Global debt and the great rebalancing

August 20, 2015

After the 2008 financial crisis and the longest and deepest global recession since World War II, it was widely expected that the world’s economies would deleverage and that global levels debt would be slowly reduced as usually happens in the aftermath of a financial crisis. It has not happened. Instead, debt continue to grow in […]

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The Troika is dead

August 16, 2015

The European creditor nations and Greece have reached an agreement on a third bailout in five years.The bailout, which was approved by Greece’s Parliament includes the familiar details, in return for an infusion of 86 billion euros Greece has promised to increase taxes, cut spending and enact measures to make its economy function more efficiently. […]

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The Chinese devaluation in context

August 14, 2015

The People’s Bank of China announced this week over several days a series of devaluations of the China’s currency, the renminbi or RMB. These were each the largest single-day devaluations in the RMB since 1994 and the entire package of devaluation constitutes a Chinese policy move that has important implications for the world’s two largest […]

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Some recent items of interest

August 10, 2015

Oil futures hit a six month low Following up on my recent post about the impact of low oil prices it is worth noting that the price of crude oil futures touched multi-month lows on Monday. Brent Light hit a low of $48.24 (the the lowest in over six months) and U.S. crude was down […]

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Fracking may financially ruin Saudi Arabia

August 8, 2015

The United States has just passed Saudi Arabia as the world’s largest producer of oil. The USA passed the Russians, who were in second place, a few months ago. This is a momentous global political and economic event which will have vast implications. The increase in US domestic oil production has been due entirely to […]

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The significance of the Chinese stock market crash

August 7, 2015

In the previous post I looked at the big picture of the Chinese economy, examining the big structural imbalances that will need to be addressed though a major economic adjustment over the new few years and possibly decades. For a variety of reasons, such as the scale of the structural problems, the depth of the […]

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Thinking about China

August 5, 2015

China seems set to take over the world, its rate of growth has been astronomically high in the last couple of decades and it seems to be on course to become the largest economy in the world at some point soon. The Chinese are buying up companies and resources all over the world. China seems […]

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Some recent items of interest

July 30, 2015

Yanis Varoufakis explains his friendship with Norman Lamont. He says: When I was living in Britain, between 1978 and 1988, Lord (then Norman) Lamont represented everything that I opposed. Even though I appreciated Margaret Thatcher’s candour, her regime stood for everything I resisted. Indeed, there was hardly a demonstration against her government that I failed […]

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Plan B and the leaked tape

July 29, 2015

Over the last few days a tape has leaked of a teleconference that Yannis Varoufakis had, after his resignation, with a group of potential investors in Greece. The teleconference had been organised by Norman Lamont, who is a friend of Varoufakis, and was conducted under Chatham House rules of confidentiality, however someone leaked the transcript […]

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Greece is not the only country with unsustainable debts in the eurozone

July 22, 2015

Consider Portugal. In the first half of 2011, Portugal received a €78 billion IMF-EU bailout package in a bid to stabilise its public finances. Portugal is often presented as showing how a relatively poor eurozone member state can cope with a big debt problem by obeying the rules and embracing harsh, but necessary, ‘reforms’ and […]

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Osborne’s budget

July 20, 2015

When George Osborne unveiled the first fully Tory budget for close to twenty years just over a week ago it caused a significant degree of disorientation in the Labour parliamentary group and on the left in general. It had been expected that it would be focussed on austerity and more cuts in public spending but […]

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Recent items of interest

July 19, 2015

I recently wrote an article about Ordoliberal theory, the way that it has come to dominate economic policy making in the eurozone and the implications that that has for Europe. Now we have it straight from the horses mouth. Here is a an interview with Donald Tusk, the European Council president, in the Financial Times. […]

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New IMF report says Greek debt is unsustainable

July 14, 2015

A new leaked report from the IMF, which the eurozone leaders had seen before the completion of the deal on the third bail out program, makes it very clear that Greece will need far bigger debt relief than is currently under discussion. The reason the necessary debt restructuring must be bigger is entirely due to […]

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Fear and loathing in Brussels

July 13, 2015

I am still reeling from the events of the weekend, I nearly exhausted myself following the saga into the early hours. I think the EU is a different place after the events of the last few days. Essentially the Greeks said more or less yes to everything that had been demanded of them only to […]

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Will Berlin blink?

July 9, 2015

A disorderly Grexit grows closer. One can sense a lot fear and anxiety building up. Nobody knows what will happen if Greece is ejected from the eurozone but its probably not going to be good for anyone. Now it all hinges on Berlin, if the German government steps back from its insane instistance that ‘rules […]

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Some interesting snippets from the Eurozone

July 8, 2015

The IMF has made €2.5 billion in profit from its loans to Greece by charging a high rate of interest The IMF has been charging an effective rate of 3.6% interest on its loans to Greece. This far more than the rate of interest the Fund needs to meet all its costs which are currently […]

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The ECB turns the screw

July 6, 2015

As I explained in my previous post yesterday the job of a central bank is to support banks who are solvent but who are suffering a liquidity crisis. A common cause of a liquidity crisis is that too many people are trying to take their money out of the banks all at the same time, […]

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Understanding the Greek banking crisis

July 5, 2015

The closure of the Greek banking system has severely disrupted the Greek economy and the lives of millions of Greek citizens, and has sharply escalated the financial crisis in the country. What caused the Greek banks to close? The general narrative about Greece tends to collapse a very complex situation and history in to a […]

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Enough!

July 3, 2015

Greek debt is unsustainable. The entirely predictable results of refusing to countenance debt restructuring back in 2010 when the crisis erupted and the IMF were first involved, and then the woefully inadequate partial and begrudging partial debt restructuring in 2012, has been economic collapse in Greece. The continuing crisis has not been because the Greeks […]

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“Sorry the failed policies we forced on you shrunk your GDP by 27% and gutted your economy. Now please run a budget surplus.”

July 2, 2015

For the first time the IMF has said in public that Greek debt is unsustainable and needs to be restructured. At the same time leaked background documents detailing the most recent offer from the Troika (the one the Greeks are putting to a referendum) also explicitly accepts that debt restructuring is needed. The IMF acceptance […]

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