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Tag Archives: Eurozone

A plan to turn the Euro from zero to hero

Guest post by Ari Andricopoulos It is difficult to read the history of inter-war Europe and the US without feeling a deep sense of foreboding about the future of the Eurozone. What is the Eurozone if not a new gold standard, lacking even the flexibility to readjust the peg? For the war reparations demanded at Versailles, or the war debts owed by France and the UK to the US, we see the huge debts owed by the South of Europe to the North, particularly Germany. The growth model of the...

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Chaos in Europe and the flawed monetary system

I spend a fair bit of time in various airports each month and hate the onerous security checks, which at times seem petty in the extreme. It always amused (not the right word) me that a passenger could just walk straight on with a bag full of duty free whisky which would make a lethal weapon if smashed, yet characters like me with pins in my legs (old bike crashes) had to nearly strip each time they had to fly. Now I suppose they will have security screening outside the terminal entrance just...

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The Great Scandinavian Divergence

From @MineforNothing on Twitter comes this chart: Now, we know Finland is in a bit of a mess. A series of nasty supply-side shocks has devastated the economy. When Nokia collapsed in the wake of the 2007-8 financial crisis, ripping a huge hole in the country's GDP, the government responded with substantial fiscal support. This wrecked its formerly virtuous fiscal position: it switched from a 6% budget surplus to a 4% deficit in one year, and although its deficit has improved slightly since,...

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Finland would be better off outside the Eurozone

Towards the end of last year, I wrote a blog – Finland should exit the euro. I had been undertaking some detailed research on the plight of this relatively small Eurozone nation for a number of reasons. First, it had recently undergone a major industrial decline as Nokia/Microsoft missed market trends and went from world leader to irrelevance. Second, Finland was a vocal proponent of the view that Greece should be pillaried into oblivion by the Troika – to ‘take their...

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If I was in Britain I would not want to be in the EU

The foundations of national sovereignty are the currency-issuing capacity of the national government. The foundations of a democracy include the ability of the citizens of that currency zone (the ‘national government’) to choose the political representatives at regular intervals who will make decisions on their behalf. A direct chain of responsibility between the elected officials to the voters is thus established and the citizens can take action accordingly if they feel they are...

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The European circus continues

Yesterday, I briefly examined how a pack of big-noting financial market traders were trapped in stupidity by patterned behaviour and self-reinforcing group dynamics (aka Groupthink). Today, we consider the neo-liberal Groupthink that continues to trap political leaders and policy makers in Europe into a web of denial and stupidity. In both case, innocent people have suffered huge negative impacts while, by and large, the idiots have escaped fairly unscathed. The recent data from Eurostat...

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The trade effect of negative interest rates

Yesterday, HSBC prepared the ground for imposing negative rates on business depositors. This is an excerpt from HSBC's letter announcing the necessary change to the Terms & Conditions of HSBC business accounts:   Now, this requires some explanation. Firstly, the change applies only to BUSINESS accounts. Retail depositors are unaffected. Secondly, it applies only to currency accounts, not sterling accounts. And thirdly, despite HSBC's mention of "negative rates set by central...

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The reality of Germany and the buffoons in Brussels intervenes …

This week, I seem to have been focused on central banking this week, which is not my favourite topic, but is all the rage over the last several days given the decision of the Bank of Japan to use negative interest rates on any new bank reserves and then continue to pump reserves into the system via its so-called QQE policy (swapping public and corporate bonds for bank reserves), and then imposing a tax on the reserves so created. Crazy is just one euphemism which comes to mind. So still on...

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The ECB could stand on its head and not have much impact

As the Bank of Japan began its hopeless quest to stimulate growth with negative interest rates (see my blog yesterday – The folly of negative interest rates on bank reserves), the latest data from the ECB came out on lending to households and non-financial institutions. It tells an interesting story. The story has to be framed within the knowledge that oil prices have now fallen by some 77 per cent. But the major factor that is not usually mentioned when commentators talk about ECB...

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European-wide unemployment insurance schemes will not solve the problem

On June 10, 2015, the Italian finance minister wrote an Op Ed article for the UK Guardian – Couldn’t Brussels bail out the jobless? – which continued the call from those who sought ‘reform’ of the Economic and Monetary Union in Europe for a European-wide unemployment insurance scheme. This idea continues to resonate within European circles and is held out as a major improvement to the failed Eurozone system. My response is that if this is as far as the political...

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