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".

Does Emigration Put Spain’s Health and Pensions System At Risk?

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According to the Economist’s Buttonwood, “desperate times require desperate measures”. I am sure this is right, times in Spain are certainly getting desperate and many of the measures being implemented in Brussels, far from representing radical and innovative solutions look much more like continually closing the barn door after the horse has bolted.

The issue Buttonwood draws our attention to in the blog post which accompanies this statement is that of migration trends within the Euro Area and the impact these have on trend GDP growth and structural budget deficits in the various member countries. This is an important issue indeed, since such movements seem to be an unforeseen and largely unmeasured by-product of the current monetary and fiscal policy mix being pursued by the EU and the ECB, yet the consequences they have shape the long term future of the whole Eurozone, and with it the sustainability or otherwise of the component states. Continue reading →

When Is A Promise Not A Promise?

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Mario Draghi is proving to be a man of his word. He said he would do whatever he needed to do to hold the Euro together, and – so far so good – he has. Up to now of course some would say his will has not been truly tested, since all he has had to is sit there and twiddle his thumbs, and that has worked. It seems to have been the subliminal symbol the markets were waiting for. Continue reading →

The Great Portuguese Hollowing Out

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With every passing day Portugal has less and less economy left, while fewer and fewer people remain to try to pay down the debt.

As Portuguese President Aníbal Cavaco Silva once put it, “A country without children is a nation without a future.” He was, of course, referring to his country’s ultra-low birth rate, which is just over 1.3 (Tfr) and has been below replacement level (2.1Tfr) since the early 1980s. In 2012 only just over 90,000 children were born in the country, the lowest number in more than a century – you need to go back to the nineteenth century to find numbers like the ones we have been seeing since the crisis really took hold. Continue reading →

The Shortgage of Bulgarians Inside Bulgaria

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Oh, there’s a hole in my bucket, dear Liza, a hole……

Wenn der Beltz em Loch hat –
stop es zu meine liebe Liese
Womit soll ich es zustopfen –
mit Stroh, meine liebe Liese

According to Angela Merkel, speaking in the German city of Mainz in mid February,  European countries struggling with the fallout of the euro-area debt crisis have much to learn from East Germany’s experience with economic overhaul following the fall of the Berlin Wall. In the main she was speaking about the need for reform, something on which we can all agree. “At the beginning of the 21st century”, she said, “Germany was the sick man of Europe and that we are where we are today also has to do with reforms we carried out in the past. That’s why we can say in Europe that change can lead to good.”

But there was one tiny little detail she forgot to mention. During the post unification period East Germany’s population went into melt-down mode. Continue reading →

Has Spain’s Economic Contraction Now Become Self Perpetuating?

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Spain’s political leaders are in cheerful, almost jubilant, mood at the moment. Economy minister Luis de Guindos, speaking in Davos, declared the tide had turned, and forecast that the Spanish economy would return to growth in the second half of 2013.

“The perception of the Spanish economy has improved and will continue to do so over the coming weeks and months,” he told his audience at the World Economic Forum. In similar vein, he told Spanish journalists in Moscow last weekend that Spain’s economy no longer being a key theme at G20 meetings was another welcoming sign of the times.

As ever, Spain’s economy sage is hedging his bets – earth shattering the growth will not be, but grow the economy will, this is his mantra. Put another way, the bottom in Spain’s economic collapse has now been passed. From here on in the road may be winding, but it will be up. Perhaps, he suggested, the economy will be stationary in the third quarter, and then we will see growth, albeit ever so slight, in the fourth one. And quite possibly he is right. The core of the issue is not whether the country could see one, or even two, quarters of positive performance, but whether any faltering recovery will be sustained out into the future, through 2014 and beyond. It is here that all the old doubts really emerge. Continue reading →

Hungary’s Matolcsy Joins Japan’s Abe In Practicing The Ancient Art Of Verbal Intervention

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It’s amazing what you can achieve these days just by promising to do something. It’s also fascinating to watch just what a storm you can stir up.

Last July Mario Draghi surprised markets when he  vowed to do anything – whatever it would take – to save the Euro. He didn’t go into details, he didn’t really need to. He simply informed his audience that whatever he did it would be enough. What I suppose no one – not even Mr Draghi himself –  imagined at the time was that doing precisely nothing would turn out to be sufficient. Yet since that time that is just what has happened, he has done nothing, nothing whatsoever – no bonds have been purchased and no country has even asked for aid. So to date this verbal style intervention has been exactly what he said it would be, enough. Continue reading →

Japan’s Looming Singularity

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by Claus Vistesen and Edward Hugh

According to Wikipedia, in complex analysis an essential singularity of a function is a “severe” singularity near which the function exhibits extreme behavior. The category essential singularity is a “left-over” or default group of singularities that are especially unmanageable: by definition they fit into neither of the other two categories of singularity that may be dealt with in some manner – removable singularities and poles.

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No need to panic, a lot of analysts tell us, since far from being on the verge of some earth shattering event Japan  has invented the economic equivalent of a mechanical perpetual motion machine. Or as Nobel economist Paul Krugman put it recently, “while there is much shaking of heads about Japanese debt, the ill-effects if any of that debt are by no means obvious”. Maybe there is just one word missing here – yet. Continue reading →

After The Fat Lady Sings

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Financial journalists across the globe were both surprised and puzzled recently when they heard Christine Lagarde using a strange expression. “You know, it’s not over until the fat lady sings, as the saying goes,” she told bemused reporters at a press conference in Manilla. Which fat lady, and what does she sing must have been questions going through the heads of many of those present. Continue reading →

El Rosario De La Aurora

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The exact origins of the expression are unknown. They are lost back then, somewhere in the mists of time. But the meaning of the phrase is perfectly intelligible. In Spanish “to end up like the Rosario De L’Aurora” (acabar como el rosario de la aurora), means to end up badly. Very badly. The Rosario in question is a procession (of the kind to be seen in this YouTube video) and aurora here is not a woman’s name, but the Spanish word for dawn. According to legend, the procession which gave birth to the phrase was characterised by a dispute which developed into an outright brawl during which all those precious sacred artifacts being carried by the devout got unceremoniously destroyed. Continue reading →

Taking A Man At His Word

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Legendary hedge fund supremo Ray Dalio is in ebullient mood. Following a series of moves by Mario Draghi to underpin European government financing Dalio told Bloomberg that, in his opinion, the euro will now “likely” stay together because existing growth-constraining austerity measures will henceforth be balanced by money printing over at the European Central Bank. His statement was, of course, a response to ECB President Draghi’s save the Euro pledge. Continue reading →