, including Lehman Brothers and Merrill Lynch.
So the right government reaction is to criticize bailouts and make them very difficult. If they’re too easy, then businesses will take too much risk. Congress should have to approve any major bailout initiative on a case-by-case basis, just like they did in 2008 for the bank bailout. That was a brutal time, and Congress wasn’t thrilled, but ultimately they all put politics aside and did what needed to be done, no matter how bad it stunk. Its action wasn’t lighting-fast, but its speed was sufficient to prevent a depression.
In the meantime, actions should also be taken in an effort to avoid future bailouts. That’s part of what financial reform intends to do. Congress hopes a systemic risk regulator will help. A non-bank resolution authority couldn’t hurt. But they aren’t enough. Higher capital requirements and leverage limits could also bring greater stability, though the Senate’s bill overlooks them.
What all Washington’s reform lacks at this time is some effort to prevent financial panics. It wasn’t really the mortgage-related losses that caused the financial crisis — it was the uncertainty of financial market participants. Financial institutions and investors didn’t know how big the losses of other firms would be, or the amount of capital cushion they had in place. Was there hidden leverage that would magnify losses? The complexity of securities made it even harder to figure out what a firm’s assets were worth.
So many financial institutions were on the verge of failure because they couldn’t turn over their debt. They weren’t only highly leveraged, but much of their debt was short-term — and it was coming due faster than they could secure new funding to roll it over. Why hasn’t anyone talked, not only about leverage limits, but about leverage maturity concentration limits? It might be fine to be leveraged 15-to-1, but not if 90% of that debt has to be refreshed each week.
Transparency is also important, and somewhat taken up by the bills being considered by Congress. But they should be doing more to create an environment where, even in a financial panic, firms have time and disclosure in place to easily present clear and convincing evidence that there’s no reason for financial institutions and investors to fear the worst. The fundamentals at very few big financial firms should have actually caused failure during the 2008 crisis based on losses alone, but all were on the verge of collapse due to widespread uncertainty that caused liquidity to dry up.
If you want to avoid bailouts — and it seems just about everybody does — then you need to reform the cause and prevent panics from becoming severe. Just watching the financial system more closely in the hopes that you can spot a problem before it results in a catastrophic event isn’t enough.
Financial crisis – Lehman Brothers – Congress – Barbara Boxer – Merrill Lynch
The Guardian has now sunk to the level of Peak Energy circa 1997, devoting valuable column inches to conspiracy theories about Maurice Strong (why bother quoting an imbecile like Glenn Beck – if you want good tinfoil about Maurice, read Jeff Wells who does a much classier take on him) – Glenn Beck holds up Maurice Strong as evidence of ‘global government’ conspiracy. I guess debunking the quote about collapsing industrial civilisation does need to be done occasionally though…
Lock up your children: the bogey man cometh. We know this because Fox News rabble-rouser Glenn Beck has kindly forewarned us. Yesterday, he informed his devoted followers that they should be on the look out for the approaching tentacles of a “global government”. The contention of many ideologically fuelled climate sceptics, such as Beck, is that global warming is being used by malevolent, socialist forces lurking in the shadows to usher in a “new world order”. The commies have invented this faked, jumped-up “science” as a Trojan horse to achieve their master plan. Or something like that, anyway.
Beck has obviously been thumbing through the catalogue of conspiracy theories online because he decided to use a quote from a man called Maurice Strong which has been bouncing around unchallenged in the sceptic echo chamber for years as evidence that the heralding of a global government is a clear and present danger. Here’s what Strong, a former executive director of the United Nations Environment Programme is said to have told a reporter in 1990:
What if a small group of these world leaders were to conclude that the principal risk to the Earth comes from the actions of the rich countries? In order to save the planet, the group decides: Isn’t the only hope for the planet that the industrialized civilizations collapse? Isn’t it our responsibility to bring this about?
Beck responds to this quote with his trademark “humour”:
Now, I want to be very clear here, because we talked to the reporter that did this interview in 1990 up in Canada. And I want to be very clear: He [Strong] was fantasizing about a plot of a novel he was thinking about writing. [Pause.] Yeah.
Beck then reveals to his audience that Strong has not actually written any novels since 1990 – or ever.
You know what? He’s been busy – he’s got this great novel idea, but he hasn’t had time to do it because he’s involved in collapsing the global economies into the hands of a global government. Isn’t that interesting? It’s almost like his book. Hmm. Maybe it’s performance art.
Media Matters has already performed a detailed take-down of Beck’s “analysis”, but, needless to say, this is unlikely to influence Beck’s legion of truthers who, judging by the fact that the term “Maurice Strong” is now trending on Twitter, have evidently rushed online to find out the real deal about this – in their lingo – “watermelon” evildoer. When they throw his name into the search engines they will also see that his name has been linked to the Illuminati, the Bilderberg group and the “Jewish banking conspiracy”. Frankly, it’s a bit of a surprise that this 81-year-old Canadian hasn’t been accused of lurking in the undergrowth on the grassy knoll in Dallas on 22 November 1963. (What isn’t a surprise, though, is that the Maurice Strong meme is also being perpetuated by the likes of our dear friends Lord Monckton and James Delingpole – both of whom have appeared on the Glenn Beck show.)
Glenn Beck did not include Strong in his show and I wonder how many of Beck’s viewers will bother to visit Maurice Strong’s own website where he actually goes to the bother of responding to the many accusations that have been tossed his way over the years?
The short-term future in South Africa is the Fifa Soccer World Cup, and at the moment it is really hard to get anyone to see or think beyond it. Football is life. Nevertheless a few hundred intrepid thinkers gathered in Cape Town earlier this month to consider South Africa in 2030, under the auspices of the World Future Society, South Africa Chapter, and its very capable leader Mike Lee.
I was lucky enough to be asked to do the opening address at the conference, and even luckier in that this Web site: South Africa – The Good News summarized some of what I and others said:
“Adam Gordon, Foresight Project Director and author of “Future Savvy” gave us some pointers:
.
“The ‘BIG’ question he asks is ‘when do we influence the future and when do we adapt?’ There are big predictable forces out there (like population growth / the diminishing availability of oil etc), and there are big unpredictable forces out there (ja, well no fine!). Importantly, we can design our ability to influence and we can design the way we adapt. It is critical that we are able to do both.
“But managing the future is more than just about scenario planning, it is also about the implementation of the plan. It is about developing a methodology that prioritises, engages with stakeholders, and enables proactive actions on the ground.
So how?
Some important considerations (from various speakers):
.
“What is critical is the foresight process, it must be well-informed so that the implementation strategies that follow have buy-in, are doable, are relevant and far-reaching. There is a very real danger of visions being disconnected, unachievable and, at the end of the day, a pipe-dream.”
Dr Elizabeth Dostal talked of a stakeholder democracy in which she promoted the design of a matrix that recognised different stakeholder levels on the vertical axis and different environmental dimensions on the horizontal axis. A multi-level, multi-dimensional model.
“Imagine” she said, “putting four Nobel Peace laureates together and asking them what the causes of global conflict are. One may argue poverty, another ideology, another resources, and another greed. In no time, they would all be in different silo’s defending their view, in one sense they are all right, but in another sense they have not looked at the whole picture. A multi-level, multi-dimensional model would reveal this, the gaps in their logic, and the opportunities for agreement.”
The problem with the eurozone as currently constituted is that there are wide differences in both the business cycles and the relative productivity of various members. Normally those differentials are handled by currency fluctuation and monetary policy. The US finesses the problem of imperfect currency union with mobile labor markets and automatic fiscal transfers. Absent these, all the work of adjustment has to be done by flexible wages.
Unfortunately, wages just aren’t that flexible–at least not downward. Wages are what’s known as a “sticky” price, which is to say that they get stuck at various points. In the case of wages, that means that they’re very unlikely to adjust downward. In part that’s psychological adjustment, and in part that represents the long-term nature of peoples’ obligations; if you have a mortgage, a couple of car payments, and some student loans, it’s hard to suddenly take a 10% pay cut because business is off. That’s why recessions tend to be characterized by sharp spikes in unemployment; unable to spread the pain, employers have to fire workers.
Paul Krugman offers a taste of just how big an adjustment will be required:
WAGES IN THE PERIPHERY NEED TO FALL 20-30 PERCENT RELATIVE TO GERMANY.
How hard will it be to achieve this? Look at Latvia, which has
pursued incredibly draconian austerity. Unemployment has risen from 6
percent before the crisis to 22.3 percent now — and wages are, indeed,
falling. But even in Latvia labor costs have fallen only 5.4 percent
from their peak; so it will take years of suffering to restore
competitiveness.The official answer is that this just shows the need for more
flexible labor markets. But this was a subject we all batted back and
forth in the initial debate about the euro, circa 1990: nobody has labor markets that flexible. If the euro isn’t workable without highly flexible nominal wages, well, it isn’t workable.
I don’t know whether Krugman is right that wages in the periphery have to take a 20% nosedive in order to mediate the productivity differentials. But I do know that he’s right that nobody’s labor market is that flexible. In theory, it could happen, over a period of long years. But it is nearly impossible for me to imagine any country sticking it out that long when devaluation is so tantalizingly possible.
US states don’t talk about this sort of thing because our labor markets are more flexible, because federal policy considerably eases the frictions, and because most of our states never had the capacity or identity to act as an independent government. (Given labor mobility, people would refuse to secede simply because they have too much family and other ties in the rest of the country). None of these things are true in any of the eurozone nations; they’re nations, with a strong national identity.
All of which is to say that, like Paul Krugman, I find it hard to imagine all this ending well. But the universe has surprised me before.
Paul Krugman – United States – Latvia – Monetary policy – Economic
