Europe’s Real Crisis
The Troika has “saved” Greece, but there is more to be done. People have shifted focus to Italy and Spain now. Yes, these economies are big, and the debt ratios (irrespective of what Spain tells us) out of control. What is there to be done, is it even possible getting that growth we need in order to achieve the growth rates necessary for the economy to prosper? Europe’s biggest problem going forward is the ever falling fertility rates, especially in the Med countries. Europe needs workers and higher worker productivity in order to fix this mess. From the Atlantic.
ALL OF US can breathe easy now: policy makers and analysts finally agree on how to fix Europe’s problems.
“Europe Debt Crisis Plan Hinges on Economic Growth,” declared the Los Angeles Times in October, after finance ministers announced what felt like the hundredth plan to seriously, no-foolin’-this-time, really rescue the European Union’s illiquid and insolvent states.
“Countries have to undergo significant structural reforms that would revamp growth,” said Mario Draghi, the head of the European Central Bank, in a December interview with the Financial Times.
“Austerity is not enough, even for budgetary discipline, if economic activity does not pick up a decent rate of growth,” Italian Prime Minister Mario Monti told The Economist in January.
Bernanke’s duality
Why not try something “else”? Krugman on the pre Fed Bernanke, and the current Fed Bernanke.
Ball starts from what many of us already noted: Bernanke’s harsh early-naughties critique of the Bank of Japan’s inadequate response in the face of the zero lower bound — its “self-induced paralysis” — applies with almost eerie precision to the Bernanke Fed. So the question is what happened. Ball gets much more specific by pointing to an apparent shift in 2003, following an FOMC discussion of policy at the zero bound, in which BB appears to fully endorse the much more limited view of its policy options offered by Vincent Reinhart.
As Ball parses it, before that meeting BB endorsed, at least as possibilities:
- Targeting long-term interest rates
- Currency depreciation
- Money financed deficit spending
- A Krugman-style inflation target
After 2003, however, his menu seemed to have been reduced to:
- Guidance on future short-term rates (the rates the Fed sets)
- Purchases of long-term bonds and other nonconventional assets
- “Oversupplying reserves”, that is, just pushing up the monetary base
USD, Gold, Spain and plunging exchange products (TVIX) in the latest things that make you go hmmm
Another great weekend reading by Grant Wiliams.
ETFs definitely provide
easy diversification, tax efficiency and low ex- penses to investors while offering the benefits of ordinary shares such as limit orders, short- selling and options markets BUT, the desire to entice investors into the market by making a cornucopia of investment opportunities to them through simple vehicles has led to a ‘dumbing- down’ of the investment process in a never- ending quest for the simplest possible route into an idea when the plain truth is, there ArE no substitutes for doing the necessary research required when thinking about investing money into something. The unevenness of the regula- tory regime surrounding these instruments has not exactly helped matters in that it has made investors believe that if they are allowed to do something, it must be safe.
The pejorative term ‘Videogame Generation’ is frequently aimed at the youth of the 90s and 00s who, it is alleged, sit in front of their TV screens mindlessly pushing buttons and pay-
ing no attention to the world around them. It is synonymous with a group of people who, it is felt, look for simplicity and convenience and cannot be bothered to engage with the world. It implies a certain amount of intellectual deser- tion on their part which, when one looks at the complexity of the games they are playing, is perhaps not justified.
If you have ever watched a rapt teen playing Guitar Hero or trying to infiltrate an enemy lair in Call of Duty, you will know, as i do, that these are extremely complex, hard to master and pro- vide enormous gratification to those successful in winning.
It used to be the same with investing, but now that too has been dumbed-down – a dangerous direction in which to go.
Full must read Hmmm Apr 01 2012
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