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".

Much Ado About Nothing?

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The European Commission’s has just published the latest set of EU trade trade figures. Among the surprising details are that overall EU textiles imports were little changed. China textile importas, of course, rose – by 40% – but this was offset by a decline in 54.4% (from Burma) and 41.4% from the Philippines, South Korea, Thailand, Pakistan and Bangladesh also “saw significant falls, by 28.6 per cent, 15.1 per cent, 16.3 per cent and 9.3 per cent respectively”. (all data in value terms and for the first first eight months of the year). As the FT notes the numbers:

“are likely to confirm fears that developing countries are among the main losers after last January’s worldwide removal of textiles quotas.They have struggled to keep up with China’s large and modern clothing production facilities in a liberalised trading environment

“.

One To Watch in Russia

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Russia’s by now well known demographic problems are not, IMHO, going to leave us in peace, the danger is always going to be there of a nasty political evolution which we will in the end have to sit up and take notice of. One of the many possibilities seems to take the form of the Rodina party which Neil Buckley and Arkady Ostrovsky write about in the FT today:

A blonde, Slav-like woman pushes a pram over the rubbish. Then two respectable-looking men arrive. One is Dmitry Rogozin, leader of the nationalist Rodina (Moth- erland) party. They order the men to pick up the litter, while Mr Rogozin’s companion asks menacingly, “Do you understand the Russian language?” On the screen, the slogan appears: “Let’s rid our city of rubbish.”

So runs a television advertisement for Rodina that may have got Russia’s fastest-growing political party banned from elections to the Moscow city parliament next Sunday. The city court ruled this weekend that Rodina’s advertisement incited ethnic hatred and the party should be struck off the ballot. Mr Rogozin is appealing to the supreme court.

The advertisement has been central to Rodina’s campaign for the Moscow parliament poll, the biggest test of its popularity since it unexpectedly won 9 per cent of the vote in national parliamentary elections in 2003.

Remember Me When I’m Gone

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Just when he’s left the FT concludes that Schroder’s labour market reforms are in fact working. It is perhaps worth bearing in mind that although the German economy is producing a lot of jobs, a very high proportion of these are temporary.

Controversial labour market reforms introduced in Germany by Gerhard Schröder in 2004 are showing results, according to data published less than a week after he stood down as chancellor…..The state-run BA employment service in Nüremberg said the total number of job placements by employment offices across Germany would exceed 1m this year, an increase from 496,000 in 2004. The average length of unemployment had fallen from 22 months a year ago to about 21 months today – a downward trend that was set to continue next year.

Italian Pension Reform

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The Italian government finally agreed the details of the new penison reform yesterday. Curiously, it does not need to go to parliament for approval. Getting government agreement had not been without difficulty, and again interestingly enough it won’t come into effect for two years, giving next year’s incoming government plenty of time to change its mind.

The reform aims to launch a second pillar of private and occupational schemes to flank state pensions, using money which companies currently hold on behalf of their workers in a fund which employees receive when they leave their job. It will come into force at the same time as a reform of the state pension system which raises the retirement age to 60 from 57. Both measures could be changed or scrapped between now and 2008 by whoever wins the 2006 general election.

Investment Dearth?

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The idea that there was a global savings glut now having gone out of fashion, some are presently arguing that what we have is an investment dearth (my own view is that these two effectively mean the same thing, since the issue is a relational one). More evidence for this investment dearth hypothesis comes today from the UK.

UK Business investment grew sluggishly in the third quarter, official figures showed, confirming survey evidence that British-based companies are cautious about capital spending even though profit levels are high.

As the FT also notes:

Just as in other European countries, companies have decided to save most of the money they have been making rather than risk investment in new opportunities to generate profit in the future. The reluctance of companies to invest when interest rates are low and the return on the existing capital stock is high has puzzled economists for some time.

Dave Altig had a piece earlier in the week about the BoE rate decision wher he tries to put a brave face on the UK data. This investment news is another little bucket of cold water for the upside optimists. I’m more or less neutral here. The monetary policy committee intimate that the weakening of investment intentions “may also reflect uncertainty about the near-term outlook for the economy in the face of sluggish consumer spending and higher energy prices”. Dave concludes that “Perhaps the uncertainty will lift sooner than later”, and I agree, I’m sure it will: I’m just not sure which way the resolution of the quandry will lead us.

Thicker And Thicker

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Well, the Antonio Fazio question seems definitely to have decided that it doesn’t want to go away. The FT today informs us that the European Commission will take legal action before the end of the year against Italy over the allegations that against Fazio ( governor of the Bank of Italy). This threat is, however, not without its own problems since:

the Commission would be suing the Italian government, which has asked Mr Fazio to step down but cannot remove him. Mr Fazio is appointed for an indefinite term and can be removed only by the central bank’s board. Mr Fazio has denied any wrong-doing. On Thursday, he told Bank of Italy employees: “To serve the state independently . . . is the attitude that has always inspired the actions of the central bank.”

“To be independent, or not to be independent, that is the central bank question”

Well, Well, Well

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I have no idea whether the report pubished by the UK Daily Mirror that George W Bush discussed with Tony Blair the idea of bombing the Doha headquarters of the Arabic satellite TV channel al-Jazeera is well founded or not. How could I, I have no way of checking one way or the other. I do however agree with William Wallis and Roula Khalaf of the Financial Times that the fact that the British government has threatened newspapers with the Official Secrets Act if they reveal contents of the document does constitutes at least prima-facie evidence that the document exists, and contains information which the UK government is anxious not to make public.

I would also note that here in Spain this is only going to fuel more feelings about the José Couso case. José Couso was a journalist who worked for the Spanish TV channel Tele Cinco, and he was killed when a US tank opened fire on the Hotel Palestine in Baghdad during the 2003 invasion of Iraq. The case is scheduled to go before a judge here in the not too distant future.

As ye sow, so shall ye reap.

Schyzophrenia Outbreak At The FT?

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I know you should never take what a central banker says at face value, but still. Today Christopher Swann in Washington tells us (in an article entitled: End in sight to the Fed’s rate-tightening cycle – and with no question mark):

For much of the past year and a half the Fed has been running almost on autopilot, with rates being raised from their historic low of 1 per cent in June last year to 4 per cent now in a lockstep of quarter-point moves. None of the economic vicissitudes over the past 18 months – from Hurricane Katrina to surging energy prices – has diverted the Fed from its gradual task of bringing rates to a more neutral level.

But this week’s minutes suggested in the clearest language yet that this task is almost done. In 2006 any further rate rises will have to be justified by surprising economic data, the Fed’s internal discussion appeared to indicate.

For the first time since the rate-tightening began, some of the members of policy-making committee also warned about the dangers of going too far

Meanwhile, back home in the UK, Steve Johnson has this:

“In contrast to the ECB’s caution, comments from the US Federal Reserve hinted at several more rate hikes to come.

Michael Moskow, president of the Chicago Fed, suggested that the Fed funds rate would rise above the “neutral” level expected by the market. “With inflation at the upper end of my comfort zone, an unexpected increase in inflation would be a serious concern.””

So come on lads, get your act together, which is it, almost done, or plenty of juice left in the lemon yet awhile?

Scrambled, Or Sunny-Side Up?

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How would you like your eggs done here sir, scrambled or sunny- side up? Of course my hilarity here may be due to the fact that Huevos in Spanish has a rather different connotation:

A South Korean scientist whose cloning of a dog Time magazine called this year’s most amazing invention resigned on Thursday as head of a global hub for stem-cell work because two members on his team donated egg cells for study.