FM newswire for 11 December, hot articles for your morning reading - Fabius Maximus website

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This is what I found interesting, so it’s today’s broadsheet from the FM website pressroom, with several sections of hot news.  Lot’s happening in the world today, mostly either overlooked or misinterpreted by the mainstream media.  

1. Links to interesting news and analysis
2. Factoid for the day:  the price of oil unchanged for 5 years
3. Update on the disintigration of the European Monetary Union
4. Update: watch China take the next step to global leadership
5. Economics insight:  how the financial sector causes recessions
6. Plus an Afterword

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(1)  Today’s links  

1. Misogyny is totally cool when you’re multicultural about it:  “What signal does Barbie’s burka send?“, Mark Steyn, Macleans, 10 December 2009 — “Women forbidden by law from feeling sunlight—hey, that’s a positive message for young girls.” 
2. “Iraq: A Unified Kurdish Army?“, Stratfor, 10 December 2009 — Kurdistan takes another step to full Statehood; Stratfor remains oblivious.
3. “George F. Kennan on the Escalation in Afghanistan“, Antiwar.com, 9 December 2009 — A voice from the past gives us sound advice.
4. The EPA believes that we’re fools:  “EPA chief: Timing is a coincidence“, Politico, 10 December 2009 — How odd that the EPA rules CO2 a pollutant on the eve of the Copenhagen global warming conference.
5. State Capitalism at work — government aid for rich corporations and banks:  “As Boeing Hits Turbulence, Uncle Sam Flies to Its Aid“, Wall Street Journal, 10 December 2009 — The not so invisible hand.

(2)  Factoid for the day:  the price of oil unchanged for 5 years 

More precisely, the nominal price of spot Brent has been flat for the past 56 months. It’s down roughly 10% in real terms. This is an indicator of the supply/demand balance, far superior to the one-sided analysis — looking only at production only — used by the peak oil charlatans.

(3)  Update on the disintigration of the European Monetary Union

“It’s All Greek to Me“, Edward Hugh, 7 December 2009 — Conclusion:

We might be forgiven for getting the impression that to date rather than acting as a stimulus to deep economic reform, Euro membership has rather acted to reward those countries who would get into more and more debt, with ever less sustainable economic models, by supplying them with funding at far cheaper rates of interest than the markets would otherwise make available. It is this particular clockhand that Europe’s leaders would now dearly like to turn backwards, and this is why I have little doubt that it is in Greece that a stand will now be taken. If not, then that longest of long runs may arrive rather sooner than some of us, at least, are comfortable with.

For more about this see “Can the European Monetary Union survive the next recession?“, 11 July 2008.

(4)  Update:  watch China take the next step to global leadership 

Providing lifelines — in exchange for western-friendly terms — is the role of the IMF.  But we no longer have the money to fund it.  Will China take over this role?  Greece is going broke, and needs money.   Who will bail them out?  “Greece Aims to Sell Bond to Chinese Banks“, Wall Street Journal, 29 November 2009.

Posts about China’s evolution to global leadership:

• Greece Aims to Sell Bond to Chinese Banks”, Wall Street Journal, 29 November 2009.Power shifts from West to East: the end of the post-WWII regime in the news, 20 December 2007
• China becomes a super-power (geopolitical analysis need not be war-mongering), 9 July 2008
• Words to fear in the 21st century: Lǎo hǔ, lǎo hǔ, Lǎo hǔ, 14 July 2008
• A different perspective on the US and China, seen by an American living in Russia, 23 March 2009
• China – the mysterious other pole of the world economy, 22 July 2009
• Another big step for China on its road to becoming a great power, 27 July 2009
• Will China collapse?, 5 August 2009
• A revolution is not a dinner party. Thoughts about the future of China, 19 August 2009

(5)  Economics insight:  how the financial sector causes recessions

“Credit booms go wrong“, Moritz Schularick and Alan Taylor, 8 December 2009 — Money paragraph:

However, on the real economic side, a striking result is that the economic impact of financial crises is no more muted in the postwar era than in the prewar era. It seems that postwar policy activism was “successful” in preventing financial deleveraging but not in reducing the output costs. A cynic might conclude that central banks were successful in bailing out finance but failed to protect the real economy.

… And yet it may be plausibly argued that the postwar ascent (especially since the 1970s) of a regime of fiat-money-plus-lender-of-last-resort could have also encouraged the expansion of credit to occur. Aiming to cushion the real economic effects of financial crises, policymakers have effectively prevented the periodic deleveraging of the financial sector seen in the olden days, resulting in the virtually uninterrupted growth of leverage we saw up until 2008.

This is a summary for a general audience of this paper:  “Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008“, Moritz Schularick and Alan M. Taylor, National Bureau of Economic Research, November 2009.

(6)  Afterword   

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