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".

Settling Accounts?

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I don’t know how many of you have seen the film The Insider, but Caesar Alierta, boss of Spain’s telecommunications near-monopoly Telefonica, has always seemed to me to fit the bill perfectly. Now the Financial Times announce that he is finally to be charged with an old insider-trading scandal:

“C?sar Alierta, executive chairman of Telef?nica, the Spanish telecommunications group, has been charged with insider trading in connection with alleged improper share trades when he was chairman of a tobacco company. The public prosecutor’s office is seeking a four-and-a-half-year jail sentence for Mr Alierta, the most senior executive ever charged with insider trading in Spain. The prosecutor’s office is also requesting the seizure of ?1.86m ($2.27m) of profits Mr Alierta is alleged to have made from trading in Tabacalera shares when he was chairman of the Spanish tobacco group in 1997.”

As the FT notes, the case also has a political dimension, since it forms part of the ongoing ‘feud’ between PSOE and PP. The reality is that ‘justice’ is still a very political issue in Spain. Still, you have no idea how happy it would make me to see Alierta finally convicted of something. Adding-on a few racketeering charges might not go badly amiss either.

More Details Emerge

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Sky continue to maintain their original claim that there were four bombers, and that they are all dead. This has not had direct police confirmation. But sky do provide a lot more details. One of the most important of these is that images of the four were captured by CCTV cameras at Kings Cross. There may be some doubt about the fourth of the bombers because the police inform that three come from the Yorkshire area, but say nothing about the fourth.

Deputy Assistant Commissioner Peter Clarke explains:
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Oooops It Isn’t Baaack….

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Morgan Stanley team members Steven Jen and Eric Chaney (joined by Takehiro Sato and David Miles) debate today the interesting question of whether the eurozone economies have entered a liquidity trap (LT). Those who have no idea what one of these would look like could do worse than read Paul Krugman’s classic article on the topic: It’s baaack! Japan’s Slump and the Return of the Liquidity Trap (pdf).

So what is all the fuss about?
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Developments Update

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Sky is now reporting that all four bombers who attacked trains and a bus in London on Thursday died in the attacks, and that all four were British citizens. (This also implies that we now know there were 4 of them).

The Times has this in its article:

And a 21-year-old local man, speaking at the scene near Colwyn Road, claimed that a group of his friends who are all young British-born Pakistani men in their early twenties had already been arrested today.

The man, who did not wish to give his name, said: ?They?re all normal lads, very, very top lads they are. Police are just doing this for no reason. They don?t know what they are doing at the end of the day. This is a load of nonsense.?

It looks as if Metropolitan Police Chief John Stevens speculation might have been reasonably accurate, at least as far as the actual people who placed the bombs is concerned. Of course even if all this is confirmed there are still very many outsanding question, in particular about the origins of those military grade explosives and the operational logistics planning.

A Worrying Incident

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David posted last Friday about fears and fear. News has come in this afternoon that a Pakistani man – Kamal Raza Butt – was killed on Sunday in Nottingham. The crime – for which six youths are now in custody – was clearly not (in strict legal terms) directly related to the bombings (since there is no insinuation that Kamal Butt was in any way involved), but it is being investigated by police as a racially-aggravated incident, and in that sense it indirectly is connected. Inayat Bunglawala, a spokesman for the Muslim Council of Britain, talks of a growing backlash and cites a series of incidents were mosques have been attacked. It is highly likely that organised political groups are behind some of this, in which case it is also imperative that they are identified and made to desist.

Developments

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UK police said this morning they searched five homes in northern England. They described the search as forming a “significant” part of the investigation into last week’s London bombings. I think it’s useless speculating at this stage what this might mean. I also think it is important that the police are seen to be pro-active in the investigation, public confidence in the security services is an important part of the present picture. I will update this post during the day as the need arises.

Update 11:50 CET

Incidentally, a piece of terminology: saying ‘no arrests have been made” doesn’t have any deep significance in British parlance, since people may be ‘helping the police with their enquiries’ prior to being arrested and formally charged (or not). (This is presumeably even more complicated under the various terrorism acts which I am not especially familiar with). The issue is sufficiently serious to have evacuated part of the area. The raids were in Leeds.

Update 15:15 CET

Police have just announced that they carried out a controlled explosion to gain entry to a home in the Burley area of Leeds, justy a few miles away from Beeston where the original raid took place.

Update 16:00 CET

It has now been revealed that troops from the bomb disposal unit were involved in controlled explosion. The context is one of an Asian district of Leeds. This has implications but we shouldn’t yet jump to conclusions. The Times has fuller details:

“More than 500 people were evacuated from surrounding homes, businesses and the local mosque prior to the detonation at just after 1.30pm.

Armed police immediately surrounded the flat in Hyde Park Road, Burley .

The explosion came six hours after five other homes in Colwyn Road, Tempest Road and Shalford Street in the mainly Asian suburb of Beeston, three miles south-east of Burley, were sealed off following a series of dawn raids.

Neighbours of one of the addresses reported that a 22-year-old man who lived there with his family had been missing since Thursday.”

OK, let me make one reasonable conjecture based on the info we have so far. The raid in Leeds is based on forensics of the remains found on around the bus. This could have been one of the people who planted the bombs. If this is the case – and the Times certainly also leads us in the direction – one part of the story may be about to become clearer.

Update 17:15 CET

My conjceture has now been confirmed. Sky are now reporting that a decapitated head found near the scene of the bus bomb had been that of the bomber. Forensic tests then led police to carry out raids in Leeds, and to a car at Luton railway station north of London. This also seems to add strength to the Kings Cross meetup hypothesis (see below in comments). Sky are also claiming that there have been arrests.

Bomb In Barcelona

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This is really a clarificatory post. The bomb which exploded outside the Italian cultural institute in Barcelona this morning does *not* appear to have any relation with international terrorism. Radio reports suggest it is the work of a group of ‘anti-system’ anarchists protesting about arrests of some of their co-thinkers in Italy. Fortunately I don’t think even the police dog was badly hurt.

Eurozone Growth Forecasts Down

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There is a curious combination of expectations right now. The euro is rising, principally because of preoccupations about the US trade deficit and the associated sustainability issues, but also because there seem to be signs of a slightly better collective performance later in the year. This assessment may well be accurate. So what this means is that growth may still be slowing, but it may be about to pick up. Hence downward revisions for this year are quite compatible with mild optimism in the near term. Of course this situation will not be the same everywhere, and there are still no encouraging signs from Italy.

Economic growth in the euro region will fall short of official forecasts in 2005 as oil hovers near a record, consumer confidence stagnates and Italy struggles with recession, European finance ministers said.

Finance ministers are counting on growth in the 12-nation economy of only 1.3 percent, less than the 1.6 percent predicted by the European Commission in April, Luxembourg Prime and Finance Minister Jean-Claude Juncker said.

The Euro Also Rises

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The euro is trading this morning at around $1.2150. The big issue seems to be the US trade deficit, which is currently outweighing all other considerations. Still what goes down can come up, and what goes up……

The dollar fell to the lowest in two weeks against the euro, the biggest move of any currency, on expectations a government report tomorrow will show the U.S. trade deficit was near a record.

The U.S. currency has retreated 2.3 percent against its European counterpart since reaching a 14-month high on July 5. A rising deficit means more dollars are leaving the country to pay for imports. The dollar also weakened against the yen after Japan’s Nikkei 225 Stock Average rose to a three-month high.

“The dollar all of a sudden looks shaky; the deficit will be significant,” said Callum Henderson, head of global currency strategy in Singapore at Standard Chartered Plc. At the same time, “stock inflows are undoubtedly helping the yen. It makes sense for the dollar to weaken.”