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am i richer or poorer?

I have a yak wool hat. A week ago, someone offered me 20 euros to buy it. Now I can only get 10€.

I still have my hat!!

“Just how bad have the last three years been for some Americans? A Fed survey has some brutal data today showing that both median family income and net worth dropped dramatically over the last three years. The median family net worth dropped a staggering 40% to $77,300 in 2010 from $126,400 in 2007, the Fed said in its Survey of Consumer Finances which is released every three years. The median family income dropped as well from $49,600 in 2007 to $45,800, or a 7.7% drop.”

the web address for this article is
https://www.abelard.org/news/economics022012.php#inflation_and_prosperity_120612

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updated ho ho ho €40 billion; ho ho €400 billion; &euro trillion- maybe

“Debt crisis: Germany signals shift on €2.3 trillion redemption fund for Europe The German government has begun opening the door to shared debts for the first time in a profound change of policy, agreeing to explore proposals for a €2.3 trillion (£1.9 trillion) stabilization fund in order to stop the eurozone’s crisis escalating out of control.” [Quoted from telegraph.co.uk]

“Italian banks are strong and there is no need to fear possible contagion from the troubles of Spain's banking sector, the general manager of Italian bank UniCredit said on Saturday. Euro zone finance ministers meet to discuss a bailout of Spain's banks on Saturday, although officials have sought to emphasise that the Spanish troubles were spawned by a burst property bubble rather than by government finances as in Greece. "Our banks are strong," UniCredit's Roberto Nicastro said at a conference of young entrepreneurs organised by business lobby Confindustria. "Spain can be in a delicate situation, but substantially we do not have to be scared about Spanish banks" ” [Quoted from cnbc.com]

“Spain's problems are multidimensional, from having to deal with real estate to fixing the budget deficit and all at the same time,” said Jakobsen. “The idea that you can solve the situation with 40 billion euros of European money for the banks makes no sense.” An EU and International Monetary Fund bailout package for Spain that covered the government's gross funding needs through the end of 2014 and included 75 billion euros to recapitalize banks would amount to about 350 billion euros, David Mackie, the chief economist at JPMorgan Chase & Co. (JPM) in London, wrote in a May 30 report.” [Quoted from smh.com.au/business]

Nothing to see here, move along, the king isn’t naked. Really peally, he isn’t.

And now Ireland wants more favourable terms for its bail out.

The more I see of this, the more it looks like a slow motion bail out similar to that underway in the UK and USA; but it’s ‘illegal’' in the eurozone. And Merkel has an election.

In my view, they will just continue to print money surreptitiously while all the time denying it. But the huge transfers from north to south will continue, while they try to play a three-card trick with the electors.

the web address for this article is
https://www.abelard.org/news/economics022012.php#spanish_bailout_100612

the slow-motion crash that is the euro

we don’t want your euros - capital controls

“Heretical thoughts are gaining traction. El Confidencial suggested that Spain should engage in "blackmail" against the EU ("chantaje" in Spanish). "Rajoy has a card up his sleeve: leaving the euro. It is not the best option, and fundamentally it is not what most people want. But the time has come to make Brussels a poisonous proposal: "we have already done everything we possibly can, and if you won’t help us, we will leave," it said.”
—
“Italy is scarcely more predictable. Ex-premier Silvio Berlusconi offered us his cunningly pitched "mad idea" on Friday. If the ECB refuses to act as a lender of last resort, Italy should take matters into its own hands. "We should use our own mint to print euros," he said. It is a thinly veiled threat.”
—
“Switzerland is threatening capital controls to repel bank flight from Euroland. The Swiss two-year note has fallen to -0.32pc, not that it seems to make any difference. Denmark’s central bank said it was battening down the hatches for a "splintering" of EMU. It has cut interest rates twice in a matter or days and pledged to do whatever it takes to stop euros flooding into the country. Contingency plans are on the lips of officials in every capital in Europe, and beyond. On a single day, the European Commission said monetary union was in danger of "disintegration" and the European Central Bank said it was "unsustainable" as constructed. Their plaintive cries may have fallen on deaf ears in Berlin, but they were heard all too clearly by investors across the world."

basel 3+ causing another credit crunch

As warned several times.

“Tim Congdon from International Monetary Research said regulators were making a grave mistake by forcing banks to cut lending during a slump. "What they are doing is frightening. If banks shrink their balance sheets, it destroys money. It causes a credit crunch and intensifies the recession. This is why we are facing a global slowdown," he said.”

the web address for this article is
https://www.abelard.org/news/economics022012.php#euro_slomo_crash_040612

lower taxes, better outcomes

“Econometric analysis of advanced OECD countries for the period
1965-2010 finds that a higher tax to GDP ratio has a statistically
significant, negative effect on growth. For example, an increase in
the tax to GDP ratio of 10 percentage points is found to lower annual
per capita GDP growth by 1.2 percentage points. A similarly
statistically significant negative effect on growth is found with a
higher spending to GDP ratio. Detailed regression analysis stripped
out the impact of variables such as investment as a proportion of GDP,
the growth rate of the labour force, and the growth rate of human
capital.”

There’s a quick and dirty video for those who don’t want to work.

20-page .pdf report.

the web address for this article is
https://www.abelard.org/news/economics022012.php#lower_taxes_better_outcomes_280512

bernanke on the euro chaos

21st March 2012

“Although progress has been made, more needs to be done. Full resolution of the crisis will require a further strengthening of the European banking system; a significant expansion of financial backstops, or "firewalls," to guard against contagion in sovereign debt markets; and, critically, continued efforts to increase economic growth and competitiveness and to reduce external imbalances in the troubled countries.

“Actions Taken by the Federal Reserve
The Federal Reserve has followed developments in Europe closely, and we are in frequent contact with key European policymakers. We are particularly focused on protecting U.S. financial institutions, businesses, and consumers from adverse financial and economic developments in Europe.”

In English, don’t lend to PIIGS.

"As part of this exercise, bank capital positions were evaluated under a hypothetical stress scenario that involved a deep recession in the United States (with unemployment reaching 13 percent) and a notable decline in activity abroad, combined with sharp decreases in both domestic and global asset prices. This exercise was designed to capture both the direct and indirect exposures and vulnerabilities of U.S. financial institutions to the economic and financial stresses that might arise from a severe crisis in Europe. The results show that a significant majority of the largest U.S. banks would continue to meet supervisory expectations for capital adequacy despite large projected losses in an extremely adverse hypothetical scenario.”

In English, US bank stress tests are much stronger than those in the EUSSR.

“Third and finally, leaders of most of the members of the European Union have approved a new fiscal compact treaty that strengthens fiscal rules and their enforcement. This treaty represents a positive step toward resolving the fundamental tension inherent in having a monetary union without a fiscal union, and thus should help bolster the viability of the euro-area economy in the longer term.”

In English, the EU is removing powers from previously sovereign nations.

end note

PIIGS

The countries in the European Union with weak economies: Portugal, Italy, Ireland, Greece and Spain.

the web address for this article is
https://www.abelard.org/news/economics022012.php#bernanke_euro_crisis_240312

an interesting discussion of ‘liquidity traps’

Be sure scan through the various comments.

“...In 1940, Dennis Robertson, one of Keynes’ intellectual antagonists, invented the soubriquet ‘the liquidity trap’ to describe this unfortunate state of affairs.

“The catchy phrase has subsequently appeared countless times in textbooks. However, few people now read The General Theory with the care and attention that it demands, and the original meaning of the liquidity trap has been diluted almost to vanishing point. The phrase has come to be applied to any situation in which, in some sense or other, ‘monetary policy does not work’. For example, Paul Krugman, has asserted in several articles in his New York Times column – as on 14th December last year – that the world’s leading economies are in ‘a classic liquidity trap’.

“According to that column, a classic liquidity trap occurs when ‘a zero short-term interest rate isn’t low enough to restore full employment’. Krugman – who won the Nobel economics prize in 2008 – is widely regarded as the USA’s most articulate and effective spokesman for Keynesian ideas. For those uninitiated in macro-economic theory his words are taken as gospel. However, the trap called ‘classic’ by Krugman is no such thing.”

the web address for this article is
https://www.abelard.org/news/economics022012.php#liquidity_traps_090312

travel by train, but not in britain

Britain: the most expensive, least comfortable and least efficient railways in Europe.

Train season ticket prices
England	Woking > London	22 miles	£3,268
France	Ballancourt sur Essone > Paris	24 miles	£924
Germany	Strausberg > Berlin	21 miles	£705
Spain	Collado-Villalba > Madrid	22 miles	£673
Italy	Velletri- > Rome	22 miles	£336

“A couple of years ago, I needed to travel on short notice from Barcelona to Alicante on the 31st December for a NYE party. All flights were fully booked so I headed to the train station dreading how expensive the ticket will be (by UK standards). When I arrived there, I was advised that only first class seats were still available!

“ I decided to take one without asking for the price not to get a heart attack. I was astonished and amazed when the cashier asked for 84 € for the 6.5 hours journey! That included food and drinks throughout the trip. I had a sandwich lunch, a glass of champagne, 3 beers and 2 short glasses of Shivaz whisky. I enjoyed the trip more than the NYE party especially as this route is a coastal one.

“OK, now imagine if this was a London to Edinburgh trip under the same circumstances The 1K mark would have easily been reached!” [From a correspondent]

Incredible!

I noted this in the linked article: