Quotulatiousness

July 14, 2011

The Eurozone crises

Filed under: Economics, Europe — Tags: , , , , , , — Nicholas @ 17:30

That’s right, crises, not crisis. There are three interlinked crises, not just one:

The crisis in the Eurozone has been lurching from one country to another over the past year or so. After bailouts for Greece, Ireland and Portugal, and with a second bailout for Greece in the offing, the financial markets this week turned their attention to Italy, a far larger economy than those previously affected. Spain, another country struggling to pay its way, has also been hit by austerity measures and political turmoil. But while it is easy to get caught up in the specifics of each new stage of the crisis, it is worth taking a step back to understand what is going on and the possibilities for the future.

The Euro crisis, like just about every other economic story these days, has a three-fold character. It is not, in fact, a single crisis; it has three inter-related elements: financial, economic and political.

Of the three, the financial crisis is, paradoxically, the least significant, even though it is the most prominent of the three and the one which threatens to spin out of control with serious broader consequences. Alongside the financial, the economic aspect is the most entrenched and material of the three, while the political crisis — that is, the failure of the political elites to get on top of the other two challenges — is the most critical, as it is, or should have been, the key to the resolution of the other two. The shift in focus to Italy, the Eurozone’s third largest economy, indicates that time may have run out for effective containment. The Euro genie is probably out of the bottle.

April 18, 2011

True Finn party surges to 39 seats in Finnish election

Filed under: Europe, Politics — Tags: , , , , — Nicholas @ 15:53

From nowhere to third-largest party:

The True Finns finished just behind the conservative NCP and the Social Democrats on around 19%.

While the Social Democrats have called for changes on EU bail-outs, including the planned Portuguese rescue, True Finns opposes the plans altogether.

A hostile Finnish government could theoretically veto the package.

Unlike other eurozone countries, Finland’s parliament can vote on whether to approve the measures.

Correspondents say the increased sway of Euro-sceptics in Finland’s parliament could hold up any further bail-out deals.

As the biggest party, the NCP is tipped to lead the next government with former Finance Minister Jyrki Katainen likely to become prime minister of whatever coalition emerges, replacing Mari Kiviniemi of the Centre Party.

Gavin Hewitt called it a “tremor” with an “epicentre” in Finland:

A few years ago the True Finns were a fringe party, that received almost no attention. So what happened? The vote was not just about the bailout. There was anxiety about unemployment and fears of a jobless economic recovery. Reductions in pensions had angered many workers. The party also tapped into fears about immigration.

What makes this election so significant is that it follows a pattern across Europe. Establishment and incumbent parties are being rejected. Nationalist parties are gaining influence.

In the Netherlands, the anti-Islam MP Geert Wilders leads the country’s third largest party. In Italy the Northern League — hostile to immigration and wary of the EU — is increasingly powerful. In France, Marine Le Pen — who wants to abandon the euro — is showing strong support in the polls.

Recently, writing in the Financial Times, Peter Spiegel questioned whether we were seeing the emergence of a European Tea Party. Certainly there is a strong sense of alienation and dissatisfaction. Immigration is a key factor. It is shaking governments. There are more than 24 million people without work in the EU and there is no appetite to welcome new arrivals. That is why the migrants from Tunisia are sparking such tension between Italy and France.

As important as immigration is unemployment. In countries like Italy and Spain there is talk of a “lost generation” that cannot find work. There is a growing awareness that Europe may be a low-growth area.

H/T to Elizabeth, who reminded me that I had an obligation to report the final results after having posted links to the election race twice before.

April 17, 2011

This is why the Finnish election matters to Portugal

Filed under: Economics, Europe, Politics — Tags: , , , — Nicholas @ 09:00

Unlike most other EU states, Finland has an option of putting the bailout to a vote:

Opinion polls suggest the True Finns have nearly quadrupled in popularity since the last election though they are unlikely to enter government.

Analysts see mainstream parties taking a harder line on the EU as a result.

Unlike other eurozone states, Finland can put requests for bail-out funds to a majority vote in parliament.

Since any bail-out must be approved unanimously by all 17 eurozone members, a hostile Finnish government could theoretically veto it.

The outcome of Sunday’s election may affect EU plans to shore up Portugal as well as impacting on stability in debt markets.

April 8, 2011

Monty’s daily dose of DOOM!

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 11:12

People suffering from over-cheerful attitudes about the future of the European Union could just read Monty’s chock-full-of-DOOM postings at Ace of Spades HQ for a quick depressant:

Let’s begin abroad by explaining why Spain is boned. Spain suffers from the same disease as the rest of the continent generally — socialism, postmodernism, an ossified job market, an unsustainable welfare state — but in more concentrated form. Spain is so boned that their main export these days is young ‘uns (h/t Andy).

If you look at the countries currently in the midst of insolvency in Europe — Ireland, Greece, Portugal, and (shortly) Spain — it’s obvious that they are different entities altogether from their more prosperous European peers. For one, most of them are recent entrants onto the first-world stage. Spain languished under Franco until the mid 1970′s; Ireland only emerged from decades of civil strife (both amongst themselves and against England) in the early 1990′s; and Portugal was (and still is) a third-world nation glued to the continenet almost as an afterthought. Portugal is more properly thought of as a North African developing country than a first-world European country, whatever the maps say (h/t rdbrewer).

The Euro project hid those problems…for a while. Cheap credit allowed the dysfunctional European countries to borrow enough money to pretend to a first-world standard of living for more than a decade. There was real growth in the various economies — particularly in Ireland — but much of the “growth” was mainly borrowed money with little attendant economic or social reform.

The Great Downturn of 2008 did not cause the problem; it simply exposed what a sham the whole thing had been all along.

England is watching the drama play out on the Continent, and thanking $DEITY that they never signed on to the Euro. England still has serious problems, but they also have options that the other European nations do not have because they control their own currency.

As usual, the original post has lots of links to follow to increase the dosage of DOOM. Adjust intake to adequately suppress your optimism.

November 30, 2010

Ireland’s debt problem

Filed under: Economics, Europe, Humour, Politics — Tags: , , , , , — Nicholas @ 07:48

James Howard Kunstler looks at Ireland’s plight:

When you’re out of the country, as I was last week, it’s good to know that the home folks are keeping up with the Kardashians and bravely venturing into the blood-splattered chambers of cable TV’s latest hit, Bridal Plasty — where candidates for marriage are transformed from Holstein cows into inflatable sex toys by magic surgical technology — not to mention all those humble guardians of freedom who kept the parking lots of WalMart safe for consumerism in the wee small hours of Black Friday. These are, after all, perilous times.

Elsewhere, Ireland and the rest of Europe wore themselves out with soul-searching all week over how to handle national bankruptcy within a currency system that bears only a schematic relation to reality. Does the bankruptee go broke all at once, or is she recruited into permanent debt slavery so that the bond-holders of various banks can keep their loved ones in marzipan and Fauchon’s wonderful marrons glacés for one more holiday season? As of Monday morning, Ireland has been commanded to, er, bend over and pick up the soap, shall we say, for about a hundred billion euros in loans that will not be paid back until a mile-high ice-sheet covers Dublin (something that might happen sooner rather than later if the climate mavens are right).

We’ll see how this bail-out goes down with the French and German voters, too, who have to pay for it, after all, especially as Portugal, Spain, and Italy line up at the cash cage for their cheques (and bars of soap). Of course, a few more basis points in the interest rate spreads could prang the whole Euro soap opera — does anybody really believe this game of kick-the-can will go on after New Years? I’m not even sure it goes on past this Friday, but I am a notoriously nervous fellow.

This is almost as good as the (temporarily discontinued) daily Financial Briefings from Monty.

H/T to Terry Kinder for the link.

June 16, 2010

Monty explains it all for you

Filed under: Economics, Europe, Humour — Tags: , , , , , — Nicholas @ 12:02

Financial worries? Fiscal imbalance? Debt woes? No problem! Monty has the answers (well, answers to some questions, even if they’re not the ones you’re interested in):

And the good news just keeps coming! Slumping cattle and lean-hogs futures may have bottomed out. Screw gold, man; I’m buying swine! (Monty, The Wasteland Bacon Baron. It has a nice ring to it. The potentate of pork! The sultan of swine! The High Lord of ham! The chitlin Chieftain!)

I’m not sure whether this is good news or not: Cramer calls yesterday’s big gain a sucker’s rally and advises people to get out. My rule of thumb is to treat anything Cramer says as the ravings of a lunatic. I consider him a shill and a buffoon. And yet . . . is this a Strange New Respect I’m feeling? Or just the dying embers of that burrito I ate for lunch yesterday?

French financial group AXA experiences a blinding glimpse of the obvious and exclaims, “Ze Euro eez doomed!”. Zut alors! (And no, I don’t know why French guys would be speaking English with a French accent instead of French.)

Spain and Portugal submit their austerity plans to the ECB and IMF. Plans include selling shoelaces at the airport, dancing for nickels, graft, corruption, and murder-for-hire. The ECB and IMF remain skeptical, and suggest that Portugal and Spain might want to look into selling the family silver or something.

And if all of that isn’t enough to get you assembling your Financial Apocalypse Survival kit, how about this?

More bond issues are being denominated in Canadian Loonies and Swiss Francs as investor skittishness regarding the Euro spreads. When investors choose something called the “Loonie” over your currency because it just sounds more stable somehow, dude, you got problems.

May 3, 2010

The end of a monopoly

Filed under: Economics, Europe, Science — Tags: , , , — Nicholas @ 12:00

Wine bottles have been sealed with natural cork for hundreds of years. It is an extremely good, natural product that has been used by almost all wine producers because it was better than every other economic sealant available. But cork has a problem that, as a natural product, it is subject to certain risks, the worst of which from a wine viewpoint was contamination with the chemical compound called 2-4-6 Trichloroanisole (usually abbreviated as TCA).

It only takes a tiny amount of TCA to ruin a bottle of wine: and it occurs naturally in the trees from which the cork is harvested. Wine producers and consumers were demanding a solution (wine writers have estimated that between 10% and 15% of all wines suffer from TCA tainting). As monopoly suppliers, however, the cork producers did very little — where else were wineries going to get their bottle closures?

Enter the competition:

By the 1990s, retailers and wineries were clamoring for a solution to wine taint but the cork industry didn’t respond. “No industry with 95% to 97% market share is going to see its propensity to listen increase —and that’s what happened to us,” says Mr. de Jesus from Amorim.

The outcry was just the opening needed by Mr. Noel, a Belgian immigrant who in 1998 began making what he calls “corcs,” he says in part to avoid lawsuits from cork producers, in his North Carolina plastics factory.

Mr. Noel, whose company had specialized in extruded plastics such as pool noodles, named the new business Nomacorc LLC. He eventually built a new, highly automated factory that does nothing but churn out the plastic stoppers, 157 million a month.

The business took off as wineries, desperate for closures that wouldn’t cause cork taint, lined up to buy his product. Nomacorc now has plants on three continents, which produce 2 billion corks a year.

I’m not a big fan of plastic corks — I’m starting to prefer modern Stelvin twist-off closures — but at least with a plastic cork, there’s almost no chance of TCA contamination. I don’t buy very expensive wines, so the most expensive wine I’ve lost to cork taint was only about $60, but that’s still more money wasted than I’m willing to put up with.

If you’ve ever had a glass of wine that smelled of mouldy cardboard, you’ve had TCA-contaminated wine.

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