You say bailout, I don't say bailout
Jan. 14th, 2011 04:15 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksFrench foreign minister Christine Lagarde has said that the €440bn European Financial Stability Facility (EFSF) might be extended. German finance minister Wolfgang Schaeuble yesterday said whatever the German equivalent is of "no way, José".
This fund, you may recall, was launched in May last year as part of a total €750bn bailout back-up that was meant to be so large that it would never be needed. Now it's beginning very much to look as if Spain is indeed going to need it, and Lagarde has spotted that, oh, €750bn might not be enough after all.
The media reports that because Portugal managed to sell a paltry €1.25bn of sovereign debt at about 6.7% meant that it was "less likely" that it would eventually need a bailout is, I fear, total piffle. Firstly it was a very small amount compared with the total debt it is going to need to refinance, and secondly even this required some solid work on the part of the ECB. The forthcoming default of Portugal is, in a sort of future past participle kind of way, already a done deal. And that brings us to Spain and the prospect of innocent consumers going to the ATM one Monday morning in early November and finding that they don't work.
Since this does not follow the Birks principle of "the least damage to the largest number", I think that we can be fairly sure that various elected and non-elected authorities throughout Europe (the Spanish government itself is actually remarkably powerless in this whole affair, passim the Irish government's humiliation last November) will make sure that Spaniards aren't running around setting fire to every bank in town, just before stringing up the local councillors from lampposts.
Lagarde is making the first step to try to ensure that social armageddon doesn't strike the streets of Madrid along the lines of Tunis at the moment. But Ggermany has less freedom. Just as Ireland is about to virtually destroy a political party at the ballot box, a political party that goes back to the heart of the foundation of the Irish nation state, the German political parties have greater fears to keep at bay. For Germans, representative political democracy isn't "a nice idea" or even "a bad idea" -- it's what they have instead of Nazism or Communism and people being dragged away at 4.30am in the morning, never to be seen again. Put like this, Germany pays a bit more attention to its people than do some countries (such as the UK) where the confidence in the solidity of our current system of government leads to what is clearly the occasional abuse of process (one which, thankfully, standing against which we still have an independent judiciary).
But this veers rather too much towards tedious constitutionalism. This is really about the heart and soul of the people -- the governments of individual countries and the EU itself are something of an irrelevancy. Most people (sadly) haven't read Hobbes' Leviathan, but to do so gives an indication to what extent leaders are invariably pawns of a subset of their subjects. In Germany and France we have different subsets to which the political leaders have to nod, and it is this which is leading to posturing in public and talks behind closed doors as these people desperately try to save the euro (in their own preferred way) without causing an even larger cataclysm than would occur if the euro were allowed to split.
I hear on the radio at the moment that "people power" has already expressed itself in Tunis, with the government being dissolved. But this is a fine example of how events outside governments' control (in this particular case, commodity prices, but in the case of the eurozone, it's past over-borrowing by one sector and over-exporting by another) can bring about social crises.
People are not used to not being in control. They find it hard enough when natural disasters show that there are many things compared to which human beings are as insignificant as ants. When it comes to economies and "market forces", most governments are equally insignificant. hence the attempts to blame "speculators". It's nothing of the kind, of course. Generally speaking, there are no bad guys here (with the possible exception of the fools in the US who deliberately initiated a credit boom in 2001 when the Internet dotcom bubble burst). All the characters were, in a way, pawns in a game of which they had no control.
Tunis -- a non eurozone country, appears to have blown up. This is a fine indication of how fast this kind of thing can happen. This country was seen as an "ideal" for North Africa, far more stable than even Egypt. The banking system has broken down. The supply chain has broken down. Anarchy is in play and it isn't a pretty sight. There is no rule saying that this kind of thing can't happen in Greece, or Portugal, or Spain. Or even Italy. People who say "it couldn't happen here" are living on Fantasy Island. It very much could happen here.
It is the fear of this that leaders within the eurozone are working with, not some airy-fairy academic concern about the euro. Society is always closer to breaking down than we think -- indeed its survival in most of Europe since the early 1970s (the Balkans excepted) might be looked back upon as a golden age. Little wonder, therefore, that there is a willingness to do anything possible to keep the people happy and the financial institutions stable.
______________
This fund, you may recall, was launched in May last year as part of a total €750bn bailout back-up that was meant to be so large that it would never be needed. Now it's beginning very much to look as if Spain is indeed going to need it, and Lagarde has spotted that, oh, €750bn might not be enough after all.
The media reports that because Portugal managed to sell a paltry €1.25bn of sovereign debt at about 6.7% meant that it was "less likely" that it would eventually need a bailout is, I fear, total piffle. Firstly it was a very small amount compared with the total debt it is going to need to refinance, and secondly even this required some solid work on the part of the ECB. The forthcoming default of Portugal is, in a sort of future past participle kind of way, already a done deal. And that brings us to Spain and the prospect of innocent consumers going to the ATM one Monday morning in early November and finding that they don't work.
Since this does not follow the Birks principle of "the least damage to the largest number", I think that we can be fairly sure that various elected and non-elected authorities throughout Europe (the Spanish government itself is actually remarkably powerless in this whole affair, passim the Irish government's humiliation last November) will make sure that Spaniards aren't running around setting fire to every bank in town, just before stringing up the local councillors from lampposts.
Lagarde is making the first step to try to ensure that social armageddon doesn't strike the streets of Madrid along the lines of Tunis at the moment. But Ggermany has less freedom. Just as Ireland is about to virtually destroy a political party at the ballot box, a political party that goes back to the heart of the foundation of the Irish nation state, the German political parties have greater fears to keep at bay. For Germans, representative political democracy isn't "a nice idea" or even "a bad idea" -- it's what they have instead of Nazism or Communism and people being dragged away at 4.30am in the morning, never to be seen again. Put like this, Germany pays a bit more attention to its people than do some countries (such as the UK) where the confidence in the solidity of our current system of government leads to what is clearly the occasional abuse of process (one which, thankfully, standing against which we still have an independent judiciary).
But this veers rather too much towards tedious constitutionalism. This is really about the heart and soul of the people -- the governments of individual countries and the EU itself are something of an irrelevancy. Most people (sadly) haven't read Hobbes' Leviathan, but to do so gives an indication to what extent leaders are invariably pawns of a subset of their subjects. In Germany and France we have different subsets to which the political leaders have to nod, and it is this which is leading to posturing in public and talks behind closed doors as these people desperately try to save the euro (in their own preferred way) without causing an even larger cataclysm than would occur if the euro were allowed to split.
I hear on the radio at the moment that "people power" has already expressed itself in Tunis, with the government being dissolved. But this is a fine example of how events outside governments' control (in this particular case, commodity prices, but in the case of the eurozone, it's past over-borrowing by one sector and over-exporting by another) can bring about social crises.
People are not used to not being in control. They find it hard enough when natural disasters show that there are many things compared to which human beings are as insignificant as ants. When it comes to economies and "market forces", most governments are equally insignificant. hence the attempts to blame "speculators". It's nothing of the kind, of course. Generally speaking, there are no bad guys here (with the possible exception of the fools in the US who deliberately initiated a credit boom in 2001 when the Internet dotcom bubble burst). All the characters were, in a way, pawns in a game of which they had no control.
Tunis -- a non eurozone country, appears to have blown up. This is a fine indication of how fast this kind of thing can happen. This country was seen as an "ideal" for North Africa, far more stable than even Egypt. The banking system has broken down. The supply chain has broken down. Anarchy is in play and it isn't a pretty sight. There is no rule saying that this kind of thing can't happen in Greece, or Portugal, or Spain. Or even Italy. People who say "it couldn't happen here" are living on Fantasy Island. It very much could happen here.
It is the fear of this that leaders within the eurozone are working with, not some airy-fairy academic concern about the euro. Society is always closer to breaking down than we think -- indeed its survival in most of Europe since the early 1970s (the Balkans excepted) might be looked back upon as a golden age. Little wonder, therefore, that there is a willingness to do anything possible to keep the people happy and the financial institutions stable.
______________
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Despite the risk of boring you all ....
Date: 2011-01-14 04:50 pm (UTC)bailing out
Date: 2011-01-14 07:51 pm (UTC)Brian
Re: bailing out
Date: 2011-01-15 12:58 am (UTC)Are we talking "John Bercow" miles here, or Dopey miles?
Keep The Lights On
Date: 2011-01-14 08:46 pm (UTC)The Tunisian situation has moved on significantly. Unless I missed something (and my missus will agree that I do tend to nod off in the news) the BBC coverage of things Tunisian has been very low key and without much analysis of the situation. Now that the top man has fled it might get more coverage, although it will still most likely not be covered as a story linked into the worldwide economic situation but more as a little local difficulty.
I thought the US shootings were as usual rather more of a fixation over here than they should be. Same old story and most Americans will have forgotten about it in 10 days time. It was also interesting to see the switch in the BBC coverage of the weather stories in the southern hemisphere. After, quite understandable, intensive coverage of Queensland they were a little slow to pick up on Sri Lanka and it took a while to push Brazil to the top story. In the latter's case the massive death toll has been caused in part by the economic conditions, but again I don't see much analytical coverage of South America on most news channels.
Better send this before the lights go out again....
Re: Keep The Lights On
Date: 2011-01-15 12:56 am (UTC)They have a finely-developed sense of Aspiration and Inspiration and The Importance Of Events, otherwise known as Early Concretisation.
The Oklahoma Bombings were the (re-)making of Clinton. 9/11 was, despite even his worst efforts, the making of Dubya. I'm pretty sure that the Arizona debacle will also boost Obama at least to the point where he can navigate the next two years through Congress and lock 2012 in.
Then again, I lived in northern California for six years, and I'm still hopelessly confused about how these people purport to use their brains.
Re: Keep The Lights On
Date: 2011-01-15 02:38 am (UTC)I thiught the BBC was very quick to push Brazil to the top, even though the journos' news instincts would have been telling them that Queensland remained the "bigger story". I fear that in the land of "what makes a story" it is mosat certainly NOT true that "all humanity is equal".
At The Risk Of Being Seriously Annoying ...
Date: 2011-01-15 12:49 am (UTC)Not that there's any such thing as one of those, either.
This stuff you insist on inflicting on us miserable depressed losers is beginning to frighten me. Not because of the content, you understand, but because it's like you have a crystal ball. And not the sort of crystal ball that allows you to pick the winner of the 3:30 at Haydock Park, or even the strike price for Portuguese Gilts; oh no. Practically every single issue you've tackled in the last three or four (financial) blog posts has been picked up by the Telegraph, or the Times, or ... well, that's pretty much my sources of news other than Flanders and Peston, and maybe even by them.
May I cite your comments on Chinese support for the Euro? A classic case. Mind you, I preferred your exposition, which had the valuable merit of pithiness.
Either you're not getting paid enough, or there are multiple people out there stealing your thinking.
------------------------
I believe that the Spanish ATMs are run, on the whole, by Santander. Something to consider, perhaps, when living in the (not really affected at all, honest, guvnor) UK.
If Fianna Fail disappears into the dustbin of history, it won't be a moment too soon. That's the thing about "Celtic Tigers" and the like, you see -- they allow a bunch of (essentially) masonic despots to switch from the stagnant years of de Valera to the promise of a pot of gold, without actually changing their behaviour one iota.
Your Hobbesian analysis is characteristically doomy, but I think vastly overstated. Very little of that World Up In Flames stuff is going to happen, if only because the further a global capitalist economy develops, the more automatic stabilisers it generates. (Leaving Malthus to one side for the moment, since that's medium-to-long term, not short-to-medium.) It's possible that China: The Inscrutable Empire Strikes Back will be one of those stabilisers. What the fuck else are they going to do with those savings?
More to the point, I think: you're broadly right that politicians don't want the terms of engagement to change. And you're broadly right that external pressures will force those terms of engagement to change, across all spectrums from the financial to the political to even simple things like housing and transport and food.
Not as bad as you fear, I suspect; but still -- the End of History? Pfui, Francis.
Re: At The Risk Of Being Seriously Annoying ...
Date: 2011-01-15 01:04 am (UTC)It's a wonder we ever managed to garner an Empire. (The accusative bit, in case you're wondering, is "one." It doesn't look much like an accusative, but if you replace "one which" with "he whom" you will see the distinction.)
Re: At The Risk Of Being Seriously Annoying ...
Date: 2011-01-15 02:24 am (UTC)Re: At The Risk Of Being Seriously Annoying ...
Date: 2011-01-15 02:32 am (UTC)You are right. Stabilizers will almost certainly kick in. We will fudge through. Spain will not return to civil war and dictatorship. The French Republic will not fall and a new Hitler will not rise in Germany. Although we might not believe it, we actually HAVE learnt a few things from history -- one of those was that the British way of dealing with restless workers in the 18th century was better than that of France or Russia. A tree that is good at bending is the tree that does not break.
I think therefore that, if a sufficient balance can be kept that stops any powerful force either benefiting or suffering disproportionately (hence the banker bonus fuss) then we will "muddle through", probably via some kind of asset transfer to China (London property, anyone?)
Greece and Portugal are the main worries. I think that they COULD go the way of Tunisia.
Re: At The Risk Of Being Seriously Annoying ...
Date: 2011-01-15 06:11 pm (UTC)Portugal, I suspect, is a different matter. They've done the Fascist dicatorship bit (and Salazar wasn't even a particularly impressive Fascist dictator); they've done the whacking great army too big for the state to pay for bit -- Greece, you will note, has yet to tackle this particular, and very salient, structural problem -- and they've already been hit by the wave of Whenwes from Mozambique and Angola and even Equatorial Guinea, back in the '70s and '80s.
Put simply, there isn't enough kindling to get a proper-sized bonfire going. And the Portuguese people are pretty resourceful as individuals. I'd expect a massive Ireland-style emigration of the young to more promising pastures like Germany.
Of course, that would fuck the Portuguese exchequer up even further.
Re: At The Risk Of Being Seriously Annoying ...
Date: 2011-01-15 09:14 pm (UTC)It's possible, I'll grant you. The Japanese bought Pebble Bay at some outrageous price in the mid '80s, and they were in precisely the same macro-economic/trade surplus position that China is in now.
On the other hand, Pebble Bay is a damn fine golf course. And, famously, yer aspirational Japanese executive would have thought nothing of stumping up $1 million a year just to sign on to a country club that allowed him to hit a three-iron off a skyscraper in downtown Kyoto.
I don't think this is actually the way things will proceed, vis-a-vis PRC asset purchases in the West.
Recent PRC global asset purchases suggest that value rather than dividend is their main aim. Unless another bunch of loony oligarchs comes along and needs a safe haven in London, I don't really think the property market stands up on those terms.
If I were the PRC? Hmm. I'd buy into Australia. I'd think hard about South America. If there's a quiet way in, then Alberta and Manitoba and Saskatchewan and even British Columbia are looking good.
In Europe, I'd go for distressed bits of ex-East Germany on the way up. Oddly enough, I'd buy as much of Croatia and Slovenia as I'm allowed to buy. Assuming I'm prepared to piss the Russians off, I'd buy all three of the Baltics; and failing that, I'd pour shit-loads of money into Poland and the Ukraine in return for food concessions ... no, not the ones you see at baseball games ...
I'd pick off the wrinkly old chateaux and so on from distressed owners who relied on leveraging their bonuses from McKinseys or whatever to start a new life in the country.
Basically, I'd take advantage of the fact that anybody with money to throw around over the last ten years has been a total fucking idiot, and I'd buy their assets at pennies on the pound, and in the case of (say) emerging economies like Brasil, I'd have no opposition worth worrying about.
The very last thing I'd do is buy overpriced shit in Kensington. Lovely, I'm sure, but hardly worth it until it crashes a further 50% or so on the grounds that there are no buyers other than the Chinese, and the PRC ain't gonna let a random Chinese plutocrat jump in first.
A Tescos Express' Worth of Food for Thought
Date: 2011-01-16 05:48 pm (UTC)I've just belatedly come to the final paragraph, and it's a doozie. In the British press, at least, there's a lazy tendency to talk about European Union in terms of Philip II, Louis XIV, Napoleon and Hitler. (For some curious reason they always omit Gustavus Adolphus, Mehmet I, and Alexander I from this list. Presumably simple historical ignorance.) And that rather misses the point, doesn't it?
The whole point of European Union is to avoid this sort of crap. It may not be as immediate an imperative as it was in Monnet's day, or even in Delors', but it's still embedded in the folk memory of governments both in France and in Germany. These two aren't just the leaders of the bloc in economic terms -- there's actually a political moralism going on.
One interesting consequence of this duality is that France and Germany accept the same version of historical teleology in principle, but differ wildly in the interpretation. Broadly speaking, France's post-Napoleonic reaction was to keep the good bits (centralised dirigiste thinking, which worked well for most of the nineteenth century) and drop the bad bits (going it alone). That translates pretty well into the current EU mindset.
Germany's mindset is completely different, although nobody will admit to this. No return to Hitler or to Honecker, as you say, and crucially no return to early Weimar hyperinflation, which they still blame for the first two.
Now, these two attitudes don't commingle very well. I've got enormous respect for Christine, who is one of the sanest European spokespersons around. I've got a sneaking respect for Angela, who is walking a difficult tight-rope. Unfortunately, they're singing from very different hymn-books, and I don't see how the lyrics can be reconciled.
I think the heart of the matter is that the French people won't accept what the German people will, and vice-versa. Maybe it really is going to take riots in the streets and thousands of dead piled up a la Commune behind the barricades to get to a European solution that involves action rather than words.
This is rather a depressing thought.
Re: A Tescos Express' Worth of Food for Thought
Date: 2011-01-16 05:50 pm (UTC)check This is my own
Date: 2011-11-08 08:39 pm (UTC)get This is my own
Date: 2011-11-12 12:16 pm (UTC)