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”

A new history of Europe since 1945.

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The New Yorker: The Critics: Books

Still, “Postwar” can fairly be called an interpretation of European history since 1945, and its thesis can be put in a sentence. It is that Europe was able to rebuild itself politically and economically only by forgetting the past, but it was able to define itself morally and culturally only by remembering it. The forgetting was necessary not just because the behavior of most Europeans under Fascism and Nazi occupation was less admirable than anyone wished to acknowledge—but that was, naturally, a big part of it.

Consumption in Germany

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In comments here, Edward has addressed a question I was also thinking about this morning. He writes, “So the new coalition’s ‘play’ will be to try and really push-start domestic consumption in 2006. Obviously they hope some consumption will be brought forward in order to avoid the tax.”

Tax and a positive contribution from the ECB are important, of course, but I wonder if there aren’t other hindrances to domestic consumption. I’d be hard pressed to think of an upswing in the German economy that wasn’t led by exports and fed by investment. Domestic consumption brings up the rear.

Add to that strong admonitions in the culture that consumption is bad. Look at any apartment building and count the number of “No ads please” stickers on mail slots. Add in the Öko (“ecological”) position that the best contribution to the environment is to consume as little as possible. Add deep cultural mistrust of credit. Add some of the demographic trends that Edward has written about in detail. All of these suggest that there are barriers to a recovery sustained by domestic demand that go beyond fear of the taxman.

Or I could be wrong. Americans, after all, have famously overthrown their Puritan heritage and consume enough to keep the world economy afloat. The hard-core economists could be right, and culture might play no role at all in household decisions. I honestly don’t know what to think about German consumption. Further thoughts, anyone?

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.

The System of the World

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Sorry, this is not a post proclaiming a political theory of everything. It’s a note saying “‘Tis done!” I picked up Neal Stephenson’s The System of the World sooner than I thought and finished it up right quick.

Previous posts on the Baroque Cycle are here, here, here and here. The argument of the trilogy and further thoughts below the fold. Spoilers abound. Doug Muir, I’m finished, we can discuss.
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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.

Crying Wolf At The ECB?

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The always interesting Paul de Grauwe has a piece in the FT today (subscription only unfortunately, but he does collect all his FT pieces on his website here, so it will doubtless appear eventually). Basically he is arguing a view which I agree with: in its enthusiasm for raising interest rates the ECB is overdoing the inflation problem, and not by a little:

Strange things are happening in Frankfurt these days. Barely two weeks ago the European Central Bank issued its monthly bulletin containing an analysis of the perspectives for inflation in the euro area. In a nutshell the story was the following.

Yes, yearly inflation has increased to 2.5 per cent (October 2005) and this is a source of concern for a central bank that has promised to keep inflation below 2 per cent. But, as we all know, a central bank that targets the rate of inflation should be forward-looking and base its interest rate decisions on the expected future rate of inflation. The remarkable thing about the analysis is that, after voicing its concern about current inflation exceeding 2 per cent, it came to the conclusion that the perspectives for future inflation were favourable.

Paul de Grauwe’s work is generally highly commendable, and this presentation of his on the pluses and minuses of the euro is a really good background primer.

Destination Unknown

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While China seems to be badly in need of entering the ‘information society’, Russia seems to be going flat-out in the opposite direction:

Russia moved closer to an effective ban on many foreign non-governmental organisations as its parliament on Wednesday considered a bill that human rights groups have criticised as another step towards a “totally closed society”.

Informational Asymmetries in Harbin

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Whatever the underlying reality behind all the news headlines about ‘panic in Harbin’ one thing is sure, there are plenty of asymmetries pending resolution between the ultra-modern and sophistocated new-technology China and the ‘informationally closed’ political system which breeds a lack of trust and the kinds of over-reaction we are now seeing. China obviously badly needs to ‘modernise’ in the ‘welcome to modernity’ sociological sense. If it doesn’t there will always be the danger of this kind of ‘chain reaction’, and clearly, in the conext of modern integrated financial markets, the consequences could turn out to be particularly unpleasant for everyone involved.

Thousands of residents of Harbin on Wednesday night jammed its railway station and booked out all available flights as a deadly 80km toxic slick made its way down the Songhua river, threatening to poison the north-eastern Chinese city’s water supplies. he slick of benzene and other toxins was leaked into the river, the city’s main source of water, after a series of explosions 10 days ago at a chemicals factory 200km upriver. A mood of distrust and paranoia was spreading through the industrial city of 9m people, sharpened by the local government’s decision to turn off water supplies for four days for fear of an environmental catastrophe.