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".

Turkey Fails To Delight

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I don’t know if anyone else has noticed, but there seems to have been a deafening silence on outcomes following last weeks ‘informal’ EU foreign ministers gathering in Newport. The only thing I have been able to find was a piece from Radio Free Europe which informed me that ‘No News Is Good News‘. Possibly, but this doesn’t explain the reasons for the blackout.

Meantime all the headlines are stolen today by the results of a survey of EU opinion on the accession question conducted for the German Marshall Fund.
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On Un-Common Ground

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Now just remember, you read about it first on Afoe. Bertrand Benoit and David Pilling have an excellent article in the FT today:

Question: Which of the world’s biggest economies is holding an early election this month dominated by debate over radical economic reforms?

Two clues: The economy, long in the doldrums, is showing signs of life, thanks to improving exports and a restructured private sector. An ageing population is making structural reform an urgent priority.

The answer: Not one, but two countries – Japan and Germany.

Just my point in my earlier post, and the more this connection is recognised the sooner we’ll enter the zone of framing meaningful solutions. As the FT writers suggest, there are many intriguing parallels between next Sunday’s Japanese election and the German ballot one week later.
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China Watching

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The Economist has a timely, and very sobre assessment, of the state of the Chinese company (or should that be the Chinese state company, in any event Howard French has posted the entire piece, just in case we get link-rot), Brad Setser has a very well argued post on how China effectively seems to be continuing to operate a dollar peg (“Rather than pegging at 8.28, China is now seems to peg at 8.095-8.11”), and Asia Pundit Myrick has an excellent round-up of the general state of the argument in the ongoing ‘China Soft or Hard Landing’ debate.

Troubled Waters And No Bridge

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Global Voices has a story (Hat Tip Financial Times and Simon World) about how China dissident Shi Tao has more than a little cause to be angry with Yahoo. Reporters Sans Frontiers, on analysing the text of the verdict in Shi Tao’s case (he was sentenced to 10 years in April for “divulging state secrets abroad”) , found that details supplied by Yahoo Holdings (Hong King) Ltd helped identify and convict him.

As Global Voices indicates Yahoo “provided the Chinese investigating organs with detailed information that apparently enabled them to link Shi’s personal e-mail account (on the Chinese Yahoo! service at yahoo.com.cn) and the specific message containing information treated as a “state secret” to the IP address of his computer”.

Now this raises a number of interesting issues.
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The Nuclear Option

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Don’t blame me, blame Alex for this, since he’s the one who started me thinking about all those other issues associated with the German elections – apart that is from the economic ones. Like this in today’s FT:

“It must have seemed like a good idea at the time. ….Last week, she (Angela Merkel) named Heinrich von Pierer, a former Siemens chief executive, her chief economic advisor. The fresh faces, it was thought, would add energy and credibility to her bid for the top job….(but)…Mr von Pierer sparked his own media firestorm when he called for an extension of the life of nuclear power stations by 60 years.”

I may be slow, but the implications of this didn’t really sink-in till I read in the EU observer that:

“Brussels predicts that oil prices will stay high in the foreseeable future and that the EU will need to build more nuclear reactors..”I expect investments in the nuclear sector in Europe, and in the rest of the world, will grow”, the commissioner (Andris Piebalgs) said.

Well, no wonder the greens are fuming.

This Is Fascinating

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While the debate rages about who are what has been ultimately responsible for the plight of all those poor, largely black, people who got left behind when New Orleans went ‘under water’, this reuters article raises some fascinating points.

“If refugees end up building new lives away from New Orleans, Hurricane Katrina may prompt the largest U.S. black resettlement since the 20th century’s Great Migration lured southern blacks to the North in a search for jobs and better lives.”

“Interviews with refugees in Houston, which is expecting many thousands of evacuees to remain, suggest that thousands of blacks who lost everything and had no insurance will end up living in Texas or other U.S. states.”

“Officials say it will take many months and maybe even years before the birthplace of jazz is rebuilt.”

Dynamic systems, steady state stable bad equilibria and shocks. Fascinating.

“New Orleans did not always follow the trend. Historically, far fewer residents have moved from New Orleans than from most American cities, despite its high poverty and crime rates.”

In other words many people had become simply ‘stuck’ there. Actually, maybe the writer should have said because of the “high poverty and crime rates”, in chaos theory terms that’s precisely how things like ‘strange attractors’ and ‘sinks’ operate.

The possibility of this outcome had in fact been going through my mind. Obviously I’m in Europe, so I don’t really know at first hand, but I have the impression that this would be the best thing that could happen.

Mind you, I agree with Nicholas Lemann, author of “The Promised Land: The Great Black Migration and How it Changed America,” who is quoted as saying it is too early to tell. Quite. But here I think is one area where policy really could make a difference. Get these people into stable temporary housing, get them into jobs, get their children into schools. Then they won’t be going back.

Going Up, But Not Going Down

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AP reports that the Russian navy does not have the funds this year to buy underwater rescue vessels of the type Britain sent to Russia to save the lives of seven men trapped in a mini-sub in the Pacific last month:

“We do not have the money at the moment,” but the navy expected to obtain the money next year, Adm. Vladimir Masorin was quoted as saying by the RIA-Novosti news agency.

Russian naval authorities said after the crisis that they would buy two Scorpio underwater robotic vehicles. Each vessel costs between $1 million and $5 million, depending on the configuration.

Consistent Inconsistencies

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While we at Afoe may be suffering from intermittent service interruptions, the EU seems to have arrived at what is being described as a ‘fair and share’ agreement with the Chinese over the trapped clothing products.

Which may well be described as a made to measure, just in time, solution, since while Tony Blair is waxing lyrical about the ‘moral responsibility’ of removing protectionist barriers like the CAP, UK CBI (Industry) head Sir Digby Jones, who is currently with Blair in Beijing, is fuming:

“I’m furious” he told the Times “We’re not protectionist in Britain. We understand you offshore the production of low-value goods and that by doing so you’re creating incomes for people who can buy our high-value goods.”

For Sir Digby the blockade of 75m garments, under emergency quotas negotiatied in June by Peter Mandelson, the EU trade commissioner, is a symptom of “protectionist, hypocritical Europe”, and had given the Chinese the “moral high ground”.

Well try explaining that to Peter Mandelson. (Hat tip to China Herald).

An Al-Qaeda Blunder?

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We are so used to reading analysts reports of how intelligently Al-qaeda avails itself of the news media to advance its cause that perhaps we are becoming numb to some underlying realities. Maybe a big part of the supposed Al-qaeda success comes from shooting-yourself-in-the-foot blunders from people on our own side (obviously those responsible for the ‘disinformation’ in the Jean Charles de Menezes case immediately spring to mind here), and the Al-qaeda in-house material may in fact damage more than assist their cause (I somehow doubt that video-grabs of people getting beheaded, or having their throat slit as was the case with poor Daniel Pearl, are exactly vote winners for them). And this latest example may be a classic case. By releasing the video showing Mohammed Sidique Khan explaining his reasoning (or lack of it) they have in one foul swoop killed-off all the crazy conspiracy theories (like the ones that put it all down to Blair and British security), settled the issue (yes, they were suicide bombers) and forced the UK muslim community to come out of denial (where they were still in it) and face up to what is actually going on in their midst. Well good for them!

Europe Does Its Bit

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Apart from the human tragedy dimension, the events which are unfolding in and around New Orleans will have an economic impact which in a globalised world can ripple through each and every economy. Fears that gasoline shortages could produce a recession in the US are going the rounds. James Hamilton of Econbrowser probably has the best coverage (here and here) while Dave Altig at MacroBlog is following the debate around the blogs (here, and here). Personally I’m taking a this is serious but lets keep calm view.

As Econbrowser argues the real problem is not with crude prices as such, but with the more short term issue of gasoline prices at the pump. The big problem is that the US has a large strategic crude reserve, but no gasoline reserve, while we, here in Europe, do have large stocks of gasoline. So it was a welcome surprise to open the FT in my browser this morning and read this report:

“European countries were on Thursday preparing to release emergency stockpiles of petrol as the US confirmed that some refineries hit by Hurricane Katrina would remain shut for several months. Earlier US officials had estimated the closures at only one to two weeks…..

Germany has assured the IEA that it would release stocks if asked to participate if needed. Germany holds the largest number of barrels of petrol in public storage. These extra barrels could hit the markets within one or two days. France, Spain and Italy also have large emergency gasoline reserves.”

And now AP has just reported that Germany is about to send supplies, while earlier Reuters had a similar story from Spain.