Could the next Black Swan event be coming from China? Well, nothing would surprise us. With inequality in China today is at its greatest since the revolution things could start getting interesting. From SMH.
China’s political leaders put stability above all else. So it’s a remarkable sign of the times that they could be passing around well-thumbed copies of a book about the sudden, bloody outbreak of the French Revolution two-and-a-quarter centuries ago.
Why would China’s modern rulers, preoccupied with the leadership handover under way in Beijing this week, be interested in Alexis de Tocqueville’s The Old Regime and the French Revolution?
They are ”fascinated by the French thinker’s writings because of what his observations say about conditions in their times,” says a visiting professor at China’s Sun Yat-sen University, Nailene Chou Wiest.
Since the Communist Party seized power in 1949 in a violent revolution, its highest priority has been to guard against what it calls ”counter-revolution”.
Majority think they know what money is, but after reading this, they understand they were wrong. Essential reading (including the links). Via Golem XIV.
There is a particular scene in the film “It’s a wonderful life” in which the hero of the story is trying to prevent a run on the Bailey Savings and Loan. In an effort to calm the anxious savers wanting to withdraw their money George Bailey cries out “you’ve got it all wrong, the money’s not here, well your money’s in Joe’s house, that’s right next to yours, and the Kennedy house and Mrs Maitland’s house and a hundred others”.
As films go it is a genuine classic. But unfortunately it has perhaps unwittingly perpetuated a whopping misrepresentation of how banks actually work; a little white lie that the IMF have recently just driven a sledgehammer right through.
Their working paper, titled “The Chicago Plan revisited”, seems to have slipped under the mainstream media attention (and most of ours!) during the summer lull. That is until Ambrose Evans-Pritchard of the Telegraph picked it up a few weeks ago. At the core of the IMF paper is a deep seated analysis of how banks actually function in the economy and their role in the money supply. It is nothing short of revolutionary in that the paper gives full acknowledgement of, and support for, an intellectual movement that has doggedly criticised the very nature of money. Criticism that has so far been completely ignored and dismissed by mainstream economics.
Merkel is not very welcome in Southern Europe. Let’s see how the Euromess develops going further. One thing is sure, people don’t like the Troika nor Merkel. From her last visit in Portugal, via Spiegel.
Many people in the country view the situation differently. “Go To Hell Troika,” for example, has been the motto of one Facebook group created by the left-wing opposition, unions and civic groups to protest Merkel’s visit. And five days before her visit, more than a hundred intellectuals and artists signed an open letter posted on the Internet declaring Merkel to be a “persona non grata.” As in Greece, where protesters also greeted the chancellor during her recent visit, Merkel is being viewed by a growing portion of the population in Portugal as the personification of austerity measures and the leader responsible for the painful cuts that they are being forced to accept in return for aid from their European partners.
Another day in Europe. Euro-area finance ministers gave Greece two extra years to wrestle down its budget deficit, pledging to plug the resulting financing gaps in order to keep the country in the single currency and prevent a renewed flareup of the debt crisis.
Guest post by Sober Look.
In late August JPMorgan argued that the ECB’s OMT (Outright Monetary Transactions) program should start with Portugal (see discussion). The prediction was wrong – the ECB disqualified Portugal from participating. But why? After all Portugal has complied with multiple troika reviews and the monetary transmission mechanism in Portugal has clearly been broken. The chart below shows that Portugal’s private sector has not benefited from the ECB’s liquidity injections (LTRO) and the lower overnight rate (prime example of broken monetary transmission).
What’s particularly strange is that the whole justification for the ECB launching this sovereign bond buying program to begin with had to do with problems of monetary transmission (see discussion) in the Eurozone.