tag:blogger.com,1999:blog-41777997288300101962024-02-08T10:36:30.666-05:00Classic InDeedclassic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-4177799728830010196.post-21975885987931114812014-04-09T16:40:00.000-04:002014-04-09T16:57:30.714-04:00Couillard's Spring Cabinet: Start with one Gutsy Lady de Santis and then another, and ..Between Caffe Italia on Blvd St. Laurent and Caffe San Simeon on Dante mid way between St. Laurent and St. Dominique, there are about sixty footsteps. Most habitues of the one occasionally wander over for a <b>chiacchierata</b> with a buddy that's waiting for another buddy but likes the charm of one Caffe more than the other. These days however, the coffe-shops are filled with raucous and discussions of which Liberal MNA will get which cabinet post and, if you listen very attentively without closing in-some people may get the wrong vib, whether the Italian MNA-Rita de Santis will get anything.<br />
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In my opinion, de Santis is a gutsy lady. She showed up to the Party when most members were licking their wounds, tying new knots or fading into prehistory. As a junior MNA she assumed the role of Health critic and for most of the time was soft-spoken with little media visibility. According to many, that was the best thing she did. Glitter and glamour don't befit her. The lady has a Biochemistry background before taking her McGill Law degree and moving up the difficult trek at Davies Ward Phillips Vineberg to become a Partner. The rest is part of the profession's gilted secrets.<br />
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Do you give her a gender ministerial role? come on<i> <b>ragazzi</b>, </i>this is Little Italy, those days are gone.<br />
Do we keep her away from Business? I liked that approach from a <i><b>nonno</b></i>, waiting for the nod, but the nod never came? My first reaction was -apart from Finance most roles in the area are junior. <b>No Besinessss! </b>said his<b> </b><i><b>cumpar</b></i><b> </b><br />
Plug-ins as recognition of loyalty and deserving of merit: immigration, culture, and other elements in that subset. No!No! <i><b>E piu ingamba!</b></i> saith the Caffe owner.<br />
Education? says the Mercedes owner. Some kid from Casgrain near St. Zotique who attended Concordia University a few years ago remembers her as a bit too intransigent: <i><b>Fammi 'sto piacere..qualch'altro posto per l'Avvocatessa. </b></i><br />
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Well, she's smart lawyer, intransigent (have a problem believing that), loyal, gutsy, ambitious, perfectly bilingual, also speaks "I-talian" according to a Boston tourist that visits his mom every six months. From the corner table <b>Virgilio</b> throws out- e perche non Justice, Sante, Energie. She was after all, it seems, mentored by Me. Ciaccia- a former Bourassa cabinet minister for Energies et Ressources (1985-89). Virgilio has been around for a lifetime-according to some. They brag that all he eats is <u><i>rapini</i></u>. Now Energy covers big files and big issues and big business,and she's acquainted very well with the operations of Hydro Quebec.<br />
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Positions formed and conversations, sometimes monologues dragged on, tugging one way and the other. It had been a while that Little Italy had been so a-buzz with bickering. The last noise was, I think, Sunday morning after the Soccer matches. This time the buzz was pleasantly enjoyable. <i>Uno !! NO, <b>UNA</b> dei nostri, piuttosto delle <b>NOSTRE</b> </i>was breaking through, and from their perspective she was better than<b> tutte le altre</b> with the exception of one, according to <u><i><b>un commendatore</b></i></u>, (figuratively), a darling of Quebec and Canada-Marie-Josee Drouin, now Marie-Josee Kravis, from Ottawa, who unfortunately never ran for public office, and has since, like many others, left La Belle Province and le Pays du Nord for the world.<br />
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As for de Santis. I like Tullio's outburst. Justice! <i><b>Ci vogliono cogl.... e lei ne ha</b></i>! Some expressions get Lost in Translation.<br />
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<b>Ministre de la Justice</b>: sounds fine. Balance out the snickers- most modern jurisprudence has origins in Roman Law, and this should weigh in against the -phobes. But then she likes to travel the trade routes, the human right routes...her parliamentary Committee work is also the world at large to the US, Europe, the rest of Canada. Yet, I still think Justice is a good fit.</div>
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So is <b>Ministre de la Sante et des Services sociaux</b>: Big in the US, Big in Canada and BIG in Quebec. BIG Challenge for a Gutsy Lady. La Sante a good fit.</div>
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Bets? ummm...too early in spring.</div>
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PS. If you're lucky while strolling through Little Italy, towards <b>Caffe Via Dante (</b>another well kept secret for a good restaurant<b>)</b> and <b>Patisserie Alati-Caserta</b> (best <a href="http://en.wikipedia.org/wiki/Zeppole">Zeppole di San Giuseppe</a> in the world) you may catch a glimpse of another of La Petite Italie's best kept secrets-<b>Angelo Mingarelli</b> -probably the world's best mathematician in his field, walking his infamous dog.</div>
<br />classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-46964457292487857882014-04-08T23:18:00.000-04:002014-04-18T20:10:39.377-04:00Philippe Couillard's Printemps Quebecois and the Great Rout of 2014<span style="font-family: Times, Times New Roman, serif;"><br /></span>
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<span style="font-family: Times, Times New Roman, serif;">Not to mime Chaucer's own<a href="http://sites.fas.harvard.edu/~chaucer/teachslf/gp-par.htm"> <u>Canterbury Tales</u></a> in his praise of April </span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;"> </span><b style="background-color: white;">Whan that Aprill with his shoures soote</b></span></div>
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<span style="background-color: white; font-family: Times, Times New Roman, serif;"> When April with its sweet-smelling showers</span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;"> </span><b style="background-color: white;">The droghte of March hath perced to the roote,</b></span></div>
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<span style="background-color: white; font-family: Times, Times New Roman, serif;"> Has pierced the drought of March to the root,</span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;"> </span><b style="background-color: white;">And bathed every veyne in swich licour</b></span></div>
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<span style="background-color: white; font-family: Times, Times New Roman, serif;"> And bathed every vein (of the plants) in such liquid</span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;"> </span><b style="background-color: white;">Of which vertu engendred is the flour;</b></span></div>
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<span style="font-family: Times, Times New Roman, serif;"><span style="background-color: white;"> </span><nobr style="background-color: white;"> By which power the flower is created;</nobr></span></div>
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<span style="font-family: Times, Times New Roman, serif;"><nobr style="background-color: white;"><span style="font-size: small; white-space: normal;">but we all churn the images of the poet during our daily walks to office, plant, school, play and home. We revisit the same images metaphorically in conversation about the politics of the day, of the weeks and months, and of coming years. The imagery is universally present. </span></nobr><span style="background-color: white;">Yet, notwithstanding how admirable the bard's prowess in designing one of Quebec's spoken languages, and unraveling the season's mystery-Quebec politics, and the recent Quebec electoral results makes for equally majestic reading during this 'Cruellest of Months'. Even stern Tom Eliot would agree that Marois' short-lived minority government ended with a 'bang' and not a 'whimper' for most Quebecers. In this sense, w</span><span style="background-color: white;">e relive the ambivalent April of Eliot and Chaucer in the oxymoron character of political life, its " bitter sweet" season: but never more poetically than in the Fall of one Government and Rise of a new National Assembly controlled by a Liberal majority. </span></span></div>
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<nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;">In tune with Chaucer's best and brightest, This Liberal Majority should promise Quebec</span></nobr></div>
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<nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;">growth and health </span></nobr><nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;">as Nature renews its own </span></nobr><nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;">commitments during this Spring. </span></nobr></div>
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<nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;">In marked contrast to </span></nobr><nobr style="background-color: white; font-family: Times, "Times New Roman", serif;">Nature's glory, </nobr><nobr style="background-color: white; font-family: Times, "Times New Roman", serif;">a quote attributed to </nobr><span style="font-family: Times, 'Times New Roman', serif;">Abraham Lincoln serves best as </span><span style="font-family: Times, 'Times New Roman', serif;">to the reasons for the </span><b style="font-family: Times, "Times New Roman", serif;">Parti Quebecois' Great Rout of 2014 </b><br />
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<b><span style="font-family: Times, 'Times New Roman', serif;">"</span><span style="font-family: Times, 'Times New Roman', serif;">You can fool all the people some of the time, </span></b></div>
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<span style="font-family: Times, Times New Roman, serif;"><b>and some of the people all the time, but you cannot fool all the people all the time." </b></span></div>
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<span style="font-family: Times, Times New Roman, serif;">Quebecers have had enough of vacuous and pompous rhetoric. </span><span style="background-color: white; font-family: Times, 'Times New Roman', serif;">Contrary to some media coverage-most Quebecers rejoiced in dismissing the gratuitous platform of a waning and unenlightened political Party minority while Quebec citizenry endured the dismal woes and dire pangs of economic misfortunes. </span><br />
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<span style="background-color: white; font-family: Times, 'Times New Roman', serif;">Quebec </span><span style="background-color: white; font-family: Times, 'Times New Roman', serif;">leads the country in public debt notwithstanding the highest tax imposition rates in the country. It tops the migration list with most departures, staggers in growth and straddles with respect to trade.</span><br />
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<span style="font-family: Times, 'Times New Roman', serif;">Earth's young history has had a Prague spring, a Chinese Spring and an Arab Spring, and who knows how many more unsung springs. For some of us less ambitious in scope, but more resilient to the caveats of Quebec Politics-we can finally acclaim a blooming Quebec Spring greeted by Nature and Nurture's 'sweet showers'. </span><span style="font-family: Times, 'Times New Roman', serif;">Similarly, as far as Quebec Politics goes, when it rains it pours and yesterday's Parti Quebecois debacle </span><span style="font-family: Times, 'Times New Roman', serif;">was a predictable downpour given the unfounded policy options and sham debates of the </span><span style="font-family: Times, 'Times New Roman', serif;">party's platform. </span></div>
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<nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;"><span style="background-color: transparent;">Unfortunately, it left the 2014 National Assembly with two incumbent members of </span></span></nobr><span style="font-family: Times, 'Times New Roman', serif;">and a newly elected MNA from the riding of St Jerome, m. PELADEAU, </span><nobr style="background-color: white;"><span style="font-family: Times, Times New Roman, serif;"><span style="background-color: transparent;">whom some would caricature as the Teflon Kid. </span></span></nobr><span style="font-family: Times, 'Times New Roman', serif;">With the presence of the Messrs. Drainville, Lisee, (exit Bureau-Blouin branded as Kid Kodak) and </span><span style="font-family: Times, 'Times New Roman', serif;">Peladeau, the opposition in the National Assembly has reduced its status from tolerable to mediocre. </span><span style="font-family: Times, 'Times New Roman', serif;">Its brightest members, with the exception of Mme Marois, all defeated. Honest Parti Quebecois </span><span style="font-family: Times, 'Times New Roman', serif;">women and men, again with the same exception, suffered the slings and arrows of outrageous fortune </span><span style="font-family: Times, 'Times New Roman', serif;">that ensued from ill-founded social and economic platforms framed by a vacuous group of aspirants and </span><span style="font-family: Times, 'Times New Roman', serif;">opportunists who placed personal vanity before Quebec's future. </span></div>
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<span style="font-family: Times, 'Times New Roman', serif;">Attributed to Mark Twain, the following offers the appropriate wit in their regards: </span></div>
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<b style="font-family: Times, "Times New Roman", serif;"><span style="line-height: 26px;">"</span><a href="http://www.brainyquote.com/quotes/quotes/m/marktwain103535.html" style="line-height: 26px; text-decoration: none;" title="view quote"><span style="color: black;">It is better to keep your mouth closed and let people think you are a fool </span></a></b></div>
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<span style="font-family: Times, Times New Roman, serif;"><b><a href="http://www.brainyquote.com/quotes/quotes/m/marktwain103535.html" style="line-height: 26px; text-decoration: none;" title="view quote"><span style="color: black;">than to open it and remove all doubt</span>.</a>"</b></span></div>
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<span style="font-family: Times, Times New Roman, serif;">One presumes History confirmed the wit.</span></div>
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<span style="font-family: Times, Times New Roman, serif;">As a result the defeated PQ women and men, again excluding the same Marois, deserved no better than a rout, and with the Party's remaining four above-mentioned should expect nothing better in the future...</span></div>
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<span style="font-family: Times, Times New Roman, serif;">The fate of the Parti Quebecois lies in the hands of ex-MNA Kid Kodak and the Teflon Kid, and the two feuding amigos. </span></div>
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<span style="font-family: Times, Times New Roman, serif;">For this majority Liberal Assembly, led by a talented Philippe Couillard, to sustain momentum, it must rally around economic issues, and put aside social and political irritants. It must stop the emigration wave and momentum that is plaguing Quebec demographics. It must abandon the idea that balanced budgets are solutions to financial stability; it should assume with resolve the need to create deficits if necessary- dislodging the unsupported myth that deficits harm an economy and a society. US economic policy for over half-century has instances showing the contrary. US economic policy since 2008 shows quite the contrary. Look South, not only for wisdom but for vision after failure. </span></div>
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<span style="font-family: Times, Times New Roman, serif;">Premier Couillard must establish coherent regional initiatives that put people to work. Invest heavily into education, biomedical research and development and infrastructure to support and promote preventive medicine, and eliminate the bottlenecks and impasses that contaminate the health system and undermine the social and economic fabric of Quebec society. This new Government should propose improved benchmarks that contain a measure of competitive resolve and realistic visions, calibrated by Quebec's resources and expectations, and desire for innovation. </span></div>
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<span style="font-family: Times, Times New Roman, serif;">There is no expectation to be the best first time around; there is a need to show that we are on the way to becoming the best!. That will attract immigration and retain citizens; Fiscal and industrial initiatives must be supported by expansionary fiscal policy at the individual and corporate level. Quebecers are an innovative people; our society and our government must provide the appropriate ecology for innovation. </span></div>
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<span style="font-family: Times, Times New Roman, serif;">It was and is now time for economic innovation and action, and the mandate of this Liberal Victory should focus on the economic future of Quebec society. Philippe Couillard's Liberal Majority cannot repeat the omissions of its predecessor.</span></div>
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classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-53118856984885229482013-10-31T14:27:00.003-04:002013-11-02T10:45:16.234-04:00MONTREAL: La Petite Italie/ Little Italy <div>
A few weeks ago, after picking up 'un po di scarola e romana' for my mom au <strong>Marché Shamrock</strong>, now called le Marché Jean Talon, I ventured southwest towards <strong>la Frutteria Milano</strong> on Blvd. St. Laurent (where <strong>DiStasio</strong> is an habitué-we love her for that) in Montreal's Little Italy. Then fifteen steps south I hopped into <strong>Caffè Italia</strong> for 'un freddo'. Paolo, a Bruin's fan and bartender, asked how two of my kids were, and we exchanged a few words concerning the hockey season. During the conversation, the bartender signaled that someone was trying to catch my attention. I turned around and after a few embarrassing moments recognized an old friend. He invited me to his table swamped with some papers and a PC, a buttered toast and a cappuccio. The casual setup of shifting and moving chairs and tables makes 'Italia' like most other cafes in the area ideal for dabbling about anything and everything, regardless of the next table's proximity. So we tried (one always forgets the details) to update each other on our lives, shuttling between three languages that somehow we had never mastered, amidst the raucus that makes "Italia" unique for most of Little Italy's <em>habitués</em> and <em>turisti, </em>and among the <strong>turisti</strong> include those that escaped years ago and now show up amidst the glimmer and the trend, the rattle and hum- i <strong>tipi di spiaggia.</strong><br />
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He commented on federal politics, we talked about some cherished laughs and a lot of art. In the end, he ventured onto his health which he claimed was failing. He enjoyed the elder years more than he had imagined. He scrolled his worst and best in that order, and nostalgically mentioned a blog he had started but abandoned about eighteen months ago. Although short-lived, and rarely commented, he had achieved some satisfaction from the political and economic monologue he authored. He never signed it, choosing the anonymous, and to his own amusement, regarded his own authorship cynically. Yet the nostalgia of 'letting-it-go' irritated him as much as the 'acouphene's' stress while he wrote and proofread it. After <em>'un po'</em> di tutto e di tutti', he tossed the offer: "...you want to pick it up. I'm done. It's all yours" That intrusion was short. We moved on to reminiscing again about 'Tizio e Caio' about so-and-so and 'remember that guy..what the hell- is- his- name-? to how much time left to finish reading Balzac's <strong>la Comédie humaine</strong>. As the bleak mood dampened, I was reminded of Philip Larkin's <strong><a href="http://www.poetryfoundation.org/poem/178058"><span style="color: red;">Audabe</span></a>, </strong>and felt the eerie shiver of a second reading of those morbidly beautiful lines: <br />
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The mind blanks at the glare.
Not in remorse </div>
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—The good not done, the love
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Torn off unused...</div>
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Yet memory is sometimes the best of friends. Like an enzyme: it can, when the need be, act as repressor, catalyst and liason; but this time there was no creative biochemical challenge to the dire mutant that dark Larkin had spliced, only consolations and devastations.<strong> </strong><br />
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From <span style="color: red;"><a href="http://www.poetryfoundation.org/poem/173363"><span style="color: red;">Donne</span></a><span style="color: red;">'s</span> </span><span style="color: black;">rationalized inspiration</span> to Dylan Thomas<a href="http://www.poetryfoundation.org/poem/178637"><span style="color: red;"> </span></a><strong><em><a href="http://www.poetryfoundation.org/poem/178637"><span style="color: red;">Death shall have no Dominion</span></a>,</em> and <em><a href="http://www.poetryfoundation.org/poem/175907"><span style="color: red;">Do not go Gentle into that Good Night</span></a>,</em> </strong>the consolation is meagre and impoverishing<strong>. </strong>Memory only unravels sympathy and empathy for Larkin. Larkin's deep and shattered voice was his own; not the voice of another for another. Indeed Larkin's confessional is grueling intake.<br />
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We exchanged email addresses.<br />
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And after twenty dollars of 'cappucci e cioccolati caldi' and twenty of buttered toasts, he silently got up. I felt like Coleridge's Wedding-Guest in the <a href="http://www.poetryfoundation.org/poem/173253"><span style="color: red;">Ancient Mariner</span></a> as I watched him walk away. </div>
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I checked out the blog and yesterday night- I took him up on the offer. I asked that he sign off with a final post. He refused the demise: his output was in the blog's archive. Hopefully I will try to improve on my language triathalon. </div>
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In passing, if you want to try another good Italian coffee, go down towards Dante and St Dominique and step up into <strong>San Simeon's</strong>-it's famous for its terrace, and then browse into Venditelli's <strong>Ferramento Dante, </strong>ten steps east (la Quincaillerie Dante) made famous by the hardworking <strong>V sisters and brothers </strong>at a time when DiStasio was still too young to cook. And if you keep apace on Dante Street, you'll probably meet the best kept secret in the country walking at a hurried pace, a passionate jazzman: <strong>Giorgio Serafini</strong>- <br />
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Une excellente seconde lecture- Carolle Simard, <u><a href="http://www.editionsboreal.qc.ca/catalogue/livres/cette-impolitesse-qui-nous-distingue-620.html"><span style="color: blue;">Cette impolitesse qui nous distingue</span></a></u>, 1994, en dégustant 'un cappuccino'. <br />
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Enjoy Little Italy now; it's being smothered by condos and turisti.<br />
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To Larkin, I say, scuff the talk- take a walk with your kids, their mom and your grandkids. Especially on a rainy and overcast Halloween! <br />
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This is my entry post to Classic Indeed.<br />
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er nolano<br />
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classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com2tag:blogger.com,1999:blog-4177799728830010196.post-32808768516001887052012-04-10T19:30:00.003-04:002012-04-12T08:17:45.234-04:00<div style="color: red;"><span style="font-size: x-large;">Why am I holding Euros???</span></div><br />
The most obvious question to oneself these days, especially if one's a fund or an institutional, is <i>Why aren't we bailing out of Europe...</i>If you're the client, the question to your advisor:<i> Why are you holding on to Euros?</i> The obvious explanation is: <a href="http://the%20underlying%20hypothesis%20is%20that%20the%20individual%20seeks%20to%20reduce%20dissonance%20or%20accompanying%20discomfort./">cognitive dissonance</a>. The hypothesis was advanced by psychologist <a href="http://en.wikipedia.org/wiki/Leon_Festinger">Leon Festinger</a> (1957).It became popular among political pundits and business types quite rapidly when, years later, Newell and Simon* integrated Festinger's insights into their own hypothesis concerning human problem-solving.<br />
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The Newell-Simon model as it is now labelled, named after Allen Newell and Herbert Simon, describes how human beings make decisions, ie. solve problems. It becomes especially enlightening when it describes how people react during the intellectual logistics of problem-solving: the intelligence phase, design phase and choice phase.<br />
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How do investors react to conflicting attitudes: <i>you hold Euros but everyone calls a crash</i>.<br />
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Decision-makers, when in doubt, will "listen" 'more' to information that supports their belief system than to information that disrupts or questions their belief system. The underlying hypothesis is that the individual seeks to reduce dissonance or accompanying discomfort created by conflicting information that undermines his position. He will settle for 'satisficing' information without claim to making the optimal decision.<br />
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But in many cases, he will side with inputs that justify his original position. Of course, the more individuals are rationally bound (you don't have all the info) the more they will attempt to adjust in a timely satisficing way to the facts. If the former, You could be a die-hard and lose your pants and that of your clients, notwithstanding the information; if the latter, you could be pragmatic, give yourself and others the benefit of the doubt, and bail-out. After all, the well-known economist and investor <a href="http://www.blogger.com/%20%20http://books.google.ca/books?id=CVRq7GACfG4C&q=when+the+facts+change%2C+I+change+my+mind#v=snippet&q=when%20the%20facts%20change%2C%20I%20change%20my%20mind&f=false">John Maynard Keynes</a> evoked the perfect reaction to relieve the dissonance: "When the facts change, I change my mind. What do you do, sir?" <br />
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So why are some investors still holding on to the Euro securities...for the same reasons that some European leaders keep promoting austerity measures for public policy notwithstanding the adverse results being generated in Greece, Spain and Italy.<br />
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The dissonance:<br />
Firstly, even though things are difficult in Europe, they're difficult all-around the world. Some will argue that they're already overexposed in equities, in BRICs, in US and other sovereign currency-issuer securities, and even gold-it can collapse on a wind-shift....after which deliberation they move on and argue the next....<br />
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...Eurozone economies are not in as bad a condition as selected data suggest. It's quite reasonable to experience hiccups during 'policy transitions' after traveling over rocky roads. And Southern European roads are very rocky according to northern Europeans. Things will smooth themselves out over time. The worst case is if Greece defaults. Let it exit. Nudge Greece out gracefully. The Zone is saved. This is the message that is being conveyed by European leadership as social tensions in certain countries become more forceful. If that doesn't work out as planned....they move on and argue the next....<br />
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...Europe is 'too big to fail'. (<i>Remember Lehmann et al)</i>. The US and China won't let it happen- this is Europe, not some mismanaged bank. Some refer to this position as highly speculative; other would consider it quite realistic. Either way, their rationalization recalls Lord Byron's popular but mistranslated line found in his <a href="http://www.gutenberg.org/catalog/world/readfile?fk_files=1458303&pageno=109%20%20%20%20%20%20CXLV.%20%20%20%20%20%27While%20stands%20the%20Coliseum,%20Rome%20shall%20stand;%20%20%20%20When%20falls%20the%20Coliseum,%20Rome%20shall%20fall;%20%20%20%20And%20when%20Rome%20falls--the%20World.%27%20"><i>Childe Harolde's Pilgrimage</i></a> : <br />
<pre><i> </i></pre><pre><i> When falls the Coliseum, Rome shall fall;
And when Rome falls--the World.'</i></pre><pre><i> </i></pre><pre style="font-family: Times,"Times New Roman",serif;">The Eurozone rendition is "When falls the Euro, Europe shall fall; And when Europe falls---the World."</pre><div style="font-family: Times,"Times New Roman",serif;">It would carry more credence if it was the US, however.</div><br />
Here's my take: If China's growth is projected downwards, if Germany's order book starts doesn't refill to 2010 levels (I don't think it will refill for a long while) and growth in the US is revised downwards, then you should have bailed to liquid USD, until the facts change!!! If you didn't, think about it.<br />
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<span style="font-size: x-small;"><b>*I credit Fictional Reserve Barking, Oct 2, 2011, author (Circuit, ) and reader (JHCraw) for the reference to Herbert Simon's work.</b> </span>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-20239999713481647912012-04-09T14:05:00.029-04:002012-04-09T22:45:57.403-04:00<h3 class="post-title entry-title" itemprop="name" style="color: red;"><span style="font-size: x-large;">Europe! It's not too late to reverse austerity </span></h3><h3 class="post-title entry-title" itemprop="name" style="color: red;"><span style="font-size: small;"><i>The article is cross-posted on <a href="http://fictionalbarking.blogspot.ca/" style="color: blue;">Fictional Reserve Barking</a>. We wish to thank the editor. R</i><i>eaders are invited to post comments on either blogs.</i></span> </h3><div class="post-header"></div><i></i> <br />
Months ago we outlined<span style="color: red;"> </span><a href="http://classicindeed.blogspot.ca/2011/11/thanks-but-sorry-your-way-wont-work-so.html" style="color: red;">the challenges</a> that presented themselves to Italy and Greece, and to Germany, France and the United Kingdom. We opted <a href="http://classicindeed.blogspot.ca/2012/01/austerity-contracts-italy-and-in-turn.html" style="color: red;">against austerity</a>, trusting that the technocratic appointments of Messrs Monti and Papademos could transform governments in Italy and Greece, and enable their respective legislatures to both recommend alternative and optimal public expenditure policies and to restrain policymakers from endorsing imposed fiscal restrictions while constraining budgets any further. <br />
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Unfortunately for the global economy and markets, Messrs Monti and Papademos initiatives did the contrary. They aspired towards the heroic in adhering to a sub-optimal detriment and have now emerged as the <a href="http://www.blogger.com/goog_1683660965" style="color: red;">scapegoats for political and investment </a><i style="color: red;"><a href="http://classicindeed.blogspot.ca/2011/11/is-euro-area-collapsing-over-last-week.html">désenchantées</a>.</i><br />
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More ironic is that both men had very little to do with the original debacle. They were recommended to their nation’s legislatures to clean up a mess. Instead, as a result of attempting to implement austerity measures, they have generated more anxiety in world markets than expected. <br />
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Unfortunately, the recent economic deterioration and rising social tensions within their respective economies has become their responsibility, and the political disenchantment surfacing within the electorate is also their responsibility. Worse still, the time for apologetics is long past and is now irrelevant. At jeopardy is their leadership, the credibility they endorse for their visions of the future and the overall well-being of their citizenry. <br />
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Mr. Draghi and Mrs. Lagarde have voiced a redemptive message. Both had professed that the worst was over. For instance, in a<span style="color: red;"> </span><a href="http://www.ecb.int/press/key/date/2012/html/sp120326_1.en.html" style="color: red;">speech on March 26</a> of this year, Mr. Draghi said the following: <br />
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<blockquote class="tr_bq">“I would like to take this opportunity to provide you with my assessment of the current situation in the euro area and shed light on recent signs of improvements in the overall outlook. I would particularly like to draw your attention to the effectiveness of the policy measures implemented by the Eurosystem, the EU institutions and national authorities. And to remind you of the measures that we all must continue to pursue over the coming months and years with great diligence in order to continue on this path of stabilisation.” </blockquote>As for Mme Lagarde, on <a href="http://www.imf.org/external/np/speeches/2012/031812.htm" style="color: red;">March 18 of this year</a>, the Managing Director of the IMF sought to reassure the audience of the 2012 China Development Forum with the following statement: <br />
<blockquote>“There are signs that strong policy actions—especially in Europe—are making a difference. Financial markets have become a little calmer…” </blockquote>Yet, Spanish yields are rising, as are those of Italy and Greece, and there is more and more talk of a potential third bailout for Greece although the IMF and the ECB have reassured the investment communities that changes in Greece are being introduced as promptly as possible and will be enacted effectively. <br />
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Any remnant stress in markets, according to the institutional duo is a result of the misperception by the interested communities that the consolidations proposed by the ailing economies cannot be achieved. <br />
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The emerging doubt on behalf of investment communities and investors in general should not be surprising. After all, it’s their money and it’s their perception that underscores investment decisions.<br />
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One daresay that the investment community saw the collapse of the system much earlier than either the IMF or the ECB, although the leadership of the latter two has been proactive in attempting to stabilize investor sentiment and mitigate between some form of restraint and investment in growth and employment. Notwithstanding, the reassessment that further bailouts will be necessary is now the swan song of European austerity politics. <br />
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Unfortunately, European policymaker perceptions of the bond markets are completely skewed as a result of their own biases. What is difficult for them to appreciate is that there is no basis left for growth. Unemployment is up, <a href="http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-02042012-AP/EN/3-02042012-AP-EN.PDF" style="color: red;">with Spain leading at 23.6% followed by Greece at 21.0%</a>. And in those Eurozone countries where unemployment rates are low, many of the employed are part-time workers and, as such, susceptible to labour volatility during these turbulent times. <br />
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Moreover, <a href="http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=teibs070&plugin=1" style="color: red;">capacity utilization in the manufacturing sector</a><span style="color: red;"> </span>over the last four quarters is dropping across the Eurozone at alarming rates. Order books are not being filled as quickly as desirable, and their durations and size are shorter than required to support additional investments. As a result, business investment is stalling as management constrains expenditures and saves its liquidity for dividends in lieu of growth to stabilize share values, foreboding that equity markets react adversely to this dilemma and possibly falter. <br />
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What most pundits expected from the emerging markets may not be realized: trusting that BRIC plug the slowdown in Europe, with China leading the way. Unfortunately, there is no plug. Most <a href="http://articles.marketwatch.com/2012-03-22/economy/31220982_1_new-orders-demand-factories" style="color: red;">informed observers</a><span style="color: red;"> </span>now mitigate between a slowdown and an ease in aggregate demand, with China’s future growth rates in question. Projections for the region suggest that China’s growth potential could be in the midst of a <a href="http://english.people.com.cn/90778/7747963.html" style="color: red;">major contraction</a><span style="color: red;"> </span>with rates dropping to 7.5% from anticipated 8% and over. <br />
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Given the above, the most difficult challenge in domestic politics is for any Government to admit that it followed the wrong track. There is no shame in being part of a bigger bloc of nations that propound fiscal consolidations even if austerity is showing itself as being the ineffective solution to the Eurozone’s financial crisis, a crisis which is now becoming an economic and political crisis. <br />
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It actually takes great courage in admitting that the austerity programs recommended may not work out. The experiences of other nations in the matter, elicit danger signals that can’t be overlooked. In such a case, the consolation is that if one’s admission is timely, the Government may come out of an unfortunate situation looking respectful and remarkably diligent. There is still time for Europe to turn back its political agendas before turning the wrong corner.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-49295261097580750062012-01-12T06:00:00.004-05:002012-01-12T06:32:04.515-05:00<span style="font-size: x-large;"><span style="color: #990000;">Austerity Contracts Italy and in turn Germany</span></span><br />
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<b>ISTAT, Italy's National Statistics Institute </b>has had a busy December 2011-end. ISTAT released October's monthly stats. The results are not good. In fact, the results were not good for any of the critical markings: the releases confirmed decreases in the Orders, Production in Construction, and Trade Balance. Then, <a href="http://www.istat.it/en/">ISTAT published Italy's quarterly GDP. </a><br />
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Notwithstanding the bleak setting above-mentioned, Italy's national accounts are particularly alarming.<br />
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The decease in GDP suggests that the Austerity measures being promoted by the Euro-Area and traditionally recommended by the IMF for struggling economies are counterproductive: detrimental to the health and growth of the Italian economy. That's not new. The results are, however, significant because they offer the economist-Prime Minister Mario Monti an acid test that the austere remedy preferred by the markets, in the longer run, will weaken the economic infrastructure of the country, induce social tensions and may trigger social unrest thereby further stiffening Italy's already fragile capacity to access reasonably priced funds from future markets. After all, once reimbursement of capital is made, there is no obligation on the part of the investor to revisit and refinance a palliative patient.<br />
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For the obstinate, the position that austerity is not necessarily linked to contracting economies is a reasonable stance. In fact, for the majority of austerists, if one can coin the label, there is no<i> necessary</i> relationship between austerity measures and contracting economies, where <a href="http://www.wikicfo.com/Wiki/Default.aspx?Page=Recession%20Definition&NS=&AspxAutoDetectCookieSupport=1" style="color: #990000;">contraction</a> is usually defined as an economy in which gross domestic product weakens for two consecutive quarters. <br />
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Orders were down in October 2011 by 4.8% over the same month in the previous year 2010. In October 2011 the seasonally adjusted industrial new orders index decreased by 1.6% with respect to September 2011 (-1.0% in domestic market and -2.4% in non-domestic market). The percentage change of the average of the last three months compared to the previous three months was -2.3 (-0.7 in domestic market and -4.7 in non-domestic one). Although adjusted industrial turnover index, which measures current dollar sales was up by 1.1% for the same periods, the medium and longer term effect of <b>orders</b> is critical to the growth and stability of the country, whereas industrial turnover results are an historical metric that is already integrated into the fourth quarter's projections. Traditionally, orders underscore the basic fabric of small and medium business which constitute the majority of regional economies in central and southern Italy. The significant indicator to watch is the Order Book, especially for export orders since Eurozone orders will certainly decrease all around given the need to cut back on spending: consumer spending will drop and business will limit its investments in order to buffer cash for a 'transition' towards a better investment climate.<br />
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Germany, on the other hand appeared to be steering through the storm. Unfortunately,<span style="color: #990000;"> </span><a href="http://www.spiegel.de/international/business/0,1518,808582,00.html" style="color: #990000;">recent indicators</a>, especially the Order Book for Exports is designing a pessimistic future. Counterbalance to a drop in export orders is a suggested increase in consumer spending. I think pundits are overly optimistic about Germany's population continuing to bear the load of a European economic stall. Not only is unemployment inching up in 2012, savings will also inch up and business investment will decrease quickly and for a prolonged period.<br />
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The lesson of Austerity is that its negative effects profuse through the system much more quickly than market reinvestment. Once markets realize that an economy is slowing down, they will forestall decisions to reinvest capital, which in turn will stall growth. Austerity leads to a vicious circle and insidious downturn,especially during a global slowdown. We said it in an <a href="http://classicindeed.blogspot.com/2011/11/is-euro-area-collapsing-over-last-week.html" style="color: #990000;">earlier post</a>:<br />
<blockquote class="tr_bq">Evidently, once investors realize that the longer term confidence required to justify purchasing Eurobond securities is not justified by output figures from the region's business sector, then even if your brand name is Germany, and even if the rating agencies mark you tops, it won't help keep yields down. Germany is as susceptible to being dumped as is Italy and its next candidate France which witnessed its yields increase, and its yield gaps widen against the German counterparts. There is no Immune Boutique in this Shopping Mall. There isn't any vote of confidence for Germany; rather it signals that investor concern is becoming pandemic within the Euro-Area and no sovereign, especially a non-sovereign issuer, is immune.</blockquote><br />
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and we will repeat again: Mrs. Merkel, like all others including Mr. Monti, is neither immune to the consequences of Austerity nor to the whims of the markets. It's time to change tune before the audience boos the performance or rather lack thereof.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-11817972731101388552012-01-01T14:07:00.000-05:002012-01-01T14:07:22.474-05:00<div style="color: #990000; font-family: Times,"Times New Roman",serif;"><span style="font-size: large;"><b>Fictional Reserve Barking invites Keynes and Godley to Dinner </b></span></div><br />
Fictional Reserve Barking (FRB), not yet completed its first anniversary from inception, has assumed the role of one of the most daring commentaries on national and international political and economic policy on the B-sphere. Admittedly sympathetic to post keynesian monetary theory, FRB has again challenged the reasonableness and timeliness of everyman's expectation that Central Bankers cause and hence should solve all the problems of Government and Public Finance. In its<a href="http://fictionalbarking.blogspot.com/"> December 31, 2011 issue</a>, FRB has demonstrated again why it is considered a must and best read for economic policymakers and pundits alike. Never faltering from its underlying prescriptive mission, FRB continuously substantiates the empirical legitimacy of its optics, realigning and calibrating vision as the facts require, but never wavering on the paradigm invoked.<br />
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To say that Fictional Reserve Barking and its prolific author Circuit, is merely a keynesian sounding board is to demean the intellectual prowess of its endeavor. To even suggest is to stunt the brilliant insights that Circuit and moreso the FRB's Wall of Fame profess. And Wall of Fame it is! Among the cherished heritage FRB preserves and promotes, one finds classic Keynes, Galbraith, Godley in continuous medley with such contemporary classicists Lavoie, Seccareccia, Volcker, Bernanke, Wolf, Wray, Krugman, Mosler, Lerner, the BIS. Never admonishing, always respectful, FRB is a classical Podium of Great Policy in the making.<br />
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As one of its readers noted a while back, FRB never assumes as own the merit of others: it is by far the most serious and integral online conversation in political economy in the language, similar to Martin Wolf of the Financial Times for both scope and depth, and come the day, as notorious.<br />
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You may not agree with the script , but you never move on offended. Accessing FRB is like sitting back for a brilliant and enjoyable conversation over the dull-made-glamorous. There was a time when accountants and investment bankers were boring. Then they became glamorous-pin-up persons for the young and ambitious. History has shown them rich yet infamous and forever dull. FRB makes policymakers, economists and central bankers the new pin-ups: exciting, audacious, bright and magnanimous when they have courage, but not necessarily rich. Therein lies the rub! or is it the crux?<br />
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The latest FRB commentary on the role of the Bank of Canada in defining economic policy and delimiting monetary responsibility from fiscal initiatives, and then going on to analyze the impact of deficit spending on household and business investment is a superb application of Godley's sectoral balance to Canadian political economy and the planning process for 2012 Canadian public finance. <br />
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Take the time to savor the <a href="http://fictionalbarking.blogspot.com/2011/12/eliminating-household-sector-deficit.html">latest Classic on Carney, Household Debt, Bank of Canada and Government spending:</a><br />
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It'll change the way you look at economic policy. <br />
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Happy New Year.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com1tag:blogger.com,1999:blog-4177799728830010196.post-39028649703356017572011-12-07T11:10:00.015-05:002011-12-10T12:38:36.188-05:00<div style="font-family: Times,"Times New Roman",serif;"><br />
<div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><span style="color: #990000; font-size: large;"><b>Canadians for Nobel Literature: Of course! </b></span> </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><br />
</span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;">Chile and Greece claim two Nobel laureates in Literature each. Heaven has its ways. Things happen. </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><br />
</span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;">Nonetheless, I have a problem appreciating the Nobel Academy's oversight of Canadian authors-French and English. That they missed the vote on Robertson Davies, Margaret Laurence and Anne Hebert is polemical. All mastered the language and the novelty, body and mind of a literature and a nation.That they miss a vote on Canadian authors of the last two decades is becoming an optical bias not to say a reflection of mediocrity. Margaret Atwood and Alice Munro are outstanding in all jurisdictions. Margaret Laurence's work certainly quibbled with some of the best in Latin America; Atwood certainly quibbles with Doris Lessing. Michel Tremblay can certainly quibble with recent Nobel playwrights. Canadian authors can certainly quibble with Morrison, Gordimer, Kertesz, Jelinek, Muller. Or are Canadians considered too local. </span></div></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><br />
</span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;">We'll keep poets out. </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"> </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><br />
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<span style="font-size: small;">Shall we live to see some demise of courage and intellectual honesty instead of mutual back rubs, and the projection of historical and colonial guilt from the Academy. Or are Canadian French Literature and Canadian English Literature considered subsets of French Literature and American Literature and English Literature. Or is the novel, not the short story, the paradigm for a Literature. Or is that the Nobel Academy considers Literatures of Witness, gender count and geographic allocation more critical as criteria for awards than excellence. </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><br />
</span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;">On the other hand, the Academy did disregard the lifetime achievements of 'some such' as Hardy, Lawrence, Joyce, Musil, Lorca, Borges, Calvino. </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"><br />
</span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;">At least, let's give Kadare, if not a Canadian, recognition during this lifetime - like Next Year! </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"> </span></div><div style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;"> </span></div>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-58288028576286224962011-12-05T17:29:00.000-05:002011-12-05T17:29:25.192-05:00<div style="color: #0b5394;"><span style="font-size: x-large;">To all European Fiefs and Vassals</span>: </div><br />
<span style="color: black;">Beware if you breach the Limit: budget deficits cannot exceed 3% of GDP.</span><br />
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<span style="color: black;">To foreign (?) sovereign currency issuers: Don't meddle! or else. </span> <br />
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<div style="color: #cc0000;"><span style="font-size: large;">Kingdom of Europe</span></div><b style="color: black;">Merkel-Sarkozy</b> (<i>random</i> order :)<br />
Date: <br />
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Today's announcement foretells the coming of the Kingdom of Europe. One wonders who the terrible duo are and what legitimacy founds their pretension. Wonder! were the United States to voice such a position. European sovereign issuers or any sovereign issuer. Is this History or the loud boast that speaks the vacant mind...the boast of a florid vigor not their own! Now let's put your money where your mouth is- does the ECB-Draghi print money or not? Does it keep on lending and purchasing bonds?<br />
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The United States Secretary of the Treasury Geithner will certainly go back to Europe soon in order to ensure mutual understandings of the intent.<br />
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Heaven spare the democracies. <a href="http://en.wikipedia.org/wiki/Oliver_Goldsmith" style="color: #990000;">Oliver Goldsmith</a>'s <a href="http://journeytoforever.org/rrlib/gsmith.html"><u><span style="color: #990000;">The Deserted Village</span> </u></a>is worth the read.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com4tag:blogger.com,1999:blog-4177799728830010196.post-73261262712570542322011-11-30T10:45:00.004-05:002011-12-01T10:32:43.467-05:00<span style="color: #990000; font-size: x-large;">Equity Markets: Thank Heaven for Central Bankers</span><br />
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November 30, 2011 will be a day to remember for many Bourse firms. <br />
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It's never a pleasant to be wrong. But it's always a<a href="http://classicindeed.blogspot.com/2011/11/is-euro-area-collapsing-over-last-week.html"> <span style="color: #990000;">pleasure to be wrong when you called the only viable option that would have made you wrong. </span></a><br />
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Finally the Central Banks convened to lower USD swap costs and consequently ease tensions within the Euro-Area. Acknowledging that the <a href="http://classicindeed.blogspot.com/2011/11/is-euro-area-collapsing-over-last-week.html" style="color: #990000;">ECB (and IMF-chuckle for those that conceived that piece of gossip) could do little on their own without frustrating donors</a>, Mr. Draghi understood the problematic and the challenge. Europe needed help from its friends: The Fed and its allies, and the Bank of China. One signaled monetary comfort; the other signaled monetary stimulus. In both cases, the better bankers realized that a demand for the USD could get out of hand and leave an even more fragile Euro begging for crumbs at untenable rates. That setting without improvement on the Chinese economic front, global economies were in trouble.<br />
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The best part of the staging is that China is becoming a beach-head participant in the world's financial system. Mr. Xiao's next challenge is to convince his stakeholders that assisting in the European bailout is a necessary condition to not losing out on everything else, and exercise the appropriate actions. Slowly but surely, Chinese pragmatism is waving a wand that signals a change in political directions towards western rhetoric.The only other adjustment China has to make is a concession on the yuan.<br />
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The swap arrangements agreed to (who knows when) are effective December 5, 2011 and will extend for 15 months into 2013. Is there anyone that still thinks that Europe has no problem when its own banks show appetite only for USD. Is Europe out of the woods? Not necessarily. This morning, Mr. Cameron et al, are you listening, European unemployment is on a record rise with the exception of Germany, and that will reverse. Mrs Merkel will see a reversal within three months as less and less demand go her way, and more and more constraints are put on businesses.<br />
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Well, US President Obama, Fed Chair Bernanke and Secretary of the Treasury Geithner were there again and maybe someday, some inspired filmaker will find a decent moment to direct real drama. Europe has been saved for a second time by the United States and its credible allies. Bank of China dropped its reserve requirements by 50 basis points in order to help trigger some activity on a slowing economy. This monetary easing was the first sign that November 30, 2011 was going to be a V-Day.<br />
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At this moment, there is little left that the Central Banks and Chair Bernanke can do on the monetary front. US Republicans should analyze their own pundits' <a href="http://www.cbo.gov/ftpdocs/125xx/doc12564/11-22-ARRA.pdf" style="color: #990000;">results on job creation by President's Obama spending initiatives,</a> and improve on the solutions by fine-tuning timing and sectoral interventions rather than dismiss the spending option. Most of all, they should stop battering the US Public Service. The constituents of that sector represent the most faithful spending segment of the consumer population.<br />
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Don't knock down the walls that hold back the oceans.<br />
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To the many, stay the course.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-81485690689490771602011-11-28T09:28:00.000-05:002011-11-28T09:28:27.693-05:00<span style="color: #990000; font-size: x-large;">Mellow Yellow Monday; Black the Week</span><br />
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Today we'll experience a cover-the-shorts rally and from all indications, we might get a 200pt lift. That's the best this week will bring. By week's end, regardless of mixed signals from the US economy, the week's cumulative should be down by 250points. The USD will gain another notch, and European malaise will continue to batter the credibility of the Euro-Area. Best to short the Euro.<br />
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What can the IMF do? What are its sources of income? Should one chuckle. Not really; it's pathetic that most of the market forget that both the ECB and the IMF are recipients from donor sovereigns.<br />
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Not a week to enjoy!classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-76015189563131482872011-11-21T17:24:00.024-05:002011-11-21T18:19:19.743-05:00<span style="color: #990000; font-size: small;"><b>Mr. Niall Ferguson: Stick to History </b></span><br />
<br />
I just finished reading <a href="http://online.wsj.com/article/SB10001424052970203699404577044172754446162.html?mod=WSJ_hpp_RIGHTTopCarousel_1" style="color: #073763;">Mr. Niall Ferguson's prediction of Europe 2021</a><span style="color: #073763;">.</span> I usually enjoy Mr. Ferguson's ideas and his craftmanship. This time around, both were wanting; the article in the Wall Street Journal was soft on craft and poor on fantasy. Maybe his projection in 2012 on 2022 will have cleared up some of the blind spots in his vision. We should all stick to Malachi, Mother Shipton, Nostradamus and Cayce. They're more entertaining.<br />
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<span style="color: #990000; font-size: small;"><b>Leave the Future's <a href="http://en.wikipedia.org/wiki/Foundation_series" style="color: #0b5394;">Foundations to Isaac Asimov</a></b></span>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-60057182109075031082011-11-21T07:59:00.007-05:002011-11-21T18:10:03.468-05:00<span style="font-size: x-large;"><b>Black Monday? No. A BLACK WEEK!!</b></span><br />
<br />
A regular reader to my favorite webpage FRB or <a href="http://fictionalbarking.blogspot.com/2011/11/inflation-targeting-still-bocs-top.html" style="color: #0b5394;">Fictional Reserve Barking </a>commented after a polemic that a squall is coming the likes of which we had never seen. The structure of that phrase clicked a neuron and plucked a memory chord. I'm still trying to figure out where I heard or saw it, and it keeps on slipping. This morning's opening on Wall Street affects in a like manner. Deja vu! but I can't remember when or where. Was I young or was it more recent? In any case, for the pundits that ponder their stats looking for a pattern, this time around there is no precedent from the regressions. It's the Mule breaking out the maths: the coeffcient of error that can't be contained systemically. There are only two players that can restrain the overflow, contain the explosion and both are trading partners, both have their own tensions and both are in search of an author. <br />
<br />
One snickers listening to Mr. Cameron highlighting some punctual anomaly in the economic figures just released. It's unreal to finger out the semblance of sunlight amidst a hurricane. That's it, the phrase comes from Dune-the book and the movie!!! It's a variant in a dialogue when the Fremen note a 'wormsign'... <br />
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Well, Monday won't be Black, it'll be bleak. Losses will range between 250-325pts. Treasuries will gain and most commodities will fall. Gold, it should fall (except for those that see a backstop international standard on the horizon). Tuesday, some profit at the beginning of the day and then for another 'swerve...towards the bend of bay'. Wednesday figures will be mixed and by the end of this week, Wall Street will be flattening out with losses between 750-800 points, unless the FOMC minutes reveal some silver lining. There will be no Thanksgiving for most investors; there will be one for those holding CASH. <br />
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CASH is King!! and whether you like the sound or not, the USD is the only currency worth its logo. I guess there's something providential underscoring the dictum.<br />
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<span style="font-size: large;">The Week will be Black!!! </span>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-11515044449056514542011-11-20T13:12:00.000-05:002011-11-20T17:41:13.036-05:00<span style="font-size: x-large;"><span style="color: #990000;">Is the Euro-Area Collapsing?</span></span><br />
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Over the last week, there are three significant Euro-Area activity figures that merit the market's consideration.<br />
<br />
September's Eurozone's<b> industrial production</b> dropped from a previous August +1.3% to -1.9%<br />
September's <b>construction production</b> dropped from a previous months -0.4% to -1.3%;<br />
<b>New Industrial Orders</b> for the four largest populated economies-Germany, France, Italy and Spain all dropped significantly to -4.4%, -6.2%.-9.2% and -5.3% respectively. For the reverent, the United Kingdom NIO's dropped to -1.9%.<br />
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Well, shuttered factories are not privy only to the UK; they seem to be the prospect of industrial Europe, especially if one considers that levels of capacity utilization in manufacturing is slipping everywhere with the exception of an anomalous month in United Kingdom.<br />
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Evidently, once investors realize that the longer term confidence required to justify purchasing Eurobond securities is not justified by output figures from the region's business sector, then even if your brand name is Germany, and even if the rating agencies mark you tops, it won't help keep yields down. Germany is as susceptible to being dumped as is Italy and its next candidate France which witnessed its yields increase, and its yield gaps widen against the German counterparts. There is no Immune Boutique in this Shopping Mall. There isn't any vote of confidence for Germany; rather it signals that investor concern is becoming pandemic within the Euro-Area and no sovereign, especially a non-sovereign issuer, is immune. But the contagion on the financial front is not as great a deterrent in our opinion as the rapid weakening and dampening of economic activity within the area. Germany can certainly pull out, or welcome the unstable members' exit, but it can't deter the oncoming economic slowdown that will devastate its own regional economies. <br />
<br />
The ECB is a lame-duck if Mr. Draghi continues to endorse without challenge its constitutional mandate. Signor Draghi <b>deve sospendere</b> 'Price Stability', which is a moot predicament at the moment, and with the help from two oversea friends, act to stabilize the yield curves. The New Normal advocated by financial and portfolio managers should not be higher unemployment and softer growth, it should be lower Returns on Investment. The structural adjustment required by the global economy in order to survive the extending contagion of below-quality investments is to realign investor expectations in view of de-stabilized and riskier investment scenarios. <br />
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Obviously, this goes contrary to the grain of conventional investment lore: the riskier the target, the higher the yield! Unfortunately, when available resources are numbered, and quality contaminated, there's not much choice. You buy into the mess,praying for a cure, or seek quarantined shelters. Are there any? You run to gold? Does anyone care? To SF, Yen or some other resource-constrained sovereign? Price those economies out of the market and over time, the original predicament only changed hands.<br />
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What is becoming clearer is that there are only a few viable Backstops in this Global economy, and the Classic is the United States Treasury, with a little help from a friend.<br />
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To the United States Treasuries-of course, and at most probably quasi-zeros, or cash the portfolio. If the latter is the soundest judgement of the wise and enlightened investors, then why wait for the storm; shelter yourselves now. <br />
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How will the markets end? Not with a tumble but a crumble. The EU will fall apart unless Draghi and some confreres show their stuff...change the discourse from financial narratives about controlling deficits and imposing guarantees to a discourse with fiscal narratives about job creation, stabilizing growth engines and stimulating aggregate demand. Mr. Draghi will need support from Mr. Bernanke and gang. He knows it and the United States know it.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com1tag:blogger.com,1999:blog-4177799728830010196.post-22488687673288419952011-11-17T09:16:00.002-05:002012-01-09T10:47:45.162-05:00<span style="font-size: x-large;"><span style="color: #990000;">Thanks, but Sorry, your way won't work, so let's...</span></span><br />
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The past two weeks have witnessed major changes in the political and financial landscape of the European Union and the Euro area. Two of the European region's most economically and politically unstable members have endorsed visions for new governments. An Italian lawmakers' consensus has accorded Mr. Mario Monti the opportunity to form a transitional government that will empower Mr. Monti to negotiate and manage Italy's financial portfolio through turbulent waters; a Greek lawmakers' consensus has accorded Mr. Lucas Papademos the opportunity to form a transitional government that will empower Mr. Papademos to negotiate and manage Greece's financial portfolio through even more turbulent waters. <br />
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In the same European theatre during this year's summer and fall, a new optic is also focusing the people and market's perspective on the political savoir-faire and competence of the region's traditional leadership. According to many, Mrs. Merkel and Messrs Sarkozy and Cameron are demonstrating a lack of courage to make things happen. The situation is simply too overwhelming for that threesome. To the boisterous three is the stage, but not History! History confirms that some leaders are made for good times and others, in the mold of Roosevelt and Churchill are made of a 'stuff' that captains the worst of storms. <br />
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Although premature and echoing the sound of fluttering feathers, we are nevertheless inspired by both Monti and Papademos, firstly because the respective country's lawmakers agreed to the appointment and secondly, because the national sentiment appears to be overall favorable. The fundamental criteria for success in bleak times is the support of the people-which, while it lasts tacitly transforms the leadership of a technocrat to leadership by charisma. The 'je ne sais quoi' that makes Monti and Papademos viable is exactly the opposite of 'je sais tres bien que' Mrs. Merkel and M. Sarkozy are no longer comfortable to lead the EU nor the Eurozone out of this maelstrom. Mrs. Merkel whose economy is cruising through the turbulence seems confused about her directions and reads signals with great difficulty, she should possibly review her entourage for more capable resources. Mr Sarkozy should leave aside his political ambitions and rise to the European Region's challenge-it would probably guarantee him the undecided electorate. Finally, Mr. Cameron should abandon his economic platform and slowly steer towards fiscal accommodation before the country reaches the crevice.The economic indicators for the UK are in a sharp decline, and although inflation is for all intents and purposes non-problematic, unemployment is on the rise and capacity is in decline. The latter do not project good times.<br />
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In this maze of political ambiguity, Monti and Papademos, seconded by a known entity Mr. Mario Draghi stand out quite remarkably. In fact, the rise of Monti may have been spurred by Mr. Draghi's reluctance to fully engage the ECB in support of the Italian auction sponsored under the last Berlusconi government. The politicization of the European Central Bank in this context is not acceptable-it mirrors the rise of a political elite beyond the legitimacy of elected representation. If the analysis of the ECB's undemocratic behavior is correct, then Mr. Draghi must explain the actions of his office towards the Italian electorate.<br />
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On the other hand, regardless of the origins of their rise, Messrs Monti and Papademos were well-trained to deal with the one concrete challenge of any political economy - to spur employment and extend economic growth. Mr. Monti, as a student of the keynesian Mr. James Tobin has the baggage and opportunity to challenge the austerity measures that are being imposed on the Italian economy. The discourse is not to settle on the terms for a refinancing but to convince markets that the conventional wisdom is not operative and will fail dramatically in the longer run. If markets do not want to be disrupted, then they must entertain the possibility that social unrest will certainly ensue a market's intransigence towards the plight of the unemployed. The matter does not involve a change in narratives, it requires a change in the essence of the discourse.<br />
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For Mr. Papademos, the measure of success lies in convincing the Greek electorate that unless there is some accommodation by the people, then there will be no accommodation by the markets. But this tradeoff is quite out-of-line with Mr. Papademos own dispositions. As a young economist, Mr. Papademos studied the accommodation of anti-inflation policy in promoting employment. If one considers that the whole segment of the public service is discontented about the market behavior towards Greece's dilemma, then Mr. Papademos must re-engage the early flirtations of his intellectual odyssey and abandon the ECB temple's aphorism of 'Price Stability'. One also hopes that he will challenge the skew towards privatization of public assets that seems to be permeating the ideological baggage of most European leaders in structuring refinancing. <br />
<br />
Certainly, one of the critical errors of the ECB financial managers has been the concession to promote 'price stability' at the expense of employment. During two consecutive sessions in April and July, Mr. Trichet decided to boost interest rates when every economic indicator in Europe signaled that there was no inflationary threat imminent on the horizon. If anything, the rate increases intensified an already fragile economic landscape, tempering business investment, and disappointing any consumer initiative to spend. The initiatives certainly cast doubt on the sound judgement of European financial leadership. One can forgive Mr. Papademos for the latter case in point,because obviously, Mr Papademos although a former member of ECB's executive directorship, and Vice-President to Mr. Trichet, had left the ECB in 2010. What does that imply for Mr. Draghi who inherits the sequitor of that deepening crisis. On the one hand, Mr. Draghi has signaled his intentions to support any reasonable auctions in the market. If there is anything for Mr. Draghi to recall it is one of his former teacher's Robert Solow's insight that persistent levels of unemployment adversely affect long term growth in productivity and a second caution that accelerating unemployment can have a disinflationary effect which, in our opinion, given the European context of the day translates into a tendency to affect adversely real wages more than prices, hence disposable income and consumer spending rather than corporate revenues.<br />
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Although both Messrs Monti and Papademos are highly capable and well-intentioned, the leap from technocracy to polity is not a matter of degrees. It involves a qualitative leap that resembles more a Kierkegaardian leap of faith that marks the end of innocence. Although the scenario both men confront at the moment in their respective nations is reminiscent of the High-Noon sheriff's duel with destiny, both men are certainly more equipped and better supported than the solitary Gary Cooper with his lone gun.<br />
<br />
Nevertheless, we have faith that both men will succeed by cautiously pulling back from endorsing further austerity and inviting the markets to the table in order to embed the common sense of loosening up their exigencies. We also trust that Mr. Draghi will endorse a more accommodating stance towards national governments that confront onerous economic and financial challenges. There is no easy formula for success, but there are options that are more beneficial than tightening the coffers of an economy- put people back to work.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com2tag:blogger.com,1999:blog-4177799728830010196.post-21692114337215298722011-10-05T14:27:00.000-04:002011-10-07T20:22:31.060-04:00<b> In Memoriam:Steve Jobs</b><br />
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<span style="font-size: large;"> <span style="font-size: x-large;"> <b> </b></span></span><b><span style="color: #990000; font-size: x-large;">Steve Jobs</span></b><br />
<div style="color: #990000;"><span style="font-size: large;"> Promethean </span></div><div style="color: #990000;"><span style="font-size: large;"> 1955-2011</span></div><div style="color: #990000;"><span style="font-size: large;"> </span></div><div style="color: #990000;"><span style="font-size: large;"><br />
</span></div><div style="color: #990000;"><span style="font-size: large;"> Conceiving the Unbelievable, and Delivering it to the World</span></div><div style="color: #990000;"><span style="font-size: large;"> with </span></div><div style="color: #990000;"><span style="font-size: large;"> Courage and Compassion </span></div><div style="color: #990000;"><span style="font-size: small;"><span style="font-size: large;"> One of Two no Third </span></span></div><div style="color: #990000;"><span style="font-size: small;"><br />
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</span></div><div style="color: #990000;"><span style="font-size: x-small;"><span style="color: #cc0000;">Credit to </span><a href="http://fictionalbarking.blogspot.com/2011/08/crescenzi-watch-inconsistent-messages.html#comments" style="color: #660000;">Fictional Reserve Barking</a><span style="color: #cc0000;"> for the last line </span> </span></div>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com3tag:blogger.com,1999:blog-4177799728830010196.post-30858727172145328122011-09-22T15:05:00.000-04:002011-09-22T17:18:12.233-04:00<span style="font-size: x-large;"><span style="color: #990000;">Market Analysts and Managers Irresponsible</span> </span><br />
<br />
There's an argument circulating through the marketplace that Chair Bernanke was irresponsible by suggesting that<br />
<blockquote><a href="http://www.federalreserve.gov/newsevents/press/monetary/20110921a.htm"><span style="color: #990000;">there are significant downside risks to the economic outlook, including strains in global financial markets </span></a></blockquote>Supposedly, the Federal Reserve made a mistake by evoking the above, and should restrain its judgement on economic conditions that affect monetary policy. Avowed is the delicately obtuse cynicism that for market analysts, managers and strategists to properly advise their clients, the Fed should be silent and keep the public ignorant of matters that affect the public's respective wealth and future. Disclosure of pertinent content is the investment manager's discretion, seems to be the underscored presumption.<br />
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It can only be a relief that some men like Chair Ben Bernanke are still around and that they have the required courage to tell it as it is. As if no one ever knew that there was an economic maelstrom, or squall as my favorite <a href="http://fictionalbarking.blogspot.com/2011/09/canadian-household-debt-to-gdp-reaches.html#comments" style="color: #990000;">columnist and commentators from Fictional Reserve Barking </a>characterize it, evolving on globalscapes.<br />
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Fellas, give yourselves a break. The majority of you are certainly confused, and justly so. Consider, since when do the analysts, strategists and managers dictate appropriate communication guidelines. Basic <a href="http://plato.stanford.edu/entries/ethics-deontological/" style="color: #990000;">deontology </a>suggests that these advisors have a responsibility to seek out relevant data and give comprehensive information that will permit the client to respond appropriately to the situation. <br />
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Moreover, when the public buys and owns stocks or corporates bonds the public are shareholders and stakeholders in those companies. The public has the right to know whether there's exposure to risk out there. It is not the discretion of the advisor to weigh the call on disclosure or not. Get real guys!<br />
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A lot of people would never have received the floats if Mr. Bernanke had not sounded the warning of the imminent squall. Maybe some of the public were in those sell-offs. Good for them, if that was best for their visions.<br />
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One should be very pleased that individual Chair Bernanke and institutions like the Federal Reserve are unconstrained by political considerations, originating in Washington or New York. One also hopes that most cynics and whiners get canned under the circumstances not for ill-advising clients but for suggesting that the Federal Reserve had no reason to come out with their caution. That is professionally unethical. The narrative certainly makes a case for passing the buck for their own incompetence and lack of market insight. It certainly translates into a good show; but it should not be produced at the expense of the public.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com3tag:blogger.com,1999:blog-4177799728830010196.post-86265793653830035022011-09-22T11:47:00.000-04:002011-09-22T17:51:06.362-04:00<div style="color: #990000;"><span style="font-size: x-large;">Bernanke: Not Responsible for the Collapse of Markets of Sept 21-22, 2011</span></div><div style="color: #990000;"><br />
</div>The announcement following the <a href="http://www.federalreserve.gov/newsevents/press/monetary/20110921a.htm" style="color: #990000;">FOMC meetings of September 20-21, 2011</a><span style="color: #990000;"> </span>was expected. The infrequent decision to 'Twist'- swap short-dates Treasuries against longer date securities, particularly the very long dates, was expected. <br />
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Obviously, the respective underlying intention was to promote the consumer and housing sector with inexpensive mortgage financing, and flatten those yield curves and reward tradeoffs across the Treasury spectrum. Whether those markets react will depend on whether or not the consumer generates demand for either new homes or refinancing existing homes. In both latter cases, the intended consequence is to alleviate pressure on household debt and unlock consumer spending into the economy. <br />
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Chairman Bernanke had nothing to do with the markets' collapse world-wide.<br />
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At first, the market reacted positively to the obvious, concluding that it had already discounted the Fed's intervention for all intents and purposes. That didn't last long. Some of the more enlightened participants realized that the most important statement had been skimmed over by the markets. Mr. Bernanke had emphasized in explicit terms the dire prediction on the global economy that was <b><i>unexpected </i></b>in the announcement and, de facto, lent a deaf ear, dismissing the GOP leadership's political rhetoric of the previous day.<br />
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Chairman Bernanke, previously informed by Secretary of the Treasury Mr. Tim Geithner's return from the meeting of European Finance ministers in Poland last week, characterized his caution on the world economy in the following manner: <br />
<br />
<blockquote>Moreover, there are <b>significant downside risks </b>to the economic outlook, including strains in global financial markets. </blockquote>The markets tumbled when players realized that the global economic situation was not tepid but turbid. Financials leading the slide, dropped across the board, catalyzed by a Moody's downgrade of Bank of America, Citigroup and Wells Fargo on their debt. The only anomaly was Hewlett Packard rallying on a rumour that their CEO had been ousted. Talk about quality trading, as if a new, yet unidentified CEO will reverse macroeconomic circumstances. The morning should reverse the ridicule and ratify the quality of its governance.<br />
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All markets in Asia and Europe tumbled overnight. The additional information from Europe and China that the Purchasing Manager's Index (PMI) is contracting, followed by market commentaries that it may suggest deterioration in manufacturing output, is sending signals globally to investors that the only viable route is away from equities for now- a rush to safety and US Treasuries. In fact, all currencies, except USD, all commodities including gold, and Treasuries were down or short dates unchanged with the exception of the 6mth yield rising.<br />
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But why are BRIC indexes dropping? Fundamentally, there is no structural demand within those economies that can permeate the level of manufacturing and production that has been underlying their respective growths. Until further ado, BRIC depends on Western economies and spending. Suffice it to follow the Russian equity market this day after. Significant is to realize that BRIC cannot, at this moment of their development, drive the global economy out of its slowdown. If Japan could never act as the world engine, why should BRIC assume the role. The same is true of Europe; its lame-duck behaviour is unjustified under the conditions. Europe must put its condos in order, if the investment is to be successful.<br />
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What the headlines suggest as Mr. Bernanke's Market Debacle is absolute nonsense!<br />
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The nonsense was the GOP's leadership criticism of the Federal Reserve decisions. Boehner, Cantor & Associates' understanding of basic economic realities is unreliable and incomprehensible for that level of leadership. They should simply acknowledge that without employment there is no spending and there are no sources of Treasury revenue; and without revenue sources, there is no deficit reduction. If they persist on professing that deficit myth: that deficits matter for the US economy, they will make matters worse. They should recognize their own shortage of viable solutions, and grasp the moment to support fiscal spending programs. As for Rating Agency downgrades, they don't matter at this moment. Recently, they have been shrugged off by all sovereign levels.<br />
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Unless the US economy is activated, and this won't happen as a result of Federal Reserve monetary policy, the global economy will remain in a state of stagnation for a long time. It is obvious that any solution must come out of Washington. A reasonable start is to couple that result from flattening long date yields with an aggressive mortgage refinancing program for the suffering homeowners and well-intentioned consumers.classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com4tag:blogger.com,1999:blog-4177799728830010196.post-52314541633265018002011-08-30T19:38:00.000-04:002011-08-31T11:39:49.243-04:00<div style="color: #990000;"><span style="font-size: x-large;"><b>Fitch winks a AAA...</b></span></div><br />
On<span style="color: #990000;"> </span><a href="http://blogs.reuters.com/macroscope/2011/08/16/market-ducks-another-shock-as-fitch-affirms-u-s-aaa-rating/"><span style="color: #990000;">August 16, 2011</span>,</a> Fitch Ratings<a href="http://www.fitchratings.com/creditdesk/ratings/issr_rtng.cfm?issr_id=80442210" style="color: #990000;"> confirmed its AAA rating for the US</a><span style="color: #990000;"> </span>sovereign debt. Whether it was an anti-climactic no-brainer after witnessing the fiasco of the S&P downgrade, or Fitch corporate insight that it may just be too early to throw the towel in on US sovereigns given the response the markets gave to the rival's downgrade is irrelevant except to seers and their jury. In fact, the sequitur- Treasuries rose in price and equities tumbled, the dollar surged as capital flowed into the US for the short term was <a href="http://classicindeed.blogspot.com/2011/08/us-sovereign-downgrade-by-s-buffo-on.html" style="color: #990000;">predictable</a><span style="color: #990000;">. </span>Meanwhile, an overly cautious European financial system and European AAAs tried to make sense of their own regional fiasco in light of this US<span style="background-color: yellow;"><span style="background-color: white;"> resurgence.</span><span style="background-color: white;"> It was a perfect storm for Fitch to stall on, without sinking.</span></span><br />
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Analysts Messrs. Riley, Olert, Renwick and Fitch management should be commended for their approach and narrative:<span style="background-color: yellow;"><span style="background-color: white;"> </span> </span><br />
<blockquote><span class="smalltext">"The affirmation of the US 'AAA' sovereign rating reflects the fact that the key pillars of US's exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base. Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to 'shocks'." </span></blockquote>The narrative accompanying the affirmation reflects a humble appreciation of the mission of the Rating Agencies, a subtle recognition that the US financial structure can accommodate internal and external tensions and 'shocks', support the demands of its financial and trade partners, and a realistic understanding of the US position as underpinning the global economic system. It was a reasonable call in the case of the United States- <a href="http://fictionalbarking.blogspot.com/2011/08/modern-monetary-theory-and-its-critics.html"><span style="color: #990000;">a sovereign that could not default</span></a>, although Fitch nudged away from that premise by mitigating the controversy with '<span class="smalltext"> the risk of sovereign default remains extremely low.'</span> Notwithstanding the wink, <br />
<br />
<b><span style="color: #990000; font-size: x-large;">...Fitch also wagged the finger</span></b><br />
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Ten days later, <span style="color: black;">on </span> <a href="http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=727147&cm_mmc=Twitter-_-USDoubleDip-_-NRAC-_-20110825" style="color: #990000;">August 25, 2011, Fitch London Research Paper</a><span style="color: #990000;"> </span> released its conclusions on the global consequences of a hypothetical "double-dip recession" in the US. At the time of the original affirmation, August 16, 2011, Fitch had also confirmed its intentions to review the fiscal state and projections of the US economy in light of the <a href="http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=725063"><span style="color: #990000;">latter's own commitment to reduce its deficit</span></a>. The position Fitch advocates by its affirmation of the maximum rating is not as daring as some observers would judge. The reserve status of the US currency, the depth of the US markets, and the intrinsic ability of the US to satisfy its monetary obligations vis-a-vis its creditors, even in light of slowing economic growth and domestic political tension-all warrant the Fitch AAA affirmation and the ensuing qualified caution as to an imminent review, given the integral role the US plays in sustaining global economic stability. In this context, the Fitch London Research report is a timely and welcome sequitur to the affirmation of AAA. It reiterates and confirms the soundness of those fundamental considerations that Fitch tabled and examined in the first instance to arrive at its maximum rating. It also interposes a scenario testing the consequences of a major slowdown in the US economy. The analysis quantifies the direct, and to a much more limited extent, warns of the <a href="http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTSOCIALDEVELOPMENT/EXTTOPPSISOU/0,,contentMDK:20588762%7EmenuPK:1441948%7EpagePK:64168445%7EpiPK:64168309%7EtheSitePK:1424003,00.html"><span style="color: #990000;">second round effects </span></a>, including inter-financial sector effects, of a hypothetical 'double-dip' recession in the US. Fitch concludes that no country will be insulated from the adverse impact of a further deterioration in US economic activity. First, but not foremost, is China and the combined domino impact of a slowdown in the US and a commensurate drop in GDP in China on world economies will be formidable. The greatest effect of the US slowdown will be on its adjoining geographic trade partners Mexico and Canada, and seemingly the consequence will be 'severe'. The most intense will be to small and open economies. That the healthy state of the US economy is a <i>sine qua non</i> catalyst for any global recovery is emphasized to the point that Fitch underscores that the US dip could tip the major advanced economies into recessions, and this includes a fragile Europe and a taxed Japan. The Fitch announcement out of London preceded the prouncements by the world's leading financial figures at the <a href="http://www.kansascityfed.org/publications/research/escp/escp-2011.cfm"><span style="color: #990000;">2011 Economic Policy Symposium </span></a>sponsored by the Federal Reserve Bank of Kansas City and held in Jackson Hole, Wyoming from August 25, 2011 through to August 27, 2011. Not only did it assemble central bankers and senior policymakers, but it also gave the world an opportunity to listen to a battered field's rising stars with daring visions among which named: Mr. Dani <a href="http://www.hks.harvard.edu/fs/drodrik/"><span style="color: #990000;">Rodrik</span></a> and Mme.Esther <a href="http://econ-www.mit.edu/faculty/eduflo"><span style="color: #990000;">Duflo.</span></a><br />
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The Fitch release set a balanced and cautious mood for the world's markets and audience, thereby permitting global policymakers to ponder the complexity of a situation that required serious reflection and sound discernment in a reserved setting. <br />
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FitchRating acted very responsibly and very professionally. <br />
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h/t Fitch <br />
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classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-25086978079369262942011-08-09T23:48:00.000-04:002011-08-17T18:54:22.900-04:00<span style="color: #990000; font-size: x-large;">Mr. Bernanke's Fed. Bravo!!! </span><br />
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The <a href="http://www.federalreserve.gov/newsevents/press/monetary/20110809a.htm" style="color: #990000;">FOMC statement </a>issued Tuesday August 9, 2011 at around 14:15PM was dissented by three committee members. It initially stirred confusion in all markets. Equity markets were taken by surprise as they focused on the bleak economic outlook the Fed suggested. The Dow was down 200 points, shedding almost 450 points in 30 minutes before recouping after watching the Treasuries' plummets and appreciating the insight that maybe equity yields were favorable investments after all. At the end of the day, the Dow had rallied back over 600 points. It was a session marked with enormous market volatility. Dow closed the day 430 points higher in the most dramatic session in decades.<br />
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The same announcement shook short date (2 years and less) Treasury markets dramatically, generating yields that camouflage Short date Notes as fed funds- zero coupon- for all intents and purposes, and sent the US dollar into a tailspin against the meek Swiss Franc and roaring Gold, after market players correctly interpreted that the Fed was capping rates at near-zero for the next 30 months until the end of Mr. Bernanke's term.<br />
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Most observers also correctly felt that the Fed intentionally avoided sabotaging already nervous equity markets that were showing promise with substantive earnings and a sufficient capital base. The Fed action was seen as creating favorable portfolio opportunities for money managers to retain good yielding equity that confirm good earning and dividend profiles. The Fed idea was not to undermine potential economic benefactors and job creators.<span style="color: #990000;"> </span><a href="http://web.mit.edu/newsoffice/2010/explained-quantitative-easing.html"><span style="color: #990000;">Quantitative Easing</span> </a>1 (QE1) and QE2 had already successfully channeled funds through the system and filled corporate treasuries with low cost capital which is supporting the already fragile recovery. <br />
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Others perceived the Fed move as a preparatory scenario for an another QE3-fielding the necessary signals to the market, keeping available liquidity for timely Bond releases. <br />
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Notwithstanding the above probable explanations, I think Mr. Bernanke and this Fed were engaged in a more extraordinary exercise and endorsing a more subtle stance that blindsided a myopic market, naturally focused on its malaise. Mr. Geithner had already voiced his concerns that exogenous factors existed which also influenced US markets. Mr. Geithner minced few words when he warned the markets that European contagion was a real threat to a global recovery, much greater than the immediate slowdown in the US economy. It was confirmed by all Central Banks that if Italy failed to refinance it might mark the collapse of the eurozone and generate a systemic collapse. The Fed was aware, as was the Treasury, that <a href="http://www.ecb.int/home/html/index.en.html" style="color: #990000;">ECB</a> and the <a href="http://www.efsf.europa.eu/about/index.htm" style="color: #990000;">EFSF</a> resources would not suffice to cover the Italian and Spanish risk, if and when (within 2 years) they surfaced. There is only one player in the world that can assume the role of backstop required by the situation: enable the Eurozone to stay afloat in case of overwhelming risk, and keep Germany, France and Italy from following into political and economic disarray, and from sending the euro through Hades, and many to Dollars and Gold, SFr and maybe yen-but how much liquidity can they carry. The same can be said of gold: how much demand can it support. European contagion would also dramatically undercut the engines that drive emerging market momentum which, at present, supports some of the global economic growth. Intrusion of the Fed in the short dates would have unnecessarily squeezed Italian and Spanish offerings. It may just be that the US has saved the Italian offering. <br />
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The Fed's move was larger in scope and more daring in nature than meets the market eye. Perhaps, Frau Merkel can be more accommodating in tone when she reacts to the 'problems' in US markets and the challenges of the US Government. <br />
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classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com1tag:blogger.com,1999:blog-4177799728830010196.post-59662255942983701732011-08-07T09:55:00.000-04:002011-08-27T15:57:19.798-04:00<div class="MsoNormal"><span style="color: #990000; font-size: x-large;">US Sovereign Downgrade by S&P: <a href="http://www.larousse.com/en/dictionaries/italian-english/buffonata/6475" style="color: #990000;">Buffo</a>! </span></div><div class="MsoNormal"><br />
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</div><div class="MsoNormal">On the evening of Friday, August 5, 2011, Standard and Poor’s, in an act of Bravura, downgraded United States Sovereign Debt rating to a AA+ from a AAA while reaffirming its A-1+ rating on US short term, notwithstanding their <a href="http://www.treasury.gov/connect/blog/Pages/Just-the-Facts-SPs-2-Trillion-Mistake.aspx"><span style="color: #990000;">$2-trillion math-error</span></a>! <a href="http://www.merriam-webster.com/dictionary/bravura" style="color: #990000;">Bravura</a>? More Buffonata! than Bravura! This move had to some extent been discounted by global markets. Suffice to note the past week’s session drops in all major bourses. Those drops may also pre-empt the impending confusion and instability that will characterize the upcoming weeks' sessions on most security markets, especially from Asian and European markets which, opening after watching the announcement, should experience a tumble, but not a crumble. </div><div class="MsoNormal"><br />
Todate, Moody’s and Fitch Rating have shown caution in this regard reserving their assessments for later.<br />
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<a href="http://www.economy.com/dismal/article_free.asp?cid=223711&tid=F0851CC1-F571-48DE-A136-B2F622EF6FA4" style="color: #990000;">The analysis by Mark Zandi </a>of Moody's on fiscal sustainability, tax reform and responsible compromise demonstrates the type of level headedness that is required by Credit Rating Agencies when they approach new paradigmatic scenarios, because de facto, the current US Debt situation invites paradigmatic shifts in methodology and optics.<br />
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Sovereign Balance Sheet is not a Corporate Balance Sheet. There are overwhelming incidences of political discretion that can neither be reduced to a quantitative measure nor can they be appreciated as stand-alone components for a measurement standard. The deficit cannot be isolated from the trade-off matrices that configure the US relationship to its broader sphere of influence within the domestic and global political and economic network. </div><div class="MsoNormal"><br />
Apart from a global audience whose appetite was partially satisfied by the Washington deal, the winners of the Washington tug-of-war will be investors. The basic premise that some investors will be precluded from future purchases is unrealistic. Most institutional players have portfolio criteria that permits purchases on any security rated a AAA to peers by at least one or two of the Big Three. Flight from US Treasuries is also very unlikely because there is no other safer investment haven in the world than the United States. </div><div class="MsoNormal"><br />
On the downgrade, markets will bid up the AA+ US Treasuries; many investors will pull out of equity markets leading to their decline resulting from the failure of corporate equities to compete with rising sovereign debt. The US Dollar could appreciate for a time, as timely capital inflows into the US on purchases of US sovereigns dominate foreign exchange markets. At one point, given all things equal, markets will reach a state of equilibrium: the USD should subsequently fall into a lethargy . How far down must the Dollar fall before the <a href="http://en.wikipedia.org/wiki/The_J_Curve:_A_New_Way_to_Understand_Why_Nations_Rise_and_Fall" style="color: #990000;">J-curve</a> comes into play is anyone’s guess. US manufacturers are no longer very competitive on global markets. Marshall-Lerner conditions may no longer prevail in an orthodox manner- what previously worked and set precedents may no longer apply to current conditions. Ultimately, a drop in the currency increases the existing deficits and dissembles interest for the de-facto guarantor of most of the world’s assets. Moreover, core expenditures cuts may dramatically affect a large number of sectorial players in energy, financials, defense, health and transportation as well as state, municipalities and para-government agencies.<br />
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By 2012, unless deemed progress is made on the deficit front, markets may be confronted by another adverse assessment of the US Debt situation that could trigger another downward spiral and so on.</div><div class="MsoNormal"><br />
</div>So returning to rational predicaments.<br />
When is the Big Sell-Off.<br />
How much has already been Shorted.<br />
What is the option to a Big Sell-Off.<br />
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As with any rational and conceivable counterfactual scenario, the market must review the effects of the day-after. <br />
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</div><div class="MsoNormal">Firstly, if a AA+ still attracts investors, then the S & P Grid is substantively superfluous, because it does not deter investors, it merely panders a price peg. <br />
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Secondly, if it really considers US Sovereign Debt as relatively compromised in relation to other options (what similar options are there?), then S&P should be integrally considering a reassessment, if not a downgrade, of every major holder of US securities: reassessing the actuarial liability of every pension fund, the unit value of every mutual and the stability of every Bank in the world carrying US Treasuries especially the those of the UK, Canada and the Caribbeans, as well as the holdings of the Governments of China, Japan and Taiwan, since the integrity and liquidity of their respective financials are now compromised.<br />
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Thirdly, trading partners' current accounts may find themselves as compromised by the US deficit reduction plan as US domestic players. They, and their own nationals, may indeed have to envisage a weaker investment profile than anticipated in face of such a contagion as their own economic growth falters and begins staggering. <br />
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Finally, the effect of contagion within the American political and administrative system is even more immediate. Municipal, state and other domestic secured borrowers will not only find their investments more expensive to finance, they may actually find themselves excluded from markets. The impact of the above is extremely onerous on regions and communities attempting to recover. It is even more onerous on the American people as households will be forced to pay more for their debt. What appeared as an enterprising improvement in household wealth in the last quarters may quite rapidly deteriorate into ephemera. <br />
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There appears to be no end to the downward spiral. The downgrade weakens the Dollar, and eventually adversely skews expectations on Dollar Assets, further defeating the Dollar Stability Paradigm. <i>Why would anyone hold Dollar assets under such conditions.</i> It is somewhat irrational to advance a rational argument that impels an irrational decision. Theoretically, the world should dump dollars; but no coordinated action has been exercised yet. Is the premise false or are the components of the dilemma flawed. Probably a combination of both. As to the premise that the downgrade weakens the Dollar and the Stability Paradigm is weakened, there is some truth, but there is no real dilemma since there is no credible option to the dollar, except for the esoteric: Gold, and that should experience an early surge next week, or short date moves to the Swiss Franc or Yen. If one buys into the Gold Niche, then the predicament is: should we not revert back to the Gold Standard. <br />
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Perhaps, the real issue is that no one cares about the one S & P evaluation in the case of US Debt because 'safe haven' should be given more value than the nature or size of the deficit. Or perhaps, as reality sets in, investors will realize that the US will continue refinancing its interest payments at a higher cost indefinitely, and the principal is far enough out that it will not affect their immediate results, and in turn will be itself refinanced. So enough for intergenerational considerations!Circuit theory and modern monetary theory can certainly clarify the situation at hand and suggest reasonable solutions. We are <i>de jure</i> dealing with a perpetual money printing process. </div><div class="MsoNormal"><br />
As bond yields rise, equity markets sell-off, and since interested liquidity is not abundant these days, the market promotes its own volatility, prefers the selloff to being hostage to an uncertain future 12 months down the line-the US debt-limit problem will resurface in 2012. One hears the snickers of a community of free-loaders and free-riders. In the end, one witnesses a run to <i style="mso-bidi-font-style: normal;">les</i> <i style="mso-bidi-font-style: normal;">paradis artificiels</i> of gold and similar glitters. Metals follow course and a manufacturing sector that had tolerated an adverse and unexplainable peak in prices, experiences once again a surge in commodity prices, a drop in demand -the combination of which dampens their recovery. Layoffs follow. Companies close and household wealth plummets. We are in the third phase of the Great Recession, or Phase One of the Great Collapse. For workers and their families, it is inconceivable that this happen in and to the United States. </div><div class="MsoNormal"><br />
<i><b>Did S&P cynically engage in a Marketing bravado of 'I was First' or 'We blew it last time, and we got hammered by the US Government-it's our turn now!!! </b></i><b>'</b><br />
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If so, then it's ironic that Nemesis should be invoked in this farcical manner. Showmanship is not publicly responsible. To be sure, what the Rating Agency contends is that it is simply acting in accordance with its professional responsibility, intending Hayek and claiming unintended consequences with respect to the outcomes in performing its mission.But markets have short memory spans; they were ready to crucify S&P a few years ago for negligence; now they'll take the free ride they offer.<br />
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</div></div><div style="mso-element: comment-list;"><hr align="left" class="msocomoff" size="1" width="33%" /><div style="mso-element: comment;"><div class="msocomtxt" id="_com_1"><a href="http://www.blogger.com/post-edit.g?blogID=4177799728830010196&postID=5966225594298370173" name="_msocom_1"></a> </div></div></div>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-61450317075171518552011-08-05T13:52:00.000-04:002011-08-07T18:19:33.448-04:00<div class="MsoNormal"><span style="color: #990000; font-size: x-large;">Debt-Limit Impasse and US Credit Rating: <u>Nonsense</u> per Beckett </span><span style="font-size: large;"><br />
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The high probability that a political stalemate between a trying President Obama and a headless GOP would unleash an economic nightmare in the global financial system was unprecedented in American politics. To observe this staging with its original cast, from showmanship through the intrigues of <a href="http://www.heretical.com/potter/index.html" style="color: #990000;">gamesmanship</a> only to end in a display of outright irresponsible <a href="http://books.google.es/books?id=7RkL4Z8Yg5AC&dq=thomas+schelling+strategy+of+conflict&printsec=frontcover&source=bn&hl=en&ei=xuSjSbK-I4-O_gai_ticBQ&sa=X&oi=book_result&resnum=4&ct=result#v=onepage&q&f=false" style="color: #990000;">brinkmanship</a> was more like unraveling <a href="http://books.google.com/books?id=Ri5ho6_xorAC&printsec=frontcover&dq=the+worlds+of+Herman+Kahn+absurd&hl=en&ei=luQ-TrGUJ8rf0QGIrfHGBw&sa=X&oi=book_result&ct=book-preview-link&resnum=1&ved=0CCsQuwUwAA#v=onepage&q&f=false" style="color: #990000;">Kahn's absurd</a><span style="color: #990000;"> </span>than <a href="http://books.google.com/books?id=w4t8T2Q8v68C&pg=PA210&dq=thinking+about+the+unthinkable+Kahn&hl=en&ei=ueI-To-jEMHcgQfxocCJCA&sa=X&oi=book_result&ct=result&resnum=8&ved=0CE8Q6AEwBzgK#v=onepage&q=thinking%20about%20the%20unthinkable%20Kahn&f=false" style="color: #990000;">thinking the unthinkable.</a> There was nothing tolerable being rehearsed on the stage in Washington. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">For some, the Republican House had little to lose: they may have shattered the image once and for all of an already tarnished and staggering President Obama, if not out of the White House, most probably out of some future Majority. There is now, in hindsight, a conversation within the GOP depicting the emergence of a ‘Republican moment’ that will define the party and establish its future credentials. For others, this supposedly tactical moment may have sealed the coffin to the GOP's own demise for the upcoming election. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Yet, the debt-limit impasse between a Presidential vision and the GOP counterproposal led most pundits to rethink public ethos and try to figure out which of the parties was more irresponsible: President Obama in failing to appreciate the tactical whims of a political adversary or the Republicans failing to appreciate the gravity of the demise bearing on the American economy , and the unwarranted burden of malaise and suffering being wrought on seniors, children, the sparsely employed and the unemployed.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The actors lost themselves in their mimes. Both parties-the White House and the House have forgotten the nature of their primary obligations. </div><div class="MsoNormal"><br />
Who stands to lose? </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">There are over 14M <i><b>unemployed</b> </i>in the land, <b><i>disposable personal income</i></b> has decreased since 2007 with the exception of the 2009 anomaly,<b> <i>household wealth</i></b> although rising, is slowing down, is also largely mitigated by a rise in values of financial assets that could as easily reverse their course and plummet family balance sheets overnight, and finally <i><b>poverty thresholds</b> </i>are being surpassed daily with over 45.8M, or about 15%, of Americans on food stamps. To further taint this cautionary tale, there is no clearing in that bleak vision that signals an abetting storm; quite to the contrary, a piebald horizon of weak data and weakening indicators omens more the fury of a squall than a desired calm.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">One daresay that the world was witnessing a burlesque rendition of <a href="http://en.wikipedia.org/wiki/Waiting_for_Godot"><i style="color: #990000;">Waiting for Godot</i></a>. Certainly, <a href="http://nobelprize.org/nobel_prizes/literature/laureates/1969/beckett.html"><span style="color: #990000;">Samuel </span><span style="color: #990000;">Beckett</span></a> could not have construed better and original script for a more consequential <i>tragicomedy in two acts, </i>than the Washingtonians did with such a routine episode of American Domestic Politics as the Debt-Limit debate. Note<i> </i>Beckett's <i>Vladimir</i> underscoring Washington's lack of public accountability <br />
<blockquote>"Let us not waste our time in idle discourse! (Pause. Vehemently.) Let us do something, while we have the chance! It is not every day that we are needed. But at this place, at this moment of time, all mankind is us, whether we like it or not. Let us make the most of it, before it is too late!"</blockquote>and with the same breath, note again <i>Vladimir</i> underscoring Washington's lack of political responsibility<br />
<blockquote>"But that is not the question. Why are we here, that is the question. And we are blessed in this, that we happen to know the answer. Yes, in this immense confusion one thing alone is clear. We are waiting for God [ot to come]"</blockquote>Classic Drama, with all the classical elements, written for Washington! <br />
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Yet, Beckett's characters in waiting resonate within the absurd; Washington's characters await generational inspirations for having lacked the day's resolve- again <i>Vladimir </i><br />
<blockquote>"To-morrow, when I wake, or think I do, what shall I say of to-day?" </blockquote>It seems that, if anything is to be recognized, it is that the debt-limit dateline should have been a moot issue; the grotesque impact will and could come from the evaluation of US Treasuries by the <a href="http://en.wikipedia.org/wiki/Credit_rating_agency"><span style="color: #990000;">Credit Rating Agencies, in particular the Big Three</span>,</a>whose own records during the last three years have been less than commendable. The same process that lacked discernment with an infinitely less complex file back in 2007 will now determine the demise of a <a href="http://en.wikipedia.org/wiki/Credit_rating#Sovereign_credit_ratings"><span style="color: #990000;">AAA</span></a> sovereign. If the fate of future generations rests with the <span style="color: #990000;"><a href="http://en.wikipedia.org/wiki/Hubris" style="color: #990000;">hubris</a> </span>of a community of analysts whose only consequent is a pricing label - that influences the cost of capital that should be ultimately tagged to the sovereign’s Treasury, then we are inviting a systemic disarray.<br />
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Yet, the US is still the most secure investment haven in the world and the latter feature will not be justly embedded in the credit rating evaluation. <br />
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The embarrassment cannot be undermined; the economic and financial costs to the US Government and the American people must not be underestimated. The Rating Agencies should defer their assessments in order to fine-tune their methodologies, to refine their presumptions of what constitutes default risk, and to review the values that constitute and embed appropriate fiscal and monetary management of public finances in the 21st century. </div><div class="MsoNormal"><br />
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</div>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-21156140654312859162011-07-22T23:56:00.000-04:002011-08-30T18:15:08.558-04:00<div class="MsoNormal"><span style="color: #990000; font-size: x-large;">Mme. Lagarde’s IMF: Courage more than Heuristics </span><br />
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Our last posting suggested that the IMF exhibit courage in their next selection of a Managing Director. Although we had shown reservations towards a European selection, we confess that the appointment of Mme. Christine Madelaine Odette Lagarde to a five-year term by the IMF Executive Board must have involved great discernment and caution. The IMF certainly demonstrated great courage by dismissing gender issues; and provoked some irony in selecting a neo-liberal/conservative successor to a socialist Mr. Strauss-Kahn. Moreover, no one can now doubt that the IMF did not seriously consider the possibilities and respective consequences that adverse disclosures from the investigation in the Tapie Affair could have on the new Managing Director, the Directorships and overall image of the institution. That <a href="http://en.wikipedia.org/wiki/Point_of_no_return" style="color: #990000;"><i>Rubicon</i></a><span style="color: #660000;"> </span>is no longer a blindside-whatever the outcome. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Mme. Lagarde has enjoyed firsts for most of her life. Her trek from the law firm Baker Mackenzie to France’s Minister of Economic Affairs is convincing. Commanding excellent English, she had an early stint in Washington DC as a congressional assistant to <a href="http://en.wikipedia.org/wiki/William_Cohen" style="color: #990000;">William Cohen</a>, practiced law in Chicago to return to France and oversee <a href="http://www.imf.org/external/np/omd/bios/cl.htm" style="color: #990000;">three key French Ministries</a>. Although her stay at Finance was largely polemical because she was considered by most as an executor of Sarkozy’s monetarism, it finally became controversial with the <a href="http://www.ft.com/cms/s/0/22bdea98-a952-11e0-bcc2-00144feabdc0.html#axzz1SsB9MAi4"><span style="color: #990000;">Tapie-Credit Lyonnais settlement.</span></a> Notwithstanding, Mme. Lagarde is still considered by most critics as a very credible administrator. Some critics wonder whether her alleged monetarism and recent support of the ECB position on debt restructuring presents an intellectual hurdle in her new role. That’s somewhat doubtful. It may have been problematic for a despondent pundit, but it is actually a <i style="mso-bidi-font-style: normal;">non-sequitur</i> for a seasoned professional like Mme. Lagarde. Although her recent record relating to the European debt-strapped sovereigns may be an affront presented by her critics, her more recent announcement since taking over the helm of the IMF indicate that Mme. Chairman may actually be suiting up for a transformative leadership of the institution: </div><div class="MsoNormal" style="margin-left: 36.0pt;"><br />
</div><div class="MsoNormal" style="margin-left: 36.0pt;">… the IMF must be <a href="http://www.imf.org/external/np/sec/pr/2011/pr11260.htm" style="color: #990000;">relevant, responsive, effective, and legitimate</a>, to achieve stronger and sustainable growth, macroeconomic stability, and a better future for all.</div><div class="MsoNormal" style="margin-left: 36.0pt;"><br />
</div><div class="MsoNormal">The governance issues, and not necessarily internal, apparently take some precedence on Mme. Lagarde’ s agenda, There are facets pertaining to the IMF’s cohesiveness and overall effectiveness towards their membership that must be addressed immediately and there are incongruities that must be rectified in order to level the playing field. These <a href="http://www.imf.org/external/np/tr/2011/tr070611.htm" style="color: #990000;">‘…issues</a><span style="color: #990000;"> </span>cannot wait for yet another summer holiday.’ Structurally, the IMF is confronted by an unbalanced membership that is witnessing a proactive effort to realign expectations on the part of emerging economies and a responsive tacit gradualism on the part of the advanced economies. Organizationally, the IMF is experiencing institutional fatigue, and there are very few qualified professionals around since the inception of the Great Recession in 2007 that have any stamina remaining and vision to assume the requisite leadership and ensure the appropriate continuity to an institution that is crucial to the ongoing stability of the global economic system. Mme. Lagarde admits that</div><div class="MsoNormal"><br />
</div><div class="MsoNormal" style="margin-left: 36.0pt;"><a href="http://www.imf.org/external/np/tr/2011/tr070611.htm" style="color: #990000;">We are facing a landscape…</a> with an <i style="mso-bidi-font-style: normal;">uneven process of recovery</i> and specific issues of a divided nature,…,between the advanced economies on the one hand, the emerging markets on the other, and the least developed countries, or low-income countries… with specific issues and yet a path to recovery that is obviously pronounced.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">For Mme. Lagarde, who is a keen observer of <a href="http://www.polsci.ucsb.edu/faculty/rauchhaus/files/other/Rauchhaus--Realpolitik.pdf" style="color: #990000;">Realpolitik</a>, a refined diplomat of European mores and an ardent tenant of neo-liberal values, the signals voiced by the <i>Many</i> and <i style="mso-bidi-font-style: normal;">les Autres</i> are a clear indication that the institution must shed some of its theoretical armour- and modify its <i style="mso-bidi-font-style: normal;">modus vivendi</i> and <i style="mso-bidi-font-style: normal;">operandi </i>in favour of more proactive determinants of social responsibility. </div><div class="MsoNormal" style="margin-left: 36.0pt;"><br />
</div><div class="MsoNormal" style="margin-left: 36.0pt;">…<a href="http://www.imf.org/external/np/tr/2011/tr070611.htm"><span style="color: #990000;">we cannot only analyze the economy by looking at some of the traditional standard criteria</span>…</a>by the hope to reduce fiscal deficits and organize fiscal consolidation in a big way, reduce debt and make it sustainable…</div><div class="MsoNormal"><br />
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</div><div class="MsoNormal">Knowing how to read the writing on the wall involves knowing when to replenish the artist’s easel with different brushes and colors, when to revamp the orchestra’s partition with different instruments, and sometimes knowing when to abandon a well-versed repertoire for newer measures and sensibilities. Contrary to the unsophisticated critic who challenges Mme. Lagarde’s ability to exercise sound judgement and exert good decisions because of her so-called non-economic background, this post suggests <i>Good Riddance for the non-economist</i>! This cynic’s rebuff is understandable: Who put the world economy in this mess in the first place, and who has not been able to restore any credence towards a reasonable path of recovery…certain specialized economists and certain other specialized bankers. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">We contend that Lagarde, if one is permitted to embellish her podium with the generic pun! will be quite the man to do the job. </div><div class="MsoNormal" style="margin-left: 36.0pt;"><br />
</div><div class="MsoNormal"><a href="http://www.imf.org/external/np/tr/2011/tr070611.htm"><span style="color: #990000;">Her explicit resolve to ‘include such matters as employment</span>,</a> social affairs, peripheral components of the traditional economic look at the situation of a country’ is not only a<a href="http://www.imf.org/external/np/tr/2011/tr070611.htm"> <span style="color: #990000;">commendation of Mr. Strauss-Kahn’s </span></a>initiative but a recognition of the underlying critical factors that ensure sustainable economic growth. This flexibility towards diverse economic ideas and options is the mark of a good pragmatist. A non-zealot is what the IMF needs at the moment-an intelligent visionary:</div><div class="MsoNormal"> </div><div class="MsoNormal" style="margin-left: 36.0pt;"><a href="http://www.imf.org/external/np/tr/2011/tr070611.htm"><span style="color: #990000;">The International Monetary Fund is here… to help restore stability</span> </a>where there is instability, and there is plenty of that around; to help make sure the economies of the world work better to provide a better welfare for people. And to that, clearly, employment is a key issue. Whether you look at advanced economies, or whether you look at emerging markets, or low-income countries, the issue of employment is a critical one, and one that actually determines a stable social chemistry for society. So we should not lose sight of the overall main goal of the Fund.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The challenge nuances the Fund’s traditional mission. No one is suggesting that the Fund replace the sovereign’s responsibility over national labour and its social and human development. Mme. Lagarde is clear on the focus as well as the demarcation of independent efforts. She has no ulterior pretensions to create a surrogate for sovereigns.</div><div class="MsoNormal" style="margin-left: 36.0pt;"><br />
</div><div class="MsoNormal" style="margin-left: 72.0pt;">I'm not suggesting that the Fund should be turned into a <a href="http://www.imf.org/external/np/tr/2011/tr070611.htm" style="color: #990000;">specialized boutique on employment</a><span style="color: #990000;"> </span>and best way to reduce unemployment. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">However, she is certainly aware that IMF's traditional fiscal management may not be the only suitable solution, and may not deserve the prominent role it unfortunately once held. She is insightful with regards to spillovers and contagions recognizing their structural presence at the global systemic level, and has committed the IMF to ‘actually addressing, describing, analyzing them’, and hopefully avoid and help resolve them. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">It is not pretentious or gratuitous for<span style="color: #990000;"> </span><a href="http://www.imf.org/external/np/tr/2011/tr070611.htm" style="color: #990000;">Mme. Lagarde to suggest </a>that </div><div class="MsoNormal" style="margin-left: 36.0pt;"><br />
</div><div class="MsoNormal" style="margin-left: 36.0pt;">…Greek political parties altogether either in government or in a position, can be rightly inspired by the decisions, the <b style="mso-bidi-font-weight: normal;">courageous</b> decisions made by political parties in Ireland, the <b style="mso-bidi-font-weight: normal;">courageous</b> decisions made by political parties in Portugal. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The allusion to courage in the context of Greece and similar sovereigns is timely and natural. Courage is not only the trademark of Greek history and Greek culture, but picking up from Aristotle in the <a href="http://en.wikipedia.org/wiki/Battle_of_Salamis"><span style="color: #990000;">Nicomachean Ethics </span></a>and the <a href="http://www2.iastate.edu/%7Ehoneyl/Rhetoric/" style="color: #990000;">Rhetoric</a>, both <a href="http://books.google.ca/books?id=bJuD41RzMjgC&pg=PA4&dq=samuel+johnson+courage+is+the+first&hl=en&ei=NDgqTq25KYfMgQeG1PmxCw&sa=X&oi=book_result&ct=result&resnum=1&sqi=2&ved=0CCkQ6AEwAA#v=onepage&q&f=false"><span style="color: #990000;">Samuel Johnson</span></a> and <a href="http://books.google.com/books?id=xc_748XwCFYC&pg=PA237&dq=Courage+is+the+first+of+human+qualities+because+it+is+the+quality+which+guarantees+the+others.&hl=en&ei=pTcqToj8KMLx0gGz85yGCw&sa=X&oi=book_result&ct=result&resnum=4&ved=0CDoQ6AEwAw#v=onepage&q=Courage%20is%20the%20first%20of%20human%20qualities%20because%20it%20is%20the%20quality%20which%20guarantees%20the%20others.&f=false"><span style="color: #990000;">Winston Churchill</span></a> qualify Courage as <span class="huge">the first of all human qualities.</span> Courage is that necessary disposition that ensures first overcoming and then moving beyond fear to achieving confidence in one’s capacities. Mme. Lagarde understands full well that in order for weakening economies to succeed, it is essential to subvert fear in an unknown future and prep up the confidence factor. In the case of Greece, this modern economic crossroad is reminiscent of <a href="http://en.wikipedia.org/wiki/Battle_of_Thermopylae" style="color: #990000;">Thermopylae </a>and <a href="http://en.wikipedia.org/wiki/Battle_of_Salamis" style="color: #990000;">Salamis</a>. The Greek polis must rise to courage. Following Aristotle’s lesson <a href="http://www.constitution.org/ari/ethic_03.htm#3.8" style="color: #990000;">(Book III, chap 9)</a>, Mme. Lagarde reiterates in her own qualified manner that courage involves some ‘endurance of pain’<a href="http://www.constitution.org/ari/ethic_03.htm#3.8"> </a>; and Mme. Lagarde is certainly no newcomer to courage. Her personal achievements and professional steadfastness are reflections more of that classical virtue than exhibitions of stubbornness and misplaced pride. Her decision to assume the helm of a great but battered organization is an appropriate reflection of courage and resolve: <a href="http://www.imf.org/external/np/tr/2011/tr070611.htm" style="color: #990000;">‘So, here I am. And, for good…’ </a></div><div class="MsoNormal"><span style="background-color: #990000;"></span></div><div class="MsoNormal">We hope so, lest Tapie's <span style="color: #990000;"> </span><i><a href="http://books.google.ca/books?id=05R7kYOKD0cC&pg=PA104&lpg=PA104&dq=fortuna+in+Machiavelli&source=bl&ots=dJ4DzQC-fA&sig=MWHkhsrrbMWGRRdt7NX13OfjaKk&hl=en&ei=8jUqToccx8iBB-LD-IML&sa=X&oi=book_result&ct=result&resnum=3&ved=0CCUQ6AEwAjgK#v=onepage&q=fortuna%20in%20Machiavelli&f=false" style="color: #990000;">fortuna</a> </i>unravels another IMF debacle.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><i>Extrapolating power rankings from FORBES, Mme. Lagarde as Chair of the IMF would now move</i><i> to <a href="http://draft.blogger.com/goog_1032275037">5<sup>th </sup></a></i><a href="http://www.forbes.com/wealth/power-women" style="color: #990000;"><i style="mso-bidi-font-style: normal;">most powerful <b>woman </b>in the world</i></a><i style="mso-bidi-font-style: normal;">, </i><i style="mso-bidi-font-style: normal;">from the 17<sup>th</sup> ranking woman as Finance Minister of France. She also becomes the <a href="http://www.forbes.com/wealth/powerful-people" style="color: #990000;">37th most powerful <b>person</b> in the world. </a></i></div><div class="MsoNormal"><br />
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</div>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-49409842917224742842011-07-22T07:24:00.000-04:002011-07-24T13:04:32.028-04:00<div class="MsoNormal" style="color: #990000;"><span style="font-size: x-large;">The Blogger’s Return</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">If Parliament can recess, then Bloggers can Break. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The Bloggers’s Return, on the other hand is more fruitful than Parliament’s re-entry session.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The advantage of our break is twofold. First of all, one comments with confidence on what happened during the recess and as a result looks pretty good, if not great. Secondly, one finds out how popular one is with family and one’s audience- respectively, they get a well-deserved front look at the poster-person and the rush to the stats hoping for the hopeless is hopeless. That is <u>the true blogger’s fate! faith</u>?!. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Reality is that only a few things are unchanged. In part, the collected efforts and works of the better part of our defunct humanity slyly called the Greatful Dead! And, in passing that’s not many! </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">What has changed? Nothing much, sparsely speaking. Greece, Portugal, Ireland, Spain and Italy have been downgraded by rating agencies: the US is on the next short-list. The IMF has selected a new Managing Director and US Congress is laming a decision on the debt limit-but it won’t affect their salaries. A new nation in Africa-<a href="http://en.wikipedia.org/wiki/South_Sudan" style="color: #990000;">South Sudan</a>, has replaced <a href="http://en.wikipedia.org/wiki/Haiti"><span style="color: #990000;">Hait</span><span style="color: #990000;">i</span></a> as the poorest nation in the world. Haiti still awaits for its announced relief contributions from some Western democracies. Stock markets are so jittery that it looks like they’re dancing to the tune of a <a href="http://en.wikipedia.org/wiki/Tarantella" style="color: #990000;">tarantella</a>. Finally, no one knows what to do about the global economy other than China-although it’s also starting to worry about inflation. Yet, China will not cash in on its US Treasuries. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">So where do we go from here. Best is to start with the IMF because its continuity is so critical to the low-income regions of world.</div><div class="MsoNormal"><br />
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</div>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0tag:blogger.com,1999:blog-4177799728830010196.post-21707985234791279012011-06-11T09:54:00.000-04:002011-06-11T09:54:37.237-04:00Washington Post, Mr. Strauss-Kahn, IMF and the EuroDebt Crises<i>The<a href="http://www.washingtonpost.com/business/economy/worlds-apart-strauss-kahn-and-his-accuser-share-a-native-language-but-nothing-else/2011/05/23/AGxrOEKH_story.html?nl_headlines" style="color: #cc0000;"> Washington Post highlighted an article dated June 6, 2011</a><span style="color: #cc0000;"> </span>covering the Strauss-Kahn vs Sofitel Hotel Maid. One should restrain from commenting the case. The courts will decide on whether there are legal consequences to Mr. Strauss-Kahn's actions, and the French people will decide the political future of Mr. Strauss-Kahn. </i><i> </i><br />
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<i>The human interest perspective of the article was intelligent and very refreshing. In general, the article would have been excellent had it not been for one unfortunate mishap. </i><i>Early on, one reads incredulously the comment by the Post's journalist- Mr. Brad Dennis, who is following the case:</i><br />
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<blockquote><blockquote><b>"Monday’s hearing was the latest development in a scandal that has sparked an international media frenzy, tossed the IMF into chaos and endangered the agency’s efforts to stabilize the European debt crisis."</b></blockquote></blockquote><br />
I have a problem appreciating that the IMF is in state of chaos and a greater problem understanding why Mr. Strauss-Kahn's absence from the IMF should endanger the efforts to stabilize the European Crisis.<br />
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The man has been with the IMF for four years since 2007. His presence certainly did not prevent the global financial collapse of recent years that surfaced in 2007, nor did it appease the intensity of subsequent recessions, nor contain the quasi meltdowns of Iceland and Ireland and the debt crises of Greece and Portugal. This type of <i>hyperbole</i> or if it's the rendition of a third-party remark should be cautioned.<br />
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One can appreciate the figurative scope of the comment had it been a Keynes or a Mr. Paul Volcker. Even then! I am certain that Mr. Strauss-Kahn does not perceive himself in the same league as the former two, nor with Messrs. Bernanke or Greenspan. Nor did he aspire to be in that league. Mr. Strauss-Kahn's ambitions were, metaphorically speaking, groomed for greener fields.<br />
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The IMF as an institution is not charismatic, and its governors do not intend that it be predicated as such. One hesitates to think of the embarassment felt by IMF personnel when one suggests that their reputations are tied to one person. One hesitates to think of the embarassment felt by its governors when a reputable newspaper suggests that the organization they oversee is only one layer deep and just that good!<br />
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If either is the case, spare the needy the expense of a sham and close it down. <br />
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That the future of Greece, of Portugal, indeed of the Eurozone Debt-Crisis, or any other sovereign in the world should be yoked in this manner to Mr. Strauss-Kahn, is inconceivable and moreso unacceptable. Mr. Strauss-Kahn is a competent economist, and was a fine Minister of Finance; but to reduce an Institution whose global stature and mandate is so critical to the development and stability of one hundred eighty-seven countries, to one person is scandalous! Mr. Strauss-Kahn himself would disapprove the comment. <br />
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If the above turmoil and discomfort is true, that is also a scandal. Then some overseers and regulators should have the courage and decency to step down for having failed to ensure transparency and accountability, and be replaced with competent people.<br />
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If, on the other hand, the IMF is in chaos because the incident in New York can unravel other similar disclosures, that is a governance issue of a different type. The readership requires the precision to avoid such ambiguity. <br />
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On the succession issue: one should caution the Eurocentrism that is pervading the IMF and the World Bank. There are very good people with very good ideas beyond Europe, quite deserving of the opportunity to change things and make a difference.<br />
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<b>This is a reprint of a posting that appeared on June 8, 2011 </b>classic indeedhttp://www.blogger.com/profile/03067930754236661277noreply@blogger.com0