Story on the geopolitical angle from Foreign Policy today. And it’s better than any story you’re likely to find in a major newspaper, too.
Monthly Archives: June 2009
Brad Setser Need Be Curious No Longer
Earlier this week Brad Setser was opining on his blog:
“Like everyone else, I am curious to see what China’s May trade data tells us. If China truly is going to lead the global recovery, China needs to import more – and not just import more commodities for its (growing) strategic stockpiles.â€
Well Brad need restrain his curiosity no longer, since just this very morning we have learnt that:
China’s exports fell by a record in May as the global recession cut demand for goods produced by the world’s third-largest economy. Overseas sales dropped 26.4 percent in May from a year earlier. That compares with the median estimate for a decline of 23 percent in a Bloomberg News survey of 15 economists, and a 22.6 percent contraction in April.
These Guys Don’t Miss A Trick
This morning Bloomberg are reporting that:
Russia’s central bank may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the bank’s first deputy chairman, Alexei Ulyukayev, said in Moscow today. His comments were confirmed by a bank official who declined to be named, citing bank policy. Finance Minister Alexei Kudrin said last month that Russia planned to buy $10 billion of IMF bonds using money from its foreign reserves.
And then I recalled about a week ago reading this:
Russian Agricultural Bank, the state- owned lender to the farming industry, plans to sell dollar bonds in the first offering by a Russian lender to foreign investors this year. The issue by Rosselkhozbank, as the Moscow-based lender is also known, follows OAO Gazprom’s $2.25 billion sale in April, Russia’s only other dollar bond deal of 2009, according to data compiled by Bloomberg. Rosselkhozbank hasn’t set the maturity of its notes, according to a banker involved in the transaction, who declined to be identified before the deal is completed.
Rosselkhozbank hired Barclays Capital and Citigroup Inc. to organize the sale, said the banker. The lender is rated Baa1 by Moody’s Investors Service, the third-lowest investment-grade ranking, and one level lower at BBB by Fitch Ratings. Vnesheconombank, the nation’s state development bank, is planning a $2 billion sale of one-year notes tomorrow that will be privately placed with Russian commercial lenders and the central bank. The sale of 10-year notes by Gazprom, Russia’s gas export monopoly, was the country’s biggest-ever corporate bond offering and the first in dollars since July, Bloomberg data show.
So, if I understand things aright, you first borrow a lot of money in a given currency, and then you wind up a discourse which forces the currency you have borrowed the mony in on an ever downward path. I guess this is what they call “win-win” in Moscow.
Treasuries fell, pushing 10-year yields to the highest level since November, as the government prepared to sell $19 billion in the securities and Russia said it may switch some of its reserves from U.S. debt. Ten-year notes extended earlier losses after the first deputy chairman of Russia’s central bank said the nation may buy International Monetary Fund bonds. Today’s auction is the second of three sales this week that will raise $65 billion as part of the government’s record borrowing program.
More “Green Shoots” – Latvian Exports, German and Japanese Capital Goods Output
Well today there was plenty of fresh news for collectors of “green shoot” negatives. Starting in Latvia, where the Statistics Office announced that exports were down by 30.9% year on year in April (the fastest rate of decline to date), while imports dropped a massive 45.6%. It looks like the Latvian Parliament is set to pass another round of budget cuts today, in the hope that these will bring back growth (how is not clear). All I can say is “these poor people”, I do wish those who were advising them had a better idea what they were doing.
Green Shoots In Germany and Estonia?
Well, I am busying myself this morning scratching around looking for green shoots in Turkey. But even as I was digging for these I couldn’t help notice this coming in over the radar from Germany, courtesy of Bloomberg:
German exports fell more than economists forecast in April as the global crisis restrained demand, keeping Europe’s largest economy mired in a recession. Sales abroad, adjusted for working days and seasonal changes, fell 4.8 percent from March, when they rose a revised 0.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists expected a 0.1 percent decline in April, according to the median of 10 estimates in a Bloomberg News survey.
So German exports have not touched bottom yet – they are still falling. Since the German economy is export dependent, then this implies the obvious, the German economy is still contracting. I don’t think anyone ever doubted this, but looking at the way some of the material has been presented recently, it wasn’t always clear.
On the elections
So the pattern seems to be that incumbent parties did well in three large countries where television news apparently isn’t as independent as you’d wish (Spain, Italy and France) and collapsed in every other country.
(Correlation isn’t always causation.)
UKIP Takes Second Place, Labour Third
Possibly not the best result for a sitting government.
(That’s how British people do understatement, right?)
It also shows at least one of the perils of writing headlines. UKIP did well in 2004, so this result gains them one additional seat in the European Parliament. The Conservatives, who placed first, also gained only one seat, as did the Liberal Democrats. The British National Party gained two, the biggest seat gain of any UK party. Labour lost five seats on a decline of 7 percent in votes.
David Takes On Goliath and Loses: The Ferguson – Krugman Exchange
“As long as excessive debt is not digested, both monetary and fiscal policies are inefficient. There is not much of an alternative. Either to let the economy collapse, in order to reduce debts, and then use fiscal policy to revive it, or inundate the insolvent economy with public credit, to avoid the collapse, and loose the ability of fiscal policy to pull it out of a prolonged lethargy. Either a horrible end or an endless horror.”
After the Crisis: Macro Imbalance, Credibility and Reserve-Currency: André Lara Resende
Well, I think the title to this post makes my view on the high-profile shenanigans we are currently witnessing on the part of two widely respected contemporary intellectuals clear enough, even if Paul would probably respond that he is perfectly well able to take care of himself, thank you very much. Nonetheless, looking at the way the tone of his most recent and most public debate with Niall Ferguson has deteriorated (yes, it is Niall I’m talking about here, and not Sir Bobby, although sometimes even I have my doubts), let me confess, I am not entirely convinced on this point (Niall Ferguson’s argument can be found summarised in his Financial Times Op-Ed here, and in his rejoinder letter to Martin Wolf reproduced by the FT Alphaville’s ever interesting Izabella Kaminska here, while Paul Krugman’s “input” to the debate can be found here, here, and here).
So, since the thunder and lightening that such high profile exchanges generate tends to obscure more than it reveals, let me be so bold as to add my own 2 centimes worth – even if, apologies in advance, the whole affair ends up being most terribly “wonkish”. If you want to save yourself a good deal of trouble, and heart searching, the central point is a simple one: are long term US interest rates rising because investors are worrying about having to buy so much public debt (as K would point out, what else were they thinking of doing with the money – which isn’t really “money” at all, but, oh, never mind), or are they rising because investors expect the time path of US short term interest rates to move steadily upwards? It’s as easy, or as hard, as that. So now, you decide! Continue reading
Latvia – Devalue Now or Devalue Later?
The Latvian economy is certaily stuck in a hard and not especially pleasent place at the moment, and really one chart tells it all, since as we see above the local interbank overnight interest rates have been storming upwards and through the roof over the last two weeks. As a result of this unfortunate state of affairs the country has attained a higher profile in the international news media than most Latvians would ever have dreamt possible, or even, probably, considered desirable. Ever since Claus Vistesen’s last post, my inbox hasn’t stopped filling up with reports, analyses, forecasts etc. (apart from Claus, FT Alphaville’s Izabella Kaminska has had a steady stream of posts – here, here, here and here – while RGE analyst Mary Stokes is a regular follower of the issues – and see again here for some thoughts on the contagion question). Continue reading
Election Night
The antiliberal collective have a good data thread going on; it’s been interesting listening to the BBC Radio feed on one brain interface and reading actual data on another, an experience that reminds just how conventionalised the news experience is. Based on the numbers, it looks like the EPP-ED parties have held their own and gained a little (this is “a triumph” in mediaspeak), some of the social democrats have suffered – notably the French and British – and the Greens and some extreme-rightists have done well.
But the UK Tory blowout hasn’t happened yet. The Tory speakers on the BBC were trying to make out that their results from places like Norfolk, West Dorset, Elmbridge, and Richmond were spectacular, which sounds good until you realise that all of these are areas which have never had any statistically significant Labour support in the history of democracy. Labour has had one stinging experience, the election of a BNP member in Yorkshire.
I’m sorry.
Well, like most BNPers in office, he’ll probably crash in flames in months. Knowing how some of them managed to fail as local councillors, I really wonder what he’ll do with the financial possibilities of being an MEP. He is giving a truly bizarre speech about the D’Hondt system as we speak.
In France, meanwhile, the Socialists’ ego wars have had their impact, and as expected, the Bayrou wave was a flash in the pan. The PS is down as far as 17%, and the Greens had a blowout night, especially in Paris. This suggests that the wing of the party that supported Dominique Strauss-Kahn has swung Green, an interesting result; he did say back in 2007 that “il faut preparer l’apres-petrole”, I suppose. On the comedy wing, one seat has moved from the FN to the Hunting, Fishing and Traditions Party.
Hungary really has seen a disquieting burst of hard-right voters; the quite ugly Jobbik got almost 14%. And Sweden saw both a Socialist majority and a seat for the Pirate Party, which won hugely in the youth vote. The organised hackers/sinister nazi copythieves, depending on media version, are planning to align with the Greens.
The really weird story, though? The British Tories have won big in Wales, where they have no history or support and whose autonomy they opposed. They’ve shut up about that bit lately.
Update: The Scottish Nationalists are claiming to have won heavily.
Update 2: The BNP MEP: not the disaffected ordinary man they would like, but a long-term neo-nazi maniac.
Update 3: German results: CDU 20 points ahead of the SPD, who are down 3 points. That group is equally split between the Left, the Greens, and minors.
Update 4: Oh dear, yer man from the BNP is on the radio. Apparently he thinks that the test of Britishness is “anthropological”, and specifically “like the population after the war”. Fucking idiot. He mentions the voluntary repatriation clause in the 1971 Immigration Act. Ha. Some people used to request voluntary repatriation under the Act, take their air ticket to Jamaica, and take a holiday – because the Act’s drafters set up that any such action was without prejudice to one’s immigration status. He doesn’t seem to know that.
Update 5: Suggested UK figures – Tories 20-odd, UKIP 17, Labour 16, Liberals 15.
Update 6: Results for London. 2 Tories, 2 Labour, 1 Liberal, 1 UKIP, 1 Green. ‘Kippers in fifth place. A good point from Liberal London chairman Simon Hughes – BNP in Yorkshire has only gained 2%, Greens have doubled their share in the UK.
Update 7: UKIP aristocrat babbling on the BBC about Marta Andreesen. “Wouldn’t sign the EU’s fraudulent accounts”. The UK’s national accounts aren’t externally audited, but then, it was never about that. It looks like she beat Tim Worstall though.
Update 8: Jesus wept, Griffin’s in. Can’t wait to see how often he shows up, how much money goes missing, and what happens when he has to shake hands with Danny Cohn-Bendit.