Author Archives: Edward Hugh

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

Now For Some Real Medicine

Posted on by

Paul Krugman has on occassion suggested ironically that Bagdad was only for the boys, that the ‘real men’ would go to Teheran. Well here’s another of those ‘real men’ in the economics field: Paul Betts writing in the FT, with one of those delicious ‘wingnut’ arguments:

“A dose of sado-monetary policy from the European Central Bank could force long overdue structural reform in Europe. Rather than follow Sweden’s example by cutting interest rates, the ECB should consider pushing them higher.

Politicians, especially in Berlin and Paris, would hate it. Wolfgang Clement, Germany’s finance minister, applauded the Swedish decision as showing how a central bank could support general economic policy without upsetting its price stability strategy.”

Portugal and the SGP

Posted on by

With all the fuss about Italy, I’ve obviously been neglecting poor little Portugal, but Joaquim Almunia hasn’t forgotten about them. According to Business Week:

“The European Union’s head office told Portugal on Wednesday to cut its burgeoning budget deficit and public debt, saying the country’s economic slowdown was no excuse for violating euro-zone rules on sound finances.

Portugal follows Italy and Greece in facing a formal complaint from the European Commission for running up government borrowing way above the limit of 3 percent of gross domestic product set for countries using the euro.”

The Head Office eh? I presume they mean the Commission. You can find the relevant document from the Economics and Financial Affairs department here.

Two Views of Europe

Posted on by

Gerhard Schr?der said yesterday that Europe had to choose between two versions of its future: one as a politically united continent able to hold its own in a globalized economy and the other as an enfeebled trading block.

“The core question is: which Europe do we want? Do we want a united Europe capable of acting, a real political union … or do we want to limit ourselves to being a large free-trade zone?”

Meantime Wolfgang Gerhardt, opposition Free Democratic party’s parliamentary leader and the man widely billed as Germany’s next foreign minister, said:

“he was ?not entirely unhappy about the outcome of this summit?. Had a budget been agreed, ?we could have ended with a money-sharing compromise that would have left 40 per cent of EU expenditures going to agriculture,? he said of last week’s acrimonious, and ultimately fruitless, talks“.

Gerhardt suggested this in an interview with the FT where he indicated that Germany should press France to accept cuts in European Union farm aid to ease a deal on the EU’s “controversial long-term budget”.

Turkey Grows and Grows

Posted on by

One of the few real IMF success stories, the Turkish economy continues with what Serhan Cevik calls its spectacular normality:

The Turkish economy is now in its fourth year of uninterrupted growth, with an average real GDP growth rate of 7.5% per annum. Indeed, the trend growth rate surged from 3.9% in the 1990s to 5.8% in the post-crisis period and to an impressive 7.8% last year. And we project 7.2% growth for Turkey in 2005 and 6.8% next year, compared with average OECD growth rates of 2.6% and 2.8%, respectively. Obviously, this is an unusual performance for a country that had long failed to keep the economy close to its potential on a sustainable basis. In fact, the growth rate of real per capita GDP decelerated from 2.3% per annum in the 1970s to 1.7% in the 1980s and then to 1.3% in the 1990s leading to the 2001 crisis. However, with prudent fiscal and monetary policies and structural reforms, real per capita income increased by 18.9% on a cumulative basis in the last three years, and should remain on an above-trend growth trajectory in the coming years.

Quinquireme of Nineveh

Posted on by

Globalisation, of course, isn’t a new phenomenon. Those who have been following my demographic material will not be surprised that the role of migration in human history is a topic which fascinates me. Well, Juan Cole has a very ‘informed’ post today about a piece of genetic research which claims to show that half of the inhabitants of Madagascar come from Borneo, while the other half derive from East Africa.

Those who want to learn more about all this could do worse than try some Cavalli_Sforza. ‘Luigi’ is undoubtedly the ‘grand-father’ of the current attempts to fuse archaelogy, linguistics and genetics. Many of the papers on site at his Stanford based Human Population Genetics Laboratory make very interesting reading.

Full disclosure: reading C-S was one of the things which really started me off thinking about all those ‘demographic issues’.

Finland Proposes

Posted on by

The Finnish government intend to push for an eco-efficient European economy when Finland assumes the EU Presidency in the second half of 2006.The inspiration will be the national Finnish programme for sustainable consumption and production. Back in 2002 the EU committed itself, during the Johannesburg Earth summit, to establish a ten-year framework programme for sustainable consumption and production, to date little has come of this.

Poland Cancels Referendum

Posted on by

Poland is now the seventh country to suspend its referendum plans. Denmark, Portugal, Sweden, Finland, Ireland and the Czech Republic have already done so. Portugal has ammended its constitution to make it possible to hold a referendum on EU related matters, but evidently there are no plans to hold any in the foreseeable future. Germany, I think, is still awaiting a judicial ruling on this topic.

Just A Fairy Story?

Posted on by

Or a real possibility: the euro at 1:1 with the dollar? The FT today cites one trader who thinks it a definite possibility. Of course, they also often quote others who hold a contrary opinion. So why do I pick up on this one? Because even though I don’t have access to the technical and currency market info, it fits in with my general reading of the respective underlying ‘macro’, and the way things could well evolve. Certainly the euro has been resisting strongly the push under the $1.20, and continually recovers ground lost. What you can say is that there is a lot of ‘volatility’ out there.

Paul Chertkow, head of global currency research at Bank of Tokyo-Mitsubishi, said a fresh impetus was needed to re-test the downside of the euros recent range, at $1.2020.

However, Mr Chertkow believes there are around $1bn worth of options in place below the $1.20 level, which could cause the euro to slide precipitously if triggered. We would have real panic, he says.

In this eventuality Mr Chertkow sees scope for the euro to fall as far as $1.10, or potentially, even parity against the dollar, led by euro-selling by US companies. American corporates have insufficient hedging ratios to protect a move on the downside through $1.20, he said. This would cause American corporates to capitulate.

Sweden Acts On Interest Rates

Posted on by

Well Sweden has just put the cat among the pigeons. Taking advantage of its ability to apply an independent monetary policy, the Riksbank has decided to cut its base lending rate from 2.0% to 1.5%. The reason why is not hard to discern, apart from the reduced growth forecast for this year, the inflation rate is falling dangerously low, at just 0.2% year on year in May, dropping from a 0.4% y-oy in April and 0.5% y-o-y in March. Obviously Sweden is on deflation alert, and in fact a greater reduction (say 1%) might have been justified.

This is bound to spark all sorts of additional debate about the euro, and its advisability. Finland would be the best point of comparison here. The Finnish inflation rate was 0.6% y-o-y in May, but it has been hovering precariously near the zero level for the last month, anything which gave a sudden push to the disinflation process, like a sudden bust in commodity prices, would certainly clearly knock Finland over the line.
Continue reading →